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Zephyrs of creative destruction:understanding the management ofinnovation in constructionGraham WinchPublished online: 14 Oct 2010.

To cite this article: Graham Winch (1998) Zephyrs of creative destruction: understanding themanagement of innovation in construction, Building Research & Information, 26:5, 268-279, DOI:10.1080/096132198369751

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Zephyrs of creative destruction: understanding themanagement of innovation in construction

Graham Winch

Bartlett School Of Graduate Studies, University College London, Gower Street, London WC1E 6BT,UK

E-mail: g.winch@ucl.ac.uk

The aim of this paper is to propose a comprehensive framework for the management of innovation inconstruction, addressing the construction innovation problem in two distinctive ways at the institutionaland �rm levels. First, an institutional perspective derived from research on complex systems industries isdeveloped which provides an alternative to the volume production model for construction innovationresearch. The roles of the innovation infrastructure, innovation superstructure and systems integrator areall identi�ed and applied to construction. The paper then moves on to the �rm level where the two keyinnovation dynamics ­ the top-down adoption=implementation dynamic and the bottom up problemsolving=learning dynamic are identi�ed. The paper ends by calling for more case studies of the trajectoriesof construction innovations.

L’objet de cet article est de proposer un cadre global ouÁ ge rer l’innovation dans le secteur de la construction;l’auteur aborde la question de l’innovation sous deux angles diffe rents, au niveau des institutions et celui desindustriels . En un premier temps, on de veloppe une perspective institutionelle de rive e de la recherche sur lessysteÁ mes complexes; on de bouche alors sur une alternative au modeÁ le de volume de production applique aÁ larecherche en matieÁ re d’innovation dans la construction. Les roà les de l’infrastructure et de la superstructure del’innovation et celcui de l’inte grateur de systeÁ mes sont tous de �nis et applique s aÁ la construction. L’auteurpasse ensuite au niveau de l’industriel et de �nit les deux axes principaux de l’innovation, la dynamiquedescendante d’adoption=mise en ú uvre, d’une part et, d’autre part, la dynamique ascendante de re solutiondes probleÁ mes et d’enseignment aÁ en tirer, L’auteur demande, pour conclure, que soient pre sente s davantagede cas d’e tude portant sur les itine raires suivis par des innovations dans le secteur de la construction.

Keywords: construction innovation, systems integrator, complex product system, adoption=implementation,problem solving=learning

One problem after another of the supply ofcommodities to the masses has been success-fully solved by being brought within thereach of the methods of capitalist produc-tion. The most important one of those thatremain, housing, is approaching solution bymeans of the prefabricated house.

Introduction

As with most of his prognoses for the future ofcapitalism, Schumpeter, writing in the late 1930s(1976 p. 68), was wrong about construction ­ his’gale of creative destruction’ (1976, p. 84) has

passed construction by. Ever since the emergenceof volume production methods in the late 19thcentury, there have been repeated attempts toapply them to the construction industry, rangingfrom Gilbreth’s work study of bricklayers in the1900s, the mass production of housing in Dessauin the 1920s, to the industrialized housing of the1960s. Only recently, there have again been callsfor the Henry Ford of housing (Miles 1996).

Such attempts have repeatedly failed, with theresult that the relative cost of housing comparedto other goods and services has been risinginexorably. This is a problem common to all

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advanced nations, as a recent internationalseminar demonstrated.1 Therefore, it is worthre�ecting upon why the construction of housingand other built products has been so resistant tothe virtuous cycle of simultaneous cost reductionand quality improvement that has bene�ted mostother industries over the last century. Thetenacity and pervasion of the problem suggeststhat the volume manufacturing model might notbe the appropriate one for construction.

The problem is not that there has been noinnovation ­ indeed bibliometric data suggestthat the industry is a lively source of new ideas.2

The problem is that the rate of innovation lagsbehind most other sectors, and appears to befalling further and further behind. Certainly,rates of productivity growth in the EU and USindustries are low compared to other sectors, oreven negative (Quigley, 1982; Allen, 1985;Margirier, 1988). Moreover, innovation efforts inthe industry are disproportionately orientatedtowards product enhancement rather than pro-cess improvement (Gann et al., 1992). This paperexplores some of the distinctive structural fea-tures of the construction industry with the aim ofanalysing some of the principal processes ofconstruction innovation, and thereby providing acomprehensive conceptual model for the manage-ment of innovation in construction. It will besuggested that the reasons for the relatively lowrate of innovation lie with these structuralfeatures, and that unless innovation programmesfully comprehend these features, they are likelyto prove unsuccessful.

The exploration will be at two levels. The �rst isthe structural features of the industry as a whole,adapting work on complex systems industries to theconstruction case, and thereby providing ananalysis of the institutional context in which�rms manage their innovation processes. Thesecond is an analysis of innovation processes atthe level of individual �rms and projects,capturing the many different types of processwhich have to be managed for successfulinnovation. For the purposes of this exploration,the management of innovation is de�ned, follow-ing Van de Ven (1986), as the ’management ofnew ideas into good currency’, which elegantlyrestates the Schumpeterian distinction betweeninvention (generating new ideas) and innovation(applying new ideas). The analysis is basedmainly on the experience of the UK industry,

but, I would submit, it has a wider relevance toall construction industries.

Construction as a complex systemsindustry

The burgeoning literature on innovation, likeresearch on most management topics, tends toassume that all industries follow a productdevelopment type model. In this model �rmsfollow market signals to develop new productsthat are produced on a volume basis and sold intoa mass market. Such products have distinctive lifecycles where the innovative opportunity shiftsfrom the product itself in the early stages of thelife cycle to the process by which it is produced inthe later stages. The new technologies that areincorporated in these new products are, in themost sophisticated industries, the result of re-search and development programmes, and insuch cases innovation rates may be usefullymeasured by patent registration. In this model,innovation is largely an in-�rm problem, althoughsuppliers may have to be involved to ensure thatthe new product can be made, and so increasingattention has been paid of late to the processes ofinnovation within networks of �rms.

This Schumpeterian model has tended to bere�ected in recent thinking on innovation inconstruction, but new research has identi�edanother innovation model speci�c to what havebeen called complex product systems (Miller et al.,1995) which may be more appropriate. Complexproduct systems are distinguished by the follow-ing characteristics:

· many interconnected and customized ele-ments organized in an hierarchical way;

· nonlinear and continuously emerging prop-erties where small changes to one element ofthe system can lead to large changes else-where in the system;

· a high degree of user involvement in theinnovation process.

The industries which create such complex productsystems are characterized as complex systemsindustries, and share many of the complex andemergent features of their products.

It has become increasingly common to analyseinnovation in terms of actor­ system networks

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(e.g. Law and Callon, 1992), an approach appliedto construction by Shove and her colleagues(Connaughton et al., 1995; Rasmussen and Shove,nd). However, to date, these applications havebeen to speci�c innovations (cladding and ready-mixed concrete respectively), and need to betaken further to provide a generic model. Gann(Gann et al., 1992; Gann, 1997) has developed amodel of the construction system as a supplychain, showing the activities of the differentactors in the system as the inventions derivingfrom research and development (R&D) pro-grammes are diffused and implemented onspeci�c projects. However, formal R&D, whilevery important, is not the only source ofinnovation in construction or any other industry,and a broader perspective that captures allmodes of innovation is required. The strengthof the complex systems industries model is thatof providing a clear articulation of the institu-tional context in which �rms innovate, categoriz-ing the different types of actor in the innovationnetwork, and identifying their distinctive roles inthe innovation process. This allows the develop-ment of a generic model of the structural contextof the management of innovation in construction.Developing their model in the context of the�ight simulation industry, Miller et al. (1995)distinguish between the innovation superstructureof air carriers (clients), regulators, and profes-sional bodies, and the innovation infrastructure ofspecialized suppliers and aircraft builders. Theinterface between the two is the role of systems

integrators who supply complete �ight simulationsystems to air carriers for the training of theiraircrew.

Examination of the analysis of the principalfeatures of the constructed product by Nam andTatum (1988) strongly supports the contentionthat the constructed product is a complex productsystem, and that construction is, therefore, acomplex systems industry. However, it has anumber of distinctive features which also set itapart from the model of the complex systemsindustry developed by Miller and his colleagues.

First, the systems integrator role is shared betweenthe principal architect=engineer and the principalcontractor. Thus construction typically has twoseparate systems integrators ­ one at the designstage and one at the construction stage. Secondly,the fragmentation of the professional bodies inconstruction has weakened their ability to act ashonest brokers of innovations as they typicallythreaten the interests of one or other amongstthem. In �lling this gap, government fundednational construction research organizations ­such as the Building Research Establishment inthe UK (cf, Courtney, 1997) ­ have played a veryimportant role in brokering innovations throughthe regulatory system. Thirdly, trade contractors(specialized suppliers) are rarely given full techni-cal authority, and are often subject to separatespecialist consultants. These two also need to bedistinguished from component suppliers. Fig. 1

innovation superstructure

clients regulators professionalinstitutions

SYSTEMS INTEGRATORS

tradecontractors

specialistconsultants

componentsuppliers

innovation infrastructure

principalarchitect/engineer

principalcontractor

Fig. 1. Construction as a complex systems industry (source: adapted from Miller et al., 1995, Fig. 2).

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illustrates the complex systems industry conceptapplied to construction.

While recent research has emphasized the multi-ple sources of innovation in construction, and theembeddedness of actors in innovation networks,two of the key roles ­ that of the regulators, andthat of the professional institutions and researchestablishments as brokers has received less atten-tion. The importance of the regulatory role hasbeen demonstrated by the research of Bazin(1993), who analysed the regulatory regime, andhence space for innovation without regulatorychange, in the leading European nations, anemphasis supported by Quigley’s (1982) analysisof US housebuilding. By regulatory regime is heremeant the technical regulations aimed at assuringthe integrity and performance of the constructedproduct, not those socio-economic regulationsessentially aimed at controlling what productsare built where. Bazin characterizes the differentnational regimes along two dimensions ­ thedegree of responsibility of the state for theenforcement of technical regulations comparedto that of the actors in the system, and the degreeto which the technical regulations are prescriptionor performance oriented, as is shown in Fig. 2.

Although this basic complex systems industrialstructure is shared by all construction industries,institutional differences between national con-tracting systems mean that the brake on innova-tion can occur in different ways. Work by Bonke3

suggests that innovation dynamics can be sti�ed

either by an exploitation trap where the system isinstitutionally locked into particular technologiesas in Sweden, and the exploration trap wheretechnologies are continually re-invented in acircular rather than progressive manner as inDenmark. Extending this model, it might besuggested that the British system is a victim ofthe exploration trap, where everything tends tobe designed from �rst principles for everyproject. This explains the paradox of how theBritish system can apparently have simulta-neously too much and too little innovation ­there are plenty of new ideas, but they tend notto achieve good currency.

The dynamics of innovation in acomplex systems industry

Innovation is inherently a process through time,and in order to illustrate the dynamics ofinnovation in a speci�c complex systems industry,and the interactions between the innovationsuperstructures and infrastructures, it will beuseful to take one relatively well-researchedexample ­ the shift from load-bearing masonryto structural framing in the UK around 1900(Bowley, 1966; Cusack, 1986; Cusack, 1987;Lawrence, 1990). Two innovations were available­ reinforced concrete and steel ­ both importedfrom abroad (France and the United Statesrespectively), but they had very different trajec-tories while meeting similar kinds of problems,not untainted by xenophobia.

Great BritainSpain

The Netherlands

Germany

Franceperformance

regulation

prescriptiveregulation

responsibilityof the state

responsibilityof the actors

Fig. 2. Construction technology regulatory systems (source: adapted from Bazin, 1993).

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The arrival of steel framing in the UK was inspiredby the rebuilding of Chicago after the �re of 1871which resulted in the �rst completely framedbuilding in 1885. The �rst steel frame building inthe UK was the Ritz (1905), but because theLondon building regulations speci�ed load-bearing masonry, its walls remained of load-bearing thickness. It was Selfridge’s (1909) that�rst fully exploited steel framing in London.Inspired by the American model, Selfridge, aChicago store owner, proposed to develop a newtype of department store with large sales �oors,and extensive display windows, thus steel framingwas a product enhancing innovation. Selfridgecommissioned the Chicago architectural practiceof Burnham to design his proposed store inLondon’s Oxford Street. The structure was en-gineered by the chief engineer of the principalcontractor, Waring White, which had built theRitz. He was Bylander, a Swede who had learnthis trade in Germany and America. A major taskof the British architect appointed to adapt Burn-ham’s designs to the British context was to lobbythe authorities for waivers to the building regula-tions to allow the store to be built. As a result ofthese efforts, and those of other Oxford Streetstores keen to compete with Selfridge’s, theregulations started the slow process of change in1909.

Reinforced concrete arrived by a rather differentroute as a contractor promoted innovation thatmet needs for large, heavily loaded industrialbuildings where �re was a particular hazard andaesthetic considerations were minimal. It appearsto have been a process improving innovation,allowing the more ef�cient construction of anexisting building type. Reinforced concrete tech-nology differed from steel framing in that it wasdeveloped as competing patent systems, theleading one being that of Hennebique. As partof its strategy of overseas expansion, Hennebiquesecured the contract for the �rst fully framedreinforced concrete building in the UK ­ aprovender mill in Swansea (1897) ­ and ap-pointed Mouchel as their UK agent. Mouchel andPartners licensed the system to trained contrac-tors who paid royalties in return for the workingdrawings for a building. Although there were1073 Hennebique system buildings in the UK by1911, none of these were in London during thisperiod due to the building regulations.

In both cases, innovation was driven by parti-

cular client needs within the innovation super-structure, but it was systems integrators in theshape of principal contractors who championedthe innovation, particularly in the case of rein-forced concrete. Resistance to change came fromelsewhere within the innovation superstructure.The design systems integrators displayed vir-tually no interest in the new techniques, nor didthe potential suppliers of components, the steeland cement industries. The regulatory system isoften cited as a major source of problems, but, atleast outside London, these can be exaggerated,and they did start to respond after 1909 todemands from clients for new building types.Crucially, as Fig. 2 shows, it is the character ofthe regulations that matters, and this is a func-tion of the purposes which they are intended toserve.

It is the way in which the professional institu-tions carried out their brokering role that slowedthe innovation process, and it was this brokeringthat provided the basis for the new regulations.The Royal Institute of British Architects’ (RIBA)strategy with respect to both technologies was tocontrol the activities of principal and tradecontractors by developing detailed prescriptivespeci�cations, although it possessed little compe-tence in either of the new technologies. This wasdone without liaison with the Institution of CivilEngineers (ICE), who dealt with the new tech-nologies separately and reluctantly.4 Most nota-bly, neither included in their deliberations theprincipal contractors that knew most about thenew technologies, Mouchel and Waring White.5

In particular, the RIBA resisted the use ofpatented reinforced concrete systems because itmeant that they lost control over the technology.It was the recommendations of the RIBA whichformed the basis of the new regulations from1909 onwards. Thus the dynamics of the Britishinstitutional structure in construction resulted inthe shift from load-bearing masonry to structuralframing lagging that in other industrial countriesby 20 years or more.

Construction innovation processes

The previous sections have suggested a way ofunderstanding the structural features of theconstruction industry that provide the context ofthe innovation process, but it is at the �rm level

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that decisions to adopt new ideas take place,thereby moving them into good currency. Theterm ’�rm’ here encompasses both contractingorganizations and professional practices. Theliterature on innovation processes is both exten-sive and inconclusive (Wolfe, 1994); this sectionwill start from �rst principles, and propose amodel of innovation processes in construction,placing the de�ning feature of construction, incommon with other complex systems industries,as a project-orientated industry, at its heart. Thisis presented in Fig. 3, which shows the fourprocesses to be managed for successful innovationin construction.

The innovation literature typically identi�es twobasic processes ­ diffusion and implementation(e.g. Tornatzky and Fleischer, 1990, part III).Rogers (1995) is the standard work on the former,while Winch (1994) provides an extensive reviewof the latter. The interface between the twoprocesses is the decision to adopt a new idea,usually following the perception of a perform-ance gap in relation to competitors. Indeed,measures of the rate of diffusion of a new ideaare, in essence, measures of the number ofadoption decisions within a de�ned populationover a particular period of time. Once adopted,the innovation has to be installed and commis-sioned so that it achieves technical success (i.e.works as speci�ed), and consolidated within theorganization so that it yields performance bene�tsto the business (i.e. justi�es the investment)(Winch, 1994, chap. 10). The new ideas whichare diffused and implemented may be the out-come of formal R&D processes, transferred fromabroad or other sectors, or copied from leadinginnovators in the sector ­ whatever the source, itis, by de�nition, external to the innovating �rm,and the �ow of new ideas modelled by Gann etal. (1992; Gann, 1997) applies.

However, unlike many other industries, innova-tions in construction are, typically, not imple-mented within the �rm itself, but on the projectsupon which the �rm is engaged ­ adoptiondecisions by �rms have to be implemented onprojects. These projects are collaborative engage-ments with other �rms within the projectcoalition, and so almost all innovations in con-struction have to be negotiated with one or moreactors within the project coalition. An individual�rm’s ability to do this will be strongly in�u-enced by its role within the industry as de�nedin Fig. 1.

The projects upon which �rms are engaged offeranother, internal, source of new ideas ­ problem-solving on projects (Slaughter, 1993). Groa k(1992) argues that this process is a fully blownalternative to formal R&D through the activitiesof ’researcher-practitioners ’. Construction projectsinvolve considerable problem-solving as thegeneral repertoire of technologies and techniquesis adapted and applied to meet the speci�cclient’s needs in interaction with the constraintsof the site. For problem-solving to becomeinnovation, the solutions reached for the parti-cular problem faced on the project must belearned, codi�ed, and applied to future projects­ knowledge that remains tacit is dif�cult tomanage into good currency. Thus the model ofconstruction innovation proposed here has twodistinctive moments ­ a top-down moment ofadoption=implementation , and a bottom-up mo-ment of problem solving=learning which, acontingency approach would suggest, need tobe managed in different ways. New ideas caneither be adopted by �rms and implemented onprojects, or result from problem-solving onprojects and be learned by �rms. Both are, apriori, as important as each other in the construc-tion innovation process.

environment

environmentadoption

implementation learning

problemsolving

firm

project

Fig. 3. A model of construction innovation processes.

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The management of innovation inconstruction

In developing his general management perspec-tive on innovation, Van de Ven (1986) identi�edfour central problems ­ the management ofattention; the process problem of managing ideasinto good currency; the structural problem ofmanaging part­ whole relationships; and thestrategic problem of institutional leadership. Itwill be useful to discuss some of the implicationsof the ideas sketched above under these headings.

The management of attention

Business life is complex and dynamic; humanshave limited cognitive capability. They tend tofocus upon those things that solve their mostimmediate problems and the only way to en-courage innovation is to give it suf�cient salience.Exhortation is not enough; the incentives whichmotivate actors in particular directions need tofavour innovation. Thus the route to the success-ful management of attention is through theincentive structures that inform decision-making;the corollary is that if incentive structures do notfavour innovation, then innovation is unlikely totake place. As Ive (1996) argues, constructioninnovation depends upon the coincidence of themeans, motive and opportunity to innovate. Thusthe way in which the RIBA brokered innovationsin structural framing reduced the means ofprincipal contractors to innovate through pre-scriptive regulations; sti�ed their motives becausethey could not appropriate the returns to theirinnovations through patenting; and restricted theopportunity to industrial building types whichhad no architectural input.

The essence of incentive structures that favourinnovation is the appropriation of the rewards ofinnovation by those that take the risks ofinnovation ­ this is the logic behind patents forinstance. Most importantly, this means that anyinnovation where the client appropriates all thereturns is unlikely to happen. Many principalquantity surveyors consider it good professionalpractice to ask all tenderers to price variationsproposed by one contractor at tender stage in thehope of obtaining an even better price.6 Thedisincentive effect is clear, and even the RoyalInstitution of Chartered Surveyors’ of�cial historyargues that quantity surveying practice has

tended to sti�e innovation (Thompson, 1968,chap. 13). Similarly, innovative design solutionswhich save construction costs on site reduce thereturns to designers paid on a fee basis ratherthan increasing them ­ as Bowley put it, ’ thearchitect is in the position of a commission sales-man whose interest is to get as big a value ofturnover as possible’ (1966, p. 356). The lack ofsuch incentives in British construction has led tomost innovations being what Bowley (1966)called ersatz ­ innovations that only took placebecause preferred solutions were no longer avail-able due to external factors.

Incentives for innovation in construction cannotbe improved without the development of a gain-sharing approach, where rewards are split be-tween clients and the actors in the projectcoalition. The shift from competitive tenderingto partnering provides one of the most importantopportunities for moving towards such an ap-proach. Those in a position to innovate need tobe rewarded for taking such risks. If they are sorewarded, they will have incentives both to adoptnew ideas from outside the �rm, and to capturethe learning from problem solving to proposebetter ways of doing things to the client.

The managing ideas into good currency

Perhaps the most consistent �nding of research oninnovation is that innovations need champions ­the importance of technically competent cham-pions in construction is well demonstrated byNam and Tatum (1997). Ideas are carried bypeople, and ideas are the rallying point aroundwhich collective action mobilizes. However, whilesuch champions in complex systems industriescan come from any part of the industry, and inconstruction typically come from component sup-pliers (Pries and Janszen, 1995), the case studies ofNam and Tatum (1997) show that the role of theprincipal architect=engineer and principal con-tractor is central in all innovations. Unless thesystems integrator is convinced of the merits ofthe new idea, and has the skills to incorporate itinto the system as a whole, change is likely to beslow. As shown in Fig. 1, the systems integrator isat the interface between the innovation super-structure and the innovation substructure ­ newideas are proposed within the latter and acceptedwithin the former, mediated by the systemsintegrator.

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According to Miller and his colleagues (1995,p. 381), the systems integrator has four mainfunctions:

· the skills to integrate interdependent compo-nents into a coherent whole;

· detailed knowledge of client requirements;

· knowledge of the rules and regulationsgoverning the industry;

· the competence to use and develop themathematical models of aircraft performanceobtained from the aircraft builders.

While the last of these may be regarded as sectorspeci�c, the other three would appear to apply inall complex systems industries.

From this perspective, it can be suggested thatone of the major factors reducing the rate ofinnovation in construction is that the systemsintegrator role is split between two very differentactors ­ the principal contractor and the princi-pal architect=engineer. This means, a priori, thatthe mediating and championing roles essential tosuccessful innovations are less likely to be carriedout effectively. A second problem is that whileprincipal architect=engineers typically displaycompetence in the regulatory framework andclient requirements, they often do not have theskills to integrate the subsystems into a totalsystem. In this, they are not well complementedby the principal contractor whose integrationcapabilities are typically restricted to the manage-rial rather than technical level.

The management of part-whole relationships

Innovations on complex product systems areinherently interactive with the rest of the system­ innovating within the parts while losing sight ofthe whole is inherently dysfunctional ­ ’impec-cable micrologic often creates macrononsense andvice versa’ (Van de Ven, 1986, p. 598). One of thegreat strengths of the analysis of Miller and hiscolleagues is the emphasis placed upon the role ofindependent brokers in the innovation process. Inthe �ight simulation industry this is played by the(British) Royal Aeronautical Society at an interna-tional level. It is the function of these actors in theinnovation superstructure to broker new ideas sothat those that improve the parts and complementthe whole go forward and those that favour

subsystem optimization at the cost of wholesystem suboptimization are quashed.

The founding purpose of the Institution of CivilEngineers (ICE) ­ the international model for theprofessional organization of technical expertise ­was ’facilitating the acquirement of knowledgerequisite in their profession and for promotingMechanical Philosophy’ (cited Watson, 1988, p.12). This model was replicated in industry afterindustry and country after country during the19th century. In nonprofessionalized systemssuch as the French, the corps acted as bothbroker and champion of new ideas, and the Ecoledes Ponts reached the zenith of its internationalin�uence in construction technology during the�rst half of the 19th century (Picon, 1992, p. 465).Campagnac and Winch (1997) provide a moredetailed comparison of these two modes oforganizing technical expertise.

The problem, at least in British construction, isthat this broker role is itself spread amongst anumber of professional bodies. Abbott’s (1988)analysis of the ’system of professions’ as acompetition for jurisdictional advantage can bewell applied to the British construction profes-sions. The ICE aggressively defended its positionagainst competition from the breakaway institu-tions of mechanical and electrical engineersthroughout the 19th century, successfully pre-venting them from obtaining royal charters untilthe 1920s (Buchanan, 1989, chap. 5). The cur-rently competing claims from different profes-sions to be the leader of the construction teamfrom architects, quantity surveyors and charteredbuilders are part of the same process. It remainsto be seen whether the Construction IndustryCouncil, founded in 1988 with a leading objectiveto ’develop, encourage and co-ordinate . . . theindustry’s research programme’ (cited Watts,1997), can develop enough authority to take overthe brokering role itself.

One of the distinctive features of the constructionindustry in many countries is the role ofgovernment funded national construction re-search organizations who also play a vitalbrokering role, and, it can be suggested, the(British) Building Research Establishment hasdone much to �ll the vacuum left by thecompeting professional institutions. Many ofthese establishments around the world arecurrently being privatized (Seaden, 1997), and it

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remains to be seen whether they will be able toretain this vital brokering role once they areobliged to compete directly with other actors inthe system. In many of the most dynamic andinnovative industries, the universities haveplayed the brokering role by providing a spacewhere the merits of competing technologies canbe evaluated and disseminated to enable innova-tion, as well as their more traditional role as thesource of many new ideas. Indeed, the evidencefrom the information technology and biotechnol-ogy industries suggests that intensive interactionwith world class research universities is a pre-requisite for a technologically dynamic industry.

Institutional leadership and the innovationcontext

The particular features of the construction inno-vation context were identi�ed in the previoussection, and more attention needs to be given to’creating these intra- and extra-organizationalinfrastructures in which innovation can �ourish’(Van de Ven, 1986, p. 601). One of the strongestthemes running through the recent innovationresearch is the role of tough customers in gooddesigns (Gardiner and Rothwell, 1985); customersare one of the most important sources of innova-tions (von Hippel, 1988).

Current policy in the UK identi�es the experi-enced client as the main institutional leader instimulating construction innovation, yet theremust be doubts regarding clients’ ability to playthis role. Nam and Tatum (1997) show that theclient needs to be technically competent in orderto understand innovative proposals from systemsintegrators, and hence to take the risk ofinnovating. From this perspective, a particularweakness of the British system is that the singlemost important client ­ the state ­ has noequivalent of the US Army Corps of Engineers,the Staatsbauamt, or the Corps des Ponts etChausse es to assess innovative proposals, whilemany local authorities, private sector clients, andprivatized utilities have been outsourcing theirarchitectural and engineering functions. Theability of the client to assess and even proposeengineering solutions to the principal archi-tect=engineer and principal contractor played animportant role in the successful Glaxo project(Winch et al., 1998). The analysis of complexsystems industries also suggests that more atten-tion needs to be given to the two other elements

of the innovation superstructure ­ the regulatoryenvironment on the one hand, and the profes-sional bodies, research establishments and uni-versities on the other.

While demanding clients and other elements inthe innovation superstructure play a vital role instimulating the search for new ideas, it is theinnovation infrastructure that has the responsi-bility of managing them into good currency.Here, the capacity for organizational learning iscritical (CIOB, 1995), both in the top-down andbottom-up modes. In the top-down mode, theprocesses of adoption and implementation areessentially iterative learning cycles as the featuresof the new idea and the existing organizationalcontext are mutually adjusted (Winch, 1994,chap. 10). In the bottom-up mode, new ideasgenerated through problem-solving need to belearned by the organization so that they can bemanaged into good currency on future projects.The capacity of the �rm to learn is, arguably, themost important determinant of its ability toinnovate on projects.

One the most notable features of the contempor-ary organization of the UK industry is therelatively low ability of �rms to learn (CIOB,1995). This is particularly true of the principalcontractor, which plays a key systems integrationrole, yet stresses managerial rather than technicalintegration capabilities. In Japanese �rms such asKajima, on the other hand, the engineering func-tion acts as the focus of organizational learningas it codi�es the learning from problem-solvingon projects and implements these innovationson future projects, while passing up problemsthat cannot be solved at the project level tothe R&D functions for further work. A compari-son of a British management contractor with aJapanese general contractor (Ota, 1990) foundthat the principal difference between the twowas that learning from problem solving wascaptured by the Japanese �rm, but remained tacitand rested with individuals in the British one.7

This creates a highly �uid market for ’star’construction managers between indistinguishable�rms, rather than generating distinctive compe-tencies within �rms for which client will paypremia.

The current situation in British constructionwhereby the downstream systems integrator doesno actual site work seriously disrupts the

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problem solving=organisational learning dy-namic. In many industries, operatives are oneof the main sources of incremental innovation,often captured through suggestions schemes andquality circles, yet these groups are completelyexternalized from the �rm in constructionthrough labour-only subcontracting and casualemployment. Whatever problem solving goes onis not learned by the �rm. Similarly tradecontractors selected on a competitive tenderingbasis have absolutely no incentive to sharelearning with the systems integrator. For partner-ing to fully realize its potential in construction itmust be extended to the principal contractor=-trade contractor relationship.

Some concluding thoughts

The need to co-ordinate innovation in complexsystems industries such as �ight simulationrequires a complex institutional superstructure:

New technology proposals are channelledthrough professional bodies such as theRoyal Aeronautical Society. Acceptance testguides are established by regulators whothen specify approval requirements andvalidate tests during and after the develop-ment of a [system]. After contracting, trustand reciprocity are necessary betweenbuyers and sellers. Because many uncertain-ties have to be resolved during the processof innovation [systems] cannot be purchasedas arm’s length market transactions in thestandard model. Instead, intense relationaltransactions develop, allowing for constantinformation exchange and regular inter-action between industry participants. Con-tinuity of relationships is valued, andrespected and helps de�ne the competenceof the partners. Innovation . . . unfolds with-in a set of governing institutions where . . .co-operation and competition co-exist(Miller et al., 1995, p. 384).

The argument of this paper has had two mainthrusts. First, that constructed products are com-plex product systems, and that the constructionindustry is a complex systems industry. It followsthat the characterization of the innovation processin �ight simulation is also applicable to construc-tion. It follows that the rate of innovation inconstruction will only improve when the innova-

tion superstructure and infrastructure in theindustry moves closer to enabling the dynamicsummarized in the epigraph to this concludingsection. Schumpeter was wrong about the pro-mise of volume production for the constructionindustry, and Miller and his colleagues provide atrenchant critique of the Schumpeterian model ofinnovation to explain why he was wrong.

Secondly this paper has presented a two-momentmodel of innovation processes at the �rm level asa conceptual framework de�ning the manage-ment problem in construction innovation. Thedistinctive project organization of the industrymeans that innovation consists of both anadoption=implementation dynamic and a pro-blem solving=learning dynamic. Both of themrely on the capacity for organizational learningby the �rm, and some reasons were given whythis may be relatively low in construction. Whiledifferences do exist between principal andspecialist consultants on the one hand, andprincipal and trade contractors on the other, themodel is intended to apply to both types of �rmequally.

The poor state of knowledge generally ininnovation process research (Wolfe, 1994) favoursa case study approach which will allow theorybuilding (Yin, 1989). Here, most authoritiesappear to agree, the object of inquiry is mostappropriately the innovation itself; thus we needcase studies of the trajectory of particularinnovations, identifying who generates new ideasand how they are managed into good currency,collected within a consistent conceptualframework.8 This would allow the developmentof concepts and measures which would allow amore quantitative approach at a later stage Thispaper has attempted to sketch out what such aconceptual framework might look like at both thestructural (Fig. 1) and process (Fig. 3) levels.However, much more work is required before wecan really get a grip on the sources andapplications of new ideas in the constructionindustry. I hope that this article will stimulatethat work.

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Endnotes

1The proceedings of this UK Engineering and PhysicalSciences Research Council funded seminar on Hu-man Resources for Construction Innovation areavailable as Construction Productivity NetworkWorkshop Report No. S196, 1997. Many of theideas in this article were �rst introduced at thatmeeting, and I am very grateful to all theparticipants in the meeting for the stimulatingquality of debate over the two days.

2I am grateful to David Gann for this information. Moregenerally, this article has been much enhanced bythe constructive criticism of David Gann, althoughhe, of course, bears no responsibility for the �nalshape of the argument.

3Presentation at le Groupe Bagnolet seminar, Steinbach1997.

4This is well illustrated by the establishment of theConcrete Society in 1908, which became the Institu-tion of Structural Engineers in 1922, because the

ICE was believed to be ignoring the potential of thenew framing technologies (Buchanan, 1989).

5The neophyte Concrete Society was more open, andboth Bylander and principals from Mouchel wereactive in its governance.

6This information was obtained during an interview (29October 1992) with an employer’s agent as part of�eldwork comparing the organization of socialhousing projects in France and Great Britain ­ seeWinch and Campagnac (1995) for the results.

7A similar point was made in a rather different mannerby a speaker at a Construction Productivity SeminarConstruction Innovation; Learning from Abroad (ReportNo 811L 1998) who presented the results ofbenchmarking his construction �rm against 1000European manufacturing �rms, noting that it ratedrelatively high on the skills of its people, butrelatively low on its management processes.

8This is the strategy deployed by the MinnesotaInnovation Research Program (Van de Ven, et al.,1989) with impressive results.

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