A business ecosystem perspective on partner alignment for sustainability
A case study in the construction industry
Alma Brinkman Emma Hedlund
Industrial and Management Engineering, master's level 2020
Luleå University of Technology
Department of Business Administration, Technology and Social Sciences
ABSTRACT
Purpose The purpose of the study is to understand how partner alignment can be created in a business ecosystem to work towards sustainability in the construction industry. The following research questions will therefore be studied:
RQ1. What incentives are important for the subcontractors in a business ecosystem to reach partner alignment in a construction context?
RQ2. What factors are required to create norms in the business ecosystem to reach partner alignment in a construction context?
RQ3. How can the relationship between incentives and norms in a business ecosystem affect partner alignment in a construction context?
Method Through a qualitative, abductive, single embedded case study, we aimed to find answers to the research questions presented above. The data collection was completed in three different waves, where the second phase was where the main data was collected through 25 semi-structured interviews. We aimed to understand the current situation in the first wave, understand the subcontractors view in the second wave and validate the result in the third wave. The analysis of the data was completed through a thematic analysis, where we transcribed and coded the data with themes mainly originated from the previously studied literature.
Findings Our findings resulted in two frameworks showing (1) recommendations important to perform in diverse stages of a collaboration in order to use incentives and norms in the best way possible. The aim is to reach partner alignment in a business ecosystem in the construction industry and thereby influence the subcontractors to work towards sustainability. Further, it is shown in framework number (2) how both incentives and norms have an important role, where incentives are important for short-term motivation to confirm good behavior and will be significant in the beginning of a relationship. Norms on the other hand, evolve over time and clarify an expected behavior, but the implementation should still start in the beginning of the collaboration.
Theoretical
implications We contribute to the literature by applying the ecosystem concept in the construction industry, where a project-based partnering structure has previously
dominated. Further, we create a greater understanding for what is required to achieve aligned partners in a construction context and how the combination of incentives and norms can contribute to this. Lastly, we give a more thorough analysis of the interaction between incentives and norms and how they relate to each other.
Managerial
implications We provide managerial guidelines of how to establish partner alignment and encourage subcontractors in a business ecosystem to work with sustainability.
We provide recommendations of motivation drivers, in terms of incentives and norms, and drivers significant to implement in certain phases of a collaborative setting. We further describe the relationship between incentives and norms, and state that incentive confirms good behavior and creates short-term motivation, while norms clarifies an expected behavior.
Keywords Partner alignment, business ecosystem, collaborative strategies, sustainability, construction, incentives, norms, shared values
ACKNOWLEDGEMENT
This thesis is completed in the final course of our master program Industrial Engineering and Management, with a specialization within innovation and strategic business development at Luleå University of Technology. The thesis has been completed in the spring of 2020 at a world leading construction company with its headquarters in Stockholm, Sweden.
We would like to show gratitude towards a few people that have been extra supportive throughout this thesis. First, we would like to direct a special thanks to our supervisor at the university, Mats Westerberg. Thank you for believing in us and giving us advice throughout the project. Secondly, we would like to thank our supervisor at the case company, Mikael Frödell, for connecting us with valuable people and guiding us through the work. We would also like to thank Hans Fransson for giving us the opportunity to complete our master thesis at the case company. Further, we would like to show appreciation towards all interview respondents for providing us with valuable insights. Finally, we would like to thank our fellow students for the continuous feedback on our report.
Alma Brinkman Emma Hedlund
Stockholm, June 2020
TABLE OF CONTENT
1 INTRODUCTION 1
2 THEORETICAL FOUNDATION 4
2.1 Sustainability work in the construction industry 4
2.2 Collaborative strategies 5
2.2.1 Partnering 5
2.2.2 Business ecosystem 5
2.2.3 Incorporating the ecosystem concept in a construction context 6
2.3 Incentives and norms in an ecosystem 7
2.3.1 Incentives for partner alignment 7
2.3.2 Norms for partner alignment 8
2.3.3 The relationship between incentives and norms 10
3 METHOD 12
3.1 Research approach 12
3.2 Case study selection 13
3.3 Data collection 13
3.3.1 First wave of data collection – understanding the current situation 14 3.3.2 Second wave of data collection – understanding the subcontractors 15 3.3.3 Third wave of data collection – evaluate practical and theoretical relevance 17
3.4 Data analysis 18
3.4.1 Analysis based on the first wave of data collection 18 3.4.2 Analysis based on the second wave of data collection 18 3.4.3 Analysis based on the third wave of data collection 19
3.5 Measures to improve quality 19
4 RESULTS AND ANALYSIS 21
4.1 Incentives for partner alignment 21
4.1.1 Goal alignment 21
4.1.2 Task ownership 23
4.1.3 Incentive flexibility 24
4.1.4 Incentive distribution 25
4.1.5 Risk allocation 26
4.1.6 Sustainability demands in a contract 26
4.2 Norms for partner alignment 27
4.2.1 Imitation of behaviors 27
4.2.2 Distinct statements 28
4.2.3 Critical events and primacy happenings 29
4.2.4 Relationship management 32
4.2.5 System perspective 34
4.3 Framework for partner alignment 35
5 DISCUSSION AND CONCLUSIONS 39
5.1 Theoretical contributions 39
5.2 Managerial contributions 40
5.3 Limitations and future research 40
REFERENCES 42
APPENDICES i
APPENDIX I i
APPENDIX II ii
APPENDIX III iv
APPENDIX IV vi
APPENDIX V x
APPENDIX VI xvi
APPENDIX VII xix
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1 INTRODUCTION
Climate changes are causing an urgent need to shift towards a more sustainable society where the construction industry stands for more than 40 % of the world’s energy- and material consumption (Gluch, 2009). Recent regulations in the Swedish construction industry have caused new types of sustainability challenges; to provide a carbon-neutral value chain until 2045 (Construction and Civil Engineering Sector, 2018, p.3). Sustainable development is defined by Brundtland, Khalid, Agnelli, Al-Athel and Chidzero (1987) as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (p.33) and consists of three dimensions; economic growth, social equality and environmental protection, whereas the last one mentioned is the focus of this study.
Collaborating with other actors often comes with several strategic advantages and to incorporate a sustainable methodology, it often requires a company to look beyond its own borders and join a new collaborative setting. However, managing the alignment of partners, particularly in the construction industry, can be considered complex. Most construction projects have a project-based structure (Pulkka, Ristimäki, Rajakallio & Junnila, 2016) where the project is the source for innovation and value creation (Hobday, 2000). When a new construction project is initiated, the contractor often hires subcontractors to perform most of the work (Hinze & Tracey, 1994) and contribute with specific capabilities that the contractor is lacking. The specifications and compensations are stated through a contract (Bajari & Tadelis, 2001), which is where the contractor can clarify the expectations, often resulting in subcontractors fulfilling the agreements. The temporary collaboration, caused by the project-based structure, has resulted in that the construction industry is characterised by low-trust relationships (Wathne, Biong & Heide, 2001) with irregular and limited interaction among companies. Springing from this, the collaboration within the construction industry calls for new approaches, where a business ecosystem can cover a more long- term view of collaborations.
Companies that manage to successfully collaborate in an independent setting can often create, capture, and deliver value that would not have been possible by individual actors (Adner, 2017). A business ecosystem is defined by Adner (2017) as “the alignment structure of the multilateral set of partners that need to interact in order for a focal value proposition to materialize'' (p.40). We will further say ecosystem when we refer to a business ecosystem. Companies often join ecosystems to stay competitive on the market, establish a long-term partnership that looks beyond a distinct project, and access desired resources that can enhance value creation. The ecosystem can also be a
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foundation to address environmental problems and create mutual priorities to establish sustainability efforts. While it becomes increasingly important for construction companies to consider environmental issues, it raises the question of how to align ecosystem partners around sustainability.
Particularly since a contract does not necessarily ensure the willingness of a partner to act by values that lie outside the contract. Different scholars have attempted to examine ways of managing ecosystems (Williamson & De Meyer, 2012; Adner, 2017), including the alignment of partners to focus on the ecosystem’s overall health, but little research has been done in the construction industry.
While the ecosystem concept is intended to be generalized across industries (Thomas & Autio, 2014), Pulkka et al. (2016) state that scholars tend to focus on high-tech industries when describing the ecosystem, which in a construction context might be misleading since construction collaborations occur under circumstances that differ from other industries. For example, the construction industry is characterized by organizations with complicated construction networks while being governed mainly by contracts and strict public regulations (Pulkka et al., 2016).
Together, these traits affect how collaboration occurs and how value is created, and we argue it shows the need to study the ecosystem concept in a construction context. Furthermore, Gluch (2009) describes that literature emphasizes the lacking efforts around sustainability in the construction industry. We believe that creating common incentives and norms can help enhance an alignment among companies, motivate actors towards a common goal, and eventually establish shared values to address sustainability concerns.
Previous research on incentives and norms have shown to have an impact on the motivation to achieve a goal. Most of the theoretical work on incentives and norms, on the other hand, describe what they are and how they influence in certain contexts. To provide examples, the literature describes how incentives can be used to reward a wanted behavior (Ryan & Deci, 2000) though it is stated that incentives can only motivate to a certain extent to support a cultural change (Milne, 2007). Further, scholars describe how norms can be used as a strategy to create a collaborative setting (Harland, Staats & Wilke, 1999; Schwarz, 1999) and how norms are created (Feldman, 1984; Rose
& Manley, 2011). Put into a construction context, how group norms are created can impact the safety behaviors of project participants (Gong, Liu, Ye, Xiang & Wang, 2018). However, incentives and norms are not as well-studied in an ecosystem context, a research area that we argue needs more attention in the literature. Studying incentives and norms, and how the relationship between incentives and norms might affect partner alignment in an ecosystem, is therefore of importance to create a better understanding of what motivates ecosystem partners towards sustainability. Springing from this, we aim to shed light on how to make subcontractors motivated to act according to the goals that the contractor set. Therefore, the purpose of the study is to increase the understanding of
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how partner alignment can be created in an ecosystem to work towards sustainability in the construction industry, by studying the research questions:
RQ1. What incentives are important for the subcontractors in a business ecosystem to reach partner alignment for sustainability in a construction context?
RQ2. What factors are required to create norms in the business ecosystem to reach partner alignment for sustainability in a construction context?
RQ3. How can the relationship between incentives and norms in a business ecosystem affect partner alignment for sustainability in a construction context?
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2 THEORETICAL FOUNDATION
This chapter aims to create a fundamental understanding of factors that can be crucial in the creation of partner alignment to reach sustainability. The construction industry has traditionally been seen to almost only consist of temporary collaborations, which affects the subcontractors’ motivation. To this background, we first talk about sustainability in the construction industry, along with shared values. Secondly, we present two collaborative strategies and start by studying partnering, which is commonly used within the construction industry, and business ecosystems which is a highly discussed collaborative strategy. Second, we discuss why an ecosystem perspective can be considered more favourable in this context. Thirdly, we present incentives and norms to see how they can create a foundation for aligned ecosystem partners and how they relate to each other.
2.1 Sustainability work in the construction industry
While the climate is changing, the vulnerability of the society increases, and the change towards a more sustainable society is not anymore a dream scenario, it is a must. Springing from this, all industries have a responsibility to take actions favorable for this matter and the construction industry is no exception, especially since the development of new ideas and technologies in the construction industry often are slow (Gluch, 2009). The construction industry is standing in front of the challenge to provide a carbon-neutral value chain until 2045 (Construction and Civil Engineering Sector, 2018, p.3). As a result, new sustainability initiatives have been created, such as Sustainovation (2020), an industry-wide project in which companies cooperate to address environmental challenges, but more initiatives are needed. Therefore, we argue that one method to address sustainability challenges can be through shared values. Shared values have become increasingly important for companies in the search for new business opportunities and to address environmental challenges (Moon, Parc, Yim, and Park, 2011; Porter and Kramer, 2019). Porter and Kramer (2019) defines shared values as
“policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates” (p.6). Further, the authors state that shared values have the potential to unlock new ways of reaching global growth since both economic and social value can be reached. Thus, to reach shared values, Kramer and Pfitzer (2016) argue that alignment between involved partners must first be established by coordinating the efforts of the involved players. We argue that a strong collaborative strategy along with incentives and norms can play an important role here to reach aligned partners and eventually create shared values, which will be discussed further.
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2.2 Collaborative strategies
When a firm chooses to collaborate with other firms for the execution of certain inputs, the need to manage these relationships arise. Partnering and ecosystems have gained different amounts of attention in one industry or another. Traditionally, construction projects are performed through partnering, while the ecosystem concept is commonly used within high-tech industries (Thomas &
Autio, 2014). In the coming sections, we will discuss the concepts more thoroughly.
2.2.1 Partnering
Cooperative relationships, in a construction context, are often referred to as partnering and further, the integration of different knowledge sets from diverse actors (Eriksson, 2010). In a competitive market, a company’s relationship with partners, enhancing synergies and improvements, can determine a company’s survival (Black, Akintoye, & Fitzgerald, 2000). Black et al. (2000) argue that partnering and the view of partnership that follows, can create joint strategies between organizations and achieve strategic objectives. Scholars describe partnering as an important management strategy to improve project performance in the construction industry (Li, Cheng & Love, 2011; Larson, 1995; Wood & Ellis, 2005) and is defined “to achieve specific business objectives by maximizing the effectiveness of each participant's resources [...] based on mutual objectives, agreed method of problem resolution and an active search for continuous measurable improvements” (Bennet and Jayes, 1995, p.2). Li et al. (2000) explain that partnering can have different aims. If partnering is supposed to be used in more strategic terms, the relationship is viewed as a long-term commitment beyond a discrete project (Li et al., 2000; Cheng & Li, 2001). However, Cheng and Li (2001) state that both strategic- and project partnering often considers a specific project objective, agreed by Larson (1995) and Gluch (2009). Partnering that is developed for a specific project can be viewed as “the establishment of a co-operative relationship between parties for a single project” (Cheng &
Li, 2001, p.292), which the construction industry is traditionally dominated by. To conclude, it is not obvious that partnering is the most suitable approach to reach partner alignment for sustainability and therefore we will discuss ecosystems in the coming section.
2.2.2 Business ecosystem
An ecosystem can be viewed as a collaboration between firms that act together in a certain configuration, to deliver value and reach for a common goal. According to us, the definition “the alignment structure of the multilateral set of partners that need to interact in order for a focal value proposition to materialize'' (Adner, 2017, p.40) emphasizes the importance of mutual agreements in a collaboration, which will help in the foundation of creating a collaborative setting where prioritise
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can go beyond statements in the contract. Ecosystem partners can obtain diverse roles within the ecosystem, defined as “a characteristic set of behaviours and activities undertaken by ecosystem actors [...]” (Dedehayir, Mäkinen, & Ortt, 2018, p.18). The definition implies that depending on the role the actor undertakes, they perform a specific set of activities, which means to what degree an actor can demand other participants to perform according to their expectations. Adner (2017) argues that the difference between participation and alignment in an ecosystem will make itself evident when actors have different end-goals in mind, which he refers to as the alignment structure in his definition of an ecosystem. This implies that even though the firms collaborate to reach a common end-goal, they do not necessarily prioritize the same factors along with the project which scholars seek to find a managing strategy for (Williamson & De Meyer, 2012).
2.2.3 Incorporating the ecosystem concept in a construction context
The ecosystem concept is not a commonly discussed collaborative strategy in the context of construction. However, there are several aspects strengthening that it would be beneficial to consider it in this industry, especially to reach partner alignment for sustainability. It further becomes important to have a sustainable strategy on a corporate level as well as in the project, which partnering might miss by laying most of the focus on the project objectives (Cheng & Li, 2001).
Further, the client sets the goal and restriction for each construction project and thereby sets the precondition of what is important. However, the priorities vary depending on the client and causes inconsistency of minimum expectations of the project partners regarding sustainability. Therefore, it is important to establish a relationship that also goes beyond a distinct project and can stay robust with its own priorities. By using an ecosystem perspective, it can provide a more holistic view of the collaboration.
The ecosystem is strongly anchored with innovation and the sustainability challenges within the construction industry calls for innovative solutions. However, to only shift from a partnering perspective towards an ecosystem perspective might not be enough, but it can provide insights and create an environment where innovation becomes a more natural part of the collaboration. Second, the ecosystem definition by Adner (2017) emphasizes on partner alignment which we argue is important for sustainability. Moreover, the aim of partnering is to reach certain project objectives but in ecosystems, the overall ecosystem health also gains attention (Dedehayir et al., 2018) and we argue that the well-being of the collaborative setting will influence the end-result. Finally, the construction industry has traditionally been an industry highly permeated by a hierarchical structure.
To reach shared values and create an environment where all partners feel responsible for the end-
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result, we argue that a hierarchical structure will not be a suitable approach. An ecosystem perspective looks beyond the hierarchical structure and rather considers the management of networked firms (Asif, 2020) and coordination of partners (Pidun, Reeves, & Schüssler, 2019).
Springing from this, beyond a good collaborative structure, a strategy to motivate the partners to reach sustainability will also be important and therefore, incentives and norms will be presented in the next section.
2.3 Incentives and norms in an ecosystem
In previous sections, we talked about partnering and ecosystem and how collaboration have previously been performed in the construction industry. However, in a collaborative setting, it is not always obvious that the ecosystem partners are aligned with their priorities. Incentives can create a direct, short-term, effect on individuals’ motivation to meet certain goals, and are important in an initial phase to establish a long-term, trustworthy relationship (Bresnen & Marshall, 2000). Norms, on the other hand, can help clarify an expected behavior. In the coming sections, we will study the role of incentives and norms to create partner alignment.
2.3.1 Incentives for partner alignment
A challenge for managers in all kinds of organizations is to understand what motivates employees to reach the desired outcome, and how to create an organizational culture that includes certain norms.
Green and May (2005) claim that all actors in a project should benefit from improved performance, and equally, Eriksson and Pesämaa (2007) suggest that incentives can increase the commitment among actors and improve performance. Incentives, such as rewards or punishments, can be a driver for extrinsic motivation, which refers to “performance of an activity in order to attain separable outcomes” (p.71). However, a common principle for incentives, is that they must be fairly distributed in the project and adapted to the specific project objectives (Bresnen & Marshall, 2000).
If done correctly, incentives can be an effective tool to align a projects’ objectives and motivate participants to work in a certain direction (Bower, Ashby, Gerald, & Smyk, 2002; Broome & Perry, 2002; Tang, Qiang, Duffield, Young & Lu, 2008). In an attempt to establish norms, managers often use incentives and reward systems as an encouragement. Bower et al. (2002) define incentives as ‘‘a process by which a provider is motivated to achieve extra ‘value-added’ services over those specified originally and which are of material benefit to the user’’ (p.38), which Milne (2007) argues can help create outcomes such as cultural change.
Scholars provides various suggestions how incentives can be applied to reach a wanted behavior.
For example, Lachance (2000) argues that a wanted behavior is often correlated with recognition
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since recognition can give the employees’ performance a clearer direction and purpose. Further, Locke and Latham (2002) state that the goal itself can be an important incentive for motivation but must be supervised over time to increase commitment and motivation (Rose & Manley 2011;
Hollenbeck & Klein, 1987). Many construction projects face difficulties regarding the project performance, mainly because of complexity in the construction supply chain (Rose & Manley, 2011;
Rose & Manley, 2010). As a result, financial incentives such as risk-sharing and performance rewards, are often part of the construction contracts to motivate participants to accomplish desired project outcomes (Bower et al., 2002). Moreover, financial incentives must be linked to the efforts required to meet the rewards since it establishes fairness among the project participants (Rose &
Manley, 2011). The intensity of the rewards, with other words, greater efforts leads to greater reward, is argued by Zenger and Marshall (2000) to increase the efforts by the group. In a construction context, that could be compared to the risks and equity of the incentive that the subcontractor holds compared to other project partners. Different types of incentives, referred to as motivation drivers by Rose and Manley (2011), can help achieve certain goals in a construction project. We have presented some of the key motivation drivers in Table 1 but modified them for the purpose of this study, meaning to reach sustainability. In the next section we will talk about norms.
Table 1. Motivation drivers in terms of incentives
2.3.2 Norms for partner alignment
According to Nilsson, Borgstede and Biel (2004) there are several strategies to create the willingness to work more sustainable. To give examples, they claim that “while a command-and-control approach has been dominating in the past, market-based instruments such as taxes, subsidies, and tradable permits have gained ground” (p.267). However, they further argue that increasing the
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awareness around the environmental changes through knowledge-based campaigns has gained attention lately. Market-based instruments can be seen as a strategy consisting of incentives to create motivation, while awareness rather is a method of using norms. A norm, according to Nilsson et al.
(2004), “... refers to the belief that significant referents (other persons or groups) think that one should carry out the behavior and the motivation to comply with these referents” (p.268). Further, norms are about expectations of behaviors which often result in individuals adopting the behavior of others (Bicchieri et al., 1997; Bajari & Tadelis, 2001) to fulfill these expectations. We argue that both these statements indicate how other people become key players in the process of influencing how an actor should reason in different situations. In the context of the construction industry, an example could be that the contractor priorities sustainability, which they encourage the subcontractors to act in accordance with. Ryan and Deci (2000) uses the term intrinsic motivation when referring to norms, and they define it as “doing an activity for inherent satisfaction” (p.71).
To increase intrinsic motivation the authors signal that an individual's inherent values often increase in environments in which the individual perceives that they can pursue activities aligned with the values. Springing from this, in this study, we will apply the following definition of norms “norms are about one significant referent clarifying an expected, desirable behavior by others, that should act as a support and guidance in different strategic decisions”, adapted from Nilsson et al. (2004).
To encourage a sustainability, several scholars have emphasized on the importance of norms (Harland et al., 1999; Nilsson et al., 2004; Thøgersen, 2002). Gong et al. (2018) talks about the significance of norms in the creation of a safer construction industry. They further state that certainty in how to act is closely related to confidence, while increased confidence can be created by for example group norms. A norm is never as strong as when almost every actor complies with it and acts accordingly (Bicchieri et al., 1997). Feldman (1984) presents four main reasons why norms are formed, shown in Table 2 below.
Table 2. Four main reasons why norms are formed
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In our studied context, the fourth reason is considered most relevant. Norms creation can be a solution to make subcontractors agree to the terms of making decisions that enhance sustainability.
The question comes down to how these norms are created within a collaborative setting. Scholars suggest several methods, presented in Table 3 below, to make norms accepted within a cooperative setting, which we argue can be applied within ecosystems.
Table 3. Drivers to create norms in an ecosystem, adapted from the literature
2.3.3 The relationship between incentives and norms
We have previously described norms and incentives under two separate sections. However, we argue that they should not be seen as two separate phenomena since Ryan and Deci (2000) states that a person can experience both intrinsic motivation [norms] and extrinsic motivation [incentive].
An adapted version of Ryan and Deci´s (2000) explanation of motivation is visualized in Figure 1.
Striving for extrinsic motivators, such as performance rewards, might lead to short-term satisfaction.
Milne (2007) state that as a risk since it might lead to an opportunistic behavior where the reward becomes more important than the intrinsic value. On the other hand, self-motivation is often considered more favorable to achieve social development and well-being in the long run, which also becomes important in a sustainability context.
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Figure 1. Different dimensions of motivation
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3 METHOD
In this chapter, the method employed to fulfil the research purpose of the study will be described.
It includes both the research approach, the chosen case study and the strategy for data collection.
Further, the process of analysing the data is described in three phases based on the data collection and is followed by a description of quality improvement measures applied.
3.1 Research approach
The aim of the study is to examine how partner alignment for sustainability in an ecosystem can be achieved. The study therefore relies on a well-studied research area, namely ecosystems and how incentives and norms can be applied to create motivation among ecosystem partners. However, it is further based on observations in a certain context where this theory is less studied, to be more specific, the observations are completed within the construction industry. According to David and Sutton (2011) the research approach of going back and forth between theory and observations, which was used in this study, can be called an abductive study. An abductive study allowed us to combine learnings from the theory with learnings from the empirical study, to deepen the knowledge of existing literature and contribute with new insights. The reason why this approach was chosen was because a five step-process was considered suitable and this process will be described in Table 4 below.
The understanding of how a collaborative system with aligned partners is created was considered to be best gained through a qualitative study. We argue that creating an environment where involved partners feel included touches rather soft values and will best be understood through in-depth conversations rather than generic questions in a huge quantity, which made a qualitative approach suitable. Further, the qualitative approach enabled us to take both literature and empirical findings into consideration, since we were able to update the interview questions between the interviews based on what we learned in previous interviews. In this study, we decided to interview both
Table 4. Five-step process for an abductive study
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purchasers from the case company, further called Alpha, and recurrent subcontractors to gain an understanding about if the situation was perceived equally depending on the different actors' company affiliation.
3.2 Case study selection
The study is based on a single embedded case study, which has been carried out at a Swedish construction company, Alpha, with its subcontractors as the embedded subcases (Yin, 2011). In general, the construction industry phases a challenge to become climate-neutral, and the construction company chosen is a world leading project development- and construction group, that has a given mission by the Swedish Government to set up a roadmap for the construction industry to become climate neutral. The company was established in 1887 in Sweden and has 38,000 employees in eleven countries by the time of the study. However, in this study, we will shine light on the Swedish part of the company with its 9,300 employees, since the geographical location makes significant differences in this industry. Springing from this, the company chosen is considered to be well-suited for the study both based on the mission given by the Swedish Government and based on their size and possibility to influence other companies within the same industry to follow their lead.
The problem analyzed has its foundation in the strict regulations set by the government regarding reaching net zero carbon emissions by 2045. The construction industry is further an example of an industry with many partners involved in every project and in order to reach this goal, all partners such as the customer, the contractor, the subcontractors and the suppliers need to be involved in the process. However, this study is limited to examine how a contractor, can encourage a subcontractor to work with sustainability in mind, with two main arguments, (1) the contractor has no time to wait for the client to require certain aspects from them, instead they have to take action at this moment, simultaneously (2) the contractor will not reach the goal set by the government if the subcontractors works in a different direction.
3.3 Data collection
In this study, both primary and secondary data were collected to gain a deeper understanding of the situation. Primary data was collected through informal conversations and semi-structured interviews, divided into three different waves. Secondary data was mainly collected through academic articles and internal documents from Alpha. The research process is illustrated in Figure 2 and described below.
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Figure 2. Research process – data collection and analysis
3.3.1 First wave of data collection – understanding the current situation
The first wave of the data collection was two-fold: (1) four explorative interviews with employees from Alpha, further called internal respondents, were held with the purpose to gain a deeper understanding of the construction company's current situation and (2) documented material including goals, working methods, sustainability work and purchasing agreements were studied.
Both of us were present throughout all explorative interviews and they were recorded with approval from the respondents. This wave of the data collection was crucial for the understanding of the perceived challenges facing the company from their own perspective, the way they work with these challenges today, and to analyze whether we perceived the current situation equal to the problem described. In other words, the pilot study created an important foundation for the rest of the study and helped to formulate the research questions of the study.
To give the respondent a fair possibility to prepare for the meeting, we shared an introduction to the subject we are studying, as well as a few questions that we wanted the conversation to circulate around. The interview guide can be seen in Appendix I. However, the interviews were still little
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controlled, and the main goal was to receive as much information about the current situation as possible. All interviews held, with their output described, are visualized in Table 5 below.
3.3.2 Second wave of data collection – understanding the subcontractors
In the second wave of the data-collection, we interviewed two diverse groups of people, subcontractors and people from Alpha, mainly purchasers and Environmental Engineers. The main goal of the second wave of data collection was to gain an understanding of the two groups of people and is shown in Table 6.
The interviews held were of semi-structured nature and an interview guide was established in advance of the interview. Some questions in the interview guide were directly connected to the literature about incentives and norms, while others were separated from the previously read literature and based on the learnings from the explorative interviews. Like the first wave, all interviews were recorded with approval from the respondents to be able to properly analyze the data. The interview
Table 5. Summary of explorative interviews with internal respondents and output gained
Table 6. The main goal of the second wave of data collection
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guide was not shared with the participant in advance of the interview, because we wanted them to share their first thoughts of successful collaborations and motivation drivers. The interviews lasted between 20 and 60 minutes, depending on how much the respondents were talking and how many supplementary questions that arose. Both of us were present through all interviews, where one was held responsible to ask all the questions from the interview guide, while the other person was held responsible to ask questions that arose throughout the interview. Depending on the locations of the respondents' workplace and due to COVID-19, some interviews were held at Alpha´s office, while others were held over Skype. In order to find participants, we contacted internal purchasers recommended by our supervisor from Alpha. The internal purchasers were working in a certain project and we asked for subcontractors working in the same project. Beyond the requirement that the subcontractor should be involved in a project in this moment, they should also be recurrent subcontractors to Alpha. From the literature, we have seen that depending on the time-bound of the relationship, motivation drivers may differ and therefore this delimitation was made. The role of the respondents from Alpha will be shown in Table 7 and the external respondents in Table 8 below.
Table 7. Summary of internal interview respondents in wave two
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Table 8. Summary of external respondents in wave two
3.3.3 Third wave of data collection – evaluate practical and theoretical relevance
Based on the empirical findings in wave two together with findings from the literature, we were able to establish a framework to be used to create partner alignment for sustainability through the involvement of incentives and norms. In order to investigate whether this framework seemed to be relevant, we later confirmed the theoretical and practical relevance with a professor at Luleå University of Technology and with our supervisor from Alpha. Firstly, we discussed the framework and secondly, we refined it based on the discussion.
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3.4 Data analysis
3.4.1 Analysis based on the first wave of data collection
To analyze the situation properly, we used a thematic five-step process visualized in Figure 3.
First, all interviews were transcribed by one of the two of us completing this project. Second, the transcripts were read through by each researcher individually to familiarize with the data set and gain a deeper understanding of the content. Third, first thoughts about the material were written down and certain words that were perceived to be important were highlighted. The importance was decided on mainly two aspects: (1) if the word were recurrent in one or several interviews and (2) if the respondent were perceived to put emphasis on a certain word. Fourth, the factors highlighted as important aspects were compared and finally, a problem formulation based on the analysis were written and discussed with the supervisor from Alpha.
3.4.2 Analysis based on the second wave of data collection
Similar to the first wave, we used a thematic analysis to gain a proper insight to the data collected.
However, this time, the analysis was partly based on existing literature and partly separated from the learnings from previous studies. This means that we both had themes identified in the literature and themes evolving from the interviews. The analysis was completed in a five-step process visualized in Figure 4 below. We looked for incentives and norms parallelly, while the conclusion about the relationship between incentives and norms, made itself evident when we had a full picture of their characteristics.
Figure 3. Five-step process to analyse data from wave one
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Figure 4. Five-step process to analyse data from wave two
A thorough description of each step is presented in Table 9.
3.4.3 Analysis based on the third wave of data collection
Based on the comments gained from the discussions with the professor and out supervisor from Alpha, we had a creative session to analyze how we could improve the model. After the creative session, small changes to the initial model were made.
3.5 Measures to improve quality
A commonly used strategy to develop trustworthiness in a qualitative study, is to evaluate the quality based on credibility, transferability, dependability and confirmability (Lincoln and Guba, 1985). To reach credibility, meaning the accuracy of the findings (Murphy, Klotz, & Kreiner, 2017), we aimed to minimize the risk of influencing the material with biases. To this background, we both attended all interviews and thereby, we received two diverse perspectives on the material. Moreover, we
Table 9. Description of the five-step process
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recorded and transcribed all interviews, to enable us to double check the material. We further interviewed people from many different companies in order to receive a broader view of how Alpha was perceived by others.
To reach transferability, it is said that a single case study is not the most favourable research approach (Murphy, Klotz, & Kreiner, 2017), however, we could still use information from previous studies in combination with our empirical findings and thereby ensure transferability. This enabled us to transfer motivation drivers, in terms of norms and incentives, from general perspectives into the context of the construction industry. We further asked the respondents about specific situations where they have been very much motivated, in order to come up with a strategy about how Alpha can recreate this motivation into the relationship between Alpha and the subcontractors.
To create dependability, the research is based on multiple data sources such as primary data, in terms of interviews, and secondary data, in terms of previously written academic articles. Further, both researchers coded the data jointly (Murphy, Klotz, & Kreiner, 2017) and worked several days to create the best matches between themes, codes and quotations from the interviews. We further received both verbal and written feedback regularly from four other students, as well as one Professor within Entrepreneurship and Innovation at Luleå University of Technology. At the end, we received feedback from two additional students that did not follow the entire progress of the work.
Finally, to create confirmability, or to be more specific, to clearly visualize how we came to the final conclusions of the study (Murphy, Klotz, & Kreiner, 2017), we made an extensive analysis of the gathered data. Firstly, we wrote down first thoughts that came to our mind during the interview.
Secondly, we wrote down norms and incentive drivers found in the literature that the interviews were based on. Thirdly, we transcribed all interviews and identified specific quotes, strengthening or contradictory to the drivers. We further described the process in detail, in order to make other people able to repeat the process, basically in the exact same manner.
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4 RESULTS AND ANALYSIS
In this chapter we will present our empirical findings with the aim to answer the research questions of this study. First, an overview of our final thematic analysis with identified themes and codes can be found in Figure 5 and representative quotations for each theme can be seen in Appendix IV, V and VI. Second, we will present incentives and norms that can create motivation for sustainability, described in the sections: incentives for partner alignment and norms for partner alignment. We address each research question by presenting the findings in relation to the theory previously presented. Finally, we will visualize the findings in two frameworks.
4.1 Incentives for partner alignment
In the coming sections we will present the identified Motivation Drivers (MD) and end every section with a summary of the findings. The bold words in the text represent codes for each theme.
4.1.1 Goal alignment
An aligned goal can help unify project participant’s efforts and support the overall project performance. Our empirical study showed that goal alignment is an important motivation driver for subcontractors. As stated by Rose and Manley (2011), making sure that the project goal and performance goals are aligned, will increase the participants motivation to perform their assigned task, since they know their performance will contribute to the project's end-goal and make the
Figure 5. Thematic analysis
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project move forward. Common priorities were described as important to reach goal alignment since it ensures that the project shares the same ambitions. As stated by a Project Manager: “...but I believe in having a great collaboration between Alpha and the subcontractors, it's not requirements, but it's common ambitions” (E17). The feeling of being told what to do, was argued by the respondents to reduce their motivation. Likewise, the respondents emphasized that instead of being steered in the project, common priorities can reduce the contractor’s need to micromanage and make it easier for all participants, both those entering early and later in the project, to make day-to-day decisions.
Common priorities were also stated to create more of a collaborative environment even though the respondents' own corporate values would always steer their priorities. However, if Alpha invites the subcontractors to a discussion, the subcontractors can provide inputs on how their own corporate goals can be aligned with the project's priorities.
For some of the respondents, the term sustainability was described as hard to grasp. Likewise, some respondents emphasized sustainability as work safety, while others on environmental issues.
Sustainability does not exclude either of these perspectives, but the answer indicates different views and a common view among participants be important for goal alignment. For example, a common view on sustainability can help clarify its practical meaning, A Tendering Responsible express the importance “...to create a consensus about what sustainability actually is, to be able to agree on the goals…” (E1). While we have previously mentioned that common priorities would simplify the day-to-day decision making, a common view can be seen as more long-term and where stated by a CEO to deepen the project collaboration since it establishes a feeling of trust.
Though a common goal can help align partners to focus on what is most important, our respondents argued that it is not necessarily the goal per see that is important, it is how the goal has been created.
As one Tender Responsible express:
It is wrong to just push the goals down in the organization, they should be created together. The entire industry has a great responsibility and then it does not matter if we just push it down to the
last man, nothing is going to happen then. (E2)
The respondents stated that being able to influence a goal has a significant impact on their motivation. However, while the project’s end-goal might be set, creating short-term goals together that will contribute to the project outcome, are not hindered. A Business Manager explained that if all involved partners would just sit down and discuss the sustainability goals together, then that would enhance the process of reaching the goal, something the respondent experienced was missing today.
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Another implication from our empirical study showed the importance of measurable goals. While common priorities were important for the motivation and establishing a more collaborative setting, measurability was important for the respondents to track their own progress. This implies that the goal itself must be clearly stated and possible to measure for the participants. Respondent E9 expresses: “If you have a goal then it should be measurable so you can measure it, otherwise you can just as well ignore having a goal”. A summary of goal alignment is presented in Table 10.
4.1.2 Task ownership
“...Let them speak, they are often experts on what they do...” (E17, Project Manager). Our study showed that task ownership was important for the subcontractor’s motivation. The respondents particularly emphasized on ownership of their role, responsibility and having their say by providing input to the project. Subcontractors are often experts in their area and stated by the respondents in this study, their expertise should be acknowledged more, which our internal interviews and Lachance (2000) confirms. Subcontractors often want to be involved in the discussions that concern them, since they usually can provide valuable insights. Further, trust in the contractor-subcontractor relationship was considered fundamental for the subcontractors to be able to focus on their own responsibility. A Project Manager states “...trust, know they have hired us and they know we can manage to deliver and do it in a good way” (E18). These findings show the importance for Alpha to rely on the subcontractors’ ability and involve them in discussions. If done successfully, it can result in a greater feeling of ownership. A summary of task ownership is presented in Table 11.
Table 10. Summary goal alignment
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Table 11. Summary task ownership
4.1.3 Incentive flexibility
Financial incentives can work as an effective motivation driver for a group, but it does, however, require that they are perceived to be fair and transparent (Rose & Manley, 2011; Rose & Manley 2010). Our respondents discussed fairness in the context of being judged fairly, meaning that sustainability efforts should be judged on the subcontractor’s profession and as a Regional Manager stated “We work in a certain way, concrete has their requirements, steel has others[...] it requires different amount of energy in the contracts and a sustainability strategy depending on which profession you use for it to work” (E16).
Further, the subcontractors described that it was important to be judged on equal terms.
Subcontractors with a sustainability strategy often perceived that they are compared to companies without a sustainability strategy, which was argued as unfair, since it would make it difficult to compete fairly on price: “...it is not enough that we get to be compared with everyone because then we have to be competitive on the price...” (E1, Partner and Tender Responsible). In addition, our internal interviews showed that employees at Alpha were willing to include other parameters, however, as stated by a Project Engineer at Alpha, the difficulty is how to motivate it. While price will always be an important parameter in the tendering processes, our empirical findings does imply that other parameters should be considered, depending on what Alpha would like to convey as a priority in the project, for example sustainability. However, a Regional Manager explained that this requires that all subcontractors are informed of which tendering terms they will be judged on, preferable before entering the tendering process. A summary of incentive flexibility is presented in Table 12.
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4.1.4 Incentive distribution
Compensation was frequently discussed as an encouragement to work with sustainability. The respondents emphasized that, in general, when working in a project, compensation for general improvements are important. To be more specific, efforts that might not be stated in a contract but encouraged by the contractor, should be compensated, but the opinions were divided on which type of compensation they would appreciate. Some respondents discussed financial compensation but without being more specific than mentioning incentives focusing on monetary rewards.
However, several respondents kept coming back to a long-term collaboration with Alpha and, for example, a Project Manager argues that “I believe that when talking about Alpha, many subcontractors would like to receive recurring job offers, you want to initiate a long-term collaboration” (E17). Compensation for environmental suggestions and improvements were also argued to be important which a Partner and Tender responsible stated “...that you put a great effort on sustainability issues if it is rewarded...” (E2). While rewards and compensation are often a short- term action for motivation, it can help recognize a wanted behavior (Lachance, 2000). In this case, our findings imply that short-term recognition for sustainability efforts can come from financial incentives. This conclusion also supports what is stated by Rose and Manley (2011) that financial incentives should be linked to the performance accomplished, since that implies that greater performance can lead to greater reward. A summary of incentive distribution is presented in Table 13.
Table 12. Summary incentive flexibility
Table 13. Summary incentive distribution
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4.1.5 Risk allocation
Scholars state that a group can become more efficient by sharing risks, since they otherwise must face the consequences themselves (Rose & Manley, 2011; Bower et al., 2002). In our empirical study, sharing of the responsibility for the environment was shown to be important. According to a Sustainability Manager, it is essential that everyone in the industry takes part in the sustainability work that needs to be accomplished and states that “It is about sharing the burden to bring forward demands, if you put high demand then maybe you have to be part and finance it in some way” (E8).
Further, a Partner and Tender Responsible states that if there is too much focus on the economical aspect rather than the environmental, there is a risk that the environmental efforts will slow down and result in a few players carrying a bigger responsibility. Thus, a Project Engineer at Alpha explains that you cannot demand too much from the subcontractors, these empirical findings show the importance to involve all parties. A summary of risk allocation is presented in Table 14.
4.1.6 Sustainability demands in a contract
Attitude towards demand. Our study showed that demands are important, but more as a precondition in a project rather than a motivation driver. Demands were stated, from both the internal and external interviews, to mainly ensure that all project participants followed the expectations, though a Regional Manager explained that demands can be a motivation driver as long as the company already works with sustainability issues: “if you are in the forefront and joins directly then it is almost fun because you know that there’s others that can’t” (E16).
Table 14. Summary risk allocation
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Also, our respondents argued that sustainability demands in a contract can help clarify expectations and was stated by several respondents as important to get things done. A Business Manager emphasized the unclarity that exists in the construction industry regarding sustainability: “It is a step in the right direction against this unclarity that I think this industry has” (E9), which several respondents agreed with. Another empirical finding showed that several respondents were aware of inconsistent sustainability demands from Alpha and the client and explained that these requirements do not necessarily go hand in hand. A CEO states “Let me put it this way, Alpha as an entrepreneur does not always know what the demands are from the client, that we can see” (E20). This might explain why the subcontractors want a clarification of their expected behavior. A summary of sustainability demands in a contract is presented in Table 15.
4.2 Norms for partner alignment
In the coming sections we will present the identified Norm Drivers (ND) and end every section with a summary of the findings. The bold words in the text represent codes for each theme.
4.2.1 Imitation of behaviors
Imitation of behaviors is about showing what is expected from other parties, such as subcontractors.
Stated by several subcontractors: meeting the expectations of the contractor is something that they seek to do, because in the end, the contractor will be the one deciding whether they should work together or not. Imitation of behavior can further be done (un)consciously, either to impress the contractor or because it seems like a natural way of acting. In terms of imitation of behaviors, role modelling and living as you learn will be two important parts for the contractor to consider. To provide an example, Alpha seeks a certain behavior from their subcontractors and a Regional Manager expresses that “Alpha has been the developer in the forefront when it comes to work
Table 15. Summary sustainability demands in a contract
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safely[...] what Alpha decides often becomes law in the construction industry since they are so big”
(E16), which indicates the need for Alpha to be good role model.
However, distinct statements should not only be about pressure on the subcontractor to show that they are worth working with. A Business Manager says:
...but it should be from both sides as well, it can't just be pressure on the subcontractors, neither Alpha can drive around in old vehicles. Thus, the client must fulfil its own part, otherwise the
subcontractor will not be motivated (E7)
Therefore, living as they learn becomes important, Alpha must act the way they expect the subcontractors to act. To conclude, imitation of behaviors can be a good way to get the subcontractors to work in accordance with the expectations, but it will be important to find the balance between making them do the work because you say so, and finding their intrinsic motivation to finish the work in the best possible way. A summary of imitation of behavior is presented in Table 16.
4.2.2 Distinct statements
Feldman (1984) argues that distinct statements lead to a more predictable behavior among players in a collaborative setting, no matter if they come from a leader or another member in the ecosystem.
From our empirical findings, it can be stated that distinct statements lead to both clarification of expectations and to a better flow of information.
In general, the expectation statements simplify for all parties to understand each other's priorities. A distinct statement by a certain actor, can change people's behavior, where a Business Manager states
“if Alpha would go out and say we only work with suppliers that have this and achieve this result, I mean then everyone out in this country would work for it directly” (E9). This indicates that statements can be a powerful way of driving a desirable behavior through. However, we argue that this can also be a risk. Even though distinct statements can be a successful way to create a desirable
Table 16. Summary imitation of behavior
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behavior among subcontractors, Alpha should be careful not to strangle the motivation by forgetting the importance of common discussions. Therefore, the balance between norms and incentives becomes very important. Further, to avoid misunderstandings, a Founder and Owner emphasizes on the importance of providing continuity of information by saying “I think continuity is everything, repetition is the mother of all learning…” (E12).
To conclude, subcontractors favour distinct statements, while the motivation not necessarily will increase as a result of it. Therefore, Alpha should mediate things that they are not willing to compromise on, on any premises, through distinct statements, on the other hand, discussion should take a greater place where Alpha can consider compromises. They should also discuss why the aspects they cannot compromise on are so important to them, because that will give the subcontractors a greater understanding of the prerequisites. A summary of distinct statements is presented in Table 17.
4.2.3 Critical events and primacy happenings
Feldman (1984) and Rose and Manley (2011) states that certain events can influence and be critical for the direction of a collaboration. This implication has shown to be relevant also in the empirical part of this study. Connected to the literature about norms, it is based on the willingness to create a consensus about how to act in certain situations. An internal Purchaser says “...we usually always invite the subcontractors in the tendering review, and then we talk about such things, softer parameters and how they intend to solve things” (I3), which is in conflict with what some external actors express. Already in the tendering process the contractor will set the tone for the rest of the project and therefore, clarification in tendering will be an important consideration by Alpha. A Regional Manager strengthened this by saying “I think that kind of thing should come forward already in the tendering process when the contract is signed. Everything should be crystal clear...”
(E16).
Table 17. Summary distinct statement
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The role of price in tendering was frequently discussed in our interviews and several respondents stated that price is such an important factor that other parameters are forgotten. However, if the tender is all about price, it is a high possibility that this focus will last throughout the project as well.
A respondent titled Sales and Management Responsible, expressed:
“One thing that we are dissatisfied about with Alpha is that everything is about price and for us, as you probably know, certifications also come with a cost. We have working environment processes and quality work which requires both internal and external resources to keep this
standard” (E14)
To solve this, a Partner and Tender Responsible, states that “Maybe price should not be 100% of the evaluation, but that 20% could be sustainability” (E2). This implies that being judged mainly on price is not particularly fair for the subcontractors to compete on equal terms in the tendering process, especially if sustainability requirements are to be encouraged in the project. However, being judged on sustainability work would encourage the subcontractor to think about their sustainability work and probably create a greater willingness to invest in sustainable solutions since it becomes a criteria to be assigned the job.
Next, in the planning phase of the project an involvement creates a greater motivation and enables project success according to several respondents. A Project Manager says that “in the planning today, we see a shortage, we notice that there is a lot of copy-paste in this industry” (E17). The quote is an indication that you do not take advantage of the expertise that is available among the project performers, instead people are hired to only do the planning, without discussing the methods with the people performing the job. Almost all 20 external respondents in this study prefer to be involved as early as possible in a project and the reasons are many, such as gaining an understanding for the expectations, the possibility to be involved in the goal setting, and to influence the working methods.
If we talk about a certain goal, such as involving environmental sustainability in the project, the recommendation stays the same: involvement in the planning phase and in addition an early presentation of the expectations should be completed. A Founder and Owner suggests that in the introduction to a project it is easily solved “if you just have an extra slide in your PowerPoint about sustainability goals, then you can involve everyone from top-down.” (E12). We argue that an early involvement creates a greater possibility to feel responsible for the result of the project which in turn creates a greater collaboration among the different parties involved.
In an ongoing project, it has shown that “... Alpha´s part in this: they are undoubtedly the outermost responsible partner when talking about coordination, that is highly important” (E17, Project
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Manager). Further, a CEO states that “We do need follow-up meetings constantly through the project, but above all, we need an end meeting when the project is finished, what could have been done differently?” (E3), indicating the importance of constant evaluation.
Further, Involvement creates responsibility, which a Site Manager state by saying:
If you get involved in a project with a clear end-goal and you are part of it and can influence the path to the end-goal, the methodology in time plans and where everyone can be part and
contribute[...] then you take a bigger responsibility (E6)
This indicates how involvement creates a greatermotivation for the subcontractor to perform what is promised. Despite creating the motivation, many subcontractors argue that the motivation disappears if the agreements are only there to look good on a paper but are never being followed up.
There are different perceptions about whether follow-ups are being performed or not. A Founder and Owner says:
I don't perceive that Alpha has any tools to check if we do what we say we will do, but it would have been nice since we do it. We would like a proof that we do as we are told. (E13)
Simultaneously, employees at Alpha are saying that it depends on the situation. This indicates that it needs to be structured better, and we recommend a clear strategy to be established concerning who is following the sustainability work up and when. It also must be clearly communicated to the subcontractors. Further, creating a feeling of equality among partners is important for many participants for them to be willing to return to new projects. A Founder and Owner expresses that they prefer when: “Everyone is familiarly, happy and nice, we are all sitting by the same table, no one is better than anyone else” (E11). A summary of critical events and primacy happenings is presented in Table 18.
