Impact of owner involvement on innovation in large projects: Lessons from power plants construction

Abstract

Innovation in complex engineering projects is hampered by information asymmetries which attend joint problem solving by owners and external organizations. This uncertainty creates additional informational asymmetries between owners and firms engaged in designing, building, and supplying projects. Industrial marketing suggests that overcoming these asymmetries is easier when owners are knowledgeable and part of the design process. We examine whether the same proposition holds for innovation in complex engineering projects. We focus on the relationship between innovativeness of complex engineering projects and internal owner capabilities. We test hypotheses derived from agency and organization theories of innovation. Our results indicate that projects where owners have internal capabilities are generally less innovative than projects where owners lack internal capabilities.