Incentive mechanisms for managing local subcontractors in international construction projects

Abstract

In the domain of international construction projects, managing supply chains presents distinct challenges due to the intricate task of coordinating multiple stakeholders within diverse cultural, economic, and regulatory contexts. Prior research highlights the significance of incentive mechanisms and collaborative procurement practices, yet the effectiveness of these strategies in augmenting performance for international projects has not been extensively examined. This investigation explores the effects of financial and non-financial incentives on the performance of global construction projects, with a focus on the mediating role of cooperation. Data were gathered from Chinese international contractors and local suppliers and subsequently analyzed using Structural Equation Modeling. The results reveal two separate pathways of influence. Firstly, financial incentives exhibited substantial direct and indirect impacts on project performance; secondly, while non-financial incentives did not directly affect project performance, they significantly impacted cooperation levels, which in turn mediated the relationship between non-financial incentives and project performance. This study provides essential perspectives for managing international construction projects, emphasizing the critical need for the combined application of financial and non-financial incentives to foster cooperation and ultimately achieve superior project outcomes.