A European Analysis
Chapter 2: Networks and Innovation in Construction in Five European Countries
2. Networks and innovation in construction in five European countries INTRODUCTION The nature of ties within and between firms and institutions strongly affects their competitive performance (Lazonick 1993, Porter 1990). These ties are of particular relevance in situations that involve uncertainty arising from unforeseeable future contingencies, a high degree of interdependence between firms, or a credible threat of opportunism. In these circumstances, close and stable relations between firms may contribute to operational efficiency by reducing transaction costs and, by facilitating the sharing of information and risk, may also promote dynamic efficiency based on innovation (Deakin and Wilkinson 1998). The nature of the link between institutional structures and economic performance, however, remains elusive. The construction industry is particularly well suited for the examination of these inter-organizational relations because it can be regarded as an archetypal network system where a coalition of firms and institutions come together on a temporary basis to undertake a project (Gann 2000, Winch 1998). However, many of the problems of the performance of the construction industry seem to stem from inadequate inter-organizational cooperation. In Chapter 1, we examined the effect on innovation of national differences in firm ownership, finance, organization, management structures and mechanisms to diffuse knowledge within the firm across five European countries. Countries with a ‘Germanic’ corporate governance system (in which there is a combined influence of banks, industrial firms and workers) not only tend to ensure financial commitment to uncertain firm-specific investments in innovation but also tend to have stronger inter-organizational networks than countries...
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