- Email: [email protected]
An empirical study on incentives of strategic partnering in China: Views from construction companies
INTERNATIONAL JOURNAL OF
PROJECT MANAGEMENT International Journal of Project Management 25 (2007) 241–249 www.elsevier.com/locate/ijproman
An empirical study on incentives of strategic partnering in China: Views from construction companies Shaokai Lu a
a,b
, Hong Yan
c,*
School of Economic and Management, Southwest Jiaotong University, Chengdu, China b College of Civil Engineering, Shenzhen University, Shenzhen, China c Department of Logistics, The Hong Kong Polytechnic University, Hong Kong, China
Abstract This paper gives the results of a survey aimed at identifying the underlying incentives for strategic partnering in China’s construction industry. Fourteen common strategic partnering incentives are concluded from the construction companies’ perspective and extended to 20 items in questionnaire for data collection and analysis. It is found that through strategic partnering, companies are more likely to access technology, share risks, and improve project-based performance and competitive position. To compare the views from strategic partnering participants in the construction industry, data was collected from two groups of respondents: 80 contractors and 36 consultants. The analysis results reveal that both contractors and consultants consider ‘‘competitive position enhancement’’ and ‘‘new market entry’’ as the most significant incentives for strategic partnering. Conversely, the factors listed under ‘‘increased cultural responsiveness’’ and ‘‘project-based’’ are ranked low. Ó 2006 Elsevier Ltd and IPMA. All rights reserved. Keywords: Strategic partnering; Incentives; Construction industry; China
1. Introduction Since the economic reform and opening policy started in the early 1980s, China’s construction industry has achieved extraordinary growth and dramatic development. Construction section has moved from a welfare oriented infrastructure provider to a market oriented construction product industry. As a typical project-based process, construction performance is usually assessed based on completion time, construction quality, cost, engineering specification and stakeholder expectation. While the construction market in China has enormous demand and insufficient qualified capability, high project performance and project success are rarely seen. In recent years, project partnering has obtained a great attention in both construction industrial practice and academic research. This is due to its noteworthy effort of improving project performance *
Corresponding author. Tel.: +852 2766 7365; fax: +852 2330 2704. E-mail address: [email protected] (H. Yan).
0263-7863/$30.00 Ó 2006 Elsevier Ltd and IPMA. All rights reserved. doi:10.1016/j.ijproman.2006.08.004
and creating the organizational environment of trust, enhancing communication and employee involvement. It is thus brought into China’s construction industry to improve both construction performance and efficiency. Strategic partnering, particularly in the construction industry, is strongly cultural and local business environment related. The academic analysis and practice of partnering depends on many things, such as the maturity of the industry, local economy development, and government regulation on the industry. Although many aspects of the study of partnering and strategic alliance in developed construction markets have been reported [12,20,26,30,31,40], there has been little empirical research in the Chinese construction sector, perhaps because it is still in a stage of development with its business practices. This paper reviews the incentives of strategic partnering in general from the construction companies’ perspective. Findings from a questionnaire survey on potential incentives associated with strategic partnering in China’s construction industry are discussed.
242
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
The definition of construction ‘‘partnering’’ has various forms in academic research and business practice. Generally speaking, researchers in construction take the term ‘‘partnering’’ to represent an alliance between companies within the supply chain [10]. It is mainly defined as a working relationship between stakeholders based on respect, trust, teamwork, commitment and shared goals. Such a relationship is defined by good faith rather than a formal contract. However, the definition of ‘‘strategic alliance’’ refers to a long-term relationship [10,15] which is based not only on the principles of partnering, but also with the additional values of sharing resources, knowledge, risks and profits/losses. A contract determines the terms of a strategic alliance. Although the terms ‘‘partnering’’ and ‘‘strategic alliance’’ are relatively new in China’s construction industry, there are some partnering tools, such as team building sessions and review meetings which promote cooperation between project parties. Meanwhile, considering that the completion of construction projects usually takes years, some strategic factors such as sharing risk are also covered by formal contracts. In practice, the most efficient approach to resolve any hurdle is still heavily related to mutual relationships due to the low efficiency of litigations. Thus, in respect to the above definitions, the term ‘‘strategic partnering’’ can be treated as a ‘‘moral/contract agreement between parties that facilitates effective resolution of problems to achieve mutual benefits’’. In other words, strategic partnering includes all aspects of partnering and some aspects of strategic alliance. In this paper, the dimensions of strategic partnering are considered in line with previous studies, such as team building sessions, problem-solving process establishment and workshop, etc. [23,28,34]. This paper conducts an empirical analysis on the incentives of strategic partnering in construction industry in China through a comprehensive questionnaire survey. A total of 116 valid questionnaires are collected from various contractors and consultants, using strategic partnering incentives are compared and analyzed. In China’s construction market, due to owners’ lack of necessary knowledge and skills, consultants must usually act as representatives of the owners and take charge of the entire construction projects delivery process. Therefore, although the study only collects data from industrial members, results from consultants also reflect the perceptions of owners to some extent. The purpose of this initial pioneering study is to understand and explain strategic partnering practice and related industrial behavior in China’s construction section, and to provide insightful information for strategic development in business. 2. Incentives of partnering One research objective is to address the issue of forming strategic partnering. The existing literature on partnering and strategic alliance within the construction field offers various incentives to construction parties to facilitate stra-
tegic partnering practices. With a comprehensive literature review, we have identified fourteen common incentives for strategic partnering: technology access, risk polling, finance securing, new market entry, core customer service, competitive position enhancement, meeting special requirements, better product quality, cost reduction, better time control, reduced litigation, efficiency improvement, long-term relationship establishment and increased cultural responsiveness. 2.1. Technology access The increase in sophisticated technology-based projects demands a much higher degree of design, manufacturing, installation and commissioning skills than before [32]. The range of disciplines required to construct such a facility are seldom found within a single firm. Therefore, those companies in today’s market who desire to execute highly technical projects must form alliances with other firms that can provide the desired expertise [3]. 2.2. Risk polling According to Black et al. [5], a major factor in partnering for construction projects is the benefit from sharing risks between parties. For example, contracts may be awarded on a cost-plus basis, rather than on a lump sum. These types of differences help to eliminate risks due to the invariably unique design, number of organizations involved and unknown site conditions. Through partnering, construction firms can introduce their operations into markets while sharing risks with other firms. This is especially useful when entering a new country. Through forming an alliance with a firm from the new country, strategic partnering can minimize risks by working with local expertise [3,5]. Kumaraswamy and Matthews [25] suggest that a ‘‘win–win’’ situation can be attained by all stakeholders involved in such a partnering process. 2.3. Finance securing For a construction firm, the ability to secure financing for prospective clients is enhanced by making alliances with financial institutions and other construction firms. Alliances are thus formed in hopes of forming a stronger and more profitable organization. This ensures that progress on the projects of the firm involved can be more consistent and stable. Such continuity of work would enable better planning and resource reallocation, more predictable cash-flow, improved cost recovery and relatively secure margins. Having a long-term alliance with a bonding company also helps to enhance bonding-capacity [3,6,22]. 2.4. New market entry Forming alliances with a local firm can make the transition into new geographical markets much easier. In addi-
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
tion, a local strategic partner can be expected to assist in the construction permit process in adherence to local construction codes. Such a partner can also provide valuable insight into the local market, such as labor availability and information about other construction companies [3]. 2.5. Core customer service The essence of running a construction business today is to establish one’s own core competencies and provide quality services to customers. Such an organization should be aware that customer satisfaction is a major indicator of business success [14,30]. Black et al. [5] study the benefits of partnering in construction and find that increased customer satisfaction is ranked the second most significant benefit among all categories of responding organizations. Partnering enhances customer satisfaction as the customer is closer to the construction process and better informed [36]. Badger and Mulligan [3] also find that some construction firms state their top reason for forming an alliance is to better serve their core business clients. 2.6. Competitive position improvement It has been suggested that construction organizations should strive for sustainable competitive advantages through out the initiation of strategic alliances. According to Krippaehne et al. [24], the effective management of an alliance can be used to obtain and sustain a competitive advantage in the marketplace. Li et al. [31] argue that partnering can be formed for bidding new contracts. The participants can have work completed through partnering to rearm their deficiencies and enhance their reputation. 2.7. Meeting special requirements Some governments require some form of local company involvement in construction projects, and forming alliances with local firms is needed to meet licensing requirements in these countries. Alliances are also formed for political reasons and to meet the bidding criteria for certain special projects. Badger and Mulligan [3] conclude that participants in partnering may be most directly affected by these particular items. 2.8. Better product quality Helland [21] expresses partnering as the master key that will unlock the techniques and principles of Total Quality Management. Chan et al. [7] conclude that partnering produces high quality construction and service as well as reducing engineering rework. Larson [28] studies on the relationship between partnering activities and project success. The results show that specific partnering elements like establishing problem solving procedures and provisions for continuous improvement are linked to better technical performance. Site safety and environmental impact are two
243
other issues that have been dealt with through partnering [35]. 2.9. Cost reduction It appears that motivators common in partnering, such as target cost contracts provide a way to lower administrative costs where the uncertainty of the product usually lead a high cost level [5,38]. Gransberg et al. [19] compare partnered and non-partnered projects and conclude that partnering promises to furnish means to control cost growth. The reasons for better cost performance are many, such as alleviating rework, reducing scheduled time, etc. [1]. 2.10. Better time control As mentioned by Gransberg et al. [19], the US Army Corp of Engineers find that partnering is most valuable on projects with tight schedules. Naotum [35] argues that some common motivators like the fee at risk principle can be used to stimulate a partnering team to consider the importance of time rather than concentrate upon lowering costs. Chan et al. [7] conclude that partnering can reduce delay as a result of better scheduling, more timely decisions and reliable programming. 2.11. Reduced litigation Partnering is primarily used to resolve disruptive interorganizational conflicts [2,11]. The main reason for the introduction of partnering is the need to move away from traditional adversarial relationships in construction contracting [35]. Larson [28] states that such disputes often end up in court as either side realizes the only way to protect their interests is through litigation. Proper use of partnering reduces adversarial relationships between the owner and contractor. It may also be extended to all key members involved [12]. 2.12. Efficiency improvement Partnering provides a way to develop a control and resolution approach for dealing with problems [13]. To utilize some effective tools, such as partnering review meeting, etc., partnering promotes trust and efficient communication through open discussion [4]. Chan et al. [7] conclude that it also helps efficient problem solving, enhanced communication, continuous improvement and increased potential for innovation. 2.13. Long-term relationship establishment Partnering has been advocated as a mechanism for developing relationship so as to improve inter-organizational relations [19,21]. The Construction Industry Institute [14] defines partnering as a long-term commitment between two or more organizations. It is suggested that a
244
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
long-term alliance in construction can be expected to maximize effective management of each participant’s resources [10]. The partnering should be viewed as a long-term strategy that focuses on sharing of knowledge, experience, visions and purposes [31,35]. 2.14. Increased cultural responsiveness Li et al. [31] argue that learning should be the core element in strategic partnering and that development of a continuous learning culture should be the ultimate goal. Partnering can also be treated as a moral agreement that facilitates effective resolution of problems and conflicts without destroying the harmony between clients and contractors. It also wraps major project participants into an alliance that creates a more cooperative working environment [11,17,27,30]. It seems to relate to the collectivism prevalent in Chinese/Japanese culture, which has such characteristics as mutual obligation, trust, co-operation, long-term nature, and win–win relations [26,35]. 3. Survey process An empirical study was undertaken in China in spring 2005. Based on these findings and a discussion with six local experts in the field of construction industry, the 14 common partnering incentives identified above are rephrased and expanded into 20 statements (Table 1). These questions form the basis of an empirical questionnaire. A survey was then conducted to explore various perceptions of incentives towards strategic partnering by two principal categories of the construction industry, contractors and consultants. Apart from questions intended to capture the background information of the respondents, the remaining questions in the questionnaire ask respon-
dents to rate their degree of agreement with each of the identified incentives. This is done according to a five-point Likert scale, where an answer of ‘‘1’’ indicates ‘‘strongly disagree’’ and ‘‘5’’ indicates ‘‘strongly agree’’, and ‘‘0’’ indicates ‘‘no idea’’. Previous research indicates that it is extremely difficult to achieve the necessary response rate for a questionnaire survey by mail in China’s construction industry [39]. Therefore, this research survey adopts a ‘‘snowballing’’ approach of distributing questionnaires. Sixteen major cities including Beijing, Shanghai, Shenzhen and Chengdu are covered by the survey. With support from a number of experts in local construction industry, who have good connections with other local construction practitioners, 200 questionnaires were delivered to the potential respondents. Respondents were given 3 weeks to complete and return the questionnaires. Out of the 200 questionnaires, 116 valid responses were received, representing a response rate of 58%. This sample consists of 80 (69%) from contractors and 36 (31%) from consultants. Total 99 (85%) of respondents have longer than or equal to five years of construction related experience and 78 (67%) of respondents have more than ten years experience. Both small and large size firms are represented in the sample. Twenty-four (21%) of respondents reports that they have worked for small firms with less than one hundred employees, while 64 (55%) of the respondents have worked for large firms with more than one thousand employees. Construction companies covered by the survey consist of 100 (86%) state-owned, 4 (4%) collective owned, 9 (8%) individual owned and 3 (2%) joint venture companies. The accumulative proportion of state-owned and collective owned companies is 90%. This indicates that the non-private construction companies are the dominant force in China. This is in line with the finds of Liu et al. [28]. Although the survey is limited to
Table 1 Perceived incentives of partnering in China (all respondents) Number
Item (incentives of partnering)
Minimum
Maximum
Mean
SD
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
To To To To To To To To To To To To To To To To To To To To
1.00 1.00 1.00 1.00 1.00 2.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00
3.63 3.35 3.31 4.01 3.64 4.18 4.25 3.69 3.63 3.45 3.36 3.36 2.92 2.95 3.47 3.59 3.86 2.98 3.06 2.82
1.00 1.08 1.13 0.83 0.95 0.84 0.79 0.92 0.98 1.07 1.06 1.08 1.19 1.17 1.01 0.94 0.85 1.04 1.00 1.01
obtain the support of partner’s expertise and knowledge share risks assure financing penetrate new market serve core customers improved long-term competitive advantages increase bidding advantages enhance reputation meet requirements of local government/trade/projects have better product quality reduce costs have better schedule control reduce engineering rework reduce litigation improve efficiency increase opportunity for innovation establish long-term relationships improve social responsibilities create harmony amongst the project participants enhance company culture
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
only sixteen cities, the results can be regarded as representative of the whole country, because of the geographic position and economic status of these cities in China [29]. 4. Data analysis The data collected is analyzed using the statistical package for social sciences (SPSS). The reliability of the fivepoint scale used in the survey is tested using Cronbach’s coefficient alpha, which measures internal consistency among factors. The value of the test is 0.8918 (F statistic = 17.3033, P = 0.0000), which being greater than 0.5, indicates that the five-point scale measurement is reliable at the 1% significant level. Many studies adopt the ‘‘mean score’’ method to establish the relative importance among factors suggested by the respondents [8,9,30]. The data collected from the current questionnaire survey is analyzed using the same technique within various groups. These groups are categorized according to the role of the parties involved in the China’s construction industry (contractors and consultants). The five-point Likert scale described previously is used to calculate the mean score for each incentive, which is then used to determine the relative ranking of different incentives in descending order of importance. Kendall’s concordance analysis is implemented to measure the agreement of respondents within a group on their rankings of incentives. If Kendall’s coefficient of concordance (w) is significant at the level of 0.05, as a reasonable degree of consensus is indicated [7].
245
The ‘‘two sample Kolmogorov–Smirnov test’’ method is firstly used to measure whether these perceptions between contractors and consultants were come from the same distribution, and all probability values over 0.05 show that we can not reject the null hypothesis of it was in the same distribution. The ‘‘Mann–Whitney U test’’ method is then used to test whether the mean ranks for each incentive are equal between contractors and consultants. Lower probability value below 0.05 indicates that the null hypothesis of no difference between the mean ranks among groups can be rejected, suggesting that there is a difference in opinion between contractor and consultant groups. In order to affirm the above results and further explore the agreement between contractors and consultants, the Spearman rank correlation coefficient (rs) is used to measure the agreement between two respondents groups on their rankings of incentives of partnering. If rs is significant at the level 0.05 level, an association between the two sets of rankings is established [7]. 5. Survey result analysis The results of computation of the Kendall’s coefficient of concordance for the survey and the rankings are presented in Table 2. Kendall’s coefficient of concordance (w) for the rankings of incentives among all respondents is 0.221, among the contractor’s group 0.152, and among the consultant’s group 0.189. The computed ws are all significant at 0.000. Thus it can be concluded that there is a significant amount of agreement among the respondents
Table 2 Ranking and Kendall’s coefficient of concordance for the partnering incentives in China Number
Item (incentives of partnering)
7 To increase bidding advantages 6 To improve long-term competitive advantages 4 To penetrate new market 17 To establish long-term relationships 8 To enhance reputation 5 To serve core customers 9 To meet requirements of local government/trade/projects 1 To obtain the support of partner’s expertise and knowledge 16 To increase opportunity for innovation 15 To improve efficiency 10 To have better product quality 11 To reduce costs 12 To have better schedule control 2 To share risks 3 To assured financing 19 To create harmony amongst the project participants 18 To improve social responsibilities 14 To reduce litigation 13 To reduce engineering rework 20 To enhance company culture Kendall’s coefficient of concordance (w) Level of significance
All respondents
Contractor
Consultant
Mean
Rank
Mean
Rank
Mean
Rank
4.25 4.18 4.01 3.86 3.69 3.64 3.63 3.63 3.59 3.47 3.45 3.36 3.36 3.35 3.31 3.06 2.98 2.95 2.92 2.82
1 2 3 4 5 6 7 7 9 10 11 12 12 14 15 16 17 18 19 20
4.25 4.10 4.03 3.96 3.64 3.55 3.63 3.52 3.48 3.43 3.28 3.38 3.39 3.51 3.41 3.14 2.95 2.97 2.97 2.90
1 2 3 4 5 7 6 8 10 11 15 14 13 9 12 16 19 17 17 20
4.24 4.38 3.97 3.63 3.81 3.83 3.63 3.86 3.82 3.56 3.81 3.32 3.29 3.00 3.06 2.88 3.06 2.91 2.79 2.65
2 1 3 9 7 5 9 4 6 11 7 12 13 16 14 18 14 17 19 20
Note. Where H0 = respondents’ ratings are unrelated to each other within each group.
0.221 0.000
0.152 0.000
0.189 0.000
246
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
Table 3 ‘‘Kolmogorov–Smirnov test’’ and ‘‘Mann–Whitney U test’’ for the partnering incentives in China Number
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 a b
Item (incentives of partnering)
To To To To To To To To To To To To To To To To To To To To
Mean rank
obtain the support of partner’s expertise and knowledge share risks assure financing penetrate new market serve core customers improved long-term competitive advantages increase bidding advantages enhance reputation meet requirements of local government/trade/projects have better product quality reduce costs have better schedule control reduce engineering rework reduce litigation improve efficiency increase opportunity for innovation establish long-term relationships improve social responsibilities create harmony amongst the project participants enhance company culture
Significance level
Contractor
Consultant
K–S testa
M–S U testb
52.25 60.33 58.65 57.53 51.79 53.85 57.16 56.05 55.31 50.55 56.21 55.27 56.65 54.32 53.55 52.90 59.96 52.57 55.60 52.65
65.84 46.19 49.73 55.86 61.79 64.01 54.91 60.64 55.91 65.68 55.51 54.40 52.93 53.25 58.21 63.03 50.40 55.64 48.85 45.71
0.06 0.10 0.41 1.00 0.43 0.61 1.00 0.97 1.00 0.07 0.93 1.00 0.76 1.00 0.99 0.68 0.14 0.83 0.98 0.74
0.03 0.03 0.17 0.79 0.11 0.10 0.71 0.47 0.92 0.02 0.91 0.89 0.56 0.87 0.46 0.11 0.12 0.62 0.27 0.24
Where H0 = distributions of the perceptions between groups are same. Where H0 = no difference between the mean ranks between groups.
in each group on the rankings of the incentives of their partnering projects. Table 3 compares the responses of the contractors and consultants. The results indicate that there is general agreement of opinion between the two groups (p = 0.10–0.92) at 5% level of significance. However, the opinions of the contractors and consultants do differentiate on the factors of ‘‘to obtain the support of partner’s expertise and knowledge’’, ‘‘to share risks’’ and ‘‘to have better product quality’’ (p = 0.03, 0.03 and 0.02, respectively). They are supported by the mean ranks of 52.25, 60.33 and 50.55 for these factors by contractors, and supported by 65.84, 46.19 and 65.68 by consultants, respectively. The next stage of analysis was to test whether there is any similar substantial agreement among the respondents in the two groups. This is determined by the Spearman rank correlation coefficient (rs). The correlation coefficient of the ranking on incentives is 0.828 for contractors and consultants (Table 4). The null hypothesis that there is
Table 4 Spearman rank correlation test for the partnering incentives in China Contractor
Consultant
Contractor Spearman rank correlation coefficient (rs) Significance (2-tailed)
1.000 NS
0.828 0.000
Consultant Spearman rank correlation coefficient (rs) Significance (2-tailed)
0.828 0.000
1.000 NS
Note. Where H0 = no significant disagreement on the ranking; NS = not significant.
no significant disagreement between contractors and consultants on the ranking of incentives for strategic partnering has to be accepted. It is thus concluded with more than 99% confidence level that there is significant agreement on the ranking of incentives between contractors and consultants. 6. Survey results discussion As mentioned by Chan et al. [7], the ranking exercise is based on perception, a subjective assessment of the ranking result is made for the analysis of the perceived relative importance of factors. This subjective assessment does not provide any absolute value on the ranking position that ought to be recognized. Thus more emphasis is given to the factors that placed as most important and least important in the ranking list [7]. Analysis of the ranking exercise indicates some interesting results which show significant agreement among the participants of each group on the ranking of partnering incentives. Table 2 indicates that the rankings of contractors and consultants are not significantly different as deduced from the values of significant level (0.000). Respondents largely agree with the findings reported in the publications of Badger and Mulligan [3], Krippaehne et al. [24] and Li et al. [31]. The factors listed under ‘‘to enhance competitive position’’ are generally ranked higher than others. All respondents rank ‘‘to increase bidding advantages’’ and ‘‘to improve long-term competitive advantages’’ as the top two strategic partnering incentives. The results appear to be a departure from the finds of previous studies on strategic partnering benefits in developed
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
may be attributed to their various competitive situations in China’s construction market. Both contractors and consultants achieve dramatic development to accommodate the rapid economic expansion demands for building and infrastructure in the past two decades [30]. Due to the different natures of entrance thresholds, there are more contractors than consultants in China’s construction industry. Contractors carry higher competitive pressure and emphasize more on establishing long-term relationships to improve their competitive advantages. This result is in line with previous studies [16,37], but not consistent with findings in Hong Kong [40]. It is rather surprising that all respondents rank projectbased factors as the top 10 incentives, such as ‘‘to assure financing’’, ‘‘to reduce costs’’, ‘‘to have better schedule control’’ and ‘‘to reduce engineering rework’’. The results maybe because that most of China’s construction companies do not understand formal partnering approaches clearly, and can not perceive the project-based benefits of partnering which had been perceived by other construction companies in developed markets [28]. The results shown in Table 4 demonstrate that there is a substantial consistency on the rankings of partnering incentives between groups of respondents. The profiles for each of the 20 listed incentives of partnering indicate in general, a close scattered pattern as shown in Fig. 1. The close scatter pattern indicates that most construction companies in China exhibit a positive attitude towards strategic partnering. It can also be inferred that most significant partnering incentives of China’s construction companies are strategy based factors rather than project-based currently. Gale and Luo [16] study the construction joint ventures in China and point out that foreign firms appear
4.5 All respondets Crontractors 4.0 Consultants
3.5
3.0
2.5 20 o. N 13 o. N 14 o. N 18 o. N 19 o. N 3 o. N 2 o. N 12 o. N 11 o. N 10 o. N 15 o. N 16 o. N 1 o. N 9 o. N 5 . No 8 o. N 17 o. N 4 o. N 6 o. N 7 o.
N
markets, which says that ‘‘improvement of relationship between strategic partnering participants’’ is the most significant benefit [5,7]. Similarly, contractors and consultants all believe that they should use partnering when they enter new markets, and rank the factor as the third important incentive. This suggests that most construction companies in China take ‘‘to enhance competitive position’’ and ‘‘to penetrate new market’’ as the most important strategic partnering incentives. Through strategic partnering, construction companies can combine resources and increase likelihood of success [5]. Furthermore, partnering with a local firm on an international project, barriers such as language, legal issues and culture influence are reduced [3,5]. Similar to the results found in the relative importance ranking of strategic partnering incentives, the factors listed under ‘‘to increase cultural responsiveness’’ is ranked the lowest among contractors and consultants. All respondents rank ‘‘to enhance company culture’’ to be the least important partnering incentive, and other related items such as ‘‘to create harmony amongst the project participants’’ and ‘‘to improved social responsiveness’’ are ranked low. Although the role of intrinsic motivation based on rewards such as social recognition and meaningful work can also help to form partnering [18,33], given the relatively short history of professional project management in China it seems no surprise that construction companies have not taken cultural responsiveness as a main mission in their operations. The ‘‘Mann–Whitney U test’’ (Z ratio) indicates that not all the perceptions of partnering incentives are the same between the contractors and consultants group. In relation to item 2, ‘‘to share risks’’, the Z ratio is 2.23 and the observed significance level is less than 0.05. The results suggest that contractors (60.33) may be more conscious about the above two strategic partnering factors than consultants (46.19). Conversely, towards ‘‘to obtain the support of partner’s expertise and knowledge’’ and ‘‘to have better product quality’’, the Z ratio is 2.18 and 2.44 as well as the observed significance is 0.03 and 0.02, respectively. It can be thus concluded that consultants may be more conscious about partner’s supports and project quality, supported by the mean ranks of 65.84 and 65.68 for the factor by consultants while 52.25 and 50.55 by contractors. As mentioned by Chan et al. [7], these differences may be attributed to the different expectations and interpretations of partnering arrangement. In China’s construction industry, contractors often take responsibility for building risks while consultants take responsibility for the quality of projects. The various areas of involvement in project actives can be also used to explain the disagreements between contractors and consultants on the factors of ‘‘to obtain the support of partner’s expertise and knowledge’’ and ‘‘to increase opportunity for innovation’’. While contractors rank ‘‘to establish long-term relationships’’ as 4th, consultants rank it the 9th. The difference
247
Item No. Fig. 1. Cross-comparison of incentives among respondents.
248
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
to show more concern about cultural compatibility while the Chinese group expects a long-term attitude in cooperation.
Acknowledgements Authors sincerely thank the anonymous referee for their valuable comment and encouragement, which greatly helped us to revise the problem description and discussion.
7. Conclusions The wider adoption of a strategic partnering arrangement should be encouraged in China’s construction industry as it has been shown to improve performance and reduce confrontation in the construction supply chain. The idea of strategic partnering is relatively new to China’s construction industry compared to other developed markets such as the US. Identifying the perceived incentives of strategic partnering in construction can be used to formulate effective strategies for implementation. This paper investigates the major incentives of partnering in China’s construction industry through a questionnaire survey among both contractors and consultants. All participants generally agree on the ranking of incentives, with ‘‘to enhance competitive position’’ as one of the most important. The findings are in line with the conclusions drawn by Badger and Mulligan [3], Krippaehne et al. [24] and Li et al. [31]. As suggested by Badger and Mulligan [3] and Black et al. [5], the research respondents believe that they should use strategic partnering when they enter new markets. The results also support that the role of project participants may influence their perceptions of strategic partnering incentives, which has been discussed by Chan et al. [7]. As nearly 90% of companies involved in this study comes from the state owned section, the findings fairly reflects the attitude and practice of state owned construction enterprises towards the strategic partnering in the industry. The current strategic partnering applications in China are often observed at the tender preparation stage, where companies form alliance to bid new projects. Partly due to the less-flexible system in these enterprises, further applications at the project level are rarely seen. In addition, the results demonstrate that the strategic partnering incentives of project-based are less significant when compared to other reported studies. This may due to the fact that most construction companies in China are not familiar with the formal strategic partnering approaches. Similarly, given the relatively short history of professional project management, construction companies in China do not take factors of ‘‘to increase cultural responsiveness’’ as significant strategic partnering incentives. In general, most China’s construction companies believe that they should use partnering for strategy-based issues. In conclusion, these findings in the Chinese construction industry can provide a useful reference for other developing countries faced with similar situation in promoting the applications of strategic partnering. Furthermore, as more international construction companies are moving into the China market while the country is fulfilling its responsibility to WTO, increasing use of partnering with these external organizations would be an interesting follow up research topic.
References [1] Albanese R. Team-building process: key to better project results. ASCE, J Manage Eng 1994;10(6):36–44. [2] Appel ME. Partnering new dimensions in dispute prevention and resolution. Arbitrat J 1993;48(2):47–51. [3] Badger WW, Mulligan DE. Rationale and benefits associated with international alliances. J Constr Eng Manage 1994;121(1):100–11. [4] Bayliss R, Cheung SO, Suen HCH, Wong SP. Effective partnering tools in construction: a case study on MTRC TKE contract 604 in Hong Kong. Int J Project Manage 2004;22(3):253–63. [5] Black G, Akintoye A, Fitzgerald E. An analysis of success factors and benefits of partnering in construction. Int J Project Manage 2000;18(6):423–34. [6] Bresnen M, Marshall N. The engineering or evaluation of cooperation? A tale of two partnering projects. Int J Project Manage 2002;20(7):497–505. [7] Chan APC, Chan DWM, Ho KSK. An empirical study of the benefits of construction partnering in Hong Kong. Constr Manage Econ 2003;21(5):523–33. [8] Chan DWM, Kumaraswamy MM. Reasons for delay in civil engineering projects-the case of Hong Kong. Hong Kong Inst Trans 1996;2(3):1–8. [9] Chan DWM, Kumaraswamy MM. Compressing construction durations: lessons learned from Hong Kong building projects. Int J Project Manage 2002;20(1):23–35. [10] Cheung EWL, Li H, Love PED, Irani Z. Strategic alliances: a model for establishing long-term commitment to inter-organizational relations in construction. Build Environ 2004;39(4):459–68. [11] Crowley LG, Karim A. Conceptual model of partnering. ASCE, J Manage Eng 1995;11(5):33–9. [12] Conley MA, Gregory RA. Partnering on small construction projects. J Constr Eng Manage 1999;125(5):320–4. [13] Cowan C, Gray C, Larson E. Project partnering. Project Manage J 1992;22(4):5–12. [14] Construction Industry Institute (CII). In search of partnering excellence. Publication no.17-1, Report CII, Austin, TX; 1991. [15] Ellison SD, Miller DW. Beyond ADR: working toward synergistic strategic partnership. ASCE, J Manage Eng 1995;11(6):44–54. [16] Gale A, Luo J. Factors affecting construction joint ventures in China. Int J Project Manage 2004;22(1):33–42. [17] George MD, Palmer A. Construction management new directions. London: Blackwell Science; 2000. [18] Ghosal S, Morgan P. Bad for practice: a critique of the transaction cost theory. Acad Manage Rev 1996;21(1):13–47. [19] Gransberg DD, Dillon WD, Reynolds L, Boyd J. Quantitative analysis of partnered project performance. J Constr Eng Manage 1999;125(3):161–6. [20] Green SD. Partnering: the propaganda of corporatism. J Constr Procurement 1999;5(2):177–87. [21] Helland RB. Project partnering-principle and practice. London: Thomas Telford; 1995. [22] Holt GD, Love PED, Li H. The learning organization: toward a paradigm for mutually beneficial strategic construction alliances. Int J Project Manage 2000;18(6):415–21. [23] Kadefors A. Trust in project relationships-inside the black box. Int J Project Manage 2004;22(3):175–82. [24] Krippaehne RC, McCullouch BG, Vanegas JA. Vertical business integration strategies for construction. ASCE, J Manage Eng 1992;8(2):153–66.
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249 [25] Kumaraswamy MM, Matthews JD. ASCE, Improved subcontractor selection employing principles. J Manage Eng 2000;16(3):47–57. [26] Kwan AY, Ofori G. Chinese culture and successful implementation of partnering in Singapore’s construction industry. Constr Manage Econ 2001;19(6):619–32. [27] Larson E. Project partnering: results of study of 280 construction projects. ASCE, J Manage Eng 1995;11(2):30–5. [28] Larson E. Partnering on construction projects: a study of the relationship between partnering activities and project success. IEEE, Trans Eng Manage 1997;44(2):188–95. [29] Liu GW, Shen QP, Li H, Shen LY. Factors constraining the development of professional project management in China’s construction industry. Int J Project Manage 2004;22(3):203–11. [30] Li H, Cheng EWL, Love PED. Partnering research in construction. Eng Constr Archit Manage 2000;7(1):76–92. [31] Li H, Cheng EWL, Love PED, Irani Z. Co-operation benchmarking: a tool for partnering excellence in construction. Int J Project Manage 2001;19(3):171–9. [32] Matthews J, Tyler A, Thorpe A. Pre-construction project partnering: developing the Process. Eng Constr Archit Manage 1996;3(1& 2): 117–31.
249
[33] Miller DT, Ratner RK. The disparity between the actual and assumed power of self-interest. J Pers Soc Psychol 1998;74(1): 53–62. [34] Moore C, Mosley D, Slagle M. Partnering: guidelines for win–win project management. Project Manage J 1992;23(1):18–21. [35] Naotum S. An overview into the concept of partnering. Int J Project Manage 2003;21(1):71–6. [36] Nielsen D. Partnering for performance. ASCE, J Manage Eng 1996;12(3):17–9. [37] Sarker MB, Aulakh PS, Cavusgil ST. The strategic role of relational bonding in inter-organizational collaborations: an empirical study of the global construction industry. J Int Manage 1998;4(2):85–107. [38] Turner JR, Simister SJ. Project contract management and a theory of organization. Int J Project Manage 2001;19(8):457–64. [39] Yang ML, Chuah KB, Rao VMT, Chen EH. Project management practices in Pudong, a new economic develop area of Shanghai, China. Int J Project Manage 1997;15(5):313–9. [40] Wong PSP, Cheung SO. Trust in construction partnering: views from parties of the partnering dance. Int J Project Manage 2004;22(6):437–46.
PROJECT MANAGEMENT International Journal of Project Management 25 (2007) 241–249 www.elsevier.com/locate/ijproman
An empirical study on incentives of strategic partnering in China: Views from construction companies Shaokai Lu a
a,b
, Hong Yan
c,*
School of Economic and Management, Southwest Jiaotong University, Chengdu, China b College of Civil Engineering, Shenzhen University, Shenzhen, China c Department of Logistics, The Hong Kong Polytechnic University, Hong Kong, China
Abstract This paper gives the results of a survey aimed at identifying the underlying incentives for strategic partnering in China’s construction industry. Fourteen common strategic partnering incentives are concluded from the construction companies’ perspective and extended to 20 items in questionnaire for data collection and analysis. It is found that through strategic partnering, companies are more likely to access technology, share risks, and improve project-based performance and competitive position. To compare the views from strategic partnering participants in the construction industry, data was collected from two groups of respondents: 80 contractors and 36 consultants. The analysis results reveal that both contractors and consultants consider ‘‘competitive position enhancement’’ and ‘‘new market entry’’ as the most significant incentives for strategic partnering. Conversely, the factors listed under ‘‘increased cultural responsiveness’’ and ‘‘project-based’’ are ranked low. Ó 2006 Elsevier Ltd and IPMA. All rights reserved. Keywords: Strategic partnering; Incentives; Construction industry; China
1. Introduction Since the economic reform and opening policy started in the early 1980s, China’s construction industry has achieved extraordinary growth and dramatic development. Construction section has moved from a welfare oriented infrastructure provider to a market oriented construction product industry. As a typical project-based process, construction performance is usually assessed based on completion time, construction quality, cost, engineering specification and stakeholder expectation. While the construction market in China has enormous demand and insufficient qualified capability, high project performance and project success are rarely seen. In recent years, project partnering has obtained a great attention in both construction industrial practice and academic research. This is due to its noteworthy effort of improving project performance *
Corresponding author. Tel.: +852 2766 7365; fax: +852 2330 2704. E-mail address: [email protected] (H. Yan).
0263-7863/$30.00 Ó 2006 Elsevier Ltd and IPMA. All rights reserved. doi:10.1016/j.ijproman.2006.08.004
and creating the organizational environment of trust, enhancing communication and employee involvement. It is thus brought into China’s construction industry to improve both construction performance and efficiency. Strategic partnering, particularly in the construction industry, is strongly cultural and local business environment related. The academic analysis and practice of partnering depends on many things, such as the maturity of the industry, local economy development, and government regulation on the industry. Although many aspects of the study of partnering and strategic alliance in developed construction markets have been reported [12,20,26,30,31,40], there has been little empirical research in the Chinese construction sector, perhaps because it is still in a stage of development with its business practices. This paper reviews the incentives of strategic partnering in general from the construction companies’ perspective. Findings from a questionnaire survey on potential incentives associated with strategic partnering in China’s construction industry are discussed.
242
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
The definition of construction ‘‘partnering’’ has various forms in academic research and business practice. Generally speaking, researchers in construction take the term ‘‘partnering’’ to represent an alliance between companies within the supply chain [10]. It is mainly defined as a working relationship between stakeholders based on respect, trust, teamwork, commitment and shared goals. Such a relationship is defined by good faith rather than a formal contract. However, the definition of ‘‘strategic alliance’’ refers to a long-term relationship [10,15] which is based not only on the principles of partnering, but also with the additional values of sharing resources, knowledge, risks and profits/losses. A contract determines the terms of a strategic alliance. Although the terms ‘‘partnering’’ and ‘‘strategic alliance’’ are relatively new in China’s construction industry, there are some partnering tools, such as team building sessions and review meetings which promote cooperation between project parties. Meanwhile, considering that the completion of construction projects usually takes years, some strategic factors such as sharing risk are also covered by formal contracts. In practice, the most efficient approach to resolve any hurdle is still heavily related to mutual relationships due to the low efficiency of litigations. Thus, in respect to the above definitions, the term ‘‘strategic partnering’’ can be treated as a ‘‘moral/contract agreement between parties that facilitates effective resolution of problems to achieve mutual benefits’’. In other words, strategic partnering includes all aspects of partnering and some aspects of strategic alliance. In this paper, the dimensions of strategic partnering are considered in line with previous studies, such as team building sessions, problem-solving process establishment and workshop, etc. [23,28,34]. This paper conducts an empirical analysis on the incentives of strategic partnering in construction industry in China through a comprehensive questionnaire survey. A total of 116 valid questionnaires are collected from various contractors and consultants, using strategic partnering incentives are compared and analyzed. In China’s construction market, due to owners’ lack of necessary knowledge and skills, consultants must usually act as representatives of the owners and take charge of the entire construction projects delivery process. Therefore, although the study only collects data from industrial members, results from consultants also reflect the perceptions of owners to some extent. The purpose of this initial pioneering study is to understand and explain strategic partnering practice and related industrial behavior in China’s construction section, and to provide insightful information for strategic development in business. 2. Incentives of partnering One research objective is to address the issue of forming strategic partnering. The existing literature on partnering and strategic alliance within the construction field offers various incentives to construction parties to facilitate stra-
tegic partnering practices. With a comprehensive literature review, we have identified fourteen common incentives for strategic partnering: technology access, risk polling, finance securing, new market entry, core customer service, competitive position enhancement, meeting special requirements, better product quality, cost reduction, better time control, reduced litigation, efficiency improvement, long-term relationship establishment and increased cultural responsiveness. 2.1. Technology access The increase in sophisticated technology-based projects demands a much higher degree of design, manufacturing, installation and commissioning skills than before [32]. The range of disciplines required to construct such a facility are seldom found within a single firm. Therefore, those companies in today’s market who desire to execute highly technical projects must form alliances with other firms that can provide the desired expertise [3]. 2.2. Risk polling According to Black et al. [5], a major factor in partnering for construction projects is the benefit from sharing risks between parties. For example, contracts may be awarded on a cost-plus basis, rather than on a lump sum. These types of differences help to eliminate risks due to the invariably unique design, number of organizations involved and unknown site conditions. Through partnering, construction firms can introduce their operations into markets while sharing risks with other firms. This is especially useful when entering a new country. Through forming an alliance with a firm from the new country, strategic partnering can minimize risks by working with local expertise [3,5]. Kumaraswamy and Matthews [25] suggest that a ‘‘win–win’’ situation can be attained by all stakeholders involved in such a partnering process. 2.3. Finance securing For a construction firm, the ability to secure financing for prospective clients is enhanced by making alliances with financial institutions and other construction firms. Alliances are thus formed in hopes of forming a stronger and more profitable organization. This ensures that progress on the projects of the firm involved can be more consistent and stable. Such continuity of work would enable better planning and resource reallocation, more predictable cash-flow, improved cost recovery and relatively secure margins. Having a long-term alliance with a bonding company also helps to enhance bonding-capacity [3,6,22]. 2.4. New market entry Forming alliances with a local firm can make the transition into new geographical markets much easier. In addi-
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
tion, a local strategic partner can be expected to assist in the construction permit process in adherence to local construction codes. Such a partner can also provide valuable insight into the local market, such as labor availability and information about other construction companies [3]. 2.5. Core customer service The essence of running a construction business today is to establish one’s own core competencies and provide quality services to customers. Such an organization should be aware that customer satisfaction is a major indicator of business success [14,30]. Black et al. [5] study the benefits of partnering in construction and find that increased customer satisfaction is ranked the second most significant benefit among all categories of responding organizations. Partnering enhances customer satisfaction as the customer is closer to the construction process and better informed [36]. Badger and Mulligan [3] also find that some construction firms state their top reason for forming an alliance is to better serve their core business clients. 2.6. Competitive position improvement It has been suggested that construction organizations should strive for sustainable competitive advantages through out the initiation of strategic alliances. According to Krippaehne et al. [24], the effective management of an alliance can be used to obtain and sustain a competitive advantage in the marketplace. Li et al. [31] argue that partnering can be formed for bidding new contracts. The participants can have work completed through partnering to rearm their deficiencies and enhance their reputation. 2.7. Meeting special requirements Some governments require some form of local company involvement in construction projects, and forming alliances with local firms is needed to meet licensing requirements in these countries. Alliances are also formed for political reasons and to meet the bidding criteria for certain special projects. Badger and Mulligan [3] conclude that participants in partnering may be most directly affected by these particular items. 2.8. Better product quality Helland [21] expresses partnering as the master key that will unlock the techniques and principles of Total Quality Management. Chan et al. [7] conclude that partnering produces high quality construction and service as well as reducing engineering rework. Larson [28] studies on the relationship between partnering activities and project success. The results show that specific partnering elements like establishing problem solving procedures and provisions for continuous improvement are linked to better technical performance. Site safety and environmental impact are two
243
other issues that have been dealt with through partnering [35]. 2.9. Cost reduction It appears that motivators common in partnering, such as target cost contracts provide a way to lower administrative costs where the uncertainty of the product usually lead a high cost level [5,38]. Gransberg et al. [19] compare partnered and non-partnered projects and conclude that partnering promises to furnish means to control cost growth. The reasons for better cost performance are many, such as alleviating rework, reducing scheduled time, etc. [1]. 2.10. Better time control As mentioned by Gransberg et al. [19], the US Army Corp of Engineers find that partnering is most valuable on projects with tight schedules. Naotum [35] argues that some common motivators like the fee at risk principle can be used to stimulate a partnering team to consider the importance of time rather than concentrate upon lowering costs. Chan et al. [7] conclude that partnering can reduce delay as a result of better scheduling, more timely decisions and reliable programming. 2.11. Reduced litigation Partnering is primarily used to resolve disruptive interorganizational conflicts [2,11]. The main reason for the introduction of partnering is the need to move away from traditional adversarial relationships in construction contracting [35]. Larson [28] states that such disputes often end up in court as either side realizes the only way to protect their interests is through litigation. Proper use of partnering reduces adversarial relationships between the owner and contractor. It may also be extended to all key members involved [12]. 2.12. Efficiency improvement Partnering provides a way to develop a control and resolution approach for dealing with problems [13]. To utilize some effective tools, such as partnering review meeting, etc., partnering promotes trust and efficient communication through open discussion [4]. Chan et al. [7] conclude that it also helps efficient problem solving, enhanced communication, continuous improvement and increased potential for innovation. 2.13. Long-term relationship establishment Partnering has been advocated as a mechanism for developing relationship so as to improve inter-organizational relations [19,21]. The Construction Industry Institute [14] defines partnering as a long-term commitment between two or more organizations. It is suggested that a
244
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
long-term alliance in construction can be expected to maximize effective management of each participant’s resources [10]. The partnering should be viewed as a long-term strategy that focuses on sharing of knowledge, experience, visions and purposes [31,35]. 2.14. Increased cultural responsiveness Li et al. [31] argue that learning should be the core element in strategic partnering and that development of a continuous learning culture should be the ultimate goal. Partnering can also be treated as a moral agreement that facilitates effective resolution of problems and conflicts without destroying the harmony between clients and contractors. It also wraps major project participants into an alliance that creates a more cooperative working environment [11,17,27,30]. It seems to relate to the collectivism prevalent in Chinese/Japanese culture, which has such characteristics as mutual obligation, trust, co-operation, long-term nature, and win–win relations [26,35]. 3. Survey process An empirical study was undertaken in China in spring 2005. Based on these findings and a discussion with six local experts in the field of construction industry, the 14 common partnering incentives identified above are rephrased and expanded into 20 statements (Table 1). These questions form the basis of an empirical questionnaire. A survey was then conducted to explore various perceptions of incentives towards strategic partnering by two principal categories of the construction industry, contractors and consultants. Apart from questions intended to capture the background information of the respondents, the remaining questions in the questionnaire ask respon-
dents to rate their degree of agreement with each of the identified incentives. This is done according to a five-point Likert scale, where an answer of ‘‘1’’ indicates ‘‘strongly disagree’’ and ‘‘5’’ indicates ‘‘strongly agree’’, and ‘‘0’’ indicates ‘‘no idea’’. Previous research indicates that it is extremely difficult to achieve the necessary response rate for a questionnaire survey by mail in China’s construction industry [39]. Therefore, this research survey adopts a ‘‘snowballing’’ approach of distributing questionnaires. Sixteen major cities including Beijing, Shanghai, Shenzhen and Chengdu are covered by the survey. With support from a number of experts in local construction industry, who have good connections with other local construction practitioners, 200 questionnaires were delivered to the potential respondents. Respondents were given 3 weeks to complete and return the questionnaires. Out of the 200 questionnaires, 116 valid responses were received, representing a response rate of 58%. This sample consists of 80 (69%) from contractors and 36 (31%) from consultants. Total 99 (85%) of respondents have longer than or equal to five years of construction related experience and 78 (67%) of respondents have more than ten years experience. Both small and large size firms are represented in the sample. Twenty-four (21%) of respondents reports that they have worked for small firms with less than one hundred employees, while 64 (55%) of the respondents have worked for large firms with more than one thousand employees. Construction companies covered by the survey consist of 100 (86%) state-owned, 4 (4%) collective owned, 9 (8%) individual owned and 3 (2%) joint venture companies. The accumulative proportion of state-owned and collective owned companies is 90%. This indicates that the non-private construction companies are the dominant force in China. This is in line with the finds of Liu et al. [28]. Although the survey is limited to
Table 1 Perceived incentives of partnering in China (all respondents) Number
Item (incentives of partnering)
Minimum
Maximum
Mean
SD
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
To To To To To To To To To To To To To To To To To To To To
1.00 1.00 1.00 1.00 1.00 2.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00
3.63 3.35 3.31 4.01 3.64 4.18 4.25 3.69 3.63 3.45 3.36 3.36 2.92 2.95 3.47 3.59 3.86 2.98 3.06 2.82
1.00 1.08 1.13 0.83 0.95 0.84 0.79 0.92 0.98 1.07 1.06 1.08 1.19 1.17 1.01 0.94 0.85 1.04 1.00 1.01
obtain the support of partner’s expertise and knowledge share risks assure financing penetrate new market serve core customers improved long-term competitive advantages increase bidding advantages enhance reputation meet requirements of local government/trade/projects have better product quality reduce costs have better schedule control reduce engineering rework reduce litigation improve efficiency increase opportunity for innovation establish long-term relationships improve social responsibilities create harmony amongst the project participants enhance company culture
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
only sixteen cities, the results can be regarded as representative of the whole country, because of the geographic position and economic status of these cities in China [29]. 4. Data analysis The data collected is analyzed using the statistical package for social sciences (SPSS). The reliability of the fivepoint scale used in the survey is tested using Cronbach’s coefficient alpha, which measures internal consistency among factors. The value of the test is 0.8918 (F statistic = 17.3033, P = 0.0000), which being greater than 0.5, indicates that the five-point scale measurement is reliable at the 1% significant level. Many studies adopt the ‘‘mean score’’ method to establish the relative importance among factors suggested by the respondents [8,9,30]. The data collected from the current questionnaire survey is analyzed using the same technique within various groups. These groups are categorized according to the role of the parties involved in the China’s construction industry (contractors and consultants). The five-point Likert scale described previously is used to calculate the mean score for each incentive, which is then used to determine the relative ranking of different incentives in descending order of importance. Kendall’s concordance analysis is implemented to measure the agreement of respondents within a group on their rankings of incentives. If Kendall’s coefficient of concordance (w) is significant at the level of 0.05, as a reasonable degree of consensus is indicated [7].
245
The ‘‘two sample Kolmogorov–Smirnov test’’ method is firstly used to measure whether these perceptions between contractors and consultants were come from the same distribution, and all probability values over 0.05 show that we can not reject the null hypothesis of it was in the same distribution. The ‘‘Mann–Whitney U test’’ method is then used to test whether the mean ranks for each incentive are equal between contractors and consultants. Lower probability value below 0.05 indicates that the null hypothesis of no difference between the mean ranks among groups can be rejected, suggesting that there is a difference in opinion between contractor and consultant groups. In order to affirm the above results and further explore the agreement between contractors and consultants, the Spearman rank correlation coefficient (rs) is used to measure the agreement between two respondents groups on their rankings of incentives of partnering. If rs is significant at the level 0.05 level, an association between the two sets of rankings is established [7]. 5. Survey result analysis The results of computation of the Kendall’s coefficient of concordance for the survey and the rankings are presented in Table 2. Kendall’s coefficient of concordance (w) for the rankings of incentives among all respondents is 0.221, among the contractor’s group 0.152, and among the consultant’s group 0.189. The computed ws are all significant at 0.000. Thus it can be concluded that there is a significant amount of agreement among the respondents
Table 2 Ranking and Kendall’s coefficient of concordance for the partnering incentives in China Number
Item (incentives of partnering)
7 To increase bidding advantages 6 To improve long-term competitive advantages 4 To penetrate new market 17 To establish long-term relationships 8 To enhance reputation 5 To serve core customers 9 To meet requirements of local government/trade/projects 1 To obtain the support of partner’s expertise and knowledge 16 To increase opportunity for innovation 15 To improve efficiency 10 To have better product quality 11 To reduce costs 12 To have better schedule control 2 To share risks 3 To assured financing 19 To create harmony amongst the project participants 18 To improve social responsibilities 14 To reduce litigation 13 To reduce engineering rework 20 To enhance company culture Kendall’s coefficient of concordance (w) Level of significance
All respondents
Contractor
Consultant
Mean
Rank
Mean
Rank
Mean
Rank
4.25 4.18 4.01 3.86 3.69 3.64 3.63 3.63 3.59 3.47 3.45 3.36 3.36 3.35 3.31 3.06 2.98 2.95 2.92 2.82
1 2 3 4 5 6 7 7 9 10 11 12 12 14 15 16 17 18 19 20
4.25 4.10 4.03 3.96 3.64 3.55 3.63 3.52 3.48 3.43 3.28 3.38 3.39 3.51 3.41 3.14 2.95 2.97 2.97 2.90
1 2 3 4 5 7 6 8 10 11 15 14 13 9 12 16 19 17 17 20
4.24 4.38 3.97 3.63 3.81 3.83 3.63 3.86 3.82 3.56 3.81 3.32 3.29 3.00 3.06 2.88 3.06 2.91 2.79 2.65
2 1 3 9 7 5 9 4 6 11 7 12 13 16 14 18 14 17 19 20
Note. Where H0 = respondents’ ratings are unrelated to each other within each group.
0.221 0.000
0.152 0.000
0.189 0.000
246
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
Table 3 ‘‘Kolmogorov–Smirnov test’’ and ‘‘Mann–Whitney U test’’ for the partnering incentives in China Number
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 a b
Item (incentives of partnering)
To To To To To To To To To To To To To To To To To To To To
Mean rank
obtain the support of partner’s expertise and knowledge share risks assure financing penetrate new market serve core customers improved long-term competitive advantages increase bidding advantages enhance reputation meet requirements of local government/trade/projects have better product quality reduce costs have better schedule control reduce engineering rework reduce litigation improve efficiency increase opportunity for innovation establish long-term relationships improve social responsibilities create harmony amongst the project participants enhance company culture
Significance level
Contractor
Consultant
K–S testa
M–S U testb
52.25 60.33 58.65 57.53 51.79 53.85 57.16 56.05 55.31 50.55 56.21 55.27 56.65 54.32 53.55 52.90 59.96 52.57 55.60 52.65
65.84 46.19 49.73 55.86 61.79 64.01 54.91 60.64 55.91 65.68 55.51 54.40 52.93 53.25 58.21 63.03 50.40 55.64 48.85 45.71
0.06 0.10 0.41 1.00 0.43 0.61 1.00 0.97 1.00 0.07 0.93 1.00 0.76 1.00 0.99 0.68 0.14 0.83 0.98 0.74
0.03 0.03 0.17 0.79 0.11 0.10 0.71 0.47 0.92 0.02 0.91 0.89 0.56 0.87 0.46 0.11 0.12 0.62 0.27 0.24
Where H0 = distributions of the perceptions between groups are same. Where H0 = no difference between the mean ranks between groups.
in each group on the rankings of the incentives of their partnering projects. Table 3 compares the responses of the contractors and consultants. The results indicate that there is general agreement of opinion between the two groups (p = 0.10–0.92) at 5% level of significance. However, the opinions of the contractors and consultants do differentiate on the factors of ‘‘to obtain the support of partner’s expertise and knowledge’’, ‘‘to share risks’’ and ‘‘to have better product quality’’ (p = 0.03, 0.03 and 0.02, respectively). They are supported by the mean ranks of 52.25, 60.33 and 50.55 for these factors by contractors, and supported by 65.84, 46.19 and 65.68 by consultants, respectively. The next stage of analysis was to test whether there is any similar substantial agreement among the respondents in the two groups. This is determined by the Spearman rank correlation coefficient (rs). The correlation coefficient of the ranking on incentives is 0.828 for contractors and consultants (Table 4). The null hypothesis that there is
Table 4 Spearman rank correlation test for the partnering incentives in China Contractor
Consultant
Contractor Spearman rank correlation coefficient (rs) Significance (2-tailed)
1.000 NS
0.828 0.000
Consultant Spearman rank correlation coefficient (rs) Significance (2-tailed)
0.828 0.000
1.000 NS
Note. Where H0 = no significant disagreement on the ranking; NS = not significant.
no significant disagreement between contractors and consultants on the ranking of incentives for strategic partnering has to be accepted. It is thus concluded with more than 99% confidence level that there is significant agreement on the ranking of incentives between contractors and consultants. 6. Survey results discussion As mentioned by Chan et al. [7], the ranking exercise is based on perception, a subjective assessment of the ranking result is made for the analysis of the perceived relative importance of factors. This subjective assessment does not provide any absolute value on the ranking position that ought to be recognized. Thus more emphasis is given to the factors that placed as most important and least important in the ranking list [7]. Analysis of the ranking exercise indicates some interesting results which show significant agreement among the participants of each group on the ranking of partnering incentives. Table 2 indicates that the rankings of contractors and consultants are not significantly different as deduced from the values of significant level (0.000). Respondents largely agree with the findings reported in the publications of Badger and Mulligan [3], Krippaehne et al. [24] and Li et al. [31]. The factors listed under ‘‘to enhance competitive position’’ are generally ranked higher than others. All respondents rank ‘‘to increase bidding advantages’’ and ‘‘to improve long-term competitive advantages’’ as the top two strategic partnering incentives. The results appear to be a departure from the finds of previous studies on strategic partnering benefits in developed
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
may be attributed to their various competitive situations in China’s construction market. Both contractors and consultants achieve dramatic development to accommodate the rapid economic expansion demands for building and infrastructure in the past two decades [30]. Due to the different natures of entrance thresholds, there are more contractors than consultants in China’s construction industry. Contractors carry higher competitive pressure and emphasize more on establishing long-term relationships to improve their competitive advantages. This result is in line with previous studies [16,37], but not consistent with findings in Hong Kong [40]. It is rather surprising that all respondents rank projectbased factors as the top 10 incentives, such as ‘‘to assure financing’’, ‘‘to reduce costs’’, ‘‘to have better schedule control’’ and ‘‘to reduce engineering rework’’. The results maybe because that most of China’s construction companies do not understand formal partnering approaches clearly, and can not perceive the project-based benefits of partnering which had been perceived by other construction companies in developed markets [28]. The results shown in Table 4 demonstrate that there is a substantial consistency on the rankings of partnering incentives between groups of respondents. The profiles for each of the 20 listed incentives of partnering indicate in general, a close scattered pattern as shown in Fig. 1. The close scatter pattern indicates that most construction companies in China exhibit a positive attitude towards strategic partnering. It can also be inferred that most significant partnering incentives of China’s construction companies are strategy based factors rather than project-based currently. Gale and Luo [16] study the construction joint ventures in China and point out that foreign firms appear
4.5 All respondets Crontractors 4.0 Consultants
3.5
3.0
2.5 20 o. N 13 o. N 14 o. N 18 o. N 19 o. N 3 o. N 2 o. N 12 o. N 11 o. N 10 o. N 15 o. N 16 o. N 1 o. N 9 o. N 5 . No 8 o. N 17 o. N 4 o. N 6 o. N 7 o.
N
markets, which says that ‘‘improvement of relationship between strategic partnering participants’’ is the most significant benefit [5,7]. Similarly, contractors and consultants all believe that they should use partnering when they enter new markets, and rank the factor as the third important incentive. This suggests that most construction companies in China take ‘‘to enhance competitive position’’ and ‘‘to penetrate new market’’ as the most important strategic partnering incentives. Through strategic partnering, construction companies can combine resources and increase likelihood of success [5]. Furthermore, partnering with a local firm on an international project, barriers such as language, legal issues and culture influence are reduced [3,5]. Similar to the results found in the relative importance ranking of strategic partnering incentives, the factors listed under ‘‘to increase cultural responsiveness’’ is ranked the lowest among contractors and consultants. All respondents rank ‘‘to enhance company culture’’ to be the least important partnering incentive, and other related items such as ‘‘to create harmony amongst the project participants’’ and ‘‘to improved social responsiveness’’ are ranked low. Although the role of intrinsic motivation based on rewards such as social recognition and meaningful work can also help to form partnering [18,33], given the relatively short history of professional project management in China it seems no surprise that construction companies have not taken cultural responsiveness as a main mission in their operations. The ‘‘Mann–Whitney U test’’ (Z ratio) indicates that not all the perceptions of partnering incentives are the same between the contractors and consultants group. In relation to item 2, ‘‘to share risks’’, the Z ratio is 2.23 and the observed significance level is less than 0.05. The results suggest that contractors (60.33) may be more conscious about the above two strategic partnering factors than consultants (46.19). Conversely, towards ‘‘to obtain the support of partner’s expertise and knowledge’’ and ‘‘to have better product quality’’, the Z ratio is 2.18 and 2.44 as well as the observed significance is 0.03 and 0.02, respectively. It can be thus concluded that consultants may be more conscious about partner’s supports and project quality, supported by the mean ranks of 65.84 and 65.68 for the factor by consultants while 52.25 and 50.55 by contractors. As mentioned by Chan et al. [7], these differences may be attributed to the different expectations and interpretations of partnering arrangement. In China’s construction industry, contractors often take responsibility for building risks while consultants take responsibility for the quality of projects. The various areas of involvement in project actives can be also used to explain the disagreements between contractors and consultants on the factors of ‘‘to obtain the support of partner’s expertise and knowledge’’ and ‘‘to increase opportunity for innovation’’. While contractors rank ‘‘to establish long-term relationships’’ as 4th, consultants rank it the 9th. The difference
247
Item No. Fig. 1. Cross-comparison of incentives among respondents.
248
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249
to show more concern about cultural compatibility while the Chinese group expects a long-term attitude in cooperation.
Acknowledgements Authors sincerely thank the anonymous referee for their valuable comment and encouragement, which greatly helped us to revise the problem description and discussion.
7. Conclusions The wider adoption of a strategic partnering arrangement should be encouraged in China’s construction industry as it has been shown to improve performance and reduce confrontation in the construction supply chain. The idea of strategic partnering is relatively new to China’s construction industry compared to other developed markets such as the US. Identifying the perceived incentives of strategic partnering in construction can be used to formulate effective strategies for implementation. This paper investigates the major incentives of partnering in China’s construction industry through a questionnaire survey among both contractors and consultants. All participants generally agree on the ranking of incentives, with ‘‘to enhance competitive position’’ as one of the most important. The findings are in line with the conclusions drawn by Badger and Mulligan [3], Krippaehne et al. [24] and Li et al. [31]. As suggested by Badger and Mulligan [3] and Black et al. [5], the research respondents believe that they should use strategic partnering when they enter new markets. The results also support that the role of project participants may influence their perceptions of strategic partnering incentives, which has been discussed by Chan et al. [7]. As nearly 90% of companies involved in this study comes from the state owned section, the findings fairly reflects the attitude and practice of state owned construction enterprises towards the strategic partnering in the industry. The current strategic partnering applications in China are often observed at the tender preparation stage, where companies form alliance to bid new projects. Partly due to the less-flexible system in these enterprises, further applications at the project level are rarely seen. In addition, the results demonstrate that the strategic partnering incentives of project-based are less significant when compared to other reported studies. This may due to the fact that most construction companies in China are not familiar with the formal strategic partnering approaches. Similarly, given the relatively short history of professional project management, construction companies in China do not take factors of ‘‘to increase cultural responsiveness’’ as significant strategic partnering incentives. In general, most China’s construction companies believe that they should use partnering for strategy-based issues. In conclusion, these findings in the Chinese construction industry can provide a useful reference for other developing countries faced with similar situation in promoting the applications of strategic partnering. Furthermore, as more international construction companies are moving into the China market while the country is fulfilling its responsibility to WTO, increasing use of partnering with these external organizations would be an interesting follow up research topic.
References [1] Albanese R. Team-building process: key to better project results. ASCE, J Manage Eng 1994;10(6):36–44. [2] Appel ME. Partnering new dimensions in dispute prevention and resolution. Arbitrat J 1993;48(2):47–51. [3] Badger WW, Mulligan DE. Rationale and benefits associated with international alliances. J Constr Eng Manage 1994;121(1):100–11. [4] Bayliss R, Cheung SO, Suen HCH, Wong SP. Effective partnering tools in construction: a case study on MTRC TKE contract 604 in Hong Kong. Int J Project Manage 2004;22(3):253–63. [5] Black G, Akintoye A, Fitzgerald E. An analysis of success factors and benefits of partnering in construction. Int J Project Manage 2000;18(6):423–34. [6] Bresnen M, Marshall N. The engineering or evaluation of cooperation? A tale of two partnering projects. Int J Project Manage 2002;20(7):497–505. [7] Chan APC, Chan DWM, Ho KSK. An empirical study of the benefits of construction partnering in Hong Kong. Constr Manage Econ 2003;21(5):523–33. [8] Chan DWM, Kumaraswamy MM. Reasons for delay in civil engineering projects-the case of Hong Kong. Hong Kong Inst Trans 1996;2(3):1–8. [9] Chan DWM, Kumaraswamy MM. Compressing construction durations: lessons learned from Hong Kong building projects. Int J Project Manage 2002;20(1):23–35. [10] Cheung EWL, Li H, Love PED, Irani Z. Strategic alliances: a model for establishing long-term commitment to inter-organizational relations in construction. Build Environ 2004;39(4):459–68. [11] Crowley LG, Karim A. Conceptual model of partnering. ASCE, J Manage Eng 1995;11(5):33–9. [12] Conley MA, Gregory RA. Partnering on small construction projects. J Constr Eng Manage 1999;125(5):320–4. [13] Cowan C, Gray C, Larson E. Project partnering. Project Manage J 1992;22(4):5–12. [14] Construction Industry Institute (CII). In search of partnering excellence. Publication no.17-1, Report CII, Austin, TX; 1991. [15] Ellison SD, Miller DW. Beyond ADR: working toward synergistic strategic partnership. ASCE, J Manage Eng 1995;11(6):44–54. [16] Gale A, Luo J. Factors affecting construction joint ventures in China. Int J Project Manage 2004;22(1):33–42. [17] George MD, Palmer A. Construction management new directions. London: Blackwell Science; 2000. [18] Ghosal S, Morgan P. Bad for practice: a critique of the transaction cost theory. Acad Manage Rev 1996;21(1):13–47. [19] Gransberg DD, Dillon WD, Reynolds L, Boyd J. Quantitative analysis of partnered project performance. J Constr Eng Manage 1999;125(3):161–6. [20] Green SD. Partnering: the propaganda of corporatism. J Constr Procurement 1999;5(2):177–87. [21] Helland RB. Project partnering-principle and practice. London: Thomas Telford; 1995. [22] Holt GD, Love PED, Li H. The learning organization: toward a paradigm for mutually beneficial strategic construction alliances. Int J Project Manage 2000;18(6):415–21. [23] Kadefors A. Trust in project relationships-inside the black box. Int J Project Manage 2004;22(3):175–82. [24] Krippaehne RC, McCullouch BG, Vanegas JA. Vertical business integration strategies for construction. ASCE, J Manage Eng 1992;8(2):153–66.
S. Lu, H. Yan / International Journal of Project Management 25 (2007) 241–249 [25] Kumaraswamy MM, Matthews JD. ASCE, Improved subcontractor selection employing principles. J Manage Eng 2000;16(3):47–57. [26] Kwan AY, Ofori G. Chinese culture and successful implementation of partnering in Singapore’s construction industry. Constr Manage Econ 2001;19(6):619–32. [27] Larson E. Project partnering: results of study of 280 construction projects. ASCE, J Manage Eng 1995;11(2):30–5. [28] Larson E. Partnering on construction projects: a study of the relationship between partnering activities and project success. IEEE, Trans Eng Manage 1997;44(2):188–95. [29] Liu GW, Shen QP, Li H, Shen LY. Factors constraining the development of professional project management in China’s construction industry. Int J Project Manage 2004;22(3):203–11. [30] Li H, Cheng EWL, Love PED. Partnering research in construction. Eng Constr Archit Manage 2000;7(1):76–92. [31] Li H, Cheng EWL, Love PED, Irani Z. Co-operation benchmarking: a tool for partnering excellence in construction. Int J Project Manage 2001;19(3):171–9. [32] Matthews J, Tyler A, Thorpe A. Pre-construction project partnering: developing the Process. Eng Constr Archit Manage 1996;3(1& 2): 117–31.
249
[33] Miller DT, Ratner RK. The disparity between the actual and assumed power of self-interest. J Pers Soc Psychol 1998;74(1): 53–62. [34] Moore C, Mosley D, Slagle M. Partnering: guidelines for win–win project management. Project Manage J 1992;23(1):18–21. [35] Naotum S. An overview into the concept of partnering. Int J Project Manage 2003;21(1):71–6. [36] Nielsen D. Partnering for performance. ASCE, J Manage Eng 1996;12(3):17–9. [37] Sarker MB, Aulakh PS, Cavusgil ST. The strategic role of relational bonding in inter-organizational collaborations: an empirical study of the global construction industry. J Int Manage 1998;4(2):85–107. [38] Turner JR, Simister SJ. Project contract management and a theory of organization. Int J Project Manage 2001;19(8):457–64. [39] Yang ML, Chuah KB, Rao VMT, Chen EH. Project management practices in Pudong, a new economic develop area of Shanghai, China. Int J Project Manage 1997;15(5):313–9. [40] Wong PSP, Cheung SO. Trust in construction partnering: views from parties of the partnering dance. Int J Project Manage 2004;22(6):437–46.