An Analysis of International Construction Risk Factors on Partner Selection by Applying ANP Approach

Abstract

International construction involves uncertainties similar to domestic construction projects as well as risks specific to the host country. International contractors usually establish partnerships with a local firm in order to reduce risks and obtain knowledge of current local business practices and general knowledge of the local economy, politics and customs since they are unfamiliar with these institutional environments. Selecting an appropriate partner and considering the political, economic and socio-economic environment of a foreign country is essential for the formation and operation of a successful venture. Industry related factors and project related factors are the common risk factors that affect both domestic and international construction projects. In this respect, host country related factors, industry related factors and project related factors are considered as the main parameters of the partner selection process for international construction joint ventures (ICJVs), and the criteria of these factors are determined thorough literature review. The aim of this study is to assess the priorities of the determined risk factors in partner selection for ICJVs. Analytical network process (ANP) is selected as the most appropriate tool for this study as it allows interdependencies between components of a problem. A two phases of survey was conducted. Within the context of this study, the priorities and the weights of the determined risk factors are revealed. As a result; political stability, socio-economic stability, force majeure, inflation, government policy to construction sector and the strength of the legal system are found to be most important determinants of the partner selection process. The paper is relevant to both industry practitioners and researchers. Industry practitioners may assume the weighted criteria for partner selection or apply ANP approach to determine the priorities of their own set of selection criteria. It is also possible to add or remove a risk criterion according to the conditions of the specified country.