Inter-firm collaboration in the implementation of structural innovations in building construction

Abstract

It is increasingly recognized that the development of many innovations typically requires collaboration across disciplines because an innovation in one area will often necessitate changes in other areas. In the construction industry, the problem is not merely one of interdisciplinary collaboration within a vertically integrated firm, but one of inter-firm collaboration over the life of a project because dozens of specialized firms typically work together on the delivery of built facilities. Thus, firm boundaries and other factors can affect the success of the implementation of innovations in construction. The goal of this research is to gain an understanding of the factors that influence inter-firm collaboration in the development and implementation of construction innovations. Ten case studies of structural system innovations implemented on 17 projects were developed in order to analyze the role of these factors, including contract type, delivery system, transaction cost, bond, appropriation of costs/benefits, and sharing of competencies on inter-firm information. The results from the case studies often contradict the expectations of principal-agent theory and other areas of management and economic theory related to inter-firm collaboration for innovation. For example, all of the innovations were implemented under outcome-based contracts. This result is surprising because the common perception in the literature is that the widespread use of outcome-based contracting hinders innovation. Also surprising was that, of the innovations introduced by contractors under outcome-based contracts, many were quality enhancing. However, one would expect that, due to the cost pressures of their contract, a contractor would be more likely to implement cost-saving innovations. A strong relationship was found between innovative activity and the integration of the design and construction functions, supporting the belief that the traditional delivery system used in construction, which separates design from construction, is a barrier to innovation. In addition, it was found that, in this set of cases, contractors were more likely to introduce innovations on projects that used integrated delivery systems. It was also found that investment in co-specialized assets occurred in conjunction with outcome-based contracts. This finding contradicts the expected result, which is that such investment should occur most frequently in behavior-based contracting situations. it is hoped that this knowledge will enhance our understanding of the process of innovation development and implementation in the construction industry in particular, and in other industries in general, specifically in fields where the design and realization of complex systems involves multiple firms. Owners can use this information to organize projects to implement innovations successfully and construction and other companies can use it to improve their strategies regarding innovation.