The contingent effect of requirement uncertainty and project complexity

Completing a discussion of the effects of independent value creation and value co-creation processes on project value leads to a subsequent analysis of the contingency theory that proclaims that contextual conditions (also called moderators) affect the fit between organisational characteristics and performance (L. Donaldson, 2001). Many contingency factors have been analysed in prior management and business literature in different industries, levels and project contexts. Among the moderator factors at the firm-level, for example, are firm size, agency conflicts, environmental uncertainty, business strategy, competition within the industry, firm complexity, monitoring by board of directors (Elgharbawy & Abdel-Kader, 2013; Gordon, Loeb, & Tseng, 2009), and stakeholder role clarity (Beringer, Jonas, & Kock, 2013). At the project level, moderator factors that have been applied as contingent variables include moderators, such as supplier asset specificity and requirements certainty (Narayanan, Narasimhan, & Schoenherr, 2015); governance

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mechanisms (i.e. trust and control) and governance complexity (Müller et al., 2016); external turbulence (Voss & Kock, 2013); severity of contract enforcement (Quanji, Zhang, & Wang, 2017); joint collaborative planning (Hadaya & Cassivi, 2012); physical distance (Mesly, 2015); organisational environment and project team risks (S. Liu & Wang, 2016); project type, project uncertainty and contract type (Larsson, Eriksson, Olofsson, & Simonsson, 2015;

Yang, Chen, & Wang, 2012); stakeholder support and project schedule (Eweje et al., 2012);

collaborative climate and project characteristics (i.e. customisation, project value/size and time pressure) (Eriksson & Westerberg, 2011; Larsson et al., 2015); emergent properties (Zhu

& Mostafavi, 2017); project stability, market diversity, hostility, external control and internal power (Van Donk & Molloy, 2008); quality of the vision/goals and team experience (Serrador & Pinto, 2015); and project complexity (Açikgöz, Günsel, Kuzey, & Seçgin, 2016;

Geraldi, Maylor, & Williams, 2011; Larsson et al., 2015; S. Liu, 2015; Serrador & Pinto, 2015; Van Donk & Molloy, 2008; Zhu & Mostafavi, 2017).

In a comprehensive research study using 21 selected publications, Howell, Windahl, and Seidel (2010) identified uncertainty, project complexity, urgency, team empowerment and criticality as five original themes that encompass almost all the project contextual factors previously discussed. In addition, two contingencies have received special attention in the business and management literature: namely uncertainty and complexity (Eriksson &

Westerberg, 2011; Hanisch & Wald, 2011; Padalkar & Gopinath, 2016; Shenhar & Dvir, 2007). The literature review considers three determinations – first, that complexity does not imply necessarily uncertainty, or vice versa (Tidd, 1997); second, that the lack of certainty in project requirements and project complexity can significantly affect the value proposition of a project (Lechler, Edington, & Gao, 2012); and third, that both contextual contingencies are recognised as critical to influencing organisational structure and management processes for innovation (Tidd, 2001). As a result, this research study has elected to include requirements

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uncertainty and complexity as moderators of the relationship between value creation processes and project value, interpreted as follows.

The first moderator, uncertainty, is recognised as the difference between the amount of information required for a decision and the amount of information available (Winch, 2010).

Project requirements refer to the owner and users to establish the functionalities of the project deliverables that will provide the desired benefits (i.e. outcomes) (Turner, 2006a). If project requirements are unclear or frequently changing, the project requirements uncertainty is high.

Thus, requirements uncertainty (RU) is the difference between the information required and the information available to specify the requirements to be fulfilled by the project. This variable has been broadly studied in information systems projects, particularly in the area of software development (Kossmann, 2013; J. Liu, Chen, Chen, & Sheu, 2011). There are two main subdimensions of RU, namely, requirements instability and requirements diversity (Jiang, Klein, Wu, & Liang, 2009). Requirements instability refers to the extent of changes that occur to the project requirements during the project, whereas requirements diversity represents the degree to which project stakeholder requirements differ from each other in the requirements to be met (Jiang et al., 2009; J. Liu et al., 2011).

The second moderator, complexity, involves project scope, project size, the number and variety of components, subtasks and interactions (Baccarini, 1996; Shenhar & Dvir, 2007).

Complexity is also recognised as a source of uncertainty (Floricel, Michela, & Piperca, 2016). Project complexity has several dimensions, including structural, uncertainty, dynamic, pace and socio-political complexities (Geraldi et al., 2011), information, task, technological, organisational, environmental and goal complexities (Luo, He, Xie, Yang, & Wu, 2016). For other relevant examples, see Bakhshi, Ireland, and Gorod (2016), Geraldi et al. (2011), Lessard, Sakhrani, and Miller (2014), Luo et al. (2016). Floricel et al. (2016) and Brady and Davies (2014), all of which define two basic dimensions of project complexity (PC) – structural complexity and dynamic complexity. Whereas the former is associated with the

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arrangement of elements and subsystems into the whole project, the latter refers to the changing relationships between components in the project and between the project and its context over time (Brady & Davies, 2014).

Understanding complexity and uncertainty in the requirements of projects affect the decisions in practice to manage projects effectively (Geraldi et al., 2011), which strongly influences the method of creating value for project stakeholders.

The majority of project management literature agrees that when there are high levels of uncertainty and complexity, project delivery requires a more collaborative approach (i.e., value co-creation) to create a favorable impact on efficiency as measured by cost, time and scope, and achievement of the desired outcomes (Eriksson, 2014; Eriksson & Westerberg, 2011; Pesämaa et al., 2009; M. Rahman & Kumaraswamy, 2005). With small, simple, and standardised projects, which are associated with low levels of uncertainty and complexity, a transactional approach based on contract, coordination and monitor and control (i.e., independent value creation) would be sufficient to meet customer expectations (Eriksson &

Westerberg, 2011). Nevertheless, Merrow (2011) found that collaborative relationships between owners and contractors, in alliance-type procurement methods, increase instability in project execution mainly when projects have high levels of requirements uncertainty. This situation motivated the owners to divide the delivery model into two separate parts, one for engineering and procurement, using a relational approach; and another for construction (Merrow, 2011), reverting to a traditional procurement method governed by a transactional approach based on cost-efficiency (Challender, Farrell, & Sherratt, 2014).

As a result, various discussions present contradictory recommendations about which value creation process is more suitable and successful for different requirements uncertainty and project complexity. Although in general PDM research advocates a relationship-based approach for project complexity and requirements uncertainty, most of the evidence relied upon is either anecdotal or based on case studies (Alam, Kabir, & Chaudhri, 2014; Caldwell,

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Roehrich, & Davies, 2009; Eriksson & Westerberg, 2011; Nord, 2012; Smyth, Lecoeuvre, &

Vaesken, IN PRESS; Walker & Lloyd-Walker, 2013; Xue, Turner, Lecoeuvre, & Anbari, 2013). This type the evidence represents another gap that is empirically investigated in this study, as elucidated by the second research question.

RQ2: How do requirements uncertainty and project complexity moderate the relationship between value creation processes and project value?