Research Policy 29 Ž2000.

955–972
www.elsevier.nlrlocatereconbase

Innovation in project-based, service-enhanced firms: the

construction of complex products and systems
David M. Gann ) , Ammon J. Salter
SPRU-Science and Technology Policy Research, UniÕersity of Sussex, Mantell Building, Brighton BN1 9RF, UK

Abstract

This paper explores the management of innovation within firms producing complex products and systems. It is based on a
study of how design, engineering and construction firms develop and produce buildings and structures. We contend that
these project-based, service-enhanced forms of enterprise are not adequately addressed in the innovation literature.
Project-based firms rely upon combining technical expertise from other organisations in order to deliver their own technical
capabilities, usually in one-off processes. The paper argues that these firms are only able to effectively harness and
reproduce their technological capabilities by integrating project and business processes within the firm. Our results show the
need for a better conceptual understanding and new management practices to link project and business processes. The paper
offers a framework for achieving this, explaining the dynamics of project-based firms and how they can improve
performance across portfolios of projects. q 2000 Elsevier Science B.V. All rights reserved.

Keywords: Construction firms; Design and engineering firms; Complex product systems; Management of technology; Project-based firms;
Innovation; Systems integration

1. Introduction business processes within the sphere of control of

what we call project-based, service-enhanced firms.
Constructing complex products and systems re- Business processes are the intra-organisational activi-
quires the mobilisation and management of a wide ties, forming the ‘glue’, which binds the different
range of capabilities. Rarely are these to be found parts of a project-based firm. The issue here is not
within the sphere of control or ownership of a single immediately about project performance, rather, it is
enterprise. This paper explores innovation processes about the performance of firms whose business is to
in firms operating in design, engineering and con- engage with others in delivering projects.
struction, who produce and service buildings, struc- Capabilities are explored in terms of delivery and
tures and infrastructures. It focuses on the nature of feedback mechanisms linking one firm’s technical
activities that link core technical capabilities and capabilities with those of other enterprises, with
whom the firm collaborates, in order to produce
one-off projects. A resource-based approach to the
) firm is taken, following Penrose’s earlier work
Corresponding author. Tel.: q44-1273-678167; fax: q44-
ŽPenrose, 1995.. The management of innovation is
1273-685865.
E-mail addresses: [email protected] ŽD.M. Gann., analysed in the context of the organisation of firms’
[email protected] ŽA.J. Salter.. technical capabilities associated with their business

0048-7333r00r$ - see front matter q 2000 Elsevier Science B.V. All rights reserved.
PII: S 0 0 4 8 - 7 3 3 3 Ž 0 0 . 0 0 1 1 4 - 1
956 D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972

processes. This is linked to project processes where to find the right balance between these various struc-
firms’ technical competencies are practiced in asso- tures. However, there is an increasing trend in many
ciation with technical capabilities from other firms. industries toward a project-based approach to organi-
We contend that these types of activities require sational design ŽMiles et al., 1997; Hughes, 1998..
particular skills and resources that differ from those For example, although the automotive sector has
found in more stable production networks in which been used as the model of the M-form, there is
standard mass-produced products and services are evidence of increasing use of projects, especially in
delivered. product development ŽWomack et al., 1991..
Recent studies of innovation have pointed to the These issues have important consequences for
use of new forms of organisation to cope with general economic growth. In most OECD countries,
increasing complexity of production, communica- the production and renewal of buildings and struc-
tions and technology ŽHedlund, 1994; Miles et al., tures contributes around 7% of the total value of
1997: Hughes, 1998; Rycroft and Kash, 1999.. These goods and services Žgross domestic product, GDP.:
suggest that firms have become increasingly reliant the figure is higher if the value of construction-re-
upon projects to organise the production of complex lated materials and components is included. In some
products and systems. There are coherent bodies of fast growing, newly industrialising regions, for ex-
knowledge about innovation in projects, project man- ample, until recently, in Japan and Korea, construc-
agement and the management of projects within tion accounted for around 12% to 14% of GDP.
firms ŽDeFillipi and Arthur, 1998; Morris, 1994. and These are large industries, often employing millions
an emerging literature on the virtual enterprise ŽNagel of people, accounting for around 8% or 9% of
and Dove, 1991.. We argue that project-based, ser- economy-wide employment in 1994 ŽOECD, 1997..
vice-enhanced forms of enterprise are not adequately The role and significance of project-based firms in
addressed in the innovation literature. In this paper, the production of the built environment extends far
we explore the way that these firms manage innova- beyond their direct economic contribution to wealth
tion in construction projects. Our aim is to develop a creation. The products and services provided create
framework for understanding the dynamics of pro- and maintain the physical environment that supports
ject-based firms, offering an approach to explaining existing and emerging social and economic activities.
how they might grow, improve performance and The provision of a high-quality built environment
develop reputation for technical excellence. Our fo- helps to facilitate wealth creation and improve living
cus is on the relationship between firms’ core techni- standards. If inadequate or inappropriate buildings
cal capabilities and the projects in which they work. are produced, or they are poorly maintained and
Key issues for makers of complex products and adapted, then social and economic life is compro-
systems in the built environment are not solely the mised. The ability to meet new demands and im-
management of projects or the management of busi- prove performance through the management of
ness processes per se, but rather the integration of innovation is closely related to the development of
project and business processes within the firm. technical capabilities within project-based design,
The rise in project-based organisational forms in engineering and construction firms. These firms op-
other industries indicates that the problems faced by erate within a dynamic environment in which rapid
construction firms in their management of technolo- changes in the economy and society are creating
gies may not be exceptional. The relentless project- demands for new types of buildings and structures.
based nature of construction serves to heighten the Processes of production, distribution and consump-
problems faced by firms in this sector. We suggest tion are changing such that new facilities are needed
that our findings could also have implications for for extraction of raw materials, processing, manufac-
producers of a wide range of other types of complex ture, retail and service sector activities. New infras-
products and systems. As Galbraith suggested in tructures are required for transmitting information,
1977, there is a continuum of organisational forms transporting people, goods and services and provid-
ranging from M-form through the matrix to the ing basic utilities such as water, sanitation and power.
project-based ŽGalbraith, 1977.. Companies struggle Demand for new types of buildings to support infor-
D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972 957

mation intensive activities and businesses in the divisions or units are operationally identifiable with
emergent bio-technology and life-science industries coherent boundaries between the firm’s sphere of
poses particular technological and organisational operation and control and its interfaces with external
challenges for construction ŽGann, 2000.. activities ŽPenrose, 1995.. Yet, this notion of the
This paper is organised in six parts. The following firm as a bounded entity does not appear to fit with
section describes our research method and the litera- reality when applied to organisations involved in the
ture relevant to our approach. Section 3 presents an production of complex products and systems. For
analysis of the general contextual issues within which example, in firms operating in design, engineering
project-based, service-enhanced firms operate in con- and construction, internal divisions within the firm
struction. In Section 4, we discuss some of the are often greater than those conventionally assumed
results from our case studies, followed by the devel- in innovation studies. In many project-based firms,
opment of a conceptual framework for understanding project teams have limited contact with senior man-
innovation in project-based firms in Section 5. Our agement, are based off-site and work in teams with
conclusions are presented in Section 6. many other firms. Value is created and profits gener-
ated by project groups that tend to operate at the
boundaries of the firm. Their tenuous links to the
2. Literature and method central core of the firm require a research method
that captures information about experiences of these
The paper is based on research with leading UK-
largely independent project groups, as well as central
based design, engineering and construction firms,
actors of the firm. In order to analyse the firm in its
their clients and suppliers. Over 30 organisations
totality, it was therefore found to be necessary to
have participated in the research, including design,
compare and contrast the views of personnel from
engineering and construction firms. Research in-
projects and central groups within the firm.
cluded semi-structured interviews and the develop-
ment of in-depth case studies with two organisations,
2.2. Project and business leÕels of analysis
for which up to 40 interviews were carried out in
each case. The research method is based on a three-
The division of the firm into project and business
step, iterative process. The first step involved inter-
groups requires that firms constructing complex
views with project team members and the second
products and systems manage both project and busi-
step focused on the views and activities of central
ness processes. In general, business processes are
groups within the firm. The third step involved
ongoing and repetitive, whereas project processes
workshops with the research team, central actors and
have a tendency to be temporary and unique ŽGann,
project groups, focusing on different ways in which
1998; Brusoni et al., 1998.. Firms usually develop
firms manage technology. Several workshops were
routines in their business activities. These routines
designed to challenge ideas and share knowledge
are made possible by the recurrence and frequency
between participants from a number of different
of their business activities. Routines can stimulate
organisations.
innovation, providing opportunities for standardisa-
2.1. Organisation of the firm tion and sustained process improvements. By con-
trast, project processes usually present non-routine
The research method was designed to examine features that do not lend themselves easily to system-
particular features of the ways in which project-based atic repetition. This can limit opportunities for pro-
firms are organised. There has been a tendency in cess improvement, standardisation and economies of
studies of innovation to see the firm as a single scale. Despite a large body of literature on project
definable entity. For example, in Chandler’s work, management and organisational design, little re-
firms are coherent entities, based on divisions, and search has been completed on how firms build links
tend to have strong leadership from a central strategy between operations at the project level, portfolios of
team ŽChandler, 1990.. Penrose’s work also presents projects, and central routine activities. Traditionally,
the firm as a bounded entity, in which different project management research has focused on the
958 D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972

critical success factors in project design, manage- represent good examples of current practices within
ment and execution ŽMorris, 1994; Kerzner, 1995.. It the firm. Detailed interviews with project-based staff
relates to projects, not firms. By contrast, the organi- were conducted to elicit their current ways of work-
sational design literature mainly focuses on business ing and their relationships with central business func-
processes ŽLeonard-Barton, 1995; Nonaka, 1994; tions. For each project, six interviews were carried
Clark and Fujimoto, 1991; Womack et al., 1991.. It out. Project actors were asked about the nature of the
does not take adequate account of the role of project project and the technical support they required to
processes. No clear link has been drawn in either achieve the project’s goals. Project-based actors were
literature between business and project processes asked to assess the quantity and quality of service
ŽGann, 1998; Brusoni et al., 1998.. they received from central technical support groups.
This is often a point of confusion in the literature The way project-based actors stored, accessed and
as researchers use project-based studies to describe developed information was also analysed to investi-
the competitiveness of firms, equating projects with gate the degree to which knowledge management
firm performance. For example, Pisano’s study of practices extended from the central parts of the firm
project development in the pharmaceuticals sector to individual projects.
shows how learning-before-doing in the experimen- The second step of our research involved inter-
tation and development of procedures for manufac- views with staff from central departments, including
turing drugs can accelerate and enhance the introduc- R & D, engineering support, IT support, finance, con-
tion of successful innovations in pharmaceutical firms tracts, sales and marketing and senior management.
ŽPisano, 1997.. Pisano’s research focuses on 23 de- These interviews explored the structures and busi-
velopment projects in 11 organisations. The unit of ness processes operating within the firm. Individuals
analysis is the project leading to the development of located in central departments were asked to describe
new drugs. Pisano uses his study of projects to the types of support they offered to projects, the
comment on the competitive advantage of different mechanisms used by the firm to capture learning
firms. Although measures of the project-based firm from projects, and how lessons were embedded to
may relate to the sum of all its projects, particular support future activities of the firm.
projects may not always provide an accurate measure
of overall firm performance. Projects may be excep- 2.4. Integrating the results
tional, one-off. Firm-level processes depend upon a
variety of organisational factors outside the project The two perspectives of firm practices were inte-
itself, such as the firm’s financial position, owner- grated and each firm was assessed on the basis of its
ship, structure, etc. The unit of analysis in Pisano’s ability to manage projects and manage the business
study, the project, may not therefore by itself be processes associated with delivering a portfolio of
capable of explaining the characteristics of firm per- projects. As Winch has suggested, the management
formance. of business processes associated with projects is a
In order to help fill the gap in the literature generic business process in construction ŽWinch,
between work focusing on projects and that on firms, 1998.. It provides a source of key competitive advan-
our research set out to explore the mechanisms by tage for firms in the sector who rely not only on their
which technical support was mobilised from central project management abilities, i.e. the ability to man-
resources within firms, to projects. It also sought to age a given project, but also their ability to manage a
develop a framework for understanding feedback to portfolio of projects. This research method elicited
the core of the firm from lessons learnt on projects. information about firms’ practices and the findings
were communicated to the firms involved via inter-
2.3. Studying project and business processes active workshops. These workshops were designed
to provide feedback to participating firms. They
The first step of the research involved the nomina- provided a mechanism for developing a dialogue
tion of projects for analysis by participating firms. among all the divisions of the firm involved in the
The projects were selected on the basis that they development and management of technology. Generic
D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972 959

lessons from these workshops have been included in cal support infrastructure, including professional in-
the conclusions drawn in this paper. stitutions, industry organisations and associations,
together with mobility of personnel, aids learning
between firms and projects. Firms’ technology strate-
3. Innovation in design, engineering and construc- gies, therefore, need to extend beyond their immedi-
tion firms ate boundaries if technologies are to be managed
effectively. Many of these issues are similar to those
The particular characteristics of markets, indus- encountered in other project-based sectors, producing
trial organisation, governance structures, technolo- complex products and systems, such as aircraft, ships,
gies and competencies in design, engineering and oil-platforms and high-speed trains ŽHobday, 1998..
construction provide the context for our analysis of The main characteristics that describe project-based
forms of organising innovation in project-based firms. firms in construction are:
Fig. 1 illustrates the types of actors, activities and
knowledge flows found in construction activities. Ži. their design and production processes are or-
This model has six main analytical dimensions: ganised around projects;
Žii. they usually produce one-off, or at least highly
Ži. Project-based firms. customised, products and services; and
Žii. Project supply networks. Žiii. they operate in diffuse coalitions of compa-
Žiii. Projects Žclients, owners, users.. nies along the supplier–customer chain.
Živ. Technology support infrastructure.
Žv. Regulatory and institutional frameworks. Production of the built environment involves mak-
Žvi. Knowledge flows. ing many types of technically and organisationally
complex products such as, hospitals, concert halls,
In project-based productive networks, linkages be- research laboratories or silicon chip fabrication
tween firms and other institutions differ from those plants. It also involves producing structures and in-
found in traditional manufacturing approaches, which frastructures such as bridges, power plants or air-
focus on individual firms with clear boundaries and ports. These complex products often need to be
transactions between them and their operations, integrated with new and existing systems in order to
working in a purely buy–sell relationship with one operate, as is the case with hospitals, so-called ‘intel-
another. For example, attention may be focused on ligent buildings’ — including large research facili-
coordination mechanisms between firms, including ties — and buildings housing control systems for
non-market mechanisms such as indirect ownership, air-traffic, land transportation, telecommunication
coengineering practices and partnering arrangements. and utilities operations. Operation usually involves
We view construction as a process rather than an the management of facilities as part of larger techni-
industry. In our definition, it includes designing, cal systems and infrastructures. Thus, individual pro-
maintaining and adapting the built environment, in- jects often have to be designed within constraints
volving many organisations from a range of indus- defined by existing systems and the legacies of the
trial sectors, temporarily working together on pro- technologies they embody ŽDavid, 1985.. The level
ject-specific tasks. Functions involve planning and of technical complexity appears to be increasing as
design, engineering, supply and integration, erection new vintages of technology are overlaid onto older
and installation of a diverse array of materials, com- vintages. New technical specialisations are emerging,
ponents and increasingly complex technical systems. increasing the need for capabilities in systems inte-
The project-based nature of work implies that firms gration ŽGann and Salter, 1999..
have to manage networks with complex interfaces. The extent to which technical competencies are
Delivery of products and services requires collabora- specialised and located in different places within and
tion between firms. Performance and competitive- between organisations affects how they can be de-
ness depends not solely on the single firm, but on the ployed, ultimately affecting project performance, the
efficient functioning of the entire network. A techni- ability to deliver value to clients, and firms’ prof-
960 D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972

Fig. 1. Knowledge, information flows and actors in project-based processes.1

itability. At the level of the firm, technology policy ply chain. Production is often triggered in response
and the strategic management of resources involves to user needs and in this sense, projects are demand-
issues of how firms develop their core technical derived rather than the result of arm’s-length market
competencies within project-based environments. In transactions, which typify consumer-goods indus-
the production and use of complex products and tries. Government regulatory and procurement poli-
systems this relates directly to issues of integration cies have a strong influence on demand and play an
in planning, design, systems integration, assembly important part in shaping the direction of technologi-
and construction. cal change. Governments and international agencies,
In general, construction markets are segmented financial institutions and insurance organisations are
according to different product types: housing, com- creating a new framework for the governance of
mercial and industrial buildings, civil engineering technology in construction ŽGann, 1997; Gann et al.,
structures and infrastructures, public works, and re- 1998..
pair, maintenance and improvement to existing facili-
ties. Demand for buildings and infrastructures fluctu- 3.1. InnoÕation driÕers
ates with business and investment cycles. In several
market segments, activities are demand-led, particu- A number of general inter-related forces drive the
larly where large complex facilities and infrastruc- innovation process Žsee Gann, 2000.. The most sig-
tures are required. Production and operation often nificant is the demand for radically new types of
involves long-term business to business interactions buildings and structures. During the 1980s and 1990s,
between customers and suppliers and within the sup- demand for new types of buildings was generated by

1
This approach was partially developed in our previous study of the construction R & D system, which encompassed design, engineering,
component manufacture, supply, assembly, construction operation and use ŽGann et al., 1992..
D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972 961

the diffusion of information and communication boundaries, within networks of interdependent sup-
technology, new methods of manufacturing, and pliers, customers and regulatory bodies. Knowledge
growth of the service sector. Globalisation of mar- is differentiated and distributed throughout these net-
kets and production, and new regions of economic works. Under these conditions, the management of
growth around the Pacific Rim and in China have technical know-how has become a significant strate-
also created pressures to innovate. Owner–operators gic consideration for suppliers and operators. There
of large facilities are exerting pressures to improve is a need for integrity of information between suppli-
the ways in which complex engineering and con- ers, designers, systems integrators, engineers, con-
struction projects can be delivered on time, within structors, clients and end-users. Yet, firms tend to
budget and to specified quality. They also wish to manage risk by retaining information crucial to sys-
improve lifecycle performance characteristics and tems integration within their own sphere of control,
enhance flexibility to meet unforeseen changes in rather than by transferring know-how between the
demand. Forces of change also emanate from within temporary coalitions of firms with whom they col-
construction itself, as firms compete in their quest to laborate.
secure orders and deliver new products and services. Design, engineering and construction firms there-
Management of innovation is complicated by the fore have to manage innovation in multi-technology
discontinuous nature of project-based production in environments,2 responding to changes in software,
which, often, there are broken learning and feedback engineering, information and materials technologies,
loops. The choice of technology in construction takes rising costs, and the need to deal with increasing
place under conditions where it is not usually feasi- complexity due to social and political circumstances.
ble to test full-scale prototypes. Simulation and mod- In response to this rise in complexity, leading firms
elling is therefore of great importance in front-end in the construction sector have developed scientific
decision-making, planning and execution. Product and technological capabilities across a large range of
definition, development, simulation, testing and pro- technical fields. Data from corporate publication in
duction usually involve the transfer of knowledge academic journals indicates that not only do con-
within complex networks of suppliers and include a struction firms publish in traditional fields such as
large number of interactions between many different civil engineering, they also publish extensively in
specialists. This includes the need to deal with tech- chemistry, materials science, mathematics and me-
nical decisions in which the interdependency be- chanics ŽSalter et al., 2000..3
tween components and subsystems creates the need
for an exchange of technical know-how across a 3.2. Reputation and branding
range of professional and engineering disciplines.
Design and engineering processes often occur Construction firms trade on their reputations,
concurrently, and these are increasingly affected by based on past performance. Some project-based firms
events that were once considered to be exogenous to dominate specialist niche markets and have become
engineering decision-making processes. For exam- recognised for their technical capabilities in the pub-
ple, the form of project finance and role of new lic realm, in a similar way to major product brands in
financial institutions are becoming important stimu- some consumer markets. For example, in structural
lants of change. The structure and timing of project engineering, Ove Arup and Partners is a world leader,
finance introduces new institutional decision makers a brand reputation consolidated with completion of
in project planning, and this may have implications the Sydney Opera House. Their ability to utilise
for the procurement of technologies. Similarly, de-
mands concerning environmental protection, made
2
by what were once considered to be ‘external’ pres- In some ways, the types of competences required by project-
sure groups, are also shaping the conditions within based organisations may be similar to those needed by large
multi-technology firms — see Grandstrand et al. Ž1997..
which technical decisions are made. 3
It is also possible to find academic publications from con-
Project-based firms need to manage technological struction firms in infectious diseases, optics, zoology and palaeon-
innovation and uncertainty across organisational tology.
962 D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972

reputation to win new orders, and thus gain further production, which centre on the delivery of products
experience in the deployment of technical expertise and services. There appears to be a growing need for
is of crucial importance to their long-term competi- suppliers to provide more than basic physical prod-
tiveness. This also has a direct impact on profitabil- ucts. Value-added services to support components
ity and therefore on the ability to invest in new and systems are needed to assist owners and users in
generations of technology and business process operating, maintaining and adapting buildings and
changes. A reputation of technical expertise is often structures. Services include financial deal structur-
a key component in the formation of project teams. ing, planning and design, specialist consultancy, cus-
Large clients often conduct expertise audits of pro- tomer support and training, supply-chain coordina-
ject members to determine whether they have the tion, production and risk management, together with
required technical skills to complete the tasks. Main- the management of coalitions of interests concerned
taining a reputation for technical expertise can be with project operation, use and facilities management
expensive, but it is often essential to demonstrate to — including legal, environmental and regulatory
clients and other project team members that the firm governance authorities. Growing demand for pack-
has the resources available to handle complex prob- aged product and service delivery is blurring the
lems that might emerge during design and construc- traditional boundaries between manufacturing, de-
tion. Firms in construction often use professional sign, construction and service sectors ŽLester,
journals and other forms of publications associated 1998a,b; Gann and Salter, 1998; Marceau et al.,
with the engineering professions to signal their com- 1998.. Some project-based firms are positioning
petencies to others in the sector ŽSalter and Gann, themselves to provide systems integration services,
2000.. which they view as a key source of competitive
Reputation in the production and delivery of com- advantage.
plex products and services in construction can be lost Some firms have adopted an approach to sharing
through high-profile, public failures. In some re- project information aimed specifically at extending
spects, construction, like movie picture production or the market for their services. For example, in the US,
sports management, is a public business. Construc- the engineering firm RM Parsons created opportuni-
tion projects often draw high levels of media atten- ties to provide clients with new value-added services,
tion since they may involve public funding or impact extending their market for engineering, procurement
directly on a large number of people. Failures, diffi- and construction, into early project decision-making
culties and conflicts often play themselves out in the and downstream facilities management ŽGann et al.,
media. Reputations can be lost as easily as they are 1996.. To achieve this, they developed their existing
gained. There are many examples of how failure can Computer-Integrated Engineering systems to form
damage reputations, including the Jubilee Line in new Computer-Integrated Project systems. These are
London or the new Safco field in Seattle — which supported by a variety of technologies such as Geo-
sullied the reputation of NBBT, a world leader in the graphical Information Systems used in early devel-
design and production of sports stadia ŽEngineering opment and planning processes. The adoption of this
News Record, 1999.. In more conventional manufac- approach resulted in the need for internal business
tured products, reputation is gained or lost in the process changes and new relationships with clients,
quality and durability of products over time. In design organisations, contractors and suppliers, gov-
construction, questions of quality, technical expertise ernment agencies, financiers and political groups.
and management may remain in the public gaze for This has been important in enabling them to sell new
many years such as in the construction of the Chan- services earlier in the project lifecycle.
nel Tunnel or the British Library. The recognition that the ‘bundling’ of products
and systems with services has the potential to offer
3.3. From products to serÕice solutions customers enhanced performance and increased value
lies at the heart of these new approaches. The growth
The cocktail of drivers for innovation in construc- in number and workload of systems integrators sup-
tion is leading to the emergence of new forms of plying turnkey solutions is an indicator of the growth
D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972 963

in provision of bundled services. For example, Davies system supply with operators letting maintenance
Ž1997, p. 252. argues that Ericsson and Nokia are and service contracts.4
market leaders in the provision of telecommunica-
tions systems in part because they offer financial
assistance, technical support and consultancy ser- 4. Research results
vices to help their clients open new markets. More-
over, Tidd et al. Ž1997, p. 178. argue that value In this part of the Paper we present tentative
added at the systems level is greater than the sum of findings and general results gleaned from work in
the value — added by the components — except progress with a range of design, engineering and
where a component or subsystem is significantly construction firms. We also present more substantial
superior to competing offerings. In the aero-engine material from one of our completed case studies.
industry, the prime engine manufacturers earn profits
largely in the maintenance and service contracts 4.1. Case study results
associated with purchases. For some engine makers,
it takes up to 7 years after the original sale for the Our first detailed case study was carried out with
firm to begin to turn a profit ŽPrencipe, 1997.. In all a specialist design, engineering and manufacturing
of these industries, firms’ competencies in adding company making ventilation equipment, roof vents
services to the original, physical project are becom- and smoke exhaust systems for buildings. These
ing the major enticement for the production of the have evolved to include sophisticated components,
artefact itself. which form sub-systems in complex products —
This new approach to production is in part driven including embedded software for digital control. The
by the changing nature of demand. In the UK, the business is family-owned and although it is a na-
privatisation of utilities and infrastructures has tional leader, with international capabilities, it is a
brought with it changes in the structure of markets small player in a large and diverse sector. The
for project-based, service-enhanced firms. The Pri- company has grown from its manufacturing base in
vate Finance Initiative has changed the role of many the 1950s to become a specialist in schematic design
traditional project suppliers, involving them in work in the 1990s, offering a range of technical consul-
earlier in project lifecycles, requiring new knowledge tancy services, including integrated systems solutions
about financing and regulatory issues. Customers ŽFig. 2..
such as electricity generators, which once may have The firm operates on the basis of projects, which
engineered and commissioned new facilities, now vary in size, characteristics and complexity. Intervie-
outsource far more work, including services to pro- wees suggested that the business operates through a
ject-based firms. Evidence of these shifts can be pyramid of projects, with a small number of large
found in the public statements of supplier firms — projects, a group of medium-sized projects and many
the section on ‘Intelligent Building Systems’ in small projects ŽFig. 3.. Size, however, has little
ABB’s Ž1997. Annual Report states that: relationship with the company’s overall profitability
or the importance attached to an individual project.
Our building systems customers are increasingly
Large projects often involve large numbers of stan-
asking for total solutions that cover all of their
dardised components and their integration and instal-
needs, from lighting and ventilation systems to
lation as more complex sub-systems within build-
monitoring and control systems that ensure the
ings, whereas many small projects involve bespoke
most efficient use of electricity through an entire
and time-consuming design processes. The business
building. ABB has the product and system know-
expends much effort on large projects and often
how and design and project management capabili-
finds it difficult to compete on small projects. A
ties to meet this growing demand. Žp. 23.
Adtranz, an ABBrDaimler Benz joint venture, the
world’s largest producer of trains, places particular 4
We are grateful to Andrew Davies for references to ABB and
emphasis on what it sees as the trend towards total Adtranz.
964 D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972

stimulated by new requirements by clients, the need

to develop standards and to comply with new regula-
tions, and from ideas generated by staff in R & D and
technical support units, as well as from personnel
working on projects. Major external sources of inno-
vation were standards and legislation. The firm plays
Fig. 2. Evolution from manufacturing to integrated systems solu-
a leading role in regulating fire and smoke systems,
tions. helping to write the standard performance criteria for
these systems. Involvement in regulation therefore
provides competitive advantage to the firm. Writing
network of smaller suppliers is often used to assist in standards at a high level, to match firm competen-
the delivery of smaller projects. Large projects can cies, spurs innovation and advantage. The company
be very profitable, but the overhead costs incurred in also receives a substantial number of unsolicited
developing small projects can cause these to be calls from architects and building consultants about
loss-making. Small projects fill the factory and help designs and systems, although servicing these calls
to build contacts and reputation to win larger pro- was often time consuming, they could lead to new
jects, particularly when they are carried out for large business opportunities. There were equally many
customers. But what is often unknown, is which barriers to innovation, including lack of resources —
small projects might lead to future, profitable large- there was a reduction in the number of technical staff
projects. following the recession in construction markets in
Sales staff bid for new projects and are rewarded the early 1990s. Traditional approaches and limita-
on an incentive basis — a system, which may tions in technical knowledge in some specialist areas
account for the large number of small projects won also constrained the business’s ability to innovate.
each year. In contrast, technical engineering staff Responsibilities for the management of technol-
have weaker incentives in their work and often feel ogy were divided between Technical Support and the
themselves to be over-stretched in terms of deliver- R & D units. Knowledge in the Technical Support
ing on projects. Project slippage is ‘enemy number group is based on mechanical engineering, fluid
one’ creating a cycle of delay, catch-up and blame dynamics and thermodynamics and a detailed under-
within the business. There were contrasting views in standing of the regulations concerning fire and smoke
the business about the ways in which detailed speci- systems. However, this type of knowledge is not
fication and technical design work were managed. necessarily useful in relaying information about new
The ability to integrate tendering packages was seen business opportunities. We found that technical sup-
by some to offer new opportunities for exploiting port was one of the weaker links in the flow of
technical competencies. However, tendering for new technical information within the business. It was
projects was a cost-driven exercise and this, together driven by an external orientation, focusing on meet-
with lack of incentives, tended to limit the ability to
integrate capabilities across the business. New meth-
ods of winning work were being explored, including
partnering with other design and construction firms
and with clients, but the firm had limited experience
of this and how it might help them to exploit their
technical expertise.
Although the firm has a wide range of technical
capabilities, we found that there were limited links
between these across different business units and
between business units and individual projects. There
were few indicators of technical performance. There
were many sources of technological innovation, Fig. 3. The pyramid of projects.
D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972 965

ing requirements from projects, and it was often used bilities, a strong internal culture based on values
to fulfill training functions. However, there were no derived from the family-owned nature of the busi-
obvious links with marketing and selling the busi- ness, and a willingness to change among its staff.
ness’s reputation for technical excellence. The R & D
unit focused on product innovation and there were 4.2. Initial general results
only limited communications between ideas gener-
ated here and the needs of other divisions. Few In many firms in our study, there appears to be a
technical performance indicators existed. mismatch between the knowledge acquired and used
Our review of the firm indicated two contrasting in inter-organisational project processes, including
sets of issues relating to business and project pro- project-based learning, and the intra-organisational
cesses. From the point of view of internal business business process knowledge needed to manage and
processes, the relatively flat structure of the firm work in project-based firms. Project processes often
with semi-autonomous operating units resulted in involve delivering products and services in tempo-
ineffective use of technical knowledge. A range of rary coalition with other suppliers. Different speciali-
issues surfaced during a workshop with senior man- sations are usually brought together from a range of
agers, including: industries including other project-based firms, often
in unique combinations. Project processes are estab-
Ø The variable quality of technical documents. lished in multifarious ways and when competitive
Ø Unmet need for shared directories and use of procurement systems are used, a number of different
central library resources. and unique potential processes are invented to de-
Ø The potential to use the Intranet and Internet for liver the project, only one of which will be chosen.5
transferring technical data. The case study outlined above, together with re-
Ø The need to speed up information flows and sults from interviews and case studies currently be-
update current practices. ing developed with other firms, suggests that the
management of technology in construction firms is
Issues concerning project processes included: often conducted informally. Few mechanisms are
used to track the development of technology
Ø The need for greater technical support at the throughout the firm. The management of innovation
front-end of projects. within these firms tends to be confined to the R & D
Ø The need to provide better integration between unit, senior management and engineering staff. Yet,
different technical specialist skills and create more in construction firms, learning, research, and devel-
flexibility between technical experts and general opment is not limited simply to the R & D depart-
systems integrators. ment. Project teams are involved in a considerable
Ø Mechanisms by which additional technical spe- amount of ‘practitioner-research’ and they often con-
cialist skills were bought in. duct research and develop expertise in the course of
Ø Mechanisms for allocating technical support and their project activities ŽGroak and Krimgold, 1989..
prioritisation of resources. Central actors within the firm often have a poor
Ø New business opportunities in providing design understanding of these ‘practitioner-research’ activi-
solutions to projects on-line, and the possible ties within project teams. Some conservative firms in
difficulties of charging for these. the sector have tried to stamp out unplanned practi-
tioner-research projects seeing these projects as a
Our case study with this company provided op-
portunities for internal debate about business and
project processes that had hitherto not existed. It 5
helped to raise awareness of potential problem areas The bidding process is often an important first stage of
engagement for many types of project-based firms. Considerable
and opportunities with senior management. The firm effort is expended in producing bids, the majority of which
appears to be well positioned to respond to new usually fail. This is expensive and provides a form of learning-
threats and opportunities, based on its technical capa- by-failure, which is nevertheless difficult to capture.
966 D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972

burden on firm resources. Other firms, such as Ove demonstrates that social, economic and political is-
Arup and Partners, have an explicit strategy to en- sues can easily compound technical complexity. Re-
courage project-team members to develop and inte- sults from our interviews suggest that few of the
grate research projects into their mainstream design firms involved in the project were prepared to with-
activities. Our interviews indicate that Ove Arup and stand the social, economic and political complexity
Partners views practitioner-research as a way of of the job. Given this complexity, frustration among
building technical capabilities within the firm — the the project team grew.
business often attempts to ‘tag on’ a research project Large projects often involve the integration of a
into major consultancy projects. large number of different teams of specialists. Dur-
In general, projects of different size — relative to ing the life of the project these teams can act as a
the size and capability of the project-based firm — single organisation through colocation, secondments,
present their own particular problems. Size of project and close trust-based working relationships. In the
is rarely proportional to the size of the design costs. case of the construction of the Millennium Dome,
Small projects can be bespoke, requiring a large the project team became a single unit at a common
number of engineering-intensive calculations. They site. Company-specific name tags were removed and
can also be design- and service-intensive. Large visitors could not tell from which firm the project
projects involve large teams made up from a wide members came. This level of integration among dif-
range and variety of firms. This variety can create ferent firms and specialisations is not always
uncertainty and cause problems for even the most achieved, but when it does take place, projects be-
seasoned construction firm. For example, in the con- come organisations with bounds of trust and author-
struction of the Jubilee subway line extension in ity similar to, or even stronger than, a firm. For
London, a large number of social and technical example, we found that in the Dome project, a policy
issues were involved that demanded much more of ‘no letters’ communication was introduced
resources than the project team had anticipated. The whereby communication by formal contractual meth-
project entailed the construction of a new subway ods was harshly frowned upon. The barrier of con-
station close to the Westminster Parliament and un- tracts created by transaction costs was overcome by
derneath Big Ben, one of the most famous landmarks a sense of common purpose and trust. However, this
in London. The constructors were responsible for form of trust and project management can be rare in
ensuring that Westminster station would remain op- the highly competitive and contract-based world of
erational during the course of the project. The project construction. Moreover, our interviews suggest that
team needed to meet on a weekly basis with over 55 it is difficult to transfer this culture back into the
different local agencies to ensure that the project did centre of individual businesses involved in large
not impact negatively on the local community. In the one-off projects.
course of construction of the station, the contractors We observed that services are increasingly sup-
had to rebuild the Westminster station four times. As plied along with products across two industrial link-
part of the project, they had to drill underneath the ages: between supply-networks and project-based
Houses of Parliament and insert probes that released firms; and between project-based firms and their
material into the ground to ensure that tunneling did customers. These services are increasingly necessary
not lead to shifts in the ground level. In order to to ensure that sophisticated component systems can
ensure that Big Ben did not move, a pendulum was be designed, integrated and operated as final com-
fixed to the top of the tower, hung to the base, and plex products. In many cases, detailed design activi-
shifts in the structure were monitored on a computer ties are migrating upstream into the supply network.
scanner every ten min. Any shifts in the structure However, knowledge about operational character-
were immediately corrected. In the face of these istics is required to perform such design services and
technical and social issues, the project slipped well this knowledge must flow up, as well as down, the
beyond budget and caused major embarrassment to supply network. Attempts to standardise procedures
the firms involved and the client, London Transport, and to use modular approaches to design and compo-
as well as to the UK government. The project nent development are important methods for ensur-
D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972 967

ing interchangeability of parts so that systems can the life of the project, acting as a conduit to capture
eventually be integrated. Such an approach offers the the clients’ perceptions. Over the life of some long-
possibility of meeting differentiated, customised re- term projects Že.g. over 5 years., companies launch
quirements while benefiting from economies of scale promotional campaigns to manage client expecta-
derived from using standardised, pre-assembled com- tions.
ponents ŽCIRIA, 1998.. Concurrent engineering is practised in many pro-
When working in large teams, it is often difficult jects and this requires capabilities in coordination
to define the intellectual property from the wide across organisations — sometimes involving coloca-
range of discrete inputs on large projects. Project- tion of staff. The consequences of failing to manage
based firms appear to struggle with definitions of coengineering between independent organisations
intellectual capital and many of the activities that may result in problems that are difficult to rectify
take place are difficult to price. For example, design because of the interdependent, systemic nature of
activities are often poorly measured and priced within technologies in complex products and systems. Suc-
projects. Design is rarely routine and therefore mea- cess often depends upon the knowledge that people
sures based on person-hours can be partly mislead- at every level of the organisation bring to bear in
ing. Engineering and design organisations in the new, semi-autonomous and often temporary, cross-
construction sector often find that elegance, com- functional teams.
plexity and detail are often considered superior to The knowledge base usually includes competence
simple and standardised designs. Expectations by in specialised technical areas, particularly where
clients put pressure on designers to prepare long, component or systems technologies are developing
detailed designs in order to justify expensive design rapidly. At the same time, interdisciplinary design
consultancy fees. Design complexity can become a and integration knowledge is required to enable the
substitute for value when few measures of the intel- coordination of the many specialists and skills from
lectual capital of design are available. different industrial activities. ‘Integrative competen-
Often, project-based firms’ inputs into a project cies’ are becoming increasingly important. The abil-
may be tied to a particular stage of the project’s ity to assemble project teams rapidly is described by
development. For example, schematic designs of fire firms as core capabilities for personnel at all levels
and smoke systems are prepared in the initial stages of the project-based enterprise. People need to be
of building design. Only after some months of con- able to form teams quickly to tackle new projects or
struction are such designs applied. In the meantime, respond to events in existing projects. Professionals,
changes in design resulting from the pressures of the managers and shop-floor operatives need to be able
construction process may alter the original schematic to respond to unforeseen events and deploy a high
design for the fire and smoke system. The makers of level of problem-solving expertise.
these systems may be far removed from the construc- Project-based firms in construction increasingly
tion process, but they are expected to alter their need new skills to deliver services, as well as prod-
designs to account for the new circumstances. Our ucts. Management, marketing customerruser support
interviews show that this places extra pressures on skills, financial management skills, risk assessment
the firm to shift design capabilities rapidly. Knowl- and coordination skills are all needed. Services pro-
edge flows, therefore, need to be managed in the vided include:
context of short-term, discrete networks of firms.
Knowledge and skills associated with deal- Ži. planning;
structuring and partnering are important in many Žii. technical support and transfer;
project-based activities. This often requires detailed Žiii. environmental analysis;
knowledge about customer organisations and under- Živ. design and engineering;
standing of the business dynamics of other firms in Žv. systems integration consultancy;
the supply chain. Clients often need to be managed. Žvi. economic assessments;
Long-term projects force firms to appoint a client Žvii. procurement advice;
liaison officer. This officer stays with the client over Žviii. legal advice;
968 D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972

Žix. teaching and training; and portfolio of projects. In part, this situation is created
Žx. facilities management and operations support. by the organisational structure of project-based firms.
With limited central functions, project-based firms
Delivering such services increases the need to need to find mechanisms to interpret project-based
harness and manage knowledge from both engineer- activities. With IT project management systems fo-
ing and social sciences within the firm. cusing on single projects, firms often rely upon
We found that project-based firms often rely on paper-based maps of project developments. Results
informal channels of communication among project from our interviews suggest that this method can be
groups to develop an understanding of the firm’s ad hoc and difficult to embed into the firm’s compet-
project-based activities. Job rotation, monthly and itive strategy.
informal meetings are often used to facilitate com-
munication. In order to improve communication,
many firms set aside central funding for project 5. Towards an understanding of project-based
support groups. These support groups act as reposito- firms in construction
ries of knowledge and information about firm-wide
processes. They are responsible for knowledge man- In our attempt to understand the management of
agement within the firm, to ensure that a flow of technology and innovation in construction firms, it
information and knowledge about current and past has been necessary to understand the theories of the
projects is maintained by the organisation. But be- firm. Of the various theories, the resource-based
cause project-teams are often self-contained, they approach seems the most promising because it fo-
may draw little from central services such as techni- cuses on systematic differences across firms in their
cal and R & D support. When they do use central ability to mobilise resources for implementing com-
in-house expertise, they often have to pay on a petitive strategies. In the theory, resources refer to
fee-for-service basis and this may form a constraint assets within the firm that enable it to muster its
to integration of internal business processes. collective capabilities, including tangible things, such
Firms are increasingly seeking to use IT-based as plant and equipment and human resources, to
project management tools, such as Baan’s Dynamic sustain competitive advantage ŽFoss, 1996.. But, as
Quantitative Modeler. These tools allow firms to Penrose stresses, Ait is never resources themselves
track the financial position of projects. But rarely do that are the ‘inputs’ in the production process, but
they assist in measuring or understanding the devel- only the serÕices that the resources can renderB
opment of technology in the firm. Technical services ŽPenrose, 1995, p. 25.. The rendering of resources
within the firms are often charged to a single project. differs from firm to firm, ensuring heterogeneity in
Yet, the benefits of such investments may be re- firm capabilities. Resources are bound to firm-level
ceived by all projects within the firm. Moreover, routines. They are the firm-specific assets of the
technological developments are notoriously difficult organisation. Resources are often considered as the
to cost— benefits to investments in technology are same as competencies or capabilities. A firm’s devel-
often subtle, indirect and varied ŽTidd et al. 1997.. opment of resources is an ‘unfolding process’, se-
Few project-based firms appear to have developed quenced in time and path dependent ŽFoss, 1996, p.
sophisticated techniques for understanding and man- 14.. Foss has argued that advocates of the resource-
aging their total portfolios of projects. Often, the based theory of the firm have struggled to define a
financial manager of the firm monitors cost and time unit of analysis, shifting from routines to processes,
estimates across the business. Monthly or quarterly and that treatments of firm’s resources have tended
meetings of project managers may act as a device for to be static ŽFoss, 1996.. In our view, resources are
ensuring that the status of different projects is under- embedded in the dynamic activities of firms and the
stood, but they rarely provide a strategic direction for changing external environment in which the firm
the firm. In project-based environments, the articula- operates. The use of resources for competitive advan-
tion of an innovation strategy often depends on tage lies in their timeliness, valuability, rareness and
limited knowledge of the current state of the firm’s costs of imitation ŽTeece and Pisano, 1994..
D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972 969

In spite of the rich stream of theorising on the Resources at the core of the firm need to be mo-
nature of the firm, little effort has been made to bilised to support projects and feedback from pro-
account for the particular project-based nature of jects is needed to replenish central resources.
construction firms, or to apply resource-based theo- Firms, such as Ove Arup and Partners, have
ries to these types of firm. Increased attention is adopted a number of knowledge management tools
necessary regarding the question of how firms de- to capture knowledge from previous projects. These
velop and resource their core technical competencies measures include skills networks, project databases
relating to issues of integration in design and con- and informal culture-generating activities, such as
struction. An initial model indicating the interactions design workshops. Nevertheless, these techniques for
within which technical support and service activities capturing project-based learning appear to have been
can be explored is shown in Fig. 4. This is based on only of limited success. Members of construction
our case study work. It illustrates in-house support firms bemoan the cycle of ‘re-inventing the wheel’
and external research and technical support services that characterise project-based production. The limits
bought-in by firms. Some of the firms in our study of knowledge management techniques are not only
are managing portfolios of hundreds of projects each driven by the project-based nature of activities, they
year. Companies like Ove Arup and Partners may be also arise from high turnover, a reluctance on the
engaged in several thousand projects at any one part of engineers to recycle designs and an incentive
point in time. system within the profession, which rewards novelty
In general, knowledge associated with ‘know- rather than standardisation. Some of the features are
what’ and ‘know-why’ tends to be codified, while not particular to the construction sector, but within
knowledge associated with ‘know-who’ and to some construction, they exist in extreme forms.
extent ‘know-how’ tends to be uncodified, or tacit. Project-based firms in construction compete on
We think that tacit knowledge may be extremely their ability to bid, manage and complete projects in
important in this environment, particularly in the a timely and cost efficient manner. Yet, in construc-
provision of design and other services. tion, they have to live with a high rate of failure. For
The model shows that project-based firms need to example, leading designers and contractors often have
manage both project and business processes. The 20% or lower bid success rates. The preparation of
resources of the firm are embedded at both the bids can involve the development of bespoke designs
project and the firm level. It is the integration of andror processes. Failures act as a drag on the
these two sets of resources that enables the firm to firm’s activities. It is common for firms to operate
be competitive. In our study, we found that business programmes to save information and experiences
processes are ongoing and repetitive, whereas project from failed bids. For other project-based firms, bids
processes have a tendency to be temporary and are often too bespoke to be recycled. For example,
unique ŽGann, 1998; Brusoni et al., 1998.. To be the firm in our first case study, presented above, had
successful, firms need to integrate the experiences of little opportunity to recycle work in preparing bids.
projects into their continuous business processes in Schematic designs for fire and smoke systems were
order to ensure the coherence of the organisation. bespoke, linked to the design of an individual build-
ing design. If the building design failed the tendering
process, then all of the firm’s efforts were lost.
Project-based firms, such as this currently face a
continuous cycle of failure and wasted effort.
The problem of failed bids in construction is
compounded by the financial structure of many pro-
ject-based firms, where a small number of projects
often account for the profits and losses of the busi-
ness. In a typical portfolio of projects, a design or
construction firm may have one or two that are
Fig. 4. The project-based firm and technical resource flows. spectacularly successful, many, which break even
970 D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972

and a number that fail. Firms often depend upon a project-based firms described in this study are not
few spectacular successes to ensure profitability. Pre- virtual enterprises. They are sustainable businesses
dicting which will be successful is often difficult. that draw strength from their histories based portfo-
When taken together with the high rate of failure for lios of projects and maintaining services based on
bids, this shows that almost all of the efforts of a their technical expertise.
project-based firm are tied to failed or losing pro- We suggest that the relationship between business
jects. Only a small proportion of effort Žsometimes and project processes is paramount for the under-
as little as 5% of the total. is responsible for success- standing of project-based firms and how they sustain
ful projects upon which the firm ultimately relies for competitive advantage over time as they operate in
its survival. multi-actor environments and on the basis of one-off
Through our initial research and feedback ses- projects. In response to this need, we have developed
sions with project-based firms, we have begun to a research method that combines project and firm-
develop a number of generic tests for our model. based studies, articulating the linkages between tech-
These include: nical resources at the core of these businesses and
their deployment and feedback in projects.
Ø the extent to which business and project processes A number of issues relating to knowledge man-
are integrated; agement and learning still need to be addressed, in
Ø the degree to which value-added services Žand particular, the relationship between learning by indi-
other new business opportunities. have been de- viduals, project teams and that across project-based
veloped on the back of core project-based activi- firms. Moreover, project-based learning and firm-
ties; level business process requirements need to be
Ø the extent to which mechanisms are in place for matched to facilitate the integration and management
capturing learning from past projects; of knowledge across project groups and business
Ø the extent to which general technical performance units. Learning also needs to take place between
metrics have been developed and implemented at physical production processes and provision of re-
project and business-wide levels; lated services. Our on-going research aims to de-
Ø the extent to which a coherent system of technical velop metrics for assessing these issues.
support and development has been developed at Project-based methods of production create a need
the core of the firm, providing technical resources to understand knowledge flows in client and supplier
to projects; and relationships that extend beyond the traditional eco-
Ø the extent to which mechanisms are in place to nomic notion of ‘an industry’. This has implications
capture ideas from outside the firm. for the form of cross-sectoral learning, development
and knowledge flows including feedback, learning-
by-doing and learning-by-using. While such learning
is generally cumulative, the discontinuous and tem-
6. Conclusions porary nature of project-based modes of production
creates problems for rapid assimilation of new
In this paper, we have argued that project-based knowledge throughout project-based organisations.
firms in design, engineering and construction repre- Modern forms of apprenticeship and peer group and
sent a challenge to research on management and team-based learning appear to offer important mech-
innovation. As regards the delivery of traditional anisms for overcoming such discontinuities. More-
physical products, they are developing new service- over, simulation of practice and observation, and a
enhanced capabilities. Traditional treatments of be- recognition that professional practitioners also have
haviour, from project management to resource-based to perform the role of problem-solving researchers, is
theories, do not have the methodological equipment ´ 1992.. The capability to develop
also useful ŽGroak,
to explore the particular dynamics of innovation in and use advanced forms of Information Technology
project-based firms, because they fail to draw a link for simulation and modelling is also likely to be of
between project and business processes. The increasing importance in helping to visualise and
D.M. Gann, A.J. Salterr Research Policy 29 (2000) 955–972 971

represent products and processes before they are creasingly dynamic environment. Deregulation and
made. Engineering and IT research in IT, together internationalisation are expanding and changing
with work in cognitive and media studies is likely to business opportunities. Rapid innovation in compo-
be of increasing importance here. nents, sub-assemblies and systems underpins compet-
Information systems are likely to change the no- itiveness in the development and use of complex
tion of decision-making and the nature of decisions products and systems. Winning firms will be those
themselves with the implementation of new project which are capable of making deep-rooted cultural
and business management tools. For example, suc- changes while maintaining engineering and technical
cessful implementation of IT-based decision support strengths.
systems in leading construction organisations
demonstrates that emerging processes are quite dif-
ferent in character from conventional approaches. Acknowledgements
The use of IT systems is resulting in fundamental
This paper is based on research in progress, sup-
changes to the timing, sequencing and hierarchy of
ported by the Engineering and Physical Sciences
decision-making. The most important aspects of
Research Council ŽEPSRC. under the Innovative
change are:
Manufacturing Initiative ŽIMI.. We are grateful for
Ži. the speed and concurrence of decision-making; their support and to all those in industry who are
Žii. the ability to make information readily avail- participating in the project. We are also grateful to
able when and where it is required; and two anonymous referees for their helpful comments
Žiii. increased visibility of decision-making pro- and insights.
cesses, including access to other people’s deci-
sions.
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