Innovation, Procurement and Construction Industry Development

Abstract

The implications for analysis of innovation in construction of theoretical developments in industrial organisation are considered in this research, as an attempt to outline a new approach to construction innovation incorporating the ideas found in knowledge based, technology centred models. The paper firstly summarises characteristics of the construction industry, focusing on their effects on innovation, before surveying some of the ideas about the sources of innovation and the expansion and application of knowledge. Construction can be seen as an industry with limited scope for knowledge externalities, where the procurement methods used by the industry"s clients do not pay for innovation. The following discussion uses recent developments in the research on the economics of innovation and industrial organization theory, such as research intensity and the endogenous sunk costs in competitive, fragmented, low research intensity industries. The effects on R&D of procurement methods and on industry structure are discussed, with a focus on the appropriability of innovations and the role of the client on the Heathrow Terminal 5 project. The paper concludes that the procurement methods used for building and construction projects appears to be a determining factor in the level of innovation in the construction industry.

Innovation in alliancing for improved delivery of road infrastructure projects

“…Over the past few decades, construction procurement has become a main issue in the industry due to the fact that the method used by the client to procure a project determines the nature of competition in the industry and this in turn influences the extent of innovation on their projects (De Valence, 2010). Substantial literature in procurement research (e.g.…”

Defining an Industry: What is the Size and Scope of the Australian Building and Construction Industry

“…At the same time a Commonwealth Government agency, the Construction Industry Development Agency (CIDA), was working with industry and publishing reports on issues identified in the Final Report. CIDA's main policy initiatives were pre-qualification criteria, Codes of Conduct and Tendering, and the development of best practice and continuous improvement tools (de Valence 1997).…”

Vectors of technical innovation delivery by small and medium Australian construction firms

“…In the Australian context, this belief was widely voiced in submissions to the Cole Royal Commission into the Building and Construction Industry (Cole, 2003). In his Summary of Findings and Recommendations, the Royal Commissioner listed as his first report outcome that there was "an urgent need for structural and cultural reform" (Cole, 2003, p.3).…”

“…Reforms to supply chains, procurement systems and quality control strategies have made significant improvements in industry performance in recent times (Briscoe et al, 2004;de Valence, 2010;Love, Irani and Edwards, 2004). Many leaders of construction firms are aware of the potential for industry disruption generated by digitalization and globalization.…”