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
Highlights
Whilst the construction industry has developed over the years there is increasing pressure to become more innovative and deliver better value for money for clients
There are good arguments to the contrary, Winch (2003) for example argues that the comparison between construction and manufacturing is inherently biased against construction if research and development (R&D) is used as Australasian Journal of Construction Economics and Building the criteria, this is a widely held view
The purpose of this paper is to look at the R&D intensity and level of innovation that characterizes the construction industry, and relate these to the procurement systems and market structure in the industry
Summary
Whilst the construction industry has developed over the years there is increasing pressure to become more innovative and deliver better value for money for clients. There are good arguments to the contrary, Winch (2003) for example argues that the comparison between construction and manufacturing is inherently biased against construction if R&D is used as Australasian Journal of Construction Economics and Building the criteria, this is a widely held view. One issue that this debate raises is whether the determinants of innovation and the rate of technological advancement in construction are well understood. Using Hobday‟s (1998) ideas on innovation in complex systems, as developed by Gann and Salter (2000), it is may be that many of the significant factors influencing innovation and development of technological capabilities in construction are found in aspects of custom and practice that are taken for granted by the industry
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