The Governance Paradox in Megaprojects

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)