2019 CSCE Annual Conference - Laval (Greater Montreal)

2019 CSCE Annual Conference - Laval (Greater Montreal) Conference

A Comparative Analysis of Perceived and Revealed Levels of Competition in The Construction Industry and Its Implications for Technological Change

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Mr. Sergiy Polyachenko, University of New Brunswick (Presenter)
Dr. Jeff Rankin, University of New Brunswick
Dr. Dhirendra Shukla, University of New Brunswick
Dr. Yuri Yevdokimov, University of New Brunswick

This work-in-progress is dedicated to identifying the effect of market competition on innovations in the Canadian Construction Industry. Overwhelming competition and low profit margins that preclude construction firms from taking a risk and introduce innovations, are the two popular arguments used by scholars and industry practitioners to explain slow technological change in the construction industry. These claims are usually supported by verbal and analytical models, anecdotal evidence or case studies. However, there is a scarcity of data-supported research in this area. In addition, the existing data-based efforts do not provide a definitive answer as to whether market competition affects innovation in the construction industry and what the nature of such an effect is. In this work, we are using data derived from public tenders conducted in several Provinces of Canada and augmenting that data with surveys of Canadian construction firms. The ongoing survey is being conducted on the sample of companies identified as participants in public tenders between 2011-2018. The tendering data allows us to understand what companies bid on the projects, what projects attract more bids, what the range of bids is, and what bids and companies usually win tenders. The survey data provides insights on firms’ performance, managerial practices and innovativeness. Merging these datasets provides a unique perspective on market performance and innovativeness among Canadian construction companies. First, having survey and tendering data for the same set of companies allows for comparisons of self-reported and observed levels of market competition in the industry. Next, it allows for an analysis and comparison of correlation of revealed and perceived levels of competition with the likelihood of innovation, controlling for other economic characteristics of a firm. Finally, it allows for a test of the functional form of such correlation. For example, preliminary analysis of tendering data for the period of 2001-2010 confirms a high degree of seasonality in terms of the number of winning bids as well as their total value. In terms of competitiveness, the highest number of bids per project is usually submitted in the first and second quarters of the year and over 75% of contracts were awarded through tenders with two or less bidders, demonstrating a clear tendency to increase in market competition as project value decreases. Next, we update and merge tendering and survey data; compare perceived and revealed levels of competition and analyze how perceived and revealed levels of competition correlate with innovations.