Understanding Construction Supply Chains: A Multiple Theoretical Approach to Inter-Organizational Relationships in Construction

Ruben Vrijhoef1, Lauri Koskela2 & Hans Voordijk3

1Doctorate candidate, Centre for Process Innovation in Building and Construction, Delft University of Technology, The Netherlands, E-mail r.vrijhoef@bk.tudelft.nl; Research consultant, TNO Building and Construction Research, Department of Building Process Innovation, The Netherlands
2Senior Researcher, VTT Building and Transport, Finland, E-mail lauri.koskela@vtt.fi
3Associate Professor, Department of Construction Process Management, Faculty of Technology and Management, University of Twente, The Netherlands, E-mail h.voordijk@sms.utwente.nl

Abstract

The transaction cost economics (TCE) approach has been applied often as a basis for the analysis and explanation of the functioning and organization of construction processes and supply chains. The objective of this paper is to develop a more complete theoretical framework to better understand inter-organizational relationships (IOR) in construction supply chains from a multi-disciplinary perspective. The starting point of this paper is the observation that the TCE perspective alone is too narrow to fully explain and understand construction supply chains. In addition to TCE, three additional perspectives are introduced to explain the organization and functioning of supply chains: production and operations management (POM), network theory, and the language/action (L/A) perspective. The POM perspective shows that an organizational form of production must be aimed at the general objective of value creation for customers, not merely on the economic argument of minimizing transaction costs. Both TCE and POM, particularly address bilateral inter-firm business relationships and do not include the complexity of wider industry networks, and additional factors of multiple inter-firm relations. Finally, TCE, POM as well as network theory disregard the dynamics associated with the recurrent process of language and action between firms and individuals. In the paper, the theoretical principles of the four perspectives are used to explain IOR in construction supply chains. Next, the four perspectives are mapped and classified in a theoretical framework, including additional directions for the further development of the framework. It is concluded, however, that the framework may still be too incomplete to fully explain and understand the organization and functioning of IOR in construction supply chains, and that a more complete theoretical paradigm is needed.

Keywords

Construction supply chain, inter-organizational relationships, transaction cost economics, production/operations management, network theories, language/action perspective

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Reference

Vrijhoef, R. , Koskela, L. & Voordijk, H. 2003, 'Understanding Construction Supply Chains: A Multiple Theoretical Approach to Inter-Organizational Relationships in Construction' In:, 11th Annual Conference of the International Group for Lean Construction. Virginia, USA, 1-.

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