Innovation in Small, Project‐Based Construction Firms^*

Abstract

Relevant literature is synthesized to provide a holistic picture of our current knowledge of innovation in small, project‐based firms, highlighting significant gaps in the broad areas of ‘focus and outcome’, ‘organizational capabilities’, ‘context’ and ‘process’. Research findings from fieldwork focused on the construction industry are offered to address these gaps. In particular, a consensus model is given of the organizational factors dynamically at play. It is shown that typically the innovations of small, project‐based firms are closely tied to their operational activities and are pushed forward by owners who utilize very scarce resources to make progress in the interstices of normal business. This leads to an emphasis on taking up established technologies through ‘learning on the job’. Growth per se is not an important target. The motivation to act is generally to get past a survival mode of operating and to achieve stability by satisfying clients. These characteristics contrast with large organizations, especially in terms of the role of the owner, the close focus on niche markets and the lack of slack resources to innovate in parallel with normal business. It is hoped that these results will be of interest to other sectors where small, project‐based firms operate.

Novel product innovation in project-based firms: explaining innovation where interdependent firms deliver complex system-level outcomes

“…On the negative side of the argument, in CoPS industries like construction and oil and gas, customers have distinct reputations for being incrementally innovative (Barrett & Sexton, 2006;Daneshy & Donnelly, 2004;Hardie & Newell, 2011;Keegan & Turner, 2002;Manley, 2008;Reichstein & Salter, 2006). In these environments, customers may view innovation as costly, risky and even dangerous (Keegan & Turner, 2002).…”

“…In CoPS settings in particular, there is a very tight link between customers and the innovative projects that they commission, because these are most often bespoke instantiations demanded by a limited customer set (Hobday, 1998). In the process of developing these tailored innovations, suppliers must react to clients' shifting requirements and needs (Barrett & Sexton, 2006). This activity is evident in the oil and gas industry, where the innovation and diffusion of product technology is tightly linked with projects Daneshy & Donnelly, 2004).…”

“…This is because in CoPS projects, customers may tend to seek out tried-and-true technologies that have been used successfully in other projects to minimise costs and risks, therefore putting pressure toward incremental (instead of novel) improvements in technologies (Barrett & Sexton, 2006;Daneshy & Donnelly, 2004;Hardie & Newell, 2011;Keegan & Turner, 2002;Manley, 2008;Reichstein & Salter, 2006).…”

“…In these environments, customers may view innovation as costly, risky and even dangerous (Keegan & Turner, 2002). In construction in particular, customers have strong reputations for disfavouring novelty, instead placing preference upon tried and true technologies (Barrett & Sexton, 2006;Daneshy & Donnelly, 2004;Hardie & Newell, 2011) that have clearly demonstrated cost savings in other projects (Manley, 2008).…”

“…Embeddedness with customers allows firms to adapt to the inevitable changes in customer preferences, and thus adapt their innovation activities accordingly to improve chances of success (Barrett & Sexton, 2006;Bohlmann et al, 2013;Wagner, 2010).…”