The purpose of this research is to examine how complex organizations function in conflict circumstances. This research aims to explain how a project firm, a collection of firms that work to accomplish a goal, maintains its associations with the partners who make up the organization and with external stakeholders. In analyzing these complex organizations, the authors create a theory that explains how and why basic traits, such as conflict, influence the potential for success, as well as how and why their composition and governance differ for enterprises with partners. To answer these concerns, the study used a dataset from 2009 to 2019 that included about 3000 project groups with more than 100,000 partners operating in 135 countries. Therefore, this study presents a contingency theory of project organization governance by performing an empirical analysis of the project firm on a size and scale not before studied in project management research. This study explores three forms of diversity: functional duties, separation of institutional values, and economic inequality, in order to identify how each type promotes conflict between project participants and external stakeholders. In addition, this research indicates that teamwork between diverse persons may minimize competition. This paper proposes a contingency theory of project organization governance by addressing the absorption of resources and connections that cause conflict and affect the project organization's performance.