Strategies for minimizing information asymmetries in construction projects: project managers’ perceptions

Abstract

Communication risk is of crucial importance in construction projects. The situation in which one of the project parties is better informed than another is known as information asymmetry. This problem is addressed by the principal-agent theory. According to this theory, information asymmetries cause three problems: adverse selection, moral hazard, and hold up. The focus here is on strategies for minimizing information asymmetries in the construction phase. A survey of project managers was conducted to establish an understanding of the relative importance of risk-minimization strategies established in the literature: bureaucratic control (contracts), information systems, incentives (bonuses), corporate culture, reputation, and trust. The multi-attribute utility theory was used to analyze the responses. According to the project managers who participated in the survey, trust is the most important strategy in the construction phase, followed by bureaucratic control (contracts) and information systems.

Keywords:

• principal-agent theory
• information asymmetries
• risk-minimization strategies
• project managers
• trust
• multi-attribute utility theory

JEL Classification:

• D8
• D82

Additional information

Notes on contributors

Anita Ceric

Anita CERIC is a Professor at the Department of Construction Management and Economics at the Faculty of Civil Engineering at the University of Zagreb. She was awarded her M.Sc. in Civil Engineering at the same University and she received her Ph.D. from the School of Construction and Property Management at the University of Salford, United Kingdom. Since 1995 she has been working at the Department of Construction Management and Economics, Faculty of Civil Engineering, at the University of Zagreb. Her research interests are in risk management, human resource management, and maintenance management. She is a member of editorial boards of four international journals. She is a member of W55 Working Commission on Building Economics and W65 Working Commission on Construction Management of the International Building Council (CIB); International Project Management Association (IPMA); Engineering Project Organizations Society (EPOS); and Academy of Management (AOM). Currently, she is the Vice-Dean for International Collaboration at the Faculty of Civil Engineering at the University of Zagreb. Also, she is serving as the Head of the Laboratory of Information Technology at the Department of Construction Management and Economics of the same Faculty.