The Principal-Agent Theory and the Role of Project Managers in Construction: Guidelines for Future Research

The principal-agent theory has been successfully applied to the research of management of construction projects. It has focused on the relationship between the project owner as principal and the contractor as agent. Also, the relationship between the contractor as principal and subcontractors as agents has been explored. After introducing the literature in this field, this paper will present recent research into the relationship between the project owner’s and contractor’s project managers along the lines of the principal-agent theory. An exploratory survey was used at the first stage of research. After the exploratory survey, the Delphi method was employed for further exploration of the issues involved. It has been shown that the two managers play key roles in the construction phase even though they are both agents not related by contracts. Risk minimization is their main concern in the construction phase. Having summarized this research, the paper addresses the opportunities for further research in this area, which offers a challenge to the principal-agent theory in the field of construction. Guidelines for future research take the central part of the paper. They focus on communication risks caused by asymmetric information, which are of central importance to the principal-agent theory.