Cultural Considerations in International Construction Contracts

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clarity of local laws and the interpretation of those contracts gov- erned by local laws. Transglobal ..... Purnell, Cape Town, South Africa. Chan, E. H. (1997).
Cultural Considerations in International Construction Contracts Edwin H. W. Chan1 and Raymond Y. C. Tse2 Abstract: International construction projects involve multinational participants from different political, legal, economic, and cultural backgrounds. As one of the major issues affecting the management of international construction projects, culture deserves wide research. This paper aims to establish a valid groundwork for further research on the impact of cultural issues on contractual arrangements; conflict causation, and the selection of dispute resolution mechanisms for international construction projects. The paper reviews the characteristics of international construction activities and discusses the cultural context. It sets the research background for disseminating the findings of two surveys, carried out in Hong Kong and in London and Sydney. The study identifies the important features expected for the contract of international construction projects and ascertains their significance to further in-depth research. DOI: 10.1061/共ASCE兲0733-9364共2003兲129:4共375兲 CE Database subject headings: Contracts; Dispute resolution; Hong Kong; International factors; Construction industry.

Introduction Within the general trend of globalization, worldwide economic cooperation and technology transfer are common practice. International construction projects are just one of the activities that involve multinational participants from different political, legal, economic, and cultural backgrounds. According to Latham 共1994兲, project procurement and construction disputes are two of the major concerns in the construction industry. Conflict and disputes are causing major damage to the industry. The work of researchers such as Turin 共1972兲, Aniekwu and Okpala 共1988兲, and Ofori 共1984, 1991兲 show that similar problems are noted worldwide and that the less-developed or developing countries are the worst hit by the problems. Research has been conducted to prevent and resolve construction disputes in specific countries 共Vorster 1993; Diekmann and Girard 1995; Cheung 1998; Kumaraswamy and Yogeswaran 1998兲. More generally, Simon 共1987兲 argues that to understand real decision making, utility maximization is neither a necessary nor a sufficient condition for the conclusion reached. The action comes from empirical assumptions, including assumptions about how people view their world. Although concerns about cultural issues seem to be discussed widely in construction, their formal analysis is infrequent. Research is necessary to minimize the problems in the global context. This paper disseminates the research findings of two sets of questionnaires carried out by the first writer as part of an ongoing 1 Associate Professor, Dept. of Building and Real Estate, The Hong Kong Polytechnic Univ., Hung Hom, Kowloon, Hong Kong SAR. E-mail: [email protected] 2 Professor, International City University of America, Asian House, 1 Hennessy Rd., Hong Kong SAR. E-mail: [email protected] Note. Discussion open until January 1, 2004. Separate discussions must be submitted for individual papers. To extend the closing date by one month, a written request must be filed with the ASCE Managing Editor. The manuscript for this paper was submitted for review and possible publication on February 6, 2001; approved on July 1, 2002. This paper is part of the Journal of Construction Engineering and Management, Vol. 129, No. 4, August 1, 2003. ©ASCE, ISSN 0733-9364/ 2003/4-375–381/$18.00.

research study, one conducted in Hong Kong during 1998, and the other in London and Sydney during 1999. The aim of this paper is to establish a valid foundation for further research on the impact of cultural issues on contractual arrangements, conflict causation, and selection of dispute resolution mechanisms for international construction projects. Following this introduction, the second section reviews the characteristics of international construction activities and discusses the cultural contextual factors that contribute to conflict and difficulties in the management of the international construction projects. The third section introduces the research methodology and data collection of the two surveys, the fourth section explains the data analysis, and the fifth presents the key observations of the research results and makes recommendations for further study in this area. The paper ends with a general conclusion.

International Construction Activities Characteristics and Problems International construction projects are those in which the contractor, the lead consultant, or the employer is not of the same domicile, and at least one of them is working outside his or her country of origin 共Stebblings 1998兲. The construction industry is complex and multidimensional, and to improve this situation, the major construction projects in developing countries are often carried out in joint ventures with construction companies from developed countries. International collaboration can be of particular benefit to less-developed and developing areas. Transglobal economic developments offer an opportunity to develop products using the most up-to-date expertise and knowledge in a cost-effective manner 共Clark and Ip 1999兲. International projects are normally fast paced but require a longer time span, and more parties are involved. Collaboration between the concerned parties requires clear project definition, and each set of objectives under the definition may be subject to changes as the project evolves. Parties to international projects are also concerned with the clarity of local laws and the interpretation of those contracts governed by local laws. Transglobal collaboration calls for greater

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cultural understanding and sensitivity in terms of personnel management by the concerned parties. Human problems are involved, such as language, communication, and the understanding of cultural differences. It is generally acknowledged that the contextual environment of a country or region also influences the construction industry of each jurisdiction. Based on previous work by other researchers, Sheath, Jaggar, and Hibberd 共1994兲 compiled a set of environmental influences associated with construction and a list of variables under each of the influence factors. The variables have been used to study the impact of these contextual factors on the choice of a project procurement system. Such a contextual research approach can be adopted and elaborated for studying the effect of culture on disputes in international construction projects.

Cultural Context The term culture has wide connotations in anthropology and ethnography. Its meaning is not clearly defined, and even anthropologists do not agree on one clear and precise definition. Definitions differ greatly and are dependent on the theoretical perspectives of those who offer them. In the management literature, Hofstede 共1984兲 defines culture as ‘‘the collective programming of the mind which distinguishes the members of one human group from other关s兴.... Culture, in this sense, includes systems of values and values are the building blocks of culture.’’ In the context of construction management education regarding culture, Loosemore 共1999兲 states that ‘‘it is now accepted that a culture of a society is its shared values, understandings, assumptions and goals learned from earlier generations. It results in common attitudes, codes of conduct and expectations that guide behavior.’’ Tso 共1999兲, an anthropologist and designer, suggested some parameters that could help to delineate the playing fields for the concept of culture, but warned that the definition will shift within the boundaries of the parameters. She suggested that one will find the essence of the term culture within the following fields: ‘‘culture describes the social system created by a group of people; it starts from the moment that a few people get together regularly and begin to establish norms and rules through which they will interact and communicate with each other and maintain order; it is about patterns of meaning; it is about shared beliefs, values, perspectives, and worldviews; it is about shared behavior, practices, rules, and rituals; it is not limited to groupings by race or ethnicity, but can describe a sub-culture within a society— designers, for instance; it is often associated with language and communication; it is viewed as a mental or cognitive construct, created in the minds of people; it is learned; it can be found in materials: objects, artefacts, clothing, artwork, and so forth; and it can emanate from social institutions and structures, such as governments, economies, and legal systems, as well as geographic and environmental factors.’’ Today, anthropologists take a relative position toward culture, believing that no one culture is ‘‘better’’ or ‘‘worse’’ than another. In this paper, we discuss problems related to culture as the word is understood by every man in the street without elaboration. It is a very general concept within the fields described by Tso 共1999兲. In international construction projects, any party involved must be cross-culturally competent. To be competent, Trompenaars and Williams 共1999兲 claim that the transcultural manager should be aware of managing in seven dimensions: universalism versus particularism, individualism versus communitarism, specific versus diffuse, neutrality versus affectivity, inner directed versus outer directed, achieved versus ascribed status, and sequential versus synchronic time. These complex psychological and behavioral di-

mensions deserve in-depth study in the context of the international construction industry. Construction professionals involved with international projects should at least be able to recognize the expectations and behavior of others. Cultural issues are expected to contribute to conflicts among parties to an international project and increase difficulties in the management of the project 共Fellow and Hancock 1994兲. ‘‘Without understanding there can be no friendship. If one wishes to understand a people one must identify oneself with them. One must study their language, customs and culture ... and they will be one’s friends’’ 共Broster 1976兲.

Dispute Resolution Processes With dispute resolution processes becoming international and unrestricted by frontier, legal system, or national culture, ‘‘cultural unity’’ is disrupted. International arbitration is said to be a ‘‘true clash of legal cultures’’ 共Shilston and Hughes 1997; Cremades 1998兲. To interact with such a legal culture, traditional arbitration practices have to be modified to incorporate a proactive, flexible, and amicable 共nonadversarial兲 process. In awareness of this, practitioners and commentators have been proposing various schemes and innovative practices 共Cremades 1998; Uff 1998; Shilston and Hughes 1997兲. New legislation such as the Arbitration Act in the U.K. and the Arbitration Ordinance in Hong Kong have been promulgated to reflect this need. The practice of combined mediation and arbitration adopted in many countries such as China has aroused much interest 共Chan 1997兲. Such a line of thinking leads to fusion of amicable and ‘‘judicialized’’ alternative dispute resolution 共ADR兲. The good that a dispute resolution mechanism will do depends on the person using it. The balancing act is dependent upon the neutral party appointed for the task. In the process of resolving disputes on an international construction project, the disputing parties and the neutral party are expected to participate in ‘‘shedding home-grown habits and prejudices’’ 共Shilston and Hughes 1997兲. Singh 共1998兲 claims that ‘‘in the context of large international projects where there are several parties of different nationalities involved, ADR offers the immediate attraction of avoiding any difficulties of conflict of laws or jurisdictional problems which may arise. It also allows the parties to reach agreement as to how their disputes should be resolved which can take account of national and cultural differences.’’ In construction disputes, the trend is toward conflict management, with the emphasis on designing a dispute prevention system to suit each project. This aims to focus on conflict in the very early stage of a project and to design the most appropriate ADR mechanism to be incorporated into the construction contract 共Vorster 1993兲. In addition to the traditionally adapted arbitration, many new ADR mechanisms, such as mediation, an executive tribunal, adjudication, a dispute resolution advisor, and a dispute review board, have been developed. In the worldwide comparative study complied by Fenn et al. 共1998兲, the preferred choice of ADR mechanisms and their practice in each country were quite varied. For most large international construction projects, one of the ADR mechanisms, or a combination of the mechanisms in the form of multitier ADR mechanism, is incorporated into the construction contracts. This situation deserves vigorous investigation to decipher the relationship between cultural issues and choice of dispute resolution mechanisms for international construction projects.

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Research Methodology This study inquires into the extent of major differences between Eastern and Western cultures in the perception of contractual arrangements and of resolving disputes. The study focuses on international projects involving parties from the U.K. and Hong Kong, which have significant differences and similarities that are appropriate for this study. As the legal systems and construction industry institutional frameworks of both countries have the same origins, some of the side issues, such as differences in legal system, business language, and structure of the construction industry, are eliminated from the scenario. Nevertheless, the organizational culture in the construction industries of the two countries is different, and Hong Kong is unique in terms of project management and government control of construction work 共Walker and Rowlinson 1990; Chan and Chan 1999兲. The major difficulty in sampling for research on such a topic is that the survey requires the respondents to have specialized knowledge and experience of the topic. In this study, the groups suitable for sampling had first to be identified to ensure that responses were based on the respondents’ specialized knowledge and genuine experience. Following a literature review on cultural context, this paper identifies the possible attributes of dispute and management difficulties in international construction activities. A pilot study was carried out to gauge the validity of the research on cultural aspects of international construction projects. A simple questionnaire was prepared with a few leading questions on problems and phenomena as perceived by the writer to solicit opinions from persons with experience in international construction activities. Backed by these indications, a more detailed questionnaire was designed with questions focused to seek more reliable opinions from groups identified within the target sample.

Pilot Study on East-West Cultural Effect, Hong Kong 1998 A single-page questionnaire with five yes or no questions was distributed to about 200 construction professionals attending a public lecture on construction disputes delivered by Professor J. Uff, an eminent academic and practitioner of construction law during his visit to Hong Kong in June 1998. The occasion provided an opportunity to seek quick and valid opinions from a target sample, including builders, engineers, surveyors, and construction lawyers, who had knowledge of the construction industry and were interested in construction law.

Survey Concerning Dispute in International Project, London 1999 A two-page questionnaire was handed out to about 200 delegates at a construction law annual conference at the Construction Law and Management Center, King’s College of London University. The conference was held in September 1999 and was the 12th annual gathering of experts in construction law. The delegates included architects, builders, engineers, construction lawyers, and surveyors. The conference provided readily available random samples and the best focus for a questionnaire survey on the research topic.

Survey Concerning Dispute in International Project, Sydney, Australia, 1999 The same questionnaire was distributed to about 50 delegates at a plenary meeting of the Council of International Construction Re-

search and Documentation 共CIB兲 W87 Commission on PostConstruction Liability and Insurance, held in September 1999 at the University of Technology, Sydney, Australia, and was the commission’s annual meeting. The delegates included architects, builders, engineers, construction lawyers, insurance brokers, and surveyors. Most of the commission members were also members of the CIB W103 Commission for Construction Dispute and Management. The conference delegates provided valid samples for the questionnaire survey on the research topic. The data from the 1998 survey are analyzed and presented in this article, and the data from the 1999 surveys carried out in London and Sydney were analyzed with more advanced statistical tools to find out the correlations between questions and important variables. The results of this analysis are presented in detail in the following section.

Analysis and Results Data Analysis of Pilot Study in Hong Kong, 1998 Of the 51 respondents from the 200 sample targets 共representing a response rate of 25.5%兲, over 60% indicated that they had experience in international construction, and about 25% were senior personnel. The opinions can safely be regarded as reflecting the practical experience in international construction disputes that involved cultural issues in Hong Kong. The data have to be viewed with the knowledge that in recent years over 10 large construction projects were completed or being carried out in Hong Kong, with many international parties attracted to the region. The key points of the survey results were 1. Over 75% of the respondents found that international construction projects had a greater chance of having disputes; 2. Over 75% of the respondents found that cultural differences among parties from different nationalities contributed to disputes in international projects; 3. Over 80% of the respondents found that Westerners and Asians have different attitudes toward disputes in international projects; and 4. Over 75% of the respondents found that Westerners and Asians have different attitudes toward resolving disputes in international projects. The results provide a good indication of potential areas for further research. The broad questions needed to be probed in more detail in the follow-up surveys.

Data Analysis of Surveys in London and Sydney, 1999 Return Rate of London Survey About 200 copies of the questionnaire were distributed to the conference delegates in London, of which 26 were returned, representing a 13% response rate for this group. Most of the questionnaires were returned during the conference, but some were returned by post. Only one copy was answered by a respondent who did not have direct involvement in international construction projects, and that copy was not included in the data analysis. Return Rate of Sydney Survey About 40 copies of the questionnaire were distributed to the conference delegates in Sydney. To make up for the views of Asian members who were absent from the plenary meeting, 7 copies were sent to experts in Hong Kong known to have direct involvement in international construction contract disputes. Among the

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Table 1. Answer Scores of London and Sydney Questionnaire Surveys Questions 共a兲 S⫽Average score 共1 if Yes, ⫺1 if No. zero otherwise兲 Q.1. Have you ever been involved with international projects? Q.2. International projects have more chances to give rise to dispute in comparison with domestic contract work Q.3. Cultural differences among all parties involved in project of different nationalities contribute to dispute in international projectsf Q.5. In comparison with Westerners, Orientals 共ethnic Chinese兲 have different attitudes toward resolving contract dispute in international projects. 共Note: most respondents indicated in Q.6 that Orientals prefer informal methods.兲 Q.9. In comparison with domestic construction contracts, do you find mediation with a neutral third party to facilitate negotiation has a less important role in resolving disputes on international projects?

S

N

R1 共%兲

1 0.263

38 38

NA 61

0.711

38

79

0.447

38

66

⫺0.053

38

39

36 33 30 32

64 27 10 0

3.816 3.667

38 33

11 3

3.314 4.848 3.257 5.028 4.514 4.886 5.242 7.324 4.889

35 33 35 36 35 35 33 34 36

34 6 34 6 9 3 0 3 14

2.946 2.50 3.243 3.556 5.265 4.118 6.063

37 36 37 36 34 34 32

22 28 11 14 9 15 0

共b兲 S⫽Level of importance 共1 is most important兲 Q.4. Parties of an international project prefer to use which of the following dispute resolution mechanisms to resolve disputes: Negotiation for commercial settlement between parties of a contract 1.694 Engage third neutral party to facilitate negotiation 2.485 Retain adjudicator to give ruling 3.80 Retain dispute resolution board to give ruling 4.313 Arbitration Multitiered dispute resolution mechanism specifically designed for project Q.7. Rank factors contributing to disputes in international projects Contract arrangements are not appropriate for project Local government intervention Cultural clash among parties involved in project Unlike domestic market, no need to worry about long-term business relationship Not familiar with local environment 共e.g., power supplies and infrastructure supports兲 Difference in legal system and interpretation of law Different economic muscles Noncooperation of local residents Capability in project management Q.8. Rank factors causing disputes in international projects: Tender has NOT been properly prepared and assessed Scope definition NOT clear Inadequacy of technical specification Unrealistic obligations for parties under contract Local government policy is NOT compatible with international practice Incompetence or unfairness of contractor administrator Dispute resolution mechanism is NOT integrated in contract N⫽number of respondents; R%1⫽percentage of respondents who ranked the corresponding factor 1.

total 47 questionnaires sent out, 13 copies were returned, and most of the respondents in this group were Asian. All returned copies were valid, representing a 27% response rate for this group. The scores for both surveys are presented in Table 1. In questions 2, 3, 5, and 9, the scores are based on the following counting system: 1 if yes, ⫺1 if no, and 0 otherwise. Suppose that the frequency for the above three options is f y , f n , f o , respectively; then the weighted average score is ( f y ⫺ f n )/( f y ⫹ f n ⫹ f o ). If the answer is neutral 共not in favor of yes or no兲, then the expected value of the average score should be close to zero. In questions 4, 7, and 8, the level of importance of the factors 共ranked from 1,2, . . . 兲 was calculated using the following formula: S⫽ 兺 k f k / 兺 f k

for k⫽1,2, . . .

(1)

where f k is the frequency of the response who has given k to the factor, and k ranges from 1 共most important兲 to 2, 3,.... Note that the index S cannot be less than one.

The average score S can be used to compare the importance of each factor. The factors in questions 4, 7, and 8 in the survey were ranked using the importance index. The general picture is given in Table 1, which shows the average score of respective factors.

Interpretation of Scores • All the respondents in this sample have been involved with international projects. • International projects have more chances to give rise to disputes in comparison with domestic contract works 共with an average score⫽⫹0.263); 61% of the respondents ranked this as factor 1. • The majority of the respondents indicated that cultural differences among all parties involved in the project did contribute to disputes 共with an average score⫽⫹0.711). About 80% of the respondents ranked this as factor 1. • There was also a strong indication that Orientals 共ethnic Chinese兲 prefer informal methods for resolving contract disputes

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Table 2. Ranking for Question 4 Subject to Conditions in Question 2

Table 4. Frequency of Questions 2 and 3

Question 2 Question 4

Yes

No

Parties to international project prefer to use which of the following dispute resolution mechanisms to resolve disputes: Negotiation for commercial settlement between 1 1 parties to contract Engage third neutral party to facilitate negotiation 2 2 Retain adjudicator to give ruling 4 3 Retain dispute resolution board to give ruling 6 6 Arbitration 5 5 Multitiered dispute resolution mechanism 3 4 specifically designed for project Note: To determine association between two variables x and y, we apply Spearman’s rank-order correlation: r⫽1⫺6⌺(x⫺y) 2 /N(N 2 ⫺1), where N is sample size; rank correlation⫽0.989.









in international projects in comparison with Westerners 共with an average score⫽⫹0.447); 66% of the respondents ranked this as factor 1. However, the results suggest that mediation with a neutral 3rd party to facilitate negotiation is irrelevant to resolving disputes in international projects. The score is not different from zero and is not sufficient to justify any other explanation. There is no significant comparison with domestic construction disputes. In question 4, respondents indicated that parties of an international project prefer to use negotiation for commercial settlements 共average score⫽1.694); 64% of the respondents ranked this as factor 1. The next preferred option was to engage a neutral 3rd party to facilitate negotiation 共average score ⫽2.485). In question 7, cultural clashes 共average score⫽3.257) and inappropriate contract arrangements 共average score⫽3.314) were the two most important factors contributing to disputes in international projects. In question 8, which related to contractual matters, the respondents indicated that unclear scope definition was the main factor causing disputes in international projects 共average score ⫽2.50), followed by improper tender arrangements 共average score⫽2.946).

Table 3. Ranking for Question 7 Subject to Conditions in Question 2 Question 2 Question 7

Yes

No

Rank factors contributing to disputes in international projects Contract arrangements are not appropriate for 1 2 project Local government intervention 8 4 Cultural clash among parties involved in project 2 1 Unlike domestic market, no need to worry about 4 6 long-term business relationship Not familiar with local environment 共e.g., power 7 3 supplies and infrastructure support兲 Difference in legal system and interpretation of law 6 5 Different economic muscles 5 8 Noncooperation from local residents 9 9 Capability in project management 3 7 Note: See note to Table 2; rank correlation⫽⫺0.350.

Question 3

Question 2

Answer

Yes

No

Indifference

Total

Yes No Indifference Total

21 7 2 30

1 2 0 3

1 4 0 5

23 13 2 38

Note: ␹ 2 ⫽26.6; number of degrees of freedom⫽2⫻2⫽4; ␹ 2 (p ⬍0.05)⫽9.49; ␹ 2 (p⬍0.01)⫽13.28.

Statistical Analysis Rank Correlation Study To know whether the views of the construction industry on the factors contributing to disputes in international projects are associated with their preferred resolution mechanism, a rank correlation study is employed. In Tables 2 and 3, the order of each factor in questions 4 and 7 are ranked according to the respondents’ answers to question 2. The rating is given as a number from 1, 2, 3 . . . , where 1 is the most significant. In Table 2, the rank-order correlation is 0.989, which suggests that the ranking of the factors in question 4 does not depend their answers to question 2. However, the rank-order correlation in Table 3 is ⫺0.35, which indicates that the ranking of the factors in question 7 would be different when the respondents have different views on question 2.

Statistical Findings The results imply that those who believe that international projects have more chances to give rise to dispute tend to agree with the rank order in question 7 共that is, cultural clashes and inappropriate contract arrangements are the two most important factors contributing to disputes in international projects兲.

Correlations Between Questions Tables 4 and 5 show the frequencies of questions 2 and 3 and questions 3 and 5, respectively. For instance, it is possible that the respondents who viewed international projects as having more chances to give rise to disputes than domestic contract work would agree/be neutral/disagree that cultural differences contribute to disputes in international projects. We categorize the answers to the questions as yes, no, and indifferent, respectively. Therefore, the following hypotheses are proposed: In Table 4, the null hypothesis is that the relative frequency of yes, no, and indifferent in question 2 is the same for the relative frequency of yes, no, and indifferent in question 3. The alternative

Table 5. Frequency of Questions 3 and 5 Question 3

Question 5

Answer

Yes

No

Indifference

Total

Yes No Indifference Total

17 8 5 30

3 0 0 3

5 0 0 5

25 8 5 38

Note: ␹ 2 ⫽23.8; number of degrees of freedom⫽2⫻2⫽4; ␹ 2 (p ⬍0.05)⫽9.49; ␹ 2 (p⬍0.01)⫽13.28.

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hypothesis is that the relative frequency of yes, no, and indifferent in question 2 is not the same for the relative frequency of yes, no, and indifferent in question 3. In Table 5, the null hypothesis is that the relative frequency of yes, no, and indifferent in question 3 is the same for the relative frequency of yes, no, and indifferent in question 5. The alternative hypothesis is that the relative frequency of yes, no, and indifferent in question 3 is not the same for the relative frequency of yes, no, and indifferent in question 5. The chi-square test can be applied to the 3⫻3 matrix in Tables 4 and 5 and is known as ␹ 2 ⫽⌺( f o ⫺ f e ) 2 / f e , where f o and f e represent the observed and expected frequencies respectively. The chi-square value in Table 4 is 26.6 and in Table 5 is 23.8. We compare the obtained chi-square value with the critical value. Therefore, we need a chi-square value of at least 13.28 共9.49兲 to reject the null hypothesis at the 0.01 共0.05兲 level of significance. As our obtained ␹ 2 in both cases exceeds the critical values, we must reject the null hypothesis.

Statistical Findings Hence, the views of respondents on question 2 共international projects have more chance for dispute兲 and question 5 共Orientals have different attitudes toward resolving disputes in international projects兲 would depend on their views on question 3 共cultural differences contribute to dispute in international projects兲.

Key Observations and Recommendations Key Observations of Research Results Combining the surveys carried out in 1998 and 1999, the following are the key observations of the research results: 1. Cultural differences contribute to disputes in international projects. Those who believe this tend to take the view that Orientals have different attitudes toward resolving contract disputes in such projects. This also suggests that those who believe that cultural differences contribute to disputes in international projects tend to agree that such projects have more chances to have disputes. 2. Irrespective of whether the project is international or not, the preferred dispute resolution 共DR兲 mechanisms in order of priority are • Negotiation for commercial settlement 共the obvious choice兲; • Engagement of a neutral third party to facilitate negotiation; and • Multitiered DR mechanisms. 3. The most significant factors contributing to disputes in international projects are • Contractual arrangements that are not appropriate; and • Cultural clashes. 4. The least significant factors contributing to disputes in international projects are • Noncooperation from local residents; and • Local government intervention. 5. For contractual matters, the most significant factors contributing to disputes in international projects are • Project scope definitions that are not clear; and • Tenders that are not properly prepared and assessed. 6. For contractual matters, the least significant factors contributing to disputes in international projects are

• DR mechanisms that have not been integrated into the contract; and • Local government policy that is not compatible with international practice.

Recommendations for Further Study From the literature review and the results of this study, the writers recommend further study of the following aspects of conflict management and contractual arrangement related to cultural issues: • As cultural diversity exists within a country or region, it will be more appropriate for further research to focus on the two cultural syndromes: collectivism and individualism. • Many publications 共Low 1996; Chan 1997; Singh 1998兲 advocate that collectivist cultures prefer mediation and procedure with animosity reduced. This position might overlook the fact that because of their ‘‘group value,’’ collectivists have very different 共almost opposite兲 attitudes toward opponents who are ingroup or outgroup members when dealing with conflicts, particularly when the conflict is full-fledged. Further study may help to understand procedural preferences and contractual arrangements when dealing with international construction conflicts. • People of two different cultures have different tolerances for uncertainty avoidance 共Hofstede 1997兲. Such considerations should be taken into account to study the contractual arrangements that contribute to disputes in international projects. • Project scope definition and tender assessment are factors that cause disputes. This general conclusion may apply to domestic and international construction projects and warrants further study to investigate the underlying criteria that apply only to international projects. • An appreciation of the factors that influence international construction projects calls for a more comprehensive study of contextual factors, which include the general nature of construction projects, socioeconomic characteristics of international projects, international legal culture and the institutional setups for dispute resolution, and international sociocultural differences in perceiving and resolving disputes. A very demanding integrative research process will be required to investigate all the influential factors and their correlations.

Conclusion Cultural differences can do substantial damage to the organization of an international construction project. This study has illustrated the views of construction professionals on the extent to which culture influences disputes and the choice of dispute resolution mechanisms. It provides good groundwork for understanding the influential forces that affect international projects. Cultural diversity in international projects cannot be avoided or ignored. A better understanding of influential cultural factors will help to reduce and manage conflicts in international construction projects. Recognizing and sensibly manipulating cultural differences could allow improvements in the efficiency and profitability of international projects. For future research on managing international construction projects, account should be taken of the influence of the behavior, values, beliefs, and cultural background of the participants.

Acknowledgments The first writer thanks Professor J. Uff for permitting him to conduct the survey in his seminars and conferences. He is also

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grateful to all participants in those seminars and conferences and to the delegates of the W87 Plenary Meeting in Sydney, 1999, who responded to the questionnaire survey.

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