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The Governance Paradox in Megaprojects

Author

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  • Lise Arena

    () (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique)

  • Eamonn Molloy

    (Saïd Business School - University of Oxford [Oxford])

Abstract

This research explores a theoretical and practical paradox in megaprojects. According to transaction cost economics (Williamson, 1975) high uncertainty, high asset specificity, situated knowledge and the high frequency of transactions associated with megaprojects should drive managers to internalise resources. However, evidence from case studies reveals the following paradox: managerial incentives to invest in internal resources through vertical integration are limited because of fixed time horizons; yet, the alternative of outsourcing and contract management through the market mechanism escalates transaction costs. This research therefore seeks to identify how practitioners might improve performance through more efficient engagement with each other and overcome the technical, psychological and political barriers uncounted in the delivery of megaprojects (Flyvbjerg, 2006). This study also identifies the extent to which the transaction costs approach applies to temporary governance structures such as mega-projects. At this stage, this paper is mainly theoretical and seeks to provide a conceptual framework for the understanding of megaprojects, as governance structures. After a brief overview of the difference forms of governance associated to organisations (section I), this paper shows that the hybrid form is, to a large extent, the most suited to megaprojects (section II). Yet, the temporary nature of megaprojects as organisations provides distinctive and additional feature to this hybrid form of governance, not initially considered by Williamson's contributions (section III).

Suggested Citation

  • Lise Arena & Eamonn Molloy, 2010. "The Governance Paradox in Megaprojects," Post-Print halshs-00721622, HAL.
  • Handle: RePEc:hal:journl:halshs-00721622
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00721622
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    References listed on IDEAS

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    1. Williamson, Oliver, 2009. "The Theory of the Firm as Governance Structure: From Choice to Contract," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 111-134, December.
    2. Eccles, Robert G., 1981. "The quasifirm in the construction industry," Journal of Economic Behavior & Organization, Elsevier, vol. 2(4), pages 335-357, December.
    3. Claude Ménard, 2004. "The Economics of Hybrid Organizations," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(3), pages 345-345, September.
    4. Flyvbjerg, Bent, 2005. "Measuring inaccuracy in travel demand forecasting: methodological considerations regarding ramp up and sampling," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(6), pages 522-530, July.
    5. Moingeon, Bertrand & Quélin, Bertrand & Dalsace, Frédéric & Lumineau, Fabrice, 2006. "Inter-organizational communities of practice: specificities and stakes," HEC Research Papers Series 857, HEC Paris.
    6. Olivier Dupouët & Murât Yildizoglu & Patrick Cohendet, 2003. "Morphogenèse de communautés de pratique," Revue d'Économie Industrielle, Programme National Persée, vol. 103(1), pages 91-110.
    7. Riordan, Michael H. & Williamson, Oliver E., 1985. "Asset specificity and economic organization," International Journal of Industrial Organization, Elsevier, vol. 3(4), pages 365-378, December.
    8. Turner, J. Rodney & Keegan, Anne, 2001. "Mechanisms of governance in the project-based organization:: Roles of the broker and steward," European Management Journal, Elsevier, vol. 19(3), pages 254-267, June.
    9. Claude Ménard, 1997. "Le pilotage des formes organisationnelles hybrides," Revue Économique, Programme National Persée, vol. 48(3), pages 741-750.
    10. Richard Arena & Bernard Conein, 2008. "On virtual communities: individual motivations, reciprocity and we-rationality," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 55(1), pages 185-208, April.
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