Identification and analyses of hidden transaction costs in project dispute resolutions

• We identify thirteen variables of the hidden transaction costs in dispute resolutions.
• The thirteen variables can be divided into five factors.
• Lack of future cooperation is the most important variable.
• Project delay is the most severe hidden cost for owners.

The hidden transaction costs in project dispute resolutions exert an important influence on the decisions about dispute settlement. In order to obtain the variables and their importance rankings, we firstly developed a thirteen-variable framework of the hidden transaction costs through a literature review and semi-structured interviews. Then we conducted a questionnaire survey to collect the importance of each variable. Based on the results, it is possible to group these variables into five factors – reputation, cooperation and trust, emotion, time, and execution of judgments – by factor analysis. Lack of future cooperation and contractors' reputation damage are the two most important variables, while for owners, project delay is the most severe hidden transaction cost. The findings provide construction practitioners with a deep understanding of the potential hidden loss. Therefore, they will resolve disputes more rationally.

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