Diversification in the international construction business

Abstract

Economic globalisation has created an interdependent market that allows companies to transcend traditional national boundaries to conduct business overseas. In the international construction market, companies often adopt diversification as a strategy for growth, for risk management, or for both. However, the diversification patterns of international construction companies (ICCs) as a group are barely clear. The primary aim of this research is to cover this knowledge void by mapping ICCs' diversification patterns in both business sectors and geographical dispersal. It starts from a literature review of diversification theories. Based on the review, a series of propositions relating to ICCs' diversification are proposed. Data is gleaned from Engineering News-Record and database i.e. Bloomberg and Capital IQ, ranging from 2001 to 2015. By testing the hypotheses, it is found that larger ICCs prefer to diversify than their smaller counterparts. Most of the ICCs tend to diversify to geographical markets with similar cultural or institutional environment. Market demands drive ICCs to diversify to different geographical markets while they are more prudential in venturing into new business sectors. The research provides not only valuable insights into diversification patterns of ICCs, but also a solid point of departure for future theoretical and empirical studies.

A four-quadrant conceptual framework for analyzing extended producer responsibility in offshore prefabrication construction

“…Some aspects of prefabrication construction transcend national boundaries, since economic globalization has created an interdependent market for construction companies ( Ye et al., 2018 ). This is called offshore prefabrication construction ( Lu and Yuan, 2013 ).…”

Product diversification and large construction firm productivity: the effect of institutional environments in Malaysia

“…Changes in institutional environments because of more liberal policies may affect industry conditions, thus affecting PD effectiveness (Holmes et al, 2018;Ye et al, 2018). However, institutional environments themselves can be separated into economic, regulatory and political institutions.…”

“…One key strategic decision that LCFs consider is product diversification (PD): this comprises related diversification (RD) and unrelated diversification (UD). RD denotes diversification in products related to construction business (Aghimien et al, 2018) and includes property development, civil engineering building construction and speciality construction trades, whereas UD denotes diversification in products unrelated to construction business, such as utilities, manufacturing and retail businesses (Ye et al, 2018). The decision to embark on one type of PD instead of another, or a combination of both, is risky, as inappropriate PD can increase the insolvency risks of LCFs (Sung et al, 2017).…”

“…An ideal PD strategy can lead to an improvement in technical efficiency (TE) through the application of appropriate technology. Also, LCFs can improve mix efficiency (ME) and scale efficiency (SE) through the exploitation of the scope/size of firm segments and firm size, respectively, indicating that managers can maximise the use of resources through PDthe resulting improvement of productivity reducing associated PD risks (Hashai, 2015;Ye et al, 2018). However, the main challenge faced by firms is in determining the appropriate PD under conditions of limited information, in this case, by answering the question of what type of PD could improve firm performance (Alashwal and Alduais, 2019;Horta et al, 2016;Kim and Reinschmidt, 2011).…”

Corporate social responsibility “glocalisation”: Evidence from the international construction business

“…Today, construction is a significant component of international business, whereas international organisations such as the World Bank (Tulacz & Reina, 2018). Unlike manufactured goods, construction products (e.g., a road or a dam) cannot be designed and constructed in advance and sold "off-the-shelf"; rather, they are bespoke, purposely designed, and individually constructed for a client, and a final product is fixed in a locality to make enduring impacts, positive, or otherwise (Ye, Lu, Flanagan, & Ye, 2017). The construction industry is thus widely perceived as heterogeneous in considering CSR issues.…”