Paper for the 17th IMP Conference, 9th-11th September 2001, Oslo, Norway.

The Construction Industry as a Loosely Coupled System

- Implications for productivity and innovativity

Anna Dubois and Lars-Erik Gadde

Abstract

Previous research suggests that the construction industry is characterised by (1)

particular complexity factors owing to industry specific uncertainties and
interdependencies, and (2) inefficiency in operations. The aim of this paper is to
analyse the operations and behaviour of firms as a means to deal with complexity.
Our observations indicate that the industry as a whole appears to be featured as a
loosely coupled system. Taking this as a starting point the couplings among activities,
resources and actors are analysed in different dimensions. The pattern of couplings
builds on three interdependent layers; tight couplings in individual projects, loose
couplings in the permanent network and collective adaptations in 'the community of
practice'. The paper concludes that the pattern of couplings seems to favour short-term
productivity while hampering innovation and learning.

Chalmers University of Technology

Department of Industrial Marketing
S-412 96 Gothenburg, Sweden

Telephone: +46 31 772 11 96/12 11

Fax. no. +46 31 772 37 83

andu@mot.chalmers.se
laga@mot.chalmers.se

1
INTRODUCTION

The physical substance of a house is a pile of materials assembled from widely

scattered sources. They undergo different kinds of and degrees of processing in large
number of places, require many types of handling over periods that vary greatly in
length, and uses the services of a multitude of people organized into many different
sorts of business entity.

These characteristics of the construction industry were expressed almost fifty years
ago in a well-known study of distribution of house-building materials (Cox and
Goodman 1956:36). One of the conclusions of the study is that ‘the number of
possible permutations and combinations of specific places and entities is enormous,
even for one product’ (p. 43). The complexity of the construction operations and the
subsequent problem solving capability needed is perceived formidable. However, this
problem is ‘in fact solved over and over again as new houses go up in their millions’.
Similar opinions concerning the complexity of the industry have been expressed more
recently. For example, Shamas-Thoma et al (1998) discuss ‘all those remarkable
processes which enable the construction process to function at all’. Winch (1987)
argues that ‘construction projects are amongst the most complex of all undertakings’
(p. 970). Gidado (1996) further emphasises this view by stating that there is ‘a
continuous increase in the complexity of construction projects’ (p. 231).

These underlying conditions shape the industry’s way of functioning and its
performance. Now and then firms in the construction industry are blamed for
inefficiency in operations (e.g. Cox and Thompson 1997). Particularly it has been
argued that a short-term perspective promotes sub-optimisation (Gann 1996) and
hampers innovation and technical development (Dubois and Gadde 2000). A number
of authors argue that construction has failed in adopting techniques that have
improved performance in other industries, such as just-in-time (Low and Mok 1999),
total quality management (Shammas-Thoma et al 1998), partnering with suppliers
(Cox 1996), the supply chain principle and ‘industrialization’ of manufacturing
processes (Gann 1996). It seems to be a common view among these authors that the
construction industry would be better off, if its behaviour changed in accordance with
the norms of other industries.

But assume that Winch and Gidado are right in the statements about the particularities
of construction complexity. If so, it might well be that management principles that
improve performance in other industries are not easily transferable to this context. If
construction follows another logic then it might even be a mistake trying to adopt
these management principles.

AIM AND SCOPE OF THE PAPER

The aim of the paper is to analyse the operations and the behaviour of firms in the
construction industry. We do this by understanding the behaviour of firms as attempts
to cope with the complexity of construction projects. In this respect we suggest the
industry to be regarded as a ‘loosely coupled system’ (Weick 1976).

The paper is structured in the following way. First we explore the characteristics of
the complexity in construction. After that we discuss how the actual operations in the

2
industry can be interpreted as responses to its inherent complexity. Then we describe
the main features of loosely coupled systems and present an analysis of the pattern of
tight and loose couplings in construction. The conclusion of the analysis is that the
pattern of couplings seems to be appropriate for dealing with the productivity in
individual construction projects. In the discussion we also bring up some
consequences for learning and innovation related to the present structure and suggest
some alternative patterns of couplings.

The empirical background of the paper is a study of a house-building project and its
connections to other projects reported in Dubois and Gadde (2000). Therefore, our
observations and conclusions regarding the logic of the operations in the construction
industry mainly relate to house-building.

THE CONSTRUCTION INDUSTRY AS A LOOSELY COUPLED SYSTEM

Complexity in construction

Gidado (1996) argues that complexity in construction originates from a number of

sources; the resources that are employed, the environment in which construction takes
place, the level of scientific knowledge required, and the number and interaction of
different parts in the workflow. He makes a distinction between two main categories
of complexity. One is related to uncertainty and deals with ‘the components that are
inherent in the operation of individual tasks and originate from the resources
employed or the environment’. The second type of complexity stems from
interdependence among tasks and represents those sources of complexity that
‘originate from bringing different parts together to form a work flow’ (ibid: 215).

The uncertainty in the undertaking of individual activities has four causes:

- Management is unfamiliar with local resources and local environment
- Lack of complete specification for the activities at the construction site
- Lack of uniformity of materials, work, and teams with regard to place and time –
“every project is unique”.
- Unpredictability of environment
These characteristics obviously make it difficult to apply a centralised approach to
decision-making. Prevailing conditions call for decentralisation of authority.

The second determinant of complexity is associated with the interdependencies

among the operations in construction. Gidado (1996:216) points to three factors:
- The number of technologies and the interdependence among them.
- The rigidity of sequence between the various main operations
- The overlap of stages or elements of construction
These conditions emanate from two characteristics of the industry identified by Eccles
(1981). The first is ‘the organization of the production work force into a variety of
trades’. The second is ‘the practice of subcontracting portions of a project to special
trade contractors by primary contractors’. Both factors cause interdependence, which
call for co-ordination. The nature of these interdependencies seems to favour local co-
ordination rather than centralised.

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Central features of construction

It has been argued that construction is ‘inherently a site-specific project based

activity’ (Cox and Thompson 1997:128). This view is shared by Shirazi et al (1996)
who conclude that construction is mainly about co-ordination of specialised and
differentiated tasks at the site level. The emphasis on site-specific activities provides
us with two central features of house building. The first is the focus on individual
projects, in terms of decentralised decision-making and financial control. The
prevailing organisational arrangements when it comes to responsibility and authority
put the emphasis on the efficiency of single projects, which makes sense as response
to the roots of complexity identified above. The strong reliance on localised decision-
making is explained by the fact that ‘management is unfamiliar with local resources
and local environment’. The second feature is the need for local adjustment at the
construction site. These adjustments are necessary owing to the three remaining
uncertainty factors; lack of complete specification, lack of uniformity and
unpredictable environment. When these conditions rule the game it is difficult (and
even unsuitable) to develop components and systems tailored to the situation at
specific sites. Therefore it is quite unusual that building materials manufacturers
develop products that are adapted to particular contractors or specific construction
sites. The industry still relies on what Stinchcombe (1959) identified as ‘standardised
parts’ while the use of ‘standardised activities’ tended to be the norm in many other
industries. The prevailing uncertainty makes the use of standardised parts an
appropriate strategy, which is further reinforced by the benefits that are gained from
increasing economies of scale in manufacturing of building materials.

Also the complexity with respect to interdependencies seems to favour standardisation

and thus local adjustments. Owing to ‘the number and interdependencies among
technologies’ customised solutions from one supplier would impact on other
components and systems. The ‘rigidity of sequences’ and the ‘overlap of stages’ in
turn makes co-ordination difficult. It is most likely therefore that these conditions are
better taken care of through decentralisation and local adjustments than through
centralised activities and customised solutions.

There are some other features of the behaviour of construction firms that must be
observed. The strong emphasis on individual projects favours a narrow perspective,
both in time and scope. Efficiency is supposed to be promoted by competitive
tendering. Cox and Thompson (1997) found the perception of the actors to be that
competitive tendering assures that subcontracting is carried out at lowest possible
cost. The strong reliance on competitive tendering explains the use of standardised
parts. Adaptations and customisation would rule out the possibility of using tendering
procedures. Competitive tendering also sets the conditions for the relationship among
the parties. Gann (1996) found that that the relationships ‘are often typified by
market-based, short-term interactions between independent business’ (p. 445).
Thompson et al (1998) also identified market-based interaction as the norm of the
behaviour and concluded that firms ‘traditionally paid very little attention to the
relational elements of business transactions’ (p. 36). The final characteristic of the
behaviour in the industry is the multiple roles of firms. The activity scope of a firm
tends to be broad, including design, production and distribution in various
combinations, which may also vary between different projects. The division of labour

4
among the actors vary greatly from project to project and the role of the individual
firm can be very different (Dubois and Gadde 2000:211).

Loose couplings

According to Orton and Weick (1990) any location in an organisation contains

interdependent elements that vary in the number and the strength of their
interdependencies. For example, every single industrial activity is to some extent
interdependent with a number of other activities – they are coupled in various ways.
Some of these couplings are ’tight’ while others are ’loose’. Glassman (1973)
discusses the degree of coupling between two ’units’ (events/elements/systems, etc.)
on the basis of ’the activity of the variables which the two units share’. If two units
have few variables in common, or if variables in both are weak compared to other
variables influencing the two units, then they are relatively independent of each other
and thus loosely coupled (Aldrich, 1980). Weick´s characteristic of loose couplings is
that ’coupled events are responsive but that each event also perceives its own identity
and some evidence of its physical or logical separateness’ (Weick 1976:3). The
attachment among the events may be ’circumscribed, infrequent, weak in its mutual
effects, unimportant, and/or slow to respond’. Loose couplings may occur in a number
of dimensions: among individuals, among sub-units, among organisations, between
hierarchical levels, between organisations and environments, among ideas, between
activities, and between intentions and actions.

Weick (1976) analyses the potential effects of loose couplings, which may be
functional and/or dysfunctional. In this section we primarily direct the attention to the
ways in which loose couplings contribute to handling complexity in operations.

• Localised adaptation
A loosely coupled system may be a good system for localised adaptation where ‘any
one element can adjust to and modify a local unique contingency without affecting the
whole system’. Hence, localised adaptations may thus be ‘swift, relatively economical
and substantial’.

• Buffering
Loose couplings serve as a buffering mechanism against unfavourable conditions in
the environment. Owing to that the organisation as a whole will not have to respond to
each little change that occurs in the environment. As Weick puts it: loose couplings
allow some parts of an organisation to persist.

• Sensing mechanism
Loose couplings provide a ‘sensitive sensing mechanism’. This is a consequence of
localised adaptation, decentralisation and low extent of co-ordination. It is argued that
loosely coupled systems preserve many independent sensing elements and therefore
‘know’ their environments better than is true for more tightly coupled systems, which
have fewer externally constrained, independent elements.

• Variation generation
Loosely coupled systems preserve the identity, uniqueness, and separateness of
elements. Therefore, the system potentially can retain a greater number of mutations

5
and novel solutions than would be the case with a tightly coupled system. The greater
‘freedom’ in a loosely coupled system would imply that the actors deal with problems
in a multitude of ways thus favouring variety and innovation.

• Self-determination
In a loosely coupled system there is more room available for self-determination by the
actors. According to Weick it is likely that a sense of efficacy might be greater in a
loosely coupled system with autonomous units than it would be in a tightly coupled
system where discretion is limited.

In Table 1 the complexity factors and the functions of loose couplings are
summarised.

Complexity owing to Complexity owing to Functions of loose

uncertainty interdependence couplings
Lack of complete speci- The number of Localised adaptation
fication of activities technologies and the
interdependence between Self-determination
Unfamiliarity with local them
resources and local Sensing mechanism
environment The rigidity of sequence
between the various main Variation generation
Lack of uniformity of operations
materials, work and teams Buffering
with regard to time and The overlap of stages or
place elements of construction

Unpredictability of
environment

Table 1. Complexity factors and functions of loose couplings

A loosely coupled system may cope with certain aspects of the complexity owing to
uncertainty and interdependence since its functions are characterised by limited
central authority and low costs of co-ordination. In suggesting that construction is
featured by the functions of loosely coupled systems, however, we must follow Orton
and Weick (1990) arguing that the recognition of an organisation 'being' a loosely
coupled system is the beginning of the analysis, not the end. Researchers should not
simplify the concept but invoke it: ‘What elements are loosely coupled? What
domains are they coupled on? What are the characteristics of the couplings and
decouplings?’ (ibid: 219).

Based on the observation of the construction industry as ‘behaving’ like a loosely

coupled system it thus seems fruitful to scrutinise the tight and loose couplings
prevalent in it. According to Weick (1976) it is the pattern of couplings (tight and
loose) that produces the observed outcomes of a system. The coming section is an
attempt to further reveal the pattern of couplings and shed some more light on the
interrelated complexity factors and functions of loose couplings.

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Tight and loose couplings in the construction network

The analysis of tight and loose couplings departs from Figure 1 where a construction
project is illustrated in its network context.

A2 B2

F ir m s i n v o ed
lv
on s i t e
A
Pro ject B
A1
B1
C1

C
Firm
D
Res o urce
C2
E
Pro ject

Figure 1. The construction project in its network context (Source: Dubois and Gadde
2000).

The project may be considered as a specific temporary network within a more

'permanent' network. In Figure 1 firms A, B and C are all involved in a construction
project. Their input in the project consists of resources of various kinds (A1, B1 and
C1). The firms are also involved in other projects in which they have to co-ordinate
their activities and resources with (partly) different sets of other firms. For example,
in figure 1 firm C needs to consider four different dimensions of co-ordination:
- co-ordination within the single project (C1 with A1 and B1)
- co-ordination among firms involved in supply chains (i.e. with D and E)
- co-ordination among different construction projects (C1 with C2)
- inter-firm co-ordination beyond the scope of the single project (i.e. with A and B).

Co-ordination within construction projects

Owing to (1) the importance of time, (2) the need to perform and co-ordinate the
activities sequentially, and (3) the specialisation of actors, there are tight couplings
between activities undertaken at site. According to Gidado (1996) this is one
important factor that makes construction complex: “… in a rigid sequence of work

7
flow, time or duration change in any specialist’s work may affect the duration of
others or even the overall production process duration. This sort of knock-on effect
may also affect production cost” (ibid: 218). Furthermore, the activities are not only
sequentially interdependent but also organised in parallel sequences, i.e. stages or
elements of construction are overlapping. According to Gidado this adds to the
complexity:

The overlapping of major elements of production is used by practitioners simply to

compress or shorten the production time. In practice, this process is dictated by a
number of resource-dependent factors. Even by considering these factors,
overlapping may change the interdependence of activities (or trades in particular)
within individual elements and also create a new structure of interdependencies
between the roles of the overlapping elements. These changes may increase the
effects of inherent complexity and uncertainty factors on project complexity.
(Gidado 1996: 218)

Another effect of the strong interdependence among the activities undertaken in every
construction process is that the consequences of changes are difficult to assess and
overview. In the so called Tavistock studies it was found that; “…each time a design
decision was taken it set in train a chain of consequences which could and did cause
the initial decision to be changed, a clear example of how decisions and actions
depend on one another” (Crichton 1966:17). These characteristics, thus, lead to tight
couplings between the activities undertaken in single projects.

Co-ordination within supply chains

The main part of the ‘input’ resources used in buildings is standardised. Furthermore,
the chain of activities, including transportation and storage, from the production of
building materials to the site seem to be based on standardised rules. Typically, large
quantities are sent directly from the factory to the construction site while smaller
quantities are delivered from the distributors' warehouses. Factory deliveries normally
means rather long lead times from order to delivery while the distributor is able to
deliver on shorter notice. Hence, distributors provide ‘slack’ resources, which is
important when the exact volume demand and timing is difficult to foresee. The latter
as a result from the very strong interdependency among activities carried out on-site
which may result in delays.

Hence, the couplings in the supply chains in construction are both tight and loose.
They are loose in terms of the coupling between the production of building materials
and what is done at site. This is dealt with by the rather long lead times and the ‘slack’
provided by distributors. The couplings are tight in the relation between the activities
undertaken on site and the activities carried out in the supply chains. If the material
has not arrived to the site when needed the whole production plan may be jeopardised.

Co-ordination within firms

Every firm involved in on-site activities have to co-ordinate its activities and
resources among the different construction projects in which it is involved. The strong
interdependencies among activities performed at each and every site and the effects of
this interdependence in terms of time extensions and delays implies that every firm
need some extent of slack resources. If not, the ‘knock-on’ effects from delays at one

8
project would carry through to other projects. The (firm) internal co-ordination of
activities undertaken and resources employed at different sites may thus even be
subject to competition if the slack is not sufficient (Crichton 1966, Dubois and Gadde
2000). This would be of particular importance for firms specialising in activities
undertaken late in the process.

In addition, the firms may be specialised in terms of resources but their roles may
vary among projects and thus also their roles vis-à-vis other firms involved (Dubois
and Gadde 2000). Gidado (1996) refers to the learning curve concept stating that the
varying nature of interdependencies or interfaces of roles of teams in construction
may bring about the occurrence of any one or a number of inherent complexity and
uncertainty factors:

It is human nature to learn from experience and improve in future similar processes;
therefore, when roles are repeated over and over by the same team, it is quite
possible that the effect of […] standard time or cost may decrease. (Gidado
1996:217)

Co-ordination among firms beyond the individual construction project

In construction one and the same team is only seldom (and then rather by coincidence
than by conscious planning) working together in more than one project. And, even if
they are to work together in another project their roles vis-à-vis one another may have
been altered. Hence, the couplings between activities undertaken at one site and
activities undertaken at other sites are loose. Even less tight are the couplings between
activities undertaken by different firms beyond an individual construction project.

Gann (1996) argues that difficulties in creating couplings outside individual

construction projects have fostered the development of prefabricated standard
components i.e. the type of components that are produced without prior knowledge of
the design or type of building. And, this relation probably goes both ways, i.e. the
existence of standard components have made it unnecessary to develop customised
solutions through the creation of couplings external to construction projects.
Regardless of the direction of the relation it is a fact that on-site, and thus localised,
adaptations are very much characterising the construction production system.

Couplings among co-ordination dimensions

Obviously, tight couplings prevail in the first co-ordination dimension, i.e. among
activities carried out within individual construction projects. Furthermore, the
couplings between this dimension and the other co-ordination dimensions seem to be
tight. Thus, to cope with the tight couplings identified the others need to provide
'slack'.

The interdependence among activities undertaken within construction projects can be

characterised as reciprocal. The loose couplings identified in the supply chains and
among different construction projects are mainly characterised by sequential
interdependence and function as buffers to deal with the tight couplings within
individual projects. The fourth co-ordination dimension - inter-firm relationships
beyond the scope of individual construction projects - seems almost non-existing.
This characteristic has been discussed by Kornelius and Warmelink (1998) suggesting

9
that co-ordination in construction is more complex compared to other industries
owing to its inherent network characteristics that cannot be dealt with by bilateral
relationships.

The pattern of couplings and the community of practice

The tight couplings in individual projects are embedded in other couplings in the
permanent network. Most couplings among firms are loose which should make it
problematic to develop the co-ordination mechanisms required for handling the
complexity in construction projects. In most other industries uncertainty and
interdependence are typically managed through tight couplings among firms.
Relational exchange and inter-firm adaptations are common means of handling these
issues. In contrast, the construction industry is characterised by loose couplings
among firms. Our analysis shows that there are few inter-firm adaptations beyond the
scope of individual projects and that the firms rely on short term market based
exchange. These conditions also imply that the individuals in the project teams are
recombined in each project, which further complicates co-ordination. Altogether these
characteristics should make it difficult to form the tight couplings in the projects,
which makes it interesting to discuss why this is possible.

As previously discussed inter-firm adaptations in construction are limited in

comparison with other industries. However, the construction industry is characterised
by substantial ‘collective adaptations’ (Dubois and Gadde 2000). The standardised
components and systems that are used have been developed through continuous
collective efforts among material producers, contractors and governmental authorities,
who prescribe norms and other conditions. These collective adaptations are formed in
what can be identified as ‘a community of practice’ (Brown and Duguid 1998). These
authors discuss the preconditions for learning and argue that ‘a great deal of
knowledge is both preserved and held collectively’ (p. 91). Collective knowledge is
generated when people work together in ‘tightly knit groups known as communities of
practice’. The authors claim that this type of common practice promotes collective
knowledge, shared sense-making and distributed understanding. A community of
practice develops a shared understanding of what it does and how to do it. In this way
a strong community of practice reduces uncertainty and serves as an informal co-
ordination mechanism in loosely coupled systems. For example, Meyer (1975) argues
that the school system in the US works ‘because everyone else knows roughly what is
going on’. The community of practice forms a common culture, which functions as a
template for how firms perceive the environment. It also serves as pattern for action
and guides the behaviour of firms. Powell (1991) discusses the benefits of this type of
shared expectations:

Shared expectations arise that provide psychological security, reduce the cost of
information processing, and facilitates the co-ordination of different activities.
Moreover established conceptions of 'the way things are done' can be very
beneficial; members of an organisation field can use these stable expectations to
predict the behaviour of others. (ibid: 194)

The construction industry relies on a strong community of practice. Important aspects

of this common practice are revealed in a study by Kadefors (1995). First,
governmental regulations have a significant impact on the design and construction of

10
houses. Building codes, norms, and principles for housing subsidies to a large extent
impose requirements favouring certain standards. The regulation system concerning
working environment and workers’ protection contributes to re-enforcing the
community of practice. Second, the industry itself is a source of formal
standardisation. The firms involved have established numerous forms of common
contract formulas, which set standards in terms of operations, components,
documentation, and work principles. Third, the tendering procedure requires that
suppliers’ offerings are standardised. Without standardisation contractors would not be
able to evaluate the different offerings. Fourth, the generic roles of the participants in
the processes of design, planning and construction are standardised. Individual firms
take on different roles in different projects. Therefore, the generic roles of designers,
general contractors and subcontractors (plumbers, carpenters, etc.) must be similar in
different projects. These roles are closely related to the fifth aspect concerning
standardisation of skills and knowledge, which follows from the existence of an
informal control system. This is acknowledged in the standard contracts according to
which the quality of the contractor's work should conform to 'current standards of
workmanship' (ibid. p. 403). The need for formulations of this type stems from the
difficulties in exactly specifying every detail of each task in the contract. Reliance on
the standard of workmanship helps reduce the type of uncertainty explained by Gidado
(1996) as 'lack of complete specification'. These conditions are important reasons for
the strong reliance on decentralisation of authority and the requirements for localised
adaptations. As argued by Stinchcombe (1959) 'operative decisions are very important
at the work level' (p. 182).

INDUSTRY STANDARDS

Community of practice
GOVERNMENT TENDERING
REGULATIONS SYSTEM
Local adjustment Focus on single projects

Market-based Independent Tight Interdependent Firms have

interaction actors couplings activities multiple roles
in projects

Loose Standardised resources

couplings
Permanent network
Standardised input Competitive tendering

Collective adaptations
STANDARDISATION OF STANDARDISED
SKILLS AND KNOWLEDGE GENERIC ROLES

Figure 2: The pattern of couplings in the construction industry

11
Figure 2 summaries the discussion of the pattern of couplings in the construction
industry. The individual project is characterised by tight couplings owing to the
conditions in the temporary network. The project task is to handle the activity
interdependence arising when standardised resources are adapted to local conditions
by actors that strive for independence beyond the scope of individual projects. The
tight couplings in the temporary network are embedded in loose couplings in the
permanent network of firms. Our analysis identified six different aspects of the
behaviour of firms that can be classified in terms of loose couplings. A strong
community of practice completes the pattern of couplings. The collective adaptations
provide means to cope with the tight couplings that are required in each construction
project, while the loose couplings provide the slack needed to maintain flexibility.

DISCUSSION

The aim of this paper is to understand the logic of the operations in the construction
industry. The analysis reveals that the behaviour of the firms differs considerably from
what is common in other industries, particularly in terms of the absence of inter-firm
adaptations. The industry operates similar to what has been identified as loosely
coupled systems (Weick 1976). The pattern of tight and loose couplings can be
interpreted as a means of coping with the prevailing complexity in the construction
operations. The tight couplings in individual projects combined with the loose
couplings in the permanent network makes it possible to come to grips with the two
roots of complexity – i.e. uncertainty and interdependence.

In particular, it appears that the loose couplings in the permanent network together
shape the slack that is necessary in order to handle the tight couplings in projects. The
focus on individual projects, the use of standardised components, the local
adjustments, and the multiple roles played by firms allow both for handling
complexity in individual projects and securing economies of scale in manufacturing.
The overall conclusion is thus that the behaviour of the industry seems to be an
appropriate response to the inherent complexity of construction projects.

However, the pattern of loose couplings in the industry behaviour also involves
competitive tendering and market-based exchange among firms. It is not quite clear
whether loose couplings in these respects are necessary to attain the observed benefits
in terms of slack and flexibility. Therefore, a further exploration of the relationship
between complexity and the nature of exchange is the first topic of the discussion. The
prevailing pattern of couplings seems favourable for short-term productivity of single
projects, while the long-term effects are less obvious. The second issue for discussion,
hence, is which consequences these couplings imply for innovation and learning in the
permanent network. Finally, we bring up some potential features emanating from
alternative patterns of couplings.

Complexity and the nature of exchange

Crichton (1966) found construction to be characterised by technical interdependence

and organisational independence. The organisational arrangements in the industry are
based on the assumption that dependence on individual counterparts should be
avoided, because dependence might impose problems in various respects. This view

12
used to be current in other industries as well, but it has gradually been abandoned
through recognition of the advantages possible to gain from close relationships.
Obtaining these benefits entail counterpart specific adjustments that, in turn,
necessitates dependence on specific partners (Gadde and Håkansson 2001). Therefore,
it is most likely that development of close relationships in the permanent network
would improve performance in construction as well. Shammas-Toma et al (1998)
argue that the tendering system and the short-term perspective are to blame for many
short-comings in construction, for example the problems of adopting concurrent
engineering practices and the difficulties in integrating design and building activities.
These problems mainly emanate from the sequence of operations in the open tender
form of the building process. Owing to this procedure ‘design affects construction
planning while construction planning can not affect design’. Shammas-Toma et al
(1998) illustrate the consequences for contractors which have ‘to build according to
specified dimensions, shapes, strength requirements etc., regardless of the problems
that the design specification may pose during construction’ (p. 183). Thus, in this
respect relational exchange could contribute to improved co-ordination and reduce
complexity stemming from interdependence. The other dimension of complexity is
concerned with uncertainty. Competitive tendering and market-based exchange reduce
the uncertainty associated with the evaluation of offerings and switching costs. On the
other hand interaction in close relationships can be used as means for reducing other
types of uncertainty, for example need uncertainty and transaction uncertainty (Ford et
al. 1998).

The implication of this discussion is that changes in the pattern of couplings in figure
2 may affect both performance and complexity. It seems likely that other patterns
could improve the performance in construction without increasing the complexity.
Four of the characteristics of the industry behaviour seem to be relevant means for
managing complexity. However, when it comes to competitive tendering and market-
based exchange we are faced with another situation. The analysis leads us to question
whether these conditions are necessary for gaining the benefits from local adjustment,
standardised components, focus on single projects, and the multiple roles of the firms.
Tighter couplings among firms might be beneficial to the overall performance in
construction. It seems also to be an increasing interest among firms in developing
closer relationships. For example, Cox and Thompson (1997) state that ‘the search for
more collaborative contractual relations has become a contemporary theme in the
construction industry’ (p. 129). However, the authors (as well as others) found that
these efforts have not been very successful so far. Our conclusion is that a change in
this direction must be difficult to undertake because it is not in accordance with the
cultural norms of the community of practice. We agree with Kornelis and Warmelink
(1998) who argue that co-ordination through bilateral relationships is problematic in
construction. Therefore, (successful) collaborative relationships may not be possible
to develop unless the community of practice is changed.

The organisational independence identified by Crichton (1966) is a characteristic not

only of inter-firm relationships. The decentralisation of authority to the single project
leads to loose couplings also between different entities within firms. We have argued
that these conditions provide opportunities for localised adaptations and supports self-
determination. On the other hand, large contractors have an obvious interest in taking
advantage of potential economies of scale in purchasing. Decentralisation of authority
might constrain these efforts, because in loosely coupled systems a centrally located

13
authority has limited possibilities to intervene in local operations. According to Weick
(1976) the same mechanisms that work as buffers by isolating ‘trouble spots’ and thus
prevent the trouble from spreading, also make it difficult ‘to repair the defective
element’. These conditions may however be representative for other project based
activities as well. One example is that von Krogh (1998) observed similar tendencies
in R & D projects. O’Dell and Grayson (1998) argue that decentralised decision-
making in temporary organisations makes project leaders focus on maximising their
own accomplishments and rewards. Therefore, they might act in ways that contradict
the goals of the organisation as a whole. The authors conclude that too much
emphasis on the individual project’s self determination leads to situations where ‘the
left hand doesn’t know what the right hand does’.

Loose couplings and innovation

This far we have dealt with the effects of the pattern of couplings in terms of
efficiency and productivity. Hereon we focus on some of the consequences for
innovation and dynamics. According to Teece (1998) the opportunities for learning
are closely related to previous activities and experiences. If many aspects of a firm’s
learning environment changes simultaneously the ability to form cognitive structures
favouring learning become severely restricted. This is a problem because learning is
‘a process of trial, feedback and evaluation’. Gann (1996) argues that this process is
seldom accomplished in construction and concludes that ‘each house is treated as a
pilot model for a design that never had any runs’. It seems to be the case that the
pattern of couplings do not foster economies of scale in design, planning, and
construction while they are beneficial for economies in manufacturing of building
materials.

On the other hand these industry conditions should be favourable for the development
of new ideas. The pattern of couplings makes each construction site an experimental
workshop. In complex networks experimentation is an important breeding ground for
innovation (Gadde and Håkansson 2001). One typical outcome of loose couplings is
the ability to generate variation (Weick 1976). Localised adaptations imply that any
one element can adjust to local contingencies. This means that loosely coupled
systems potentially can retain a greater number of mutations and novel solutions than
would be the case with a tightly coupled system, because the actors deal with
problems in a multitude of ways. However, Weick argues that while ‘a local set of
elements can adapt to local idiosyncrasies without involving the whole system, then
this same loose coupling could also forestall the spread of advantageous mutations
that exist somewhere in the system’. Hence, while the loosely coupled system may
contain novel solutions for new problems, the very structure that allows these
mutations to flourish may prevent their diffusion. These conditions prevail in
construction and can be explained by the pattern of couplings. Below we discuss
explanations related to the project, the individual firm, the relationships among the
actors and the community of practice.

First, the project organisation is not promoting learning. One reason is the temporary
nature of the project offering no guarantee of further contacts among team-members.
The consequences are discussed by Crichton (1966:22):

14
 … there is no input of commonly shared experience of other building processes:
each member of the building team brings little more than his own accumulated
experiences – and prejudices – to bear on current problems. Learning – in the
sense of adaptations brought about by experience – is therefore a slow and
uncertain process, which takes place at an individual level rather than at industry
level.

However, time limitations also make individual learning problematic. For example,
von Krogh (1998) observed that time constraints made it difficult for individuals to get
the most learning benefit out of R&D projects. He also argues that too little effort is
devoted to transmitting knowledge and experience from one project to another.
Projects are problematic in this respect because they ‘do not have an organisational
memory’ (Björkegren 1998:110). They lack the natural transfer mechanisms of
permanent organisations where structures and routines can contribute to knowledge
absorption. Therefore learning needs to be transferred via the level of the firm.

The second explanation for the problems with innovation in construction relates to the
organisational arrangements within the firm. In this respect loose couplings not only
make it difficult to intervene in localised decision-making. They also prohibit learning
and innovation because in strongly decentralised structures ‘the left hand not only does
not know what the right hand is doing, but it also may not even know that there is a
right hand’ (O’Dell and Grayson, 1998:157). Therefore, in organisations mainly based
on decentralisation and project activities ‘lies unknown a vast treasure house of
knowledge, know-how and best practice’ (ibid:154). These conditions are prevalent in
construction as well. The activities at construction sites generate a lot of ideas from
creative problem-solving tasks. However, the pattern of couplings in the industry is a
hinder for their diffusion.

Thirdly, the loose couplings in the permanent network serve as a barrier to innovation.
Long-term relationships and adaptations beyond individual construction projects are
necessary requisites to foster learning and innovation. For example, Loasby (1976)
argues that learning cannot take place through anonymous contracting but requires
continuous interaction through which individuals and companies increasingly
'commits to the group and thus becomes one within the group'. The existing market-
based short-term exchange causes problems in this respect. The outcome of this
procedure is that the constellation of firms involved in the temporary network does
not have joint plans beyond the project (Thompson et al 1998). Therefore, neither the
individual nor the company becomes 'one within the group'. They become 'one within
a group' the constitution of which is completely changed from one project to another.
The problems associated with these organisational arrangements are analysed by
several authors. Kreiner (1995) points to the danger with the short-term based project
focus arguing that 'the fact that projects occupy only a bracket in time and thus have
neither history nor future, allows evolutionary processes little scope for improving
performance' (p. 345). Cox and Thompson (1997) explicitly discuss the implications
for learning owing to the fact that the constellation of actors all the time is changing.
These conditions make it difficult to make use of experience gained in previous
projects. The authors argue that this 'creates particular cost inefficiencies for the client
as a new learning curve is climbed each time' (p. 128).

Tighter couplings among firms in the permanent network could thus improve the
opportunities for innovation. We have argued above that such conditions might even

15
improve the opportunities to reduce uncertainty, through the continuous interaction in
close relationships. Furthermore, if couplings become tighter it is most likely that the
parties will find new ways to adapt to each other which has been important for
innovation in other industries. For example, some of the adjustments now undertaken
at the construction site might be conducted more efficiently up-stream the supply
chain through utilisation of more specialised resources in terms of machinery and
manpower. In turn this might result in a change from the strong reliance on
standardised input to more customised solutions tailor-made for specific buildings
(Gadde et al 2000).

The fourth barrier to innovation is found in the strong community of practice. We

identified the community of practice as a means of enhancing productivity and
efficiency, because it allowed for tight project couplings in spite of the loose
couplings in the permanent network. The community of practice stabilises conditions,
which promote short-term productivity. However, the same conditions hamper
innovation because they tend to make firms similar and independent. This is a
problem when learning is concerned because ‘heterogeneity and interdependence are
greater spurs to collaborative action than homogeneity and discipline’ (Powell 1998:
231). In construction the resources of different suppliers are quite homogeneous and a
contractor could not expect to learn more from one of them than from another. These
conditions also differ from the situation in many other industries. For instance, the
textile industry is similar to construction in being a craft industry. However, Powell
(1987) found the German textile industry to be characterised by a wide range of
institutional arrangements linking small and medium-sized firms in ways that ‘further
the well-being of the industry as a whole’. In contrast to construction firms these
companies are highly specialised and the more distinctive each firm is ‘the more it
depends on the success of other firms’. These conditions form – and are formed – by
the community of practice. In the German textile industry the organisational
arrangements are important means of assuring collaboration for innovation. These
arrangements in turn ‘strengthen the social structure in which textile firms are
embedded and encourage co-operative relations that attenuate the destructive
competition’ (Powell 1987:70).

Furthermore, government regulations and industry standards make the system difficult
to change which in turn hampers innovation. According to Kadefors (1995) the
existence of joint industry standards simplifies work considerably. However, these
standards also imply that only certain well-tested constructions are included and
therefore ‘the technical solutions and work procedures actually are reduced’ (p. 402).
The tendering system favouring standard offerings thus functions as a fence against
innovation and creation of new solutions.

Alternative patterns of couplings

We argue in this paper that the construction industry has the features of a loosely
coupled system. The particular pattern of couplings favours productivity in projects
while overall innovativity suffers. These characteristics have made the industry as a
whole lag behind other industries in terms of traditional performance measures.
Depending on what theoretical foundations have been applied this observation has led

16
researchers and consultants to prescribe either 'more competition' or 'more co-
operation' to increase performance of the industry as a whole.

The strong project focus makes co-ordination in other dimensions difficult, or even
pointless. Each project is supposed to have its own life – without either history or
future. Furthermore it is only loosely coupled to the overall network structure, thus
having few connections to other projects. Therefore, performance criteria relate to
what takes place within the boundary of the single project. This focus makes it
problematic for a contractor to co-ordinate its efforts in different projects.
Furthermore it complicates inter-firm co-operation. The boundary around individual
projects call for standardised interfaces among firms favouring short-term
productivity and hindering learning. Focusing one single dimension of performance
means that others are neglected. Torvatn (1996) discusses potential disadvantages
following from emphasising one particular system boundary while others are not
considered. As a solution to this problem experimentation with different performance
boundaries is recommended.

In construction the most obvious experiment would be to put less emphasis on the
project boundary. Such a change would allow for increasing co-ordination in other
dimensions, where successful experiments can be observed in other industries. For
example, ‘just-in-time delivery’ is the outcome of close co-ordination of supply
chains and ‘customisation’ is the outcome of close collaboration in inter-firm
development teams. Such network structures emphasise other performance criteria
and are based on other combinations of tight and loose couplings.

What these alternative efforts have in common are firstly that they are based on inter-
firm co-operation and counterpart-specific adjustments leading to interactive effects.
Secondly, connections between relationships make it possible to build on previous
interactive effects, which, in turn, foster learning in the structure as a whole. The main
characteristic of these successful attempts is the interdependence among organisations
and projects contrasting the independence typical for projects and firms in
construction.

However, when suggesting more attention to inter-firm co-operation, the dialectic

nature of couplings stressed by Weick (1976) should not be forgotten. Couplings are
interrelated and thus any change of a coupling impacts on the others. The pattern of
couplings in the construction industry favouring project efficiency is clearly an
obstacle for innovation and learning. We have pointed to some possible modifications
of the present pattern of couplings. However, following Weick (1976), changing some
of the couplings necessarily means that other couplings are changed as well. It is the
pattern of couplings that shape (and is affected by) the behaviour of the actors.
Different patterns have different consequences for complexity. Each pattern reduces
some uncertainties and increases others in the same way as it solves some
interdependencies and creates new ones.

17
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