Capabilities-based forecasting model for innovation development in small-and-medium construction firms (SMCFS)

    Chen Wang   Affiliation
    ; Yee Lin Lee Affiliation
    ; Jeffrey Boon Hui Yap Affiliation
    ; Hamzah Abdul-Rahman Affiliation


Triggering innovation among Small-and-Medium Construction Firms (SMCFs) is of paramount importance to gear up the growth of construction firms. Thus, this study aims to develop a Capability-Based forecasting model for innovation development in SMCFs. Built on 157 questionnaires, the model was tested using partial least squares (PLS) technique of structural equation modelling (SEM). The practicality and robustness of this model was then validated by 12 experts. Findings affirm SMCFs making use of multiple Capability-Based approaches would be able to secure their performance via innovation activities. For academia, the new model contributes to the stream of construction innovation management by integrating both technological and organizational innovations in a single framework. For practitioners and policymakers, the model offers valuable input for continuing growth of SMCFs via innovation.

Keyword : capability-based model, innovation development, construction SME, forecasting model

How to Cite
Wang, C., Lee, Y. L., Yap, J. B. H., & Abdul-Rahman, H. (2018). Capabilities-based forecasting model for innovation development in small-and-medium construction firms (SMCFS). Journal of Civil Engineering and Management, 24(3), 167-182.
Published in Issue
May 24, 2018
Abstract Views
PDF Downloads
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.


Abdul-Rahman, H.; Wang, C.; Lee, Y. L. 2013. Design and pilot run of fuzzy synthetic model (FSM) for risk evaluation in civil engineering, Journal of Civil Engineering and Management 19(2): 217–238.

Alashwal, A.; Fong, P. 2015. Empirical study to determine fragmentation of construction projects, Journal of Construction Engineering and Management 141(7), 04015016.

Arditi, D.; Polat, G.; Makinde, S. A. 2008. Marketing practices of US contractors, Journal of Management in Engineering 24(4): 255–264.

Armstrong, J. S.; Overton, T. S. 1977. Estimating nonresponse bias in mail surveys, Journal of Marketing Research 14(3): 396–402.

Australian Bureau of Statistics (ABS). 2006. Innovation in Australian business. Cat. No. 8158.0. Canberra: ABS.
Barney, J. 1991. Firm resources and sustained competitive advantage, Journal of Management 17: 99–120.

Barney, J. B.; Wright, P. 1998. On becoming a strategic partner: The roles of human resources in gaining competitive advantage, Human Resource Management 37(1): 31–46.<31::AID-HRM4>3.0.CO;2-W

Barrett, P.; Sexton, M. 2006. Innovation in small, project-based construction firms, British Journal of Management 17(4): 331–346.

Betts, M.; Ofori, G. 1992. Strategic planning for competitive advantage in construction, Construction Management and Economics 10(6): 511–532.

Betts, M.; Wood-Harper, T. 1994. Reengineering construction: a new management research agenda, Construction Management and Economics 12(6): 551–556.

Brochner, J. 2010. Construction contractors as service innovators, Building Research and Information 38(3): 235–246.

Bygballe, L.; Ingemansson, M. 2014. The logic of innovation in construction, Industrial Marketing Management 43: 512–524.

Chang, Y. C.; Linton, J. D.; Chen, M. N. 2012. Service regime: An empirical analysis of innovation patterns in service firms, Technological Forecasting & Social Change 79: 1569–1582.

Chaston, I.; Badger, B.; Sadler-Smith, E. 2001. Organizational learning: An empirical assessment of process in small UK manufacturing firms, Journal of Small Business Management 39: 139–151.

Chetty, S.; Holm, D. B. 2000. Internationalisation of small to medium-sized manufacturing firms: A network approach, International Business Review 9(1): 77–93.

Chin, W. W. 1998. The partial least squares approach to structural equation modeling, in G. A. Marcoulides (Ed.). Modern business research methods. Mahwah, NJ: Lawrence Erlbaum, 295–358.

Chin, W. W.; Dibbern, J. 2010. A permutation based procedure for multi-group PLS analysis: Results of tests of differences on simulated data and a cross cultural analysis of the sourcing of information system services between Germany and the USA, in V. E. Vinzi, W. W. Chin, J. Henseler and H. Wang (Eds). Handbook of partial least square: Concepts, methods and applications in marketing and related fields. Berlin: Springer, 171–193.

Cohen, W.; Klepper, S. 1996. A reprise of size and R&D, The Economic Journal 106: 925–951.

Damanpour, F. 1991. Organizational innovation: A meta–analysis of effects of determinants and moderators, Academy of Management Journal 34(3): 555–590.

Deshpande, R.; Farley, J. W.; Webster, F. E. J. 1993. Corporate culture, customer orientation, and innovativeness in Japanese firms: A quadrad analysis, Journal of Marketing 57(1): 27–37.

Dibrell, C.; Davis, P. S.; Craig, J. 2008. Fueling innovation through information technology in SMEs, Journal of Small Business Management 46(2): 203–218.

El-Mashaleh, M.; O’Brien, W. J.; Minchin, Jr., R. E. 2006. Firm performance and information technology utilization in the construction industry, Journal of Construction Engineering and Management 132(5): 499–507.

Fornell, C.; Larcker, D. 1981. Evaluating structural equation models with unobservable variables and measurement error, Journal of Marketing Research 18(1): 39–50.

Gann, D. M.; Salter, A. J. 2000. Innovation in project based, service enhanced firms: The construction of complex products and systems, Research Policy 29: 955–972.

Garcia-Morales, V. J.; Llorens-Montes, F. J.; Verdu-Jover, A. J. 2007. Influence of personal mastery on organizational performance through organizational learning and innovation in large firms and SMEs, Technovation 27: 547–568.

Gronum, S.; Verreynne, M. L.; Kastelle, T. 2012. The role of networks in small and medium–sized enterprise innovation and firm performance, Journal of Small Business Management 50(2): 257–282.

Gunday, G.; Ulusoy, G.; Kilic, K.; Alpkan, L. 2011. Effects of innovation types on firm performance, International Journal of Production Economics 133: 662–676.

Hair, J. F.; Hult, G. T. M.; Ringle, C. M.; Sarstedt, M. A. 2013. Primer on partial least squares structural equation modeling (PLS–SEM). Thousand Oaks, CA: Sage.

Hair, J.; Black, W. C.; Babin, B. J.; Anderson, R. E.; Tatham, R. L. 2006. Multivariate data analysis. 6th ed. Upper Saddle River, NJ: Pearson Education International.

Hardie, M. P.; Manley, K. 2008. Exemplars of successful innovation delivery by small and medium construction enterprises, in K. A. Brown, K. D. Hampson, P. S. Brandon and J. Pillay (Eds). Clients driving construction innovation: Benefiting from innovation. Brisbane: CRC for Construction Innovation, 190–196.

Hardie, M.; Allen, J.; Newell, G. 2013. Environmentally driven technical innovation by Australian construction SMEs, Smart and Sustainable Built Environment 2(2): 179–191.

Hillebrandt, P. 2006. Letter to the editor, Construction Management and Economics 24: 669–670.

Hine, D.; Ryan, N. 1999. Small service firms: Creating value through innovation, Managing Service Quality 9(6): 411–422.

Hulland, J.; Ryan, M. J.; Rayner, R. K. 2010. Modeling customer satisfaction: A comparative performance evaluation of covariance structure analysis versus partial least squares, in V. E. Vinzi, W. W. Chin, J. Henseler, and H. Wang (Eds). Handbook of partial least square: Concepts, methods and applications in marketing and related fields. Berlin: Springer, 307–325.

Iliescu, M.; Ciocan, R. 2017. Modern technologies innovation in use for quality control on construction site, Procedia Engineering 181: 999–1004.

Jerez-Gomez, P.; Cespedes-Lorente, J.; Valle-Cabrera, R. 2005. Organizational learning capability: A proposal of measurement, Journal of Business Research 58(6): 715–725.

Kohli, A. K.; Jaworski, B. J. 1990. Market orientation: The construct, research propositions and managerial implications, Journal of Marketing 54(2): 1–18.

Kolb, D. 1984. Experiential learning. Englewood Cliffs, NJ: Prentice Hall.

Kotler, P.; Armstrong, G. 1991. Principles of marketing. 5th ed. Englewood Cliffs, NJ: Prentice Hall.

Laforet, S. 2013. Organizational innovation outcomes in SMEs: Effects of age, size and sector, Journal of World Business 48(4): 490–502.

Langford, D.; Dimitrijevic, B. 2002. Construction creativity casebook. London: Thomas Telford Publishing.

Laursen, K.; Salter, A. 2006. Open innovation: The role of openness in explaining innovation performance among U.K. manufacturing firms, Strategic Management Journal 27: 131–150.

Liao, L.; Teo, E. A. L. 2017. Critical success factors for enhancing the building information modelling implementation in building projects in Singapore, Journal of Civil Engineering and Management 23(8): 1029–1044.

Ling, F. Y. Y.; Li, S; Low, S. P.; Ofori, G. 2012. Mathematical models for predicting Chinese A/E/C firms’ competitiveness, Automation in Construction 24: 40–51.

Lu, S. L.; Sexton, M. 2006. Innovation in small construction knowledge–intensive professional service firms: A case study of an architectural practice, Construction Management and Economics 24(12): 1269–1282.

Lukas, B. A.; Ferrell, O. C. 2000. The effect of market orientation on product innovation, Journal of Academy of Marketing Science 28(2): 239–247.

Manley, K. 2008. Against the odds: Small firms in Australia successfully introducing new technology on construction projects, Research Policy 37(10): 1751–1764.

Martínez-Román, J. A.; Tamayo, J. A.; Gamero, J. 2017. Innovativeness and its influence on growth and market extension in construction firms in the Andalusian region, Journal of Engineering and Technology Management 43: 19–33.

Matear, S.; Osborne, P.; Garrett, T.; Gray, B. 2002. How does market orientation contribute to service firm performance? An examination of alternative mechanisms, European Journal of Marketing 36(9/10): 1058–1075.

Mohannak, K. 2007. Innovation networks and capability building in the Australian high–technology SMEs, European Journal of Innovation Management 10(2): 236–251.

Narver, J. C.; Slater, S. F. 1990. The effect of a market orientation on business profitability, Journal of Marketing 54(4): 20–35.

Narver, J. C.; Slater, S. F.; MacLachlan, D. L. 2004. Responsive and proactive market orientation and new product success, Journal of Product Innovation Management 21: 334–347.

Nasution, H. N.; Mavondo, F. T. 2008. Organizational capabilities: Antecedents and implications for customer value, European Journal of Marketing 42(3/4): 477–501.

Nasution, H. N.; Mavondo, F. T.; Matanda, M. J.; Ndubisi, N. O. 2011. Entrepreneurship: Its relationship with market orientation and learning orientation and as antecedents to innovation and customer value, Industrial Marketing Management 40: 336–345.

National SME Development Council. 2005. Definitions for small and medium enterprises in Malaysia. Bank Negara, Kuala Lumpur.

Nelson, R.; Winter, S. 1982. An evolutionary theory of economic change. Cambridge, MA: Belknap Press.

Nonaka, I. 1994. A dynamic theory of organizational knowledge creation, Organization Science 5(1): 14–37.

Nunnally, J. C. 1978. Psychometric theory. New York: McGraw-Hill.

Nyström, J.; Nilsson, J.; Lind, H. 2016. Degrees of freedom and innovations in construction contracts, Transport Policy 47: 119–126.

Oerlemans, L. A. G., Knoben, J. 2010. Configurations of knowledge transfer relations: An empirically based taxonomy and its determinants, Journal of Engineering and Technology Management 27(1/2): 33–51.

Pedersen, D. O. 1996. The economics of innovation in construction, in M. Katavic (Ed.). Economic Management of Innovation, Productivity and Quality in Construction: CIB W 55 Building Economics 7th International Symposium. Zagreb, Croatia: Faculty of Civil Engineering University of Zagreb, 158–184.

Pelham, A. M. 1999. Influence of environment, strategy, and market orientation on performance in small manufacturing firms, Journal of Business Research 45(1): 33–46.

Podsakoff, P. M.; MacKenzie, S. B.; Lee, J. Y.; Podsakoff, N. P. 2003. Common method biases in behavioral research: A critical review of the literature and recommended remedies, Journal of Applied Psychology 88(5): 879–903.

Polanyi, M. 1967. The tacit dimension. New York: Doubleday Anchor.

Razouk, A. 2011. High-performance work systems and performance of French small- and medium-sized enterprises: Examining causal order, International Journal of Human Resource Management 22(2): 311–330.

Reichstein, T.; Salter, A. J.; Gann, D. M. 2005. Last among equals: a comparison of innovation in construction, services and manufacturing in the UK, Construction Management and Economics 23(6): 631–644.

Rezgui, Y.; Miles, J. 2010. Exploring the potential of SME alliances in the construction sector, Journal of Construction Engineering and Management 136(5): 558–567.

Russell, A.; Tawiah, P.; Zoysa, S. 2006. Project innovation: a function of procurement mode, Canadian Journal of Civil Engineering 33(12): 1519–1537.

Salunke, S.; Weerawardena, J.; McColl–Kennedy, J. R. 2011. Towards a model of dynamic capabilities in innovation-based competitive strategy: Insights from project-oriented service firms, Industrial Marketing Management 40(8): 1251–1263.

Schumpeter, J. A. 1934. The theory of economic development. Cambridge, MA: Harvard University Press.
Sexton, M.; Barrett, P. 2003. Appropriate innovation in small construction firms, Construction Management and Economics 21(6): 623–633.

Sexton, M.; Barrett, P.; Aouad, G. 2006. Motivating small construction companies to adopt new technology, Building Research and Information 34(1): 11–22.

Slater, S.; Narver, J. C. 1994. Does competitive environment moderate the market orientation–performance relationship?, Journal of Marketing 58: 46–55.

Slaughter, E. S. 2000. Implementation of construction innovation, Building Research and Information 28(1): 1–17.

Tatum, C. B.; Funke, A. T. 1988. Partially–automated grading: construction process innovation, Journal of Construction Engineering and Management 114(1): 19–35.

Thorpe, D.; Ryan, N.; Charles, M. B. 2009. Innovation and small residential builders: An Australian study, Construction Innovation 9(2): 184–200.

Turk, Z. 2016. Responsible research and innovation in construction, Procedia Engineering 164: 461–466.

Utterback, J. M. 1974. Innovation in industry and the diffusion of technology, Science 183: 658–662.

Wernerfelt, B. 1984. A resource-based view of the firm, Strategic Management Journal 5: 171–180.

Wiklund, J. 1999. The sustainability of the entrepreneurial orientation–performance relationship, Entrepreneurship Theory and Practice 24(1): 37–48.

Wiklund, J.; Shepherd, D. 2005. Entrepreneurial orientation and small business performance: A configurational approach, Journal of Business Venturing 20(1): 71–91.

Winch, G. 1998. Zephyrs of creative destruction: understanding the management of innovation in construction, Building Research and Information 26(4): 268–279.

Wright, P.; Dunford, B.; Snell, S. 2001. Human resources and resource based view of the firm, Journal of Management 27(6): 701–721.

Xue, X.; Zhang, X.; Wang, L.; Skitmore, M.; Wang, Q. 2018. Analyzing collaborative relationships among industrialized construction technology innovation organizations: A combined SNA and SEM approach, Journal of Cleaner Production 173: 265–277.

Yap, J. B. H.; Skitmore, M. 2017. Investigating design changes in Malaysian building projects, Architectural Engineering and Design Managementi.

Zubizarreta, M.; Cuadrado, J.; Iradi, J.; García, H.; Orbe, A. 2017. Innovation evaluation model for macro–construction sector companies: A study in Spain, Evaluation and Program Planning 61: 22–37.