Entrepreneurial innovation in the construction sector: overcoming process discontinuities in projects
Hughes, W.
It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing. Abstract/SummaryTechnological innovation seems uncommon in the construction sector. The traditional organization of construction supply involves sub-contracting and complex networks of contracts. The reasons for this are explained through the application of transaction cost economics. Sub-contracts create vertical discontinuity in the process. Horizontal discontinuity occurs as work is handed over from one stage to another. For construction companies, process discontinuity is problematic. The business models they develop explain how they operate within this fragmented process. We argue that process discontinuity, vertical and horizontal, obstructs the development and implementation of technological innovation. Further, the involvement of each part of the project organization comes about through contracts, which crystallize the nature of each contribution too early in the process. This contractual process discontinuity is a difficult boundary for innovative ideas to cross. While there are multiple methods of overcoming these problems in practice, we examine one case of an innovative company that has removed process discontinuities, horizontally and vertically. They are also technologically innovative. This empirical work explores a particularly interesting solution that seems well-aligned with encouraging the emergence of technological innovation. The indications are that it may be useful for construction firms to explore new business models, utilizing whole-scale integration. While vertical integration may not be the only answer, it seems to carry less organizational and legal complexity than the more common solution of developing of alliances and/or joint ventures. In other words, the findings from this case indicate that traditional industry structures and norms do not necessarily encourage technological innovation. Innovative entrepreneurs may operate outside traditional market structures.
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