building relationships for technological innovation

Journal of Business Research 58 (2005) 1240–1250

Building relationships for technological innovation

Elsebeth Holmen*, Ann-Charlott Pedersen1, Tim Torvatn2

Department of Industrial Economics and Technology Management, Norwegian University of Science and Technology, Alfred Getz vei 1,

N-7491 Trondheim, Norway

Received 25 February 2002; received in revised form 28 April 2003; accepted 8 October 2003

Abstract

Because the construction industry often is characterised by adversarial relations, the corresponding lack of cooperation has been seen as a

major contributing cause for the low level of innovation in the construction industry. Therefore, many initiatives try to address the lack of

innovation by attempting to increase cooperation between companies.

By taking empirical data from two projects that are actively trying to organise technological innovation in a cooperative manner across

firm boundaries as the point of departure, we illustrate and discuss challenges with introducing relationships and networks as an

organisational form in the construction industry. We investigate the outcome of such active initiatives in terms of the creation of relationship

substance for technological innovation. Furthermore, we scrutinise and discuss how these results were affected by the existing structure of the

construction industry.

D 2004 Elsevier Inc. All rights reserved.

Keywords: Technological innovation; Industrial networks; Relationships; Construction industry

1. Introduction and purpose

There is little dispute that technological innovation is

important for the prosperity of firms, industries and society

(see, e.g., Dosi, 1988). At the same time, there is general

agreement that there is too little technological innovation in

the construction industry (Koskela and Vrijhof, 2001). Join-

ing these two observations or conjectures, it is hardly sur-

prising that the lack of technological innovation in the

construction industry is seen as a problem. In a number of

countries, policy makers, practitioners and researchers alike

have taken various forms of initiatives aimed at bringing

about technological innovation in the construction industry.

Such initiatives are often inspired by theories developed on

the basis of studies of other industries that are considered to

be significantly more innovative than the construction indus-

try. While innovation was once considered to be the province

of a firm, researchers studying technological development

increasingly stress the importance of cooperation across firm

0148-2963/$ – see front matter D 2004 Elsevier Inc. All rights reserved.

doi:10.1016/j.jbusres.2003.10.010

* Corrsponding author. Tel.: +47-73-59-04-64; fax: +47-73-59-3565.

E-mail addresses: [email protected] (E. Holmen),

[email protected] (A.-C. Pedersen), [email protected]

(T. Torvatn).1 Tel.: +47-73-59-35-03.2 Tel.: +47-73-59-34-93.

boundaries, in interfirm relationships and networks (Hakans-

son, 1989). Because the construction industry often is char-

acterised by adversarial relations, the corresponding lack of

cooperation has been seen as a major contributing cause for

the low level of innovation in the construction industry.

Therefore, many initiatives try to address the lack of innova-

tion by attempting to increase the cooperation between

companies. Hence, organisational innovation is seen as a

prerequisite for technological innovation.

Bringing about organisational change is a challenge in

itself, whether the change is aimed at the intrafirm, the

interfirm and/or the industry level, as inertial forces work

against change. This implies that attempts at increasing the

level of innovation and cooperation in the construction

industry are expected to (and do) encounter problems.

However, such attempts and problems should be studied

so that it is possible to learn from them. The purpose of this

article is twofold. First, we aim to investigate the outcome of

such active initiatives in terms of the creation of relationship

substance for technological innovation. Second, we aim to

scrutinise and discuss how these results were affected by the

existing structure of the construction industry (i.e., project-

based episodic coordination).

In the next section, we present literature focusing on the

construction industry and identify a number of character-

E. Holmen et al. / Journal of Business Research 58 (2005) 1240–1250 1241

istics of the industry. Furthermore, we present and discuss

literature on interorganisational relationships and networks,

of which technological innovation is assumed to be an

integral part, and draw attention to three main concepts,

which we use to discuss cooperative technological innova-

tion across firm boundaries. In the fourth section, the

methodology and the empirical base, containing two tech-

nological innovation initiatives, are briefly introduced. By

taking these initiatives, organised in a cooperative manner

across firm boundaries, as the point of departure, we

illustrate, analyse and discuss the challenges with introduc-

ing relationships and networks as an organisational form in

the construction industry.

2. The construction industry

Most scholars agree that the construction industry is

characterised by a low degree of innovation. This means

that the main sources of innovation in the construction

industry are suppliers of materials and machinery (Pries

and Janszen, 1995; Dubois and Gadde, 2000; Miozzo and

Dewick, 2002) and not architects, consulting engineers,

main contractors, subcontractors, etc. In trying to explain

why this is the case, several inquiries have been made into

the idiosyncratic characteristics of the construction industry.

The construction industry is characterised by a tender

system that leads to a focus on standardisation of

products and subcontracting work, the ability to compare

prices and choose the lowest price per product and subcon-

tract, competition between ‘identical’ and independent sup-

pliers, and the use of different suppliers in each construction

project (Thompson et al., 1998; Dubois and Gadde, 2002a).

In addition, the parties, to a large extent, rely on stand-

ardised types of contracts that limit the respective respon-

sibilities of the parties (Cox and Thompson, 1997). These

characteristics are seen as impediments to innovation, for

example, ‘‘in several countries [..] it appears that the

practice of awarding contracts through lowest cost tender

may act as a constraint to innovation and R&D spending

among contractors’’ (Miozzo and Dewick, 2002, p. 990). In

a similar vein, Dubois and Gadde (2000, p. 17) suggest that

‘‘strong reliance on standardised products and standardised

interfaces between firms clearly does not foster technical

development. [..] Therefore, it is not surprising that the only

traces of product development found in this study were

related to the input side of the material producers’’.

Furthermore, most work within the construction industry

is organised as (construction) projects, which are always

unique in some respects, also implying that it is not feasible

to make and test full-scale prototypes (Gann and Salter,

2000). First, few clients are able to provide demand for a

series of relatively similar projects; therefore, such projects

are intermittent and dependent on highly unpredictable and

heterogeneous demand of different clients (Easton and

Araujo, 1997). The discontinuous and temporary nature of

projects presents a problem for the accumulation of knowl-

edge in the construction industry, as a new learning curve is

climbed by the supplier each time (Cox and Thompson,

1997). Second, individuals from different firms who work

together within one project only infrequently meet each

other again in other projects (Welling and Kamann, 2001).

Even within a single project, substitutions of individuals

frequently takes place. Third, within a single project, the

design and the construction (implementation) processes are

often separated, which implies that possible feedback from

the construction process is not taken into account in the

design process; within a single project, the design remains

fixed. Thereby, contractors (and subcontractors) often have

very little autonomy to alter design specifications and

introduce product and process innovations (Miozzo and

Dewick, 2002). Even so, it is also often pointed out that

in single construction projects, ‘‘firms have to manage

networks with complex interfaces’’ (Gann and Salter,

2000, p. 959) because of technical and logistical interde-

pendencies, which cut across firm boundaries. Consequent-

ly, at least some coordination necessarily takes place

between the involved firms. However, in general, the

construction industry and single projects are characterised

by ‘‘decentralized decision-making and informal coordina-

tion (which) prevent all systematic optimization and inno-

vative evolution’’ (Koskela and Vrijhof, 2001, p. 198). The

tender system, the project-organisation of most work within

the industry, etc., lead to a structure of firms with market-

like relationships, even if construction firms encounter the

same set of counterparts in various construction projects

over time. The construction industry is often described as a

setting filled with low trust and opportunism in action

(Korczynski, 1994).

The lack of innovation within the construction industry is

generally perceived as a problem. In several European

countries, there is ongoing discussion, on the level of firms

as well as on the level of the industry, on how the rate of

innovation may be increased. It has been suggested that the

lack of continuous, dense relationships between firms may

be the main reason for the lack of innovation in the

construction industry (Cox and Furlong, 1997). Hence, it

is increasingly assumed that interfirm cooperation is a

requirement for increased innovation. To get inspiration

for enlarging technological innovation via organisational

innovation, practitioners, policy makers and researchers

alike often look to manufacturing industries, which are

viewed as some kind of ‘ideal’. However, in manufacturing

industries, production takes place within controlled factory

environments, and the supply of goods is merely a repeat

process of a production line. Therefore, some scholars argue

that such practices may not be immediately transferred to

the construction industry. As Cox and Thompson (1997, p.

128) claim, the type of cooperation on innovation in

manufacturing has ‘‘very little application to an industry

such as construction where repetition is rare and works are

procured typically on a one-off project-by-project basis’’.

E. Holmen et al. / Journal of Business Research 58 (2005) 1240–12501242

Somewhat contrary to this, Koskela and Vrijhof (2001)

suggest that concepts and methods for innovation, devel-

oped on the basis of manufacturing industries, may be

transferred if the theoretical core of the concepts and

methods can be abstracted from its original industrial setting

and then recreated in an application that fits the peculiarities

of construction.

Such differences of opinion, notwithstanding, many of

the initiatives taken are based on models and theories

developed on the basis of experiences in other industries,

where benefits of substantial relationships are reaped. We

argue that it is important to study some of these initiatives at

‘building relationships for technological innovation’, which,

for the moment, are carried out in the construction industry.

By studying the results of such initiatives, it may be possible

to learn, and, on the basis of such learning, firms in the

construction industry (and policy makers) may revise sub-

sequent initiatives and endeavors into cooperative techno-

logical innovation.

3. Relationships, networks and technological innovation

To understand the initiatives at building relationships for

technological innovation in the construction industry, we

may start by scrutinising the models and theories that seem

to underlie the initiatives and the assumptions made and

propositions put forward in these. It quickly becomes

apparent that the theories on which the initiatives are based

are seldom made explicit. This implies that we need to

search for theory focusing on the interplay between inter-

firm relationships and technological innovation. One such

theory is the IMP perspective. This perspective has focused

explicitly on the value of interfirm relationships for decades

(see, e.g., Hakansson, 1982; Axelsson and Easton, 1992;

Hakansson and Snehota, 1995, 2000; Dubois, 1998; Ford et

al., 1998; Gadde and Hakansson, 2001; Ford, 2002;

Hakansson and Ford, 2002). Within this perspective, sub-

stantial conceptual experimentation has been carried out

towards understanding interfirm relationships and networks.

Furthermore, the interplay between technological innova-

tion and relationships has been paid considerable attention.

Therefore, this perspective seems a fruitful point of depar-

ture when investigating attempts at cooperating on techno-

logical innovation.

In the IMP perspective, relationships are the main unit of

analysis; however, because relationships are connected and

thereby form networks, the latter is an important unit of

analysis, too. One basic assumption of the perspective is that

firms are embedded in the networks of other firms (and

relationships), to which the focal firms have substantial,

continuous relationships, which, furthermore, are connected

to each other. Hence, a single firm must be viewed in lieu of

its relationships to other firms in the network and the

relationships between the other firms in the network. There-

by, the value of a firm’s actions, investments and efforts at

technological innovation, etc., is dependent on what other

firms do, which, in turn, is dependent on the structure of and

processes in relationships between firms in the wider

network.

What is a relationship? An oft-used definition is that of

‘‘mutually oriented interaction between two reciprocally

committed partners’’ (Hakansson and Snehota, 1995, p.

25). However, in addition to such an abstract definition,

several attempts have been made at coming to grips with

what a relationship is. One such attempt concerns the

distinction between a relationship and an episode. A rela-

tionship can be viewed as a set of connected exchange

episodes (or business transactions). Such episodes are lim-

ited in time and may concern the production of deliveries,

joint development projects, product tests, negotiations of

long-term contracts, education and exchange of personnel,

etc. However, prior to a single exchange episode, other

episodes may have taken place, in which some kind of

‘substance’ or ‘mutual orientation’ has been created that is,

a relationship may have been brought into existence. If a

relationship exists prior to a single exchange episode, it is

assumed that the relationship will, in some way or another,

influence the single exchange episode. Hence, each episode

is assumed to be affected by the relationship of which it

forms part, and each episode, in turn, affects the relationship

itself (see, e.g., Andersen and Christensen, 2000; Ford,

2002). This means that the explanation for a single

episode is to be sought not only in the content of the single

episode but also in the content of the relationship surround-

ing the single episode. Pursuing this logic, and by discern-

ing between simple and complex episodes, Gadde and

Hakansson (1993) propose Table 1 for analysing a focal

episode.

Other attempts at understanding what a relationship is

concern the different types of substances that a relationship

may contain. To understand the economic consequences of

relationships in networks, Hakansson and Snehota (1995)

proposed an analytical framework consisting of (a) three

layers of substance of relationships, firms and networks and

(b) three functions of relationships. According to the frame-

work, relationships consist of three layers: activity links,

actor bonds and resource ties. Furthermore, a relationship

between two firms has a function for (a) the relationship

(dyad) in itself, (b) the respective firms involved in the

relationship and (c) third parties with which either or both of

the two firms also have relationships.

3.1. Resource ties, actor bonds and activity links

The concept of resource ties captures a number of

aspects. Knowledge and awareness about the resources of

a counterpart are important aspects. In a relationship,

resource ties develop as the counterparts interact and be-

come aware of each other’s resources, i.e., as they learn.

Such learning includes knowledge into which resources the

Table 1

Analytical approach for relating episode and relationship (adapted from

Gadde and Hakansson, 1993, p. 60)

No previous relationship Well-developed

relationship

Simple episode Because behaviour

within the focal

episode does not

depend on previous

episodes, the focal

episode can be

analysed as discrete

Because

earlier

exchange

episodes

have taken

place, the

focal episode

Complex episode To carry out exchange

in a focal complex

episode, the involved

parties may need to

orient themselves

towards each other.

Therefore, the focal

episode should be

seen in relation to the

‘relationship’ being

built up during this

‘first’ episode and

possible future

expectations

need,

whether

simple or

complex,

to be

seen

in relation

to the

existing

relationship

and

possible

future

expectations


counterpart has access to and how the resources are used at

present. However, the knowledge may also comprise insight

into the combinations in which the resources have been tried

out, successfully or unsuccessfully, earlier on. Furthermore,

the knowledge may give rise to ideas about how the

resources may be used in new combinations. Interaction

and knowledge about the resources of counterparts often

lead to an adaptation of resources. The counterparts may

adapt some of their resources towards each other in various

ways (Hakansson and Snehota, 1995). For example, adap-

tations may be made of the features of some resources, of

the ways in which some of the resources are used and of the

resources that are available. Both knowledge and awareness

of the counterparts’ resources and adaptations of resources

can be investments; that is, the incurred costs and expected

revenues do not occur in the same period. For example,

companies may acquire or develop new resources, the

contemplated use of which is mainly related to a particular

counterpart. Furthermore, companies may jointly develop

new products, processes and technologies. Innovation,

which traditionally is defined as the carrying out of new

combinations of resources in a trial-and-error manner, is

therefore closely related to resource ties, which develop

over time. It is assumed that the resource layer of a

relationship may vary in type and strength. We may say

that its strength depends on the width and depth of the

knowledge and awareness, which the counterparts have of

each others’ resources. The strength is also related to the

number and types of mutual adaptations, which are made of

resources, including investments in real capital or new

product designs, and to the durability of adaptations made.

Hence, ‘‘as resource ties develop between two companies

they become mutually and increasingly interdependent’’

(Hakansson and Snehota, 1995, p.136).

Similar to the concept of resource ties, the concept of

actor bonds captures a number of aspects. One such aspect

is the creation of identities. ‘‘Identities, to begin with

diffused, are shaped by the mutual interaction and its

interpretation by the individuals within the two parties over

time’’ (Hakansson and Snehota, 1995, p. 198). As such, the

actors in a relationship develop identities when they expe-

rience how their counterpart acts and reacts in various

situations. How identities develop in a relationship between

two firms is closely related to the development of mutual

trust and commitment. Whereas identities refer to what

counterparts can do for each other, commitment relates to

what counterparts will do for each other, e.g., the extent to

which they prioritise each other (Hakansson and Snehota,

1995). Commitment is primarily important to assess in

relation to future actions, and because the future is always

circumscribed by uncertainty, trust may be a necessary

condition for commitment (Hakansson and Snehota,

1995). Trust between counterparts, however, takes time to

develop because it primarily emerges as counterparts prove

their trustworthiness by acting in ways that are to the benefit

of the counterpart—when they could have chosen to do

otherwise. By stressing that trust emerges over time, atten-

tion is also paid to the existence of different degrees or

strengths of trust. For example, the distinction between

fragile and resilient trust has been proposed by Smith Ring

(1997). Whereas the concept of fragile trust represents a

kind of trust that is easy to disrupt and can support low-risk

exchange, the concept of resilient trust represents a kind of

trust that can support exchange involving high risks and can

withstand disappointments before it breaks down. Hence,

actor bonds are important in relation to action because the

value of actions made by a company, at one point in time,

will depend on the actions of other companies, at the same

time and at later points in time. Similar to the resource layer,

the actor bond layer of a relationship may vary in type and

strength. We may say that its strength depends on the type of

trust that has been developed between the counterparts in a

relationship. Furthermore, the strength is also related to the

priority that the counterparts give each other and, thereby, to

the counterparts’ commitment to pursuing actions, which

(also) favour the interests of their opposite number over

time.

The concept of activity links can be said to capture

efficiency in the use of resources due to coordination across

firm boundaries. When performing an activity, a certain

combination and certain amounts of resources are used for a

particular amount of time. Furthermore, activities are linked

to each other either in the sense that the output of one

activity forms the input for a subsequent activity or in the

sense that several activities are performed in parallel as they

are all input for the same subsequent activity. Thereby,

activities combine to form activity patterns. The coordina-


tion of activities (and, thereby, the use of resources) across

firm boundaries is referred to as activity links. Links can be

made between the activities of different firms by adapting,

for example, production and delivery schedules, adminis-

trative and payment routines, investments in production

capacity and the timing of product development activities

(Hakansson and Snehota, 1995). By linking activities, firms

may capture efficiency gains by coordinating which stan-

dardized and/or customised activities are carried out for

whom, when and for what amounts of time. The economic

logic underlying activity links is the firms’ respective

abilities for capturing economies of scale and scope by

considering their activities in relation to each other and the

wider activity pattern. The types of links between the

activities of firms in a network may vary over time in the

sense that they may be tightly linked during some periods of

time and loosely linked during other periods of time. In any

case, (in)stability in the linking of activities affects the

ability of firms to plan their activities ex ante and, thereby,

their ability to cope with uncertainty regarding their future

use of resources in particular activities.

3.2. Relationships and technological innovation

In addition to understanding the substance of relation-

ships, some efforts have been made towards understanding

the effects of relationships—why do (and should) firms

create such interorganisational substance. One type of effect,

which has been focused on, is the effect of relationships on

technological innovation. Within the IMP perspective, tech-

nological innovation is assumed to be an integral part of

relationships and networks. Thus, technological innovation

is considered not to be the result of the efforts of a single

firm or innovator but, on the contrary, the result of an

interplay between a number of different firms (see, e.g.,

Hakansson and Laage-Hellman, 1984; Hakansson, 1987;

Ford and Saren, 1996; Ford et al., 1998). Consequently, the

innovativity of a firm is assumed to be a function of the

extent to which a firm engages in relationships comprising

technological cooperation and development. Furthermore,

the IMP perspective stresses the importance of history and

embeddedness for understanding how technological inno-

vation takes place within relationships and networks (Ford

et al., 1998). Hakansson and Ford (2002, p. 135) propose

that ‘‘the history of a business network is the process

through which time and money have been devoted to build,

adapt, develop, understand, relate and combine different

human and physical resources together’’. Due to the large

amount of investments made along these different dimen-

sions, the existing structure of the network acts as a brake on

both organisational and technological innovation (Hakans-

son and Ford, 2002). Thereby, the relation between relation-

ships and technological innovation seems quite similar to

the relation between relationships and episodes in the sense

that the history of the former has an impact on the latter,

respectively.

Several attempts have been made towards understanding

more specifically what it is about relationships and networks

that enable a firm to be innovative and develop new

technologies, products and processes. Among the factors

that have been proposed as being of importance are the

types of substance created in relationships: resource ties,

activity links and actor bonds. As previously mentioned,

relationships can be conceptualised as comprising three

interdependent layers. Hakansson and Snehota (1995) argue

that the activity layer is related to productivity, the resource

layer is related to innovativity, and the actor layer is related

to trust, commitment and identity. Although Hakansson and

Snehota (1995) argue that technological innovation across

firm boundaries primarily is reflected in the creation of

resource ties, the other two layers are also seen as important

for bringing about innovation.

In this article, we focus on interorganisational relation-

ships and networks in which projects aimed at technological

innovation take place. Such projects may be considered as

episodes. If we want to understand what happens in such

focal interorganisational episodes aimed at developing new

technology, what aspects do the IMP perspective advise us

to consider in our analysis? First, we have to consider the

complexity of the episode and whether the episode takes

place within a relationship established prior to the episode.

Second, if a relationship existed prior to the focal episode,

we need to consider which types of substance the relation-

ship comprises. Furthermore, if there is no prior relationship

but the focal episode is complex, we need to consider the

types of relationship substances, which are built up within

the focal episode.

4. Methodology and empirical base

Empirically, this article is based on in-depth interviews,

field trips and document studies of two specific construction

projects: one in Denmark and one in Norway. These

construction projects were chosen for two specific reasons

that both are important for this article. First, both construc-

tion projects contained an intended element of interfirm

technological innovation. The idea was that if interfirm

cooperation on innovation existed in the construction in-

dustry, it should at least be possible to detect results in

projects specifically intended to contain such elements.

Second, the projects were part of larger programmes aimed

at improving innovation in the construction industry.

Both the Danish and the Norwegian projects were

maiden sites for the construction of multistorey timber-

frame (MSTF) residential housing. The (re-)introduction

of this technology was the main goal for the 11 million

NOK research project coined ‘‘timber-houses in several

storeys’’, which comprised research (particularly in the areas

of acoustical characteristics, fire resistance and stabilisation

of dynamic, light-weight constructions), coordination of

tests and the erection of maiden sites for the implementation


of the test results. A total of 40 MSTF-buildings resulted

from this project, which involved researchers and various

types of firms from four Nordic countries: Denmark, Fin-

land, Norway and Sweden. This research project was a part

of the much larger programme, Nordic Wood, which aimed

at increasing the use of wood in the Nordic countries. This

programme spent approximately 340 million NOK, and

more than 700 firms and 25 universities were involved in

the numerous research projects within the programme. In

addition, the Danish construction project was also part of a

large Danish programme aimed at increasing ‘Product and

Process Innovation in the Building Industry’. This

programme was initiated by the Danish Ministry of Busi-

ness and Industry and the Danish Ministry of Housing and

covered the years 1994–2001. Hence, both focal construc-

tion projects were part of much larger initiatives and

programmes and were supported by research institutions

and firms within, or related to, the construction industry.

The method used for the research underlying this article

is case research, which implies investigating a contemporary

social phenomenon within its real-life context (Yin, 1989).

Furthermore, we relied on an abductive logic in the sense

that deduction and induction were intertwined and fed each

other during the research process (Dubois and Gadde,

2002b). The material gathered for the case studies is both

retrospective and real time, and multiple sources of empir-

ical evidence are used, e.g., industry conference papers,

company documents, programme and project documenta-

tion, field trips and 22 semistructured, personal interviews

with people from different organisations involved in the

cooperative development of MSTF technology.

Instead of presenting the detailed case studies of the

projects in Denmark and Norway, we have opted for

presenting an overview of the empirical material and a

small number of examples. These examples are incorporated

into two large tables presenting the results, which are

structured according to the three theoretical concepts which,

earlier on, were put forward as being important for cooper-

ative technological innovation: resource ties, actor bonds

and activity links. Thereby, the theoretical base is inter-

twined with the presentation of the empirical material,

which is in accordance with the logic of abductive research.

Although the empirical material is closely connected to

the actual projects and the firms and researchers involved in

them, all actors were also asked about their former experi-

ences with MSTF construction and about how their experi-

ences have been used after the projects were completed.

Certain types of actors were interviewed in both cases, such

as consulting engineers, the main contractor, wood suppli-

er(s), the architect(s) and researcher(s) involved in the

project. In addition, other groups of important actors were

also interviewed.

The Danish material includes the maiden project, Mar-

ieparken, which consists of 36 dwellings (two 3-storey

blocks of flats and three 2-storey houses). This project

was the result of cooperative efforts at technological and

organisational innovation made by a consortium called Casa

Nova and some other firms who were associated to the

consortium. The Casa Nova consortium consisted of a main

contractor (Skanska), a consulting engineer (Cowi) and an

architect firm (Nova 5). The aim of the consortium was to

develop a wood-based building system for multistorey

apartment buildings, in which industrialisation principles

from prefabricated construction are applied to wooden

buildings and which is based on a flexible organisation with

formal cooperation and vertical integration. The Casa Nova

consortium was one out of four winners of a national contest

in 1994 aimed at improving the efficiency and innovation in

the Danish construction industry. Hence, the attempts at

developing MSTF technology in Denmark were closely

related to the aforementioned programme ‘Product and

Process Development in the Building Industry’.

The maiden project in Norway, Solbakken 34, comprised

five dwellings and was built by the Norwegian main

contractor, Block Watne. Block Watne was, at that time,

an active partner in the Nordic MSTF project and had

offered to build a Norwegian maiden project. Solbakken

was chosen as the site for this project. For consulting

engineer services, Block Watne relied on a team of three

individuals who had been (or were) active in the research

part of the programme, giving them a chance to apply some

of their theories and ideas. The architect firm was a local

firm chosen primarily due to their extensive knowledge of

wooden constructions (although not with MSTF buildings).

Two suppliers were also involved: A sister company of

Block Watne provided most of the standardised wood

needed, while a large Norwegian sawmill provided more

complex wood elements such as composite balks and

adapted floor and wall boards. The area where the building

is located was developed by Block Watne and was then sold

on the private market. The other buildings in the area (villas,

row houses and apartment buildings) are concrete buildings,

and the only difference between the apartments in Sol-

bakken 34 and the other apartments is the load-bearing

structure.

5. Analysis and discussion

First of all, we can observe that both in Denmark and in

Norway, the MSTF technology was developed to such an

extent that actual buildings could be (and were) erected.

Thereby, the efforts may be described as technologically

successful, although the degree of success can be challenged

in terms of economic outcome. The individual firms, how-

ever, generally agree that the goals were met. Second, the

involved firms strove for, and to some extent, succeeded in,

establishing some substance in some of the relationships

between the parties involved in developing MSTF technol-

ogy. In relation to this, it should be remembered that in the

Danish case, a consortium had been created early on, which

made it evident that the consortium partners would cooper-


ate to bring about technological innovation across (a number

of) single construction projects. Furthermore, the fact that

the Casa Nova consortium was accompanied by a relatively

high degree of publicity due to it being part of the

programme ‘Process and Product Development in the

Building Industry’ may also have contributed to the partners

trying to cooperate across single projects.

However, to understand the relation between interfirm

relationships and technological innovation in construction,

we may, according to the theory presented earlier, put the

relationships under further scrutiny. One way of doing this is

related to the theory regarding actor bonds, resource ties and

activity links and to the proposition that these may vary in

strength (e.g., from tight to loose). If we add to this the

distinction and relation between single episodes and rela-

tionships, we may organise the empirical material as shown

in Tables 2 and 3. The Danish relationships appear in Table

2, while the Norwegian relationships are shown in Table 3.

As such, we get an overview of the substance of the

relationships related to the technological innovation in the

two countries, respectively.

Table 2

The substance of relationships in the Danish case

Relationship between Danish firms Actor bonds R

No earlier relation

and/or new actor

bonds are

Existing

relation

N

an

tie

None Loose Tight Reused N

Consult. engineer–contractor .1 .1

Consult. engineer–architect 1 .1 .1 .

Consult. engineer–architect 2 .

Consult. engineer–supplier 1 .(5)

Consult. engineer–supplier 2 . .3

Consult. engineer–client .

Consult. engineer– research institution . .

Contractor–architect 1 .1 .

Contractor–architect 2 . .

Contractor– supplier 1 .(5) .

Contractor– supplier 2 . .3

Contractor–client . .

Contractor– research institution . .

Architect 1–supplier 1 . .


Architect 1–client . .

Architect 1– research institution . .

Architect 1–architect 2 . .



Architect 2–client . .

Architect 2– research institution . .

Supplier 1–client . .

Supplier 1– research institution .

Supplier 1–supplier 2 . .

Supplier 2–client . .

Supplier 2– research institution . . .

Client– research institution . .

Superscript numbers within the table refers to the example in which the element is

the element is present in the example without it being the main focus of attention

To understand the tables, it may be useful to consider

how the entries in the tables relate to our empirical material.

The following six examples relate, respectively, to the actor

bonds, the resource ties and the activity links identified at

the project level in the two different countries.

5.1. Creation of actor bonds

Example 1: Actor bonds in the Danish project. The point

of departure for the Casa Nova consortium was that the

involved firms were to cooperate on a relatively equal basis.

In the prequalification phase, the consortium partners inter-

acted intensively, and a joint group had their own room at

one of the partners’ premises. The partners developed

material containing the descriptions of the basic idea,

drawings of a trial building, descriptions of development

projects connected to the trial building and a description of

the organisation of the project and the cooperation between

the parties in the consortium. However, after an agreement

was reached with a building owner regarding a specific

construction project, it was decided that the ‘leading role’

esource ties Activity links

o earlier relation

d/or new resource

s are

Existing

relation

No earlier relation

and/or new activity

links are

Existing

relation

one Loose Tight Reused None Loose Tight Reused

.3 . .

. .

. .

. .5

.3 . .

. . .

. . ..

. .

. .5

. .. .

........

. ...

. .

. ....

discussed in the main body of the text. When the number is in parenthesis,

.

Table 3

The substance of relationships in the Norwegian case

Relationship between Actor bonds Resource ties Activity links

Norwegian firmsNo earlier relation

and/or new actor

bonds are

Existing

relation

No earlier relation

and/or new resource

ties are

Existing

relation

No earlier relation

and/or new activity

links are

Existing

relation

None Loose Tight Reused None Loose Tight Reused None Loose Tight Reused

Consult. engineer–contractor . .(6) .6

Consult. engineer–architect .2 . .6

Consult. engineer–supplier 1 . . .

Consult. engineer–supplier 2 .(4) .4 .

Consult. engineer– researcher .2 .(2) .

Contractor–architect . . .6

Contractor– supplier 1 . . .

Contractor– supplier 2 .(4) .4 .(4)

Contractor– researcher . . .

Architect–supplier 1 . . .

Architect–supplier 2 . . .

Architect– researcher . . .

Supplier 1–supplier 2 . . .

Supplier 1– researcher . . .

Supplier 2– researcher . . .

Superscript numbers within the table refers to the example in which the element is discussed in the main body of the text. When the number is in parenthesis,

the element is present in the example without it being the main focus of attention.


and the legal responsibility for the whole construction

project were assigned to the contractor only, which is one

of the typical ways of organising construction projects (a

design–build contract). Having become used to cooperating

in the prequalification phase, the architect had expected this

new mode of working to continue in the construction

projects. When presented with this less cooperative mode

(e.g., a fee agreement allowing the contractor to reduce the

architect firm’s contribution to the construction project at

the contractor’s discretion), the architect objected and,

actually, stalled the construction project for half a year.

One reason for the problems with the fee agreements was

that the individuals from the firms who had participated in

the prequalification phase were not the same as those who

were involved in the construction projects. Thereby, the

trust that had emerged among the individuals involved in the

cooperative prequalification phase was destroyed when new

individuals, familiar with an arms-length way of working,

entered the project.

Example 2: Actor bonds in the Norwegian project. The

consulting engineer in the Solbakken project had a lot of

discussions with the researcher on sound protection. They

very much enjoyed working on the project and reported that

an important benefit for them was getting to know other

specialists in the field of timber-frame constructions. Fur-

thermore, the consulting engineer also worked closely with

the architect and he was very impressed with the architect’s

knowledge about wooden constructions. The consulting

engineer and the architect agreed that working together

had been a valuable experience.

If we look at the creation of actor bonds, we can observe

that the firms involved in the development of MSTF

technology in Denmark and Norway commit to each other

to a relatively low degree, and some of their actions do not

reflect a high degree of mutual orientation. Some actor

bonds involving identity creation, trust, commitment and/

or mutual orientation have been created between some of

the parties. However, some of them are relatively easily

destroyed if (or when) counterparts, at a later point in time

during the joint projects, act in nontrusting or noncommitted

ways. For example, in the Marieparken project, some

substitution of individuals takes place as some individuals

are simultaneously involved in other projects that are given

priority over the Marieparken project, and this leads to

problems when individuals, who are unaware of the new

rules for cooperation, become involved and apply the logic

with which they are familiar. In the Norwegian material, for

example, we clearly see that some actor bonds between

individuals were created in the single MSTF construction

project that was carried out. However, these actor bonds

have not been reused in subsequent projects because there

(so far) has not been any. In general, we may say that the

firms refrain from becoming mutually dependent and do not

make extensive mutual plans for the future. The parties want

to keep open the possibility to change counterparts later on

and, in some cases, they actually change counterparts within

the projects investigated.

5.2. Creation of resource ties

Example 3: Resource ties in the Danish project. In

relation to Marieparken, the wooden elements for the

construction project were produced according to the detailed

technical specifications made by the consulting engineer

firm. After having been appointed the supplier of the

wooden elements for the construction project, the sawmill


(Supplier 2) had some interaction with the consulting

engineer firm regarding the construction of the wooden

elements—problems and possibilities regarding how they

could be produced. However, the sawmill felt that the

design of the wooden elements did not benefit much from

their experience and ideas. Furthermore, there was little

room for redesigns within a single construction project. In

general, production-related considerations were not incor-

porated to any considerable extent into the design of the

wooden elements, and the sawmill did not consider the

elements to be production friendly; hence, rational produc-

tion was difficult to achieve. In a similar manner, the main

contractor and the consulting engineer firm discussed the

design, production, and assembly of the wooden wall

elements. Two aspects were regarded as very critical. First,

the main contractor was of the opinion that the construction

of the joints was too complicated; the consequence of this

being that the main contractor would have to spend a lot of

time at the construction site finding ways of fitting different

wall elements together with different types of joints. This

was both a time- and cost-consuming activity and, in the

view of the main contractor, this could have been avoided

by further developing and industrialising the MSTF concept.

Second, the main contractor was somewhat concerned about

the wall elements being completely encapsulated by gypsum

on both sides (to avoid the risk of fire). The encapsulation,

in turn, increases the risk of moisture in the wall elements

due to rain at the construction site during assembly. How-

ever, because the consulting engineer firm was responsible

for the technical construction system and the specifications

for the wooden elements, the main contractor felt they had

little influence on the final specifications.

Example 4: Resource ties in the Norwegian project.

Forestia (Supplier 2) was involved in the Nordic Wood

programme. Their goal was to develop specialised timber

components for use in MSTF buildings. One such compo-

nent, a sound-dampening floorboard, was developed specif-

ically for MSTF houses. It was tested in the planning stage

of the Solbakken project and was used on the Solbakken

maiden site. Forestia also had an agreement with Block

Watne for delivery to subsequent MSTF houses, but because

Block Watne has not built any more such houses, this

contract has not given much economic return for Forestia.

Development costs for the floor board was approximately

200.000 NOK, and the consulting engineer used at Sol-

bakken had also been involved in the development of this

product. Forestia also spent approximately 500.000 NOK on

a production line and on procuring the necessary documen-

tation for the product’s usefulness in MSTF construction.

If we look at the creation of resource ties, some of the

firms did interact relatively intensively across firm bound-

aries on technical issues, and their knowledge and aware-

ness of each other’s resources did increase. At the same

time, many decisions on technical solutions were made,

relatively independently, by the respective parties. For

example, the increased awareness and knowledge acquired

during one project was not extensively incorporated in the

technical solutions used in that project, primarily, as this is

difficult (uneconomic) to accomplish within the time span of

a construction project where the design is determined before

actual construction takes place due to, e.g., considerable

time pressure within single projects and the amount of

resources which can be used for design activities within a

construction single project. Furthermore, only few technical

adaptations or investments in technical equipment, which

are specifically oriented towards the counterparts, were

made. The adaptations that were made primarily consisted

of new, but not path-breaking, ways of using existing

resources of the respective involved companies. The only

large investment made in new production equipment has not

(yet) become profitable due to the lack of subsequent

construction projects. Generally, the resource ties that are

created may be described as ‘intendedly transferable to third

parties’, in the sense that because change of counterparts

across projects cannot be ruled out, it is safest not to create

too many counterpart-specific ties.

5.3. Creation of activity links

Example 5: Activity links in the Danish project. To erect

MSTF buildings, the Danish consortium needed a supplier

of wooden elements (Supplier 1). The consortium was

unsure about how many buildings, in which the wooden

elements would be used, they were going to construct.

Furthermore, they would not commit themselves to pur-

chasing elements from the same supplier, regardless of the

number of buildings which were to be constructed. Hence,

the supplier did not get any guarantee that it would be used

as a supplier for subsequent MSTF projects.

Example 6: Activity links in the Norwegian project.

Solbakken 34 was originally planned as a concrete house,

with plans almost identical to neighbouring houses, which

were also built in concrete. However, at a late stage in the

planning process, Block Watne decided to change the

construction material of Solbakken 34 from concrete to

wood, to make the house a maiden site for MSTF construc-

tion. This situation meant that the architect and the consult-

ing engineers had to plan a wooden construction with the

additional constraint of relating it to plans originally made to

utilise the properties of concrete, rather than wood. This

meant, for example, that internal walls had to be set up at

similar places as in the concrete houses, whereas real

wooden construction could have had larger spans and lighter

internal walls. Thus, the architect and the consulting engi-

neer were forced to perform activities in an unusual way,

and in a poorly timed sequence.

The creation of activity links within single projects is

common to all projects in the construction industry where

logistical matters have to be coordinated to avoid delays and

possible penalties. The lack of activity links across projects,

seen in Tables 2 and 3, may be partly explained by the

uncertainty inherent to (all) technological innovation and


especially the uncertainty of demands by clients, which is

inherent to the construction industry. For example, in Den-

mark, the hoped-for ‘maiden projects as pearls on a string’

did not come about, which made it seem reasonable not to

invest in capacity and large, interfirm, project-crossing

activity links. Furthermore, the main contractors are not

successful in their attempts at mobilising large clients to

become heavily involved in the development of MSTF

technology and thereby possibly provide demand for a

number of reasonably similar construction projects. In Nor-

way, the main contractor does not convince any clients of

the benefits on having a MSTF building constructed and,

instead, takes refuge to a construction project on a site

owned by the main contractor. For example, the parties

seem to carry their usual project-based supplier selection

routines into their efforts at developing MSTF technology.

In Denmark, the supplier of wood elements did not get any

guarantees that it would be used as a supplier for any

possible subsequent construction projects. Such lack of

links may seem reasonable. In addition, in Denmark, when

a supplier of wood elements was appointed in advance and

the construction project became delayed, the appointed

supplier turned out to be unable to supply the elements

due to lack of capacity. On the other hand, even if guaran-

tees had been made, the uncertainty circumscribing the

demand for MSTF buildings may have discouraged the

supplier of wood elements from investing in capacity for

MSTF wood elements.

5.4. Summary of analysis

In summary, the companies involved in the development

of MSTF technology did try to cooperate more intensively

than is usual in projects in the construction industry, and

they did aim (and succeed) at creating some actor bonds,

resource ties and activity links. However, the strengths of

these are primarily loose, reflecting the uncertainty inherent

to technological innovation, in general, and the demand

uncertainty inherent to the demand-driven, project-organ-

ised construction industry, in particular.

We have analysed above the projects in terms of

relationship substance, i.e., actor bonds, resource ties and

activity links. Table 4 organises the empirical material

according to three different categories: (1) the strength of

the bonds, ties and links, (2) nonrelational versus relational

Table 4

Summary of the empirical material

Categorisation C Within the boundaries of the single episode

Categorisation B Nonrelational

Categorisation A No

bonds

No

ties

No

links

Loose

bonds

Loos

ties

Sum of elements in both cases 25 27 24 14 18

Sum Category A (% of total) 76 (52%) 54 (37%)

Sum Category B (% of total) 76 (52%) 69 (48%)

Sum Category C (% of total) 130 (90%)

aspects and (3) within single episodes versus across

episodes.

6. Conclusions and implications

The finding in this article supports the existing findings

pertaining to innovation in the construction industry. The

logic of trial-and-error innovation processes, which rely on

learning across a sequence of projects, is found to be

difficult to implement in a construction industry character-

ised by an organisation of shifting coalitions around unique

projects. Although firms are able to create some relationship

substance, they behave as if they do not expect to benefit

from this substance in later construction projects (i.e.,

substance created is categorised as loose).

The empirical material shows that the above conclusions

hold true even for projects that are part of larger initiatives

specifically aimed at creating technological innovations.

Although some loose actor bonds, activity links and re-

source ties were created, the overall impression is that the

creation of relational aspects between the involved firms

was low. One major reason for this seems to be that the

frequent switching of cooperation partners dominates over

technological innovation projects and even over larger

programmes aimed at trying out technological cooperation.

Table 4 looks more closely into the relationship sub-

stance actually created and shows that most of the ‘tight-

ness’ created is in the actor layer (although it is debatable

whether this is enough for technological innovation). It is

also in this layer that most of the reuse of existing relation-

ships takes place. Out of 15 examples of relational aspects

which cross the boundaries of episodes, 12 are related to

actor bonds, 3 to resource ties and none to activity links.

This means that construction firms create very few ties and

links, even when trying actively to increase technological

innovation by interfirm cooperation. We suggest that the

prevalence of bonds over ties and links can be related to the

fact that in the construction industry, each project represents

cooperation about something new. However, knowledge

about the counterparts and how they work is possible to

reuse in another project, which favours actor bonds (but not

resource ties and activity links).

One interesting question is the following: If we found a

way to create more substance in all three layers, what

Crossing the boundaries of episodes

Relational aspects

e Loose

links

Tight

bonds

Tight

ties

Tight

links

Reused

bonds

Reused

ties

Reused

links

22 2 2 0 10 1 0

4 (3%) 11 (8%)

15 (10%)


would the opportunity costs to achieve this goal? Our

suggestion, based on the empirical material as well as the

description of how the construction industry works, is the

following: Tight relationships with widespread adaptations

and specific investments are likely to increase innovation,

but at the same time, reduce the flexibility in the sense that

relationships put constraints on the action possibilities

open for individual firms. At the same time, it is well

known that relationships both limit and empower a firm’s

own behaviour (Hakansson and Ford, 2002). A final

consideration to be made is whether the innovation-related

advantages of interfirm ex ante coordinated action out-

weighs the flexibility and efficiency-related benefits of the

present structure.

References

Andersen PH, Christensen PR. Inter-partner learning in global supply

chains: lessons from NOVO Nordisk. Eur J Purch Supply Manag

2000;6(2):105–16.

Axelsson B, Easton G, editors. Industrial networks—a new view of reality.

London: Routledge; 1992.

Cox A, Furlong P. Cross-border trade and contract awards. Eur J Purch

Supply Manag 1997;3(1):9–20.

Cox A, Thompson I. Fit for purpose contractual relations: determining a

theoretical framework for construction projects. Eur J Purch Supply

Manag 1997;3(3):127–35.

Dosi G. The nature of the innovative process. In: Dosi G, Freeman C,

Nelson R, Silverberg G, Soete L, editors. Technical change and eco-

nomic theory. London: Pinter; 1988.

Dubois A. Organising industrial activities across firm boundaries. London:

Routledge; 1998.

Dubois A, Gadde L-E. Supply strategy and network effects—purchasing

behaviour in the construction industry. Eur J Purch Supply Manag

2000;6:207–15.

Dubois A, Gadde L-E. The construction industry as a loosely coupled

system: implications for productivity and innovation. Constr Manag

Econ 2002a;20:621–31.

Dubois A, Gadde L-E. Systematic combining: an abductive approach to

case research. J Bus Res 2002b;55:553–60.

Easton G, Araujo L. Inter-firm responses to heterogeneity of demand over

time. In: Ebers M, editor. The formation of inter-organizational net-

works. Oxford: Oxford Univ. Press; 1997. p. 66–94.

Ford D, editor. Understanding business marketing and purchasing. London:

Thomson Learning; 2002.

Ford D, Saren M. Technology strategy for business. London: Thompson

Business Press; 1996.

Ford D, Gadde L-E, Hakansson H, Lundgren A, Snehota I, Turnbull P, et al.

Managing business relationships. Chichester: Wiley; 1998.

Gadde L-E, Hakansson H. Professional purchasing. London: Routledge;

1993.

Gadde L-E, Hakansson H. Supply network strategies. Chichester: Wiley;

2001.

Gann DM, Salter AJ. Innovation in project-based, service-enhanced firms:

the construction of complex products and services. Res Policy 2000;

29:955–72.

Hakansson H, editor. International marketing and purchasing of industrial

goods: an interaction approach. Chichester: Wiley; 1982.

Hakansson H, editor. Industrial technological development. A network ap-

proach. London: Croom Helm; 1987.

Hakansson H. Corporate technological behaviour: co-operation and net-

works. London: Routledge; 1989.

Hakansson H, Ford H. How should companies interact in business net-

works? J Bus Res 2002;55:133–9.

Hakansson H, Laage-Hellman J. Developing a network R&D strategy. J

Prod Innov Manag 1984;1(4):224–37.

Hakansson H, Snehota I. Developing relationships in business networks.

London: Routledge; 1995.

Hakansson H, Snehota I. The IMP perspective. Assets and liabilities of

business relationships. In: Sheth JN, Parvatiar A, editors. Handbook

of relationship marketing. London: Sage; 2000. p. 35–50.

Korczynski M. Low trust and opportunism in action. J Ind Stud 1994;

1(2):43–63.

Koskela L, Vrijhof L. Is the current theory of construction a hindrance to

innovation? Build Res Inf 2001;29(3):197–207.

Miozzo M, Dewick P. Building competitive advantage: innovation and

corporate governance in European construction. Res Policy 2002;

31:989–1008.

Pries F, Janszen F. Innovation in the construction industry: the dominant

role of the environment. Constr Manag Econ 1995;13:43–51.

Smith Ring P. Processes facilitating reliance on trust in inter-organizational

networks. In: Ebers M, editor. The formation of inter-organizational

networks. Oxford: Oxford Univ. Press; 1997. p. 113–46.

Thompson I, Cox A, Anderson L. Contracting strategies for the project

environment. Eur J Purch Supply Manag 1998;4(1):31–41.

Welling D, Kamann JD. Vertical cooperation in the construction industry:

size does matter. J Supply Chain Manag Glob Rev Purch Supply 2001;

37(4):28–33.

Yin RK. Case study research—design and methods. London: Sage Publi-

cations; 1989.

building relationships for technological innovation

Documents