Business Models and Performance of International Construction Companies

Youjin Jang,Hyun-Soo Lee,Moonseo Park,Yonghan Ahn,Nahyun Kwon

doi:10.3390/su11092575

Abstract

As the construction business environment becomes ever more competitive and intense, business models are receiving considerable attention as potential sources of sustainable survival and growth. In order to design sustainable business models in today’s global construction market, it is important to understand the business models that would make a construction company achieve higher performance in terms of profitability, growth and market competitiveness. Therefore, this study identifies the business model variables of international construction and statistically analyzes the relationship between business model variables and firm performance guiding 72 international construction companies over a six-year period from 2009 to 2014. We examine the effect of business model variables on firm performance and how different business model variables can lead to different outcomes. The results show that business models play significant roles in determining the performance of international construction companies, with financial resources being a major determinant of profitability and regional diversification a major determinant of revenue growth and market competitiveness. Each business model variable had a different effect on profitability, growth and market competitiveness. This confirms that there are ideal combinations of business model variables that can help firms achieve higher performance. These findings are expected to provide useful guidance to assist executives’ decision making when designing a business model that will enable their firm to thrive in the global marketplace.

Highlights

The construction industry has been characterized by poor performance for decades [1], with many of its problems through to arise from low-bid tendering
This study examined the effect of business model variables on firm performance to explain what decisions on business model determine firm performance
In order to achieve superior performance and competitive advantage in the globalized construction market, executives must learn how to design business models that will enable their companies to successfully navigate in this complex, high-pressure business environment

Summary

Introduction

The construction industry has been characterized by poor performance for decades [1], with many of its problems through to arise from low-bid tendering. Cost cutting is the only way to be awarded contracts at the project level, but this often comes at the expense of worse performance for construction companies. For this reason, construction companies are increasingly interested in understanding the potential sources of competitive advantage at the corporate level. A company’s business model refers to the underlying logic of how that company operates and creates value for its stakeholders [3,4,5,6,7]. Scholars have suggested that a company’s business model may be a major source of competitive advantage and superior performance [8,9]

Methods

Results

Conclusion