An Institutional Economic Analysis of the Decision to Do-it-yourself in Housing Renovation

Abstract

This paper examines home renovators’ decision in choosing do-it-yourself (DIY) or hiring contractors. DIY may reduce financial pressure but may lead to potential domestic discord and perils of incompetence; hiring contractors may alleviate time pressures but may require more financial resource. This choice is modelled as analogous to Williamson’s corporate strategic decision between ‘outsourcing’ and ‘internalisation’ in the context of vertical integration, and extended via Richardson’s capabilities-based theory, with social reputation effect taken into account. Based on a survey of Brisbane home renovators, it is found that the Richardson’s thesis seems stronger than the Williamson’s when applied to housing renovation and that ‘trust’ issues in respect of contractors are paramount.