Innovation in construction project-based firms through the lens of exploratory and exploitative learning : effects of social capital and collaborative environment

Abstract

The construction industry is frequently criticised for its lacking of innovation. However, researchers have emphasised the limitations of conventional measures, such as profit, number of patents, and R&D allocation, to assess hidden innovation. Hence, a strong need exists for in-depth and non-traditional measurements and insights to analyse innovation in the industry. This research thus examines how construction firms, which are project-based in nature, implement innovation. In attempting to fulfil this aim, the learning theory of exploration and exploitation is adopted. Exploration (i.e., exploratory learning) refers to the pursuit of new knowledge and the search for new opportunities. Exploitation (i.e., exploitative learning), on the other hand, signifies the consumption of existing knowledge to improve existing certainties. In general, firms tend to exploit rather than explore, as exercising exploitation is more convenient, precise and quicker. However, despite its riskier nature, exploration assures significant outcomes. This study adopts the outcome view to conceptualise exploratory and exploitative learning. Thus, exploratory learning is explained by radical innovation, which is the implementation of innovation, whereas exploitative learning is explained by incremental innovation, which is the utilisation of former radical innovations with or without minor changes. Learning theory demonstrates that firms need to maintain a balance between these two learning approaches (i.e., organisational ambidexterity) for their short-term and long-term survival. Following this argument, a research framework is presented to illustrate how construction firms exercise exploratory learning (i.e., radical innovation) and exploitative learning (i.e., incremental innovation) at the project and organisational (i.e., firm) levels. In addition, the effect of social capital on exploratory and exploitative learning is investigated. In this regard, a firm’s ability to create a collaborative environment, in which employees are facilitated and encouraged to work together to achieve common goals, is also considered. The effects of three social capital dimensions—network ties, trust, and shared vision—on exploratory and exploitative learning are therefore examined by considering the mediating effect from collaborative environment. The multiphase mixed-method design containing one qualitative and one quantitative study is adopted as the research methodology. To qualitatively explore learning and innovation strategies, a single case study on a construction contracting firm is conducted. A cross-sectional questionnaire survey is carried out to quantitatively examine the effects of social capital and collaborative environment on exploratory and exploitative learning. Qualitative findings reveal that both exploratory and exploitative learning are performed simultaneously at the project and firm levels, where structural ambidexterity (i.e., structural separation for two learning activities) is evident at the firm level and contextual ambidexterity (i.e., allowing employees to explore and exploit simultaneously) is appropriate for the project and combined (i.e., the combination of firm and project levels) levels. In addition, robust knowledge sharing and integrative mechanisms are deemed vital as the knowledge obtained from exploration and exploitation is transferred within and between projects, project-to-organisation, and organisation-to-project. Innovation in construction firms is associated with benefits, such as enhanced of productivity and reputation, competitive advantage, and value creation. Conversely, lower profit margin, initial cost, client-driven nature, and lengthy approval procedures are among the risks and challenges involved with innovation. Quantitative findings regarding on interrelationships among intra-organisational social capital, collaborative environment and exploratory-exploitative learning in the context of construction firms shows that collaborative environment fully mediates the relationships between network ties and exploratory learning, and shared vision and exploratory learning. However, it does not mediate the relationship between trust and exploratory learning, nor the relationships of network ties, trust and shared vision with exploitative learning. Findings reveal that a combination of social capital and collaborative environment positively affects exploratory learning (i.e., radical innovation) but not exploitative learning (i.e., incremental innovation). Hence, construction firms with high levels of social capital and collaboration often explore new knowledge and tend to implement radical innovation. In contrast, firms do not necessarily maintain high levels of social capital and collaboration to reuse the existing knowledge and implement incremental innovation.