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Good and bad innovations in the housing sector: General background and a policy proposal
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Building and Real Estate Economics.
(English)Manuscript (preprint) (Other academic)
Abstract [en]

Purpose – The purpose is to propose a classification system for techniques to increase awareness of the uncertainties and risk connected to new techniques and materials, especially when the buyer is a non-professional client. The new classification system should increase information flow and decrease the problem occurring in principal-agent relationships in terms of moral hazard. The aim is also to shift the focus of the discussion from the quantity of innovations to how incentives can be created to further "good" innovations and to reduce the risk of "bad" innovations. The paper explores how housing firms in Sweden, municipal and private firms, are positioning themselves to implement new techniques and contracts in the construction sector.

Design/methodology/approach – The paper combines a literature review with an on-line questionnaire in combination with three face-to-face semi-structured interviews. The key data were collected from actors that build for their own management.

Findings – The paper reports two main findings. First, actors that build for their own management are risk-averse. Second, it seems that a classification system could be a good way to handle the uncertainties and risk connected to innovations in the housing construction sector. The study also underlines the need for an active public sector which takes responsibility for helping the sector to open up for more firms that will invest in the right kind of innovations.

Originality/value – The paper is one of the few that focus on discussing the potential of shifting the focus from the quantity of innovations to how incentives can be created to further "good" innovations and to reduce the risk of "bad" innovations. Also, it proposes a two-step classification system for new technical innovation to achieve increased transparency and reduced information asymmetry in the construction sector.

Place, publisher, year, edition, pages
, 18 p.
Keyword [en]
Innovations, Housing construction, Procurement, Incentives
National Category
Economics and Business
Research subject
Real Estate and Construction Management
URN: urn:nbn:se:kth:diva-176462OAI: diva2:867483

QS 2015

Available from: 2015-11-05 Created: 2015-11-05 Last updated: 2015-11-27Bibliographically approved
In thesis
1. Procurement Contracts, Innovation and Productivity in the Construction Sector: Five Studies
Open this publication in new window or tab >>Procurement Contracts, Innovation and Productivity in the Construction Sector: Five Studies
2015 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

With its size, large number of actors, and its impact on everyday life, the construction sector plays an important role in every nation’s economy and in the improvement of the built environment. The recognition of this fact by the sector, in combination with the reputation for being conservative, problematic, having low productivity growth, and low pressure for change leads to a focus on different strategies that can be used to improve of the sector. Suggestions to improve the productivity in sector have been many during the years. One example is enhanced procurement contracts that encourage long-term orientations to improve the performance outcome and increase innovations.

This thesis consists of five studies with specific objectives. The overall objective is, however, to increase the understanding of how to enhance the conditions to improve the construction sector. This is a response to the concerns that the actors on the market have difficulties carrying out necessary measures to make improvements in the construction sector. Procurement contracts were studied in two ways; bundled procurement contracts with service as a key to create incentives for innovations (Paper II) and the difficulty in evaluating the effects of different procurement contracts because of unclear concepts (Paper I). Innovations were also studied in two ways: the importance for creating incentives for “good” innovations and how to open up for more transparency with respect to innovation (Paper III), and the direct and indirect effects a specific innovation have in the design choices of construction in profit-maximising firms (Paper IV). Policies are based on data and misleading data can lead to mistaken recommendations. Indications of measurement errors in the calculations of productivity have been reported which leads to an interest to increase the reliability of productivity calculations (Paper V).

The first paper has the focus to make the evaluation process easier, for the scholar, the actors on the market as well as for governmental institutions which formulate policies, by trying to make the relation between different contract types clearer with a new framework for structuring procurement contracts. The second papers are showing that bundling construction with service will not automatically increase profit for firms in the sector, rather that it might be an alternative way to transfer the risk in construction projects. Moral Hazard problems can also reduce the potential positive effects.

Paper III wants to shift the focus from the quantity of innovations to how incentives can nourish “good” innovation and suggests a new classification system for technical innovations. The objective is to achieve increased transparency and reduced information asymmetry in the construction sector. Paper IV takes it starting point in an indicated shift in developers’ planning and construction practices for laundry facilities in owner-occupied multi-family buildings. The mapping of the shift shows that a change in regulations can have an effect on how we build, and that developers are using spaces in innovative ways, which in turn can have unforeseen external effects. The finding indicates that even though the number of appliances has increased since the 1990s, the energy consumption has not necessarily increased during the usage phase, depending on the energy performance of the appliances and on user behaviour.

Paper V highlights the effects of including more rigorously and detailed gathered indicators of characteristics in the calculations of productivity development figures in the sector. By including more cost-driving characteristics, it should be easier to distinguish pure price changes from price changes related to increase in quality. 

It is, important to bear in mind that there are several projects yearly that are delivered on time, within budget, with good quality and where innovations have been used. Seen against the background of this thesis, it can indeed be stated that improvements are needed if we intend to create an innovative friendly work environment that will contribute to productivity growth. However, the contribution here is also a warning that the evaluation tools that are used to describe the sector might not measure what we intend to measure.

Abstract [sv]

Byggsektorn är stor och består av många olika aktörer. Den påverkar alla i samhället på ett eller annat sätt och spelar en viktig roll i varje land ekonomi och hur den byggda miljön utvecklas. I kombination med att byggsektorn tampas med ryktet om att vara konservativ, har kvalitetsproblem, dålig produktivitetsutveckling och låg förändringsgrad har lett till diskussioner om många åtgärder för att förbättra sektorn. En utgångspunkt för åtgärderna har varit att uppmuntra till långsiktighet i projekten så att incitament skapas för att förbättra kvalitén i sektorn och en miljö som främjar innovationer.

Den här avhandlingen består av fem studier som var och en adresserar en specifik forskningsfråga relaterad till upphandling, innovation eller produktivitet. Det övergripande syftet med avhandlingen har varit att öka förståelsen för förutsättningarna att komma till rätta med problemen i byggsektorn. Upphandling undersöktes på två sätt; entreprenadkontrakt med helhetsåtagande med service som en viktig komponent för att skapa incitament för innovationer (Artikel II) och svårigheterna i att utvärdera effekterna av olika entreprenadkontrakt på grund av oklara begrepp (Artikel I). Innovation studerades också på två sätt: vikten av att skapa transperens och incitament för “bra” innovationer (Artikel III), och den direkta och indirekta effekten av en innovation i design av vinstmaximerande byggbolag (Artikel IV). En policy kan baseras på data men om uppgifterna den baseras på är bristfälliga, kan det leda till felaktiga rekommendationer. Mätfel kopplade till beräkningar av produktiviteten i byggsektorn har rapporterats, vilket har lett till ett intresse att öka tillförlitligheten i dessa beräkningar (Artikel V).

Den första artikeln syftar till att göra utvärderingen av entreprenadkontrakt enklare för forskare, branschen samt statliga institutioner som formulerar rekommendationer, genom att strukturera entreprenadformerna utifrån olika steg i beslutsprocessen och om hur risker fördelas för att tydliggöra relationen mellan dem. Den andra artikeln visar att entreprenadkontrakt med helhetsåtagande inklusive service inte automatiskt ökar vinsten för företag inom sektorn, snarare att det kan vara ett alternativt sätt att överföra risken i byggprojekt. Moral Hazard problem kan minska potentiella positiva effekter.

Artikel III flyttar fokus från mängden innovationer till hur incitament kan ge näring "bra" innovation och diskuterar ett nytt system för klassificering av tekniska innovationer. Målet är att uppnå ökad tydlighet och minskad informationsasymmetri i byggsektorn. Artikel IV tar sin utgångspunkt i en förändring i plan- och byggmetoder för tvättstuga i bostadsrättshus. Kartläggningen visar att en förändring av regle kan ha en effekt på hur vi bygger, och att utvecklare använder ytor på ett innovativt sätt, vilket i sin tur kan ha oförutsedda externa effekter. Artikeln visar att trots att antalet apparater har ökat sedan 1990-talet, har energiförbrukningen inte nödvändigtvis ökat under användningsfasen, beroende på apparaternas energiprestanda och på användarnas beteende.

Artikel V belyser effekterna av mer noggranna och detaljerat insamlade kvalitetsegenskaper från nyproduktion när produktivitetet i byggsektorn ska beräknas. Genom att inkludera mer kostnadsdrivande egenskaper borde det vara lättare att skilja rena prisförändringar från prisförändringar relaterade till ökad kvalitet.

Det är viktigt att komma ihåg att det årligen finns många byggprojekt som levereras i tid, inom budget, med god kvalitet och där innovationer har använts. Sett mot bakgrund av denna avhandling, kan det sägas att förbättringar behövs om vi har för avsikt att skapa en innovativ arbetsmiljö som bidrar till ökad produktivitet. Dock är bidraget här också en varning om att de utvärderingsverktyg som används för att fånga utvecklingen kanske inte mäter vad vi har för avsikt att mäta.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2015. x, 35 p.
, TRITA-FOB-DT, 2015:8
Procurement Contracts, Innovation, Productivity, Construction Sector, Incentives, Entreprenadkontrakt, Innovationer, Produktivitet, Byggsektorn, Incitament
National Category
Economics and Business
Research subject
Real Estate and Construction Management
urn:nbn:se:kth:diva-177455 (URN)978-91-85783-54-0 (ISBN)
Public defence
2015-12-16, F3, Lindstedtsvägen 26, KTH, Stockholm, 15:00 (English)
Swedish Research Council Formas
Available from: 2015-11-23 Created: 2015-11-20 Last updated: 2015-11-23Bibliographically approved

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