Integrating contractor and property developer for product system innovations

Integrating contractor and property developer for product system innovations PurposeThe aim of this paper is to explain why construction groups facing opportunities for product system innovations, such as green buildings, may choose to integrate construction and property development, taking on facilities management (FM) for a limited period.Design/methodology/approachConceptual analysis based on prior literature and illustrated by a single case of integration.FindingsFor product system innovations, an in-house developer should be more able to reduce uncertainty than independent developers, due to unobservable long-term technological quality for customers, because the property becomes associated with lower risk after having been owned and operated. Alternatives such as building certification systems support incremental innovations, warranties suffer from double moral hazard in the long run and risk allocation in public–private partnership projects often fails to encourage system innovations. Integration allows the contractor to work continuously with innovative projects, developing new capabilities, which allow the firm to signal proficiency to the market, employees and the investment community.Research limitations/implicationsThe phenomenon is new, and further empirical surveys are needed to confirm the hypothetical conclusions drawn here.Practical implicationsThe value of close collaboration between those who develop innovative green building technologies and facilities managers is outlined.Originality/valueThe relation between the scope of corporate activities in construction groups, technological innovations and FM has not been studied before. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Facilities Emerald Publishing

Integrating contractor and property developer for product system innovations

Facilities, Volume 35 (9/10): 14 – Jul 4, 2017

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0263-2772
DOI
10.1108/F-10-2016-0094
Publisher site
See Article on Publisher Site

Abstract

PurposeThe aim of this paper is to explain why construction groups facing opportunities for product system innovations, such as green buildings, may choose to integrate construction and property development, taking on facilities management (FM) for a limited period.Design/methodology/approachConceptual analysis based on prior literature and illustrated by a single case of integration.FindingsFor product system innovations, an in-house developer should be more able to reduce uncertainty than independent developers, due to unobservable long-term technological quality for customers, because the property becomes associated with lower risk after having been owned and operated. Alternatives such as building certification systems support incremental innovations, warranties suffer from double moral hazard in the long run and risk allocation in public–private partnership projects often fails to encourage system innovations. Integration allows the contractor to work continuously with innovative projects, developing new capabilities, which allow the firm to signal proficiency to the market, employees and the investment community.Research limitations/implicationsThe phenomenon is new, and further empirical surveys are needed to confirm the hypothetical conclusions drawn here.Practical implicationsThe value of close collaboration between those who develop innovative green building technologies and facilities managers is outlined.Originality/valueThe relation between the scope of corporate activities in construction groups, technological innovations and FM has not been studied before.

Journal

FacilitiesEmerald Publishing

Published: Jul 4, 2017

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