ORGANIZATIONAL FLEXIBILITY MANAGEMENT IN CONSTRUCTION LIM TECK HENG, BENSON (BACHELOR OF BUILDING CONSTRUCTION MANAGEMENT, HONOURS), UNSW A THESIS SUBMITTED FOR THE DEGREE OF DOCTOR OF PHILOSOPHY DEPARTMENT OF BUILDING NATIONAL UNIVERSITY OF SINGAPORE 2010 ACKNOWLEDGMENTS I would like to express my thanks and gratitude to the following people for their time, help, guidance, encouragement and support in the production of this doctoral thesis. I am indebted to the Singapore participants for their time and comments on the various aspects of this research. This research would not have been possible without their participation. From the bottom of my heart, I thank Associate Professor Florence Ling Yean Yng, my thesis supervisor, for her steadfast encouragement, motherly advice and incredible patience on all occasions during my three-year PhD candidature. This thesis would certainly not exist without her inspiration and support. Also, special thanks must go to Professor George Ofori and Dr. Benny Raphael, my thesis committee members, for their time and advices on my research. Likewise, I am truly grateful to Dr Hing-Po Lo of the Department of Management Sciences at the City University of Hong Kong for his guidance and prompt responses to my queries concerning the application of multivariate statistical techniques. My thanks also go to Professor Peter Lansley of the University of Reading for his valuable suggestions on my research. The scholarship award and financial support, from the National University of Singapore (NUS) and Berkeley-NUS Risk Management Institute (RMI), for this study are gratefully acknowledged. Thanks also go to all my friends and colleagues at the National University of Singapore, especially Shamas-Ur-Rehman Toor, Jovan Pantelic, Lu-Chang Peh, Allan Lee and Boon-Kuang Oh for their friendship and encouragement throughout my study. Finally, I thank my lovely wife, Dr. Bee-Lan Oo, who has been subjected to countless annoyance by myself over the last three years of study period, all of which she has endured both graciously and positively. Bee, this thesis is dedicated to you and our Barrie. Also, I am eternally grateful to my family for their relentless support and encouragement throughout this study, especially my mummy (Mdm. Mona Mah) and daddy (Mr. Ricky Lim). i TABLE OF CONTENTS Page ACKNOWLEDGMENTS i TABLE OF CONTENTS ii SUMMARY ix LIST OF TABLES xi LIST OF FIGURES xviii CHAPTER INTRODUCTION 1.1 Background 1.2 Research problem 1.3 Knowledge gap 1.4 Research aim and objectives 1.5 Definition of terms 1.6 Research hypotheses 1.7 Scope of research 1.8 Research method 1.9 Research significance 1.9.1 Theoretical significance 1.9.2 Practical significance 1.9.3 Methodological significance 1.10 Structure of the thesis 10 11 12 12 14 14 15 CHAPTER THE BUSINESS ENVIRONMENT OF CONSTRUCTION FIRMS 2.1 Introduction 2.2 Nature of the construction industry 2.3 Construction firms and their business environment 2.3.1 Construction firms 2.3.2 Business environment 2.4 Changes in the business environment of construction firms 2.4.1 Construction demand 2.4.2 Intensity of competition 2.4.3 Procurement trend 2.4.4 Clients’ performance criteria of construction services 2.4.5 Technological need 2.5 Changes in the Singapore construction industry 2.6 Need for organizational flexibility 18 18 20 20 22 26 26 30 33 36 38 41 51 ii 2.6.1 Flexibility management in construction 2.6.1.1 Flexibility within corporate-level management 2.6.1.2 Flexibility within project-level management 2.6.2 Flexibility as a challenge in construction 2.7 Summary 52 52 54 56 58 CHAPTER THEORETICAL FRAMEWORK OF FLEXIBILITY MANAGEMENT 3.1 Introduction 3.2 Concept of flexibility 3.3 Definitions of flexibility 3.4 Formulating the definition of organizational flexibility 3.5 Other defining features of flexibility 3.5.1 Hedging 3.5.2 Organizational slack 3.5.3 Liquidity 3.5.4 Versatility and agility 3.5.5 Strategic renewal 3.6 Multi-dimensional perspective of organizational flexibility 3.6.1 Dimensionality of flexibility 3.6.1.1 Micro-perspective of flexibility 3.6.1.2 Macro perspective of flexibility 3.6.1.3 Flexibility dimensions 3.6.2 Types of flexibility 3.7 Key determinants of organizational flexibility 3.8 Conceptual framework for organizational flexibility 3.9 Theories to underpin the conceptual framework 3.9.1 Contingency theories 3.9.2 Organizational learning theory 3.9.3 Resource-based theories 3.9.3.1 Resources 3.9.3.2 Capabilities 3.9.4 Complexity theory 3.10 Integration of four theories into the proposed conceptual framework 3.11 Summary 60 60 63 68 70 71 71 72 73 73 74 75 75 76 79 81 89 92 94 94 100 105 107 108 112 116 118 CHAPTER DETERMINANTS OF ORGANIZATIONAL FLEXIBILITY 4.1 Introduction 4.2 Organizational learning culture (X1) 4.2.1 Definition 4.2.2 Possible dimensions 4.2.2.1 Commitment to learning 4.2.2.2 Shared vision 4.2.2.3 Open-mindedness 4.2.2.4 Intra-organizational knowledge sharing 4.2.3 Domain 4.2.3.1 Organizational learning culture (X1) and organizational structure (X2) 121 121 122 123 124 124 125 126 127 127 iii 4.2.3.2 Organizational learning culture (X1) and employees’ skills and behaviour (X3) 128 4.2.3.3 Organizational learning culture (X1) and technological capabilities (X4) 129 4.2.3.4 Organizational learning culture (X1) and business strategies (X6) 130 4.2.4 Measurement items 132 4.3 Organizational structure (X2) 4.3.1 Definition 4.3.2 Possible dimensions 4.3.2.1 Complexity 4.3.2.2 Integration 4.3.2.3 Formalization 4.3.2.4 Centralization 4.3.3. Design of organizational structure 4.3.3.1 Simple configuration 4.3.3.2 Functional configuration 4.3.3.3 Divisional configuration 4.3.3.4 Matrix configuration 4.3.3.5 Mechanistic versus Organic structures 4.3.4 Domain 4.3.4.1 Organizational structure (X2) and business strategies (X6) 4.3.4.2 Organizational structure (X2) and organizational flexibility (Y) 4.3.5 Measurement items 4.4 Employees’ skills and behaviour (X3) 4.4.1 Domain 4.4.1.1 Employees’ skills and behaviour (X3) and technological capabilities (X4) 4.4.1.2 Employees’ skills and behaviour (X3) and supply chain capabilities (X5) 4.4.1.3 Employees’ skills and behaviour (X3) and business strategies (X6) 4.4.1.4 Employees’ skills and behaviour (X3) and organizational flexibility (Y) 4.4.2 Human resource management practices 4.4.3 Measurement items 4.5 Technological capabilities (X4) 4.5.1 Definition 4.5.2 Possible dimensions 4.5.2.1 Information technology capabilities 4.5.2.2 Process technology capabilities 4.5.3 Domain 4.5.3.1 Technological capabilities (X4) and organizational structure (X2) 4.5.3.2 Technological capabilities (X4) and supply chain capabilities (X5) 4.5.3.3 Technological capabilities (X4) and business strategies (X6) 4.5.3.4 Technological capabilities (X4) and organizational flexibility (Y) 4.5.4 Measurement items 4.6 Supply chain capabilities (X5) 4.6.1 Definition 4.6.2 Inter-organizational relationship management practices 4.6.3 Domain 4.6.3.1 Supply chain capabilities (X5) and business strategies (X6) 4.6.3.2 Supply chain capabilities (X5) and organizational flexibility (Y) 4.6.4 Measurement items 4.7 Business strategies (X6) 4.7.1 Definition 4.7.1.1 Perspectives of strategy 4.7.1.2 Aspects of strategy 4.7.2 Business strategy models 4.7.2.1 Miles and Snow’s (1978) generic typology 4.7.2.2 Porter’s (1980) generic typology 4.7.2.3 Treacy and Wiersema’s (1993) value disciplines model 4.7.3 Possible dimensions 4.7.4 Business strategies (X6) and organizational flexibility (Y) 134 134 136 136 137 138 138 139 140 140 141 141 142 143 143 144 145 147 147 148 149 149 150 152 153 155 155 157 158 158 159 159 160 162 163 164 166 166 169 170 171 172 173 175 175 175 176 177 178 180 182 183 184 iv 4.7.5 Measurement items 4.8 The role of environments on firms’ resources and capabilities, and flexibility 4.8.1 Possible dimensions 4.8.2 Measurement items 4.9 Summary 187 189 190 192 194 CHAPTER RESEARCH DESIGN AND DATA COLLECTION METHODS 5.1 Introduction 5.2 Survey research design 5.3 Exploratory phase 5.3.1 Face-to-face interview approach 5.3.2 Development of interview guide question 5.3.3 Preliminary interview findings 5.3.3.1 Business environment in the Singapore construction industry 5.3.3.2 Industry practitioners’ perspectives on organizational flexibility 5.3.3.3 Types of flexibility 5.4 Questionnaire development phase 5.4.1 Specify domain of constructs 5.4.2 Generation of sample of measurement items 5.4.3 Questionnaire design 5.4.4 Pilot study 5.4.5 Organization of the questionnaire 5.4.5.1 Part 2: Human resource 5.4.5.2 Part 3: Organizational culture 5.4.5.3 Part 4: Organizational structure 5.4.5.4 Part 5: Organizational supply chain 5.4.5.5 Part 6: Business practices 5.4.5.6 Part 7: Information technology 5.4.5.7 Part 8: Process technology 5.4.5.8 Part 9: Environmental condition 5.4.5.9 Part 10: Organizational flexibility 5.5 Data collection and analysis phase 5.5.1 Data collection process 5.5.2 Face-to-face interview approach 5.5.3 Stratified sampling method 5.5.4 Sampling frame and selection process 5.5.5 Key informant retrospective reporting approach 5.6 Validation process for statistical results 5.7 Summary 196 196 199 199 201 203 204 205 206 207 209 210 211 213 214 214 215 215 216 216 216 217 217 217 217 218 219 220 221 222 225 226 CHAPTER METHODS OF ANALYSIS 6.1 Introduction 227 6.2 Review of statistical modelling techniques and structural equation modelling 227 6.2.1 First generation analysis techniques 6.2.2 Second generation analysis techniques - SEM 6.3 Types of SEM approach 6.3.1 Comparison between covariance-based SEM and component-based SEM 227 230 234 235 v 6.3.2 Justification for using PLS approach 6.4 The PLS modelling process 6.4.1 Preparation of sample data 6.4.1.1 Common method variance 6.4.1.2 Multicollinearity 6.4.2 The PLS model specification 6.4.3 PLS modelling approach and its parameter estimation process 6.4.3.1 Confirmatory factor analysis 6.4.3.2 Path analysis 6.4.3.3 Bootstrapping technique 6.4.4 Construct validation process 6.4.4.1 Internal reliability 6.4.4.2 Uni-dimensionality 6.4.4.3 Convergent and discriminant validities 6.4.4.4 Removal of inconsistent measurement items 6.4.5 Evaluating structural models in PLS 6.5 Moderator analysis approach 6.5.1 General problems in moderator analysis 6.5.2 Justification for using the PLS product-indicator approach 6.5.3 Procedure of the PLS product-indicator approach 6.6 Summary 237 239 241 241 242 243 251 255 257 259 261 264 266 269 271 272 273 274 276 277 279 CHAPTER MEASUREMENT MODELS 7.1 Introduction 7.2 Sample profile and response rate 7.3 Results of classical validation approach 7.3.1 Cronbach’s alpha and item-to-total correlation 7.3.2 Exploratory factor analysis (EFA) 7.3.2.1 Factor analysis of organizational learning culture (X1) 7.3.2.2 Factor analysis of business strategies (X6) 7.3.2.3 Factor analysis of environmental conditions (Z) 7.3.2.4 Factor analysis of organizational flexibility (Y) 7.3.2.5 Factor analysis of single-dimensional constructs 7.4 Results of contemporary validation approach 7.4.1 Composite reliability 7.4.2 Standardized factor loadings and average variance extracted (AVE) 7.4.3 Square root of AVE and cross loading analysis 7.5 Standard deviation of measurement items of individual constructs 7.6 Hypothesis testing of H1 7.7 Summary 280 280 283 288 289 290 292 296 299 302 306 315 315 316 318 326 326 CHAPTER STRUCTURAL MODELS AND HYPOTHESES TESTING 8.1 Introduction 8.2 Evaluation of structural model of PLS M1 8.2.1 Model trimming process 8.2.2 Overall F-test for R2 8.2.3 Assessment of path coefficients 328 328 329 334 334 vi 8.3 Interpretation and discussion of findings of PLSM1 8.3.1 Direct positive impact on operational flexibility (YOF) 8.3.1.1 Employees’ skills and behaviour (X3) 8.3.1.2 Open-mindedness (X1O) 8.3.1.3 Supply chain capabilities (X5) 8.3.1.4 Cost leadership initiative (X6.1CLS) 8.3.2 Direct negative impact on operational flexibility (YOF) 8.3.3 Direct impact on tactical flexibility (YTF) 8.3.3.1 Supply chain capabilities (X5) 8.3.3.2 Product leadership (X6.2 PLS) 8.3.4 Direct impact on strategic flexibility (YSF) 8.3.4.1 Customer intimacy initiative (X6.2CIS) 8.3.4.2 Shared vision and value (X1SV) 8.3.4.3 Cost leadership initiative (X6.1CLS) 8.3.4.4 Risk leadership initiative (X6.1RLS) 8.4 Evaluation of structural model of PLS M2 8.4.1 Model trimming process 8.4.2 Overall F-test for R2 8.4.3 Assessment of path coefficients and proposition testing 8.5 Interpretation and discussion of findings 8.5.1 Predictors of organizational structure (X2) 8.5.1.1 Open-mindedness (X1O) 8.5.1.2 Technological capabilities (X4) 8.5.2 Predictors of employees’ skills and behaviour 8.5.2.1 Competence development (C) 8.5.2.2 Stress management (SM) 8.5.2.3 Performance management (PM) 8.5.2.4 Intra-organizational relationship management (RM) 8.5.3 Predictors of technological capabilities (X4) 8.5.4 Predictors of supply chain capabilities (X5) 8.5.5 Predictors of business strategies (X6) 8.5.5.1 Impact on cost leadership initiative (X6.1CLS) 8.5.5.2 Impact on risk leadership initiative (X6.1RLS) 8.5.5.3 Impact on customer intimacy initiative (X6.2CIS) 8.5.5.4 Impact on product leadership initiative (X6.2PIS) 8.5.6 Predictors of organizational flexibility (Y) 8.5.6.1 Impact on operational flexibility (YOF) 8.5.6.2 Impact on tactical flexibility (YTF) 8.5.6.3 Impact on strategic flexibility (YSF) 8.6 Moderating effects of environmental conditions (Z) 336 337 337 340 342 343 344 345 345 348 349 350 351 353 355 358 358 361 367 370 370 370 373 376 378 380 381 383 385 388 393 393 395 398 401 403 403 404 404 408 8.6.1 Moderating effects of environmental conditions on the relationship between significant determinants and firms’ operational flexibility 409 8.6.2 Moderating effects of environmental conditions on the relationship between supply chain capabilities and firms’ tactical flexibility 412 8.6.3 Moderating effects of environmental conditions on the relationship between business strategies and firms’ strategic flexibility 414 8.7 Summary 418 CHAPTER VALIDATION OF RESULTS AND PRACTICAL APPLICATION 9.1 Introduction 9.2 Designing flexibility indices 9.2.1 Operational flexibility (YOF) 9.2.2 Tactical flexibility (YTF) 421 421 421 422 vii 9.2.3 Strategic flexibility (YSF) 9.3 Testing flexibility indices 9.3.1 Subject matter experts 9.3.2 Comparing actual and predicted indices 9.3.3 Correlations between organizational flexibility and annual turnover 9.4 Experts’ views about the resultant structural models 9.4.1 Experts’ opinions about the result of the PLS M1 9.4.1.1 Three dimensions of organizational flexibility within the model 9.4.1.2 Practicality and comprehensiveness of the results concering PLS M1 9.4.2 Experts’ opinions about the result of the PLS M2 9.5 Application 9.6 Summary 423 424 424 425 429 431 431 431 434 434 435 444 CHAPTER 10 SUMMARY AND CONCLUSIONS 10.1 Summary 10.2 Summary of research findings and validations of hypotheses 450 451 10.2.1 Conceptual framework for organizational flexibility 10.2.2 Key determinants of organizational flexibility 10.2.3 Inter-relationships of determinants 10.2.4 Moderating roles of market and technological conditions 10.2.5 Flexibility indices 451 452 455 461 462 10.3 Contribution to theory 10.4 Implications for practice 10.5 Limitations of the study 10.6 Conclusions 10.7 Directions of future research 463 465 471 474 475 Bibliography 478 Appendix A – Interview guide questions 514 Appendix B – List of proposed flexibility types and their definitions 516 Appendix C – Interview survey structured questionnaire 517 Appendix D – Example of invitation letter 527 Appendix E – Model validation instrument 528 viii Appendix C – Interview survey structured questionnaire 517 518 519 520 521 522 523 524 525 526 Appendix D – Example of invitation letter 527 Appendix E – Model validation instrument 528 529 530 531 532 [...]... their flexibility potential, by engaging into a continuous process of developing and managing their resources and capabilities, for their continued existence The aim of this thesis is to investigate the organizational flexibility management of construction firms in Singapore Organizational flexibility is hypothesized as a multirather than single-dimensional concept It may be influenced, to varying degrees,... level of flexibility It is recommended that construction firms use the flexibility indices developed by this study to ascertain their flexibility potential The findings may also help contractors to attain organizational flexibility and offer managers an insight into different practices and organizational attributes in building up their firms’ flexibility potential x LIST OF TABLES Page Table 3.1 Definitions... for organizational flexibility in construction firms; 2 identify the key determinants of organization flexibility in construction firms; 3 investigate the effects of inter-relationships among the key determinants on organizational flexibility dimensions; 4 investigate the moderating effects of market and technological conditions on the relationships between the determinants and organizational flexibility. .. framework of organizational flexibility in construction business was developed by integrating the flexibility types and flexibility dimensions, and the key determinants of organizational flexibility (see Figure 3.3) This provides a general framework on the functioning of organizational flexibility, offering guidance to researchers and practitioners for discovering alternative means of exploiting opportunities... Secondly, it filled the gap in the flexibility- related studies in the construction management literature by defining: (i) the concept of flexibility; (ii) the dimensions of organizational flexibility; and (iii) the constituents of key determinants of organizational flexibility Although there are many mainstream organizational studies on flexibility, few studies have systematically investigated the conceptualization... subcontracting) for better competitiveness The gap in knowledge is that there is no comprehensive view of how construction firms could achieve flexibility in Singapore Details are discussed in Section 2.6.2 Next, considering the impact of the 1997-2005 period of continuous decline within the Singapore construction industry, no study has been done to examine the flexible 5 behaviour of construction firms in. .. opportunities for gaining flexibility in construction business management Lastly, it explored the inter-relationships among construction firms’ resources, capabilities and strategies (which are labelled as determinants in this study) As highlighted Section 1.2, construction- related studies on flexibility have focused on the 13 effects of individual organizational attributes on organizational flexibility, ... The findings provide an empirical understanding of what kinds of resources and capabilities construction firms actually accumulate, and how these valuable resources help firms to respond flexibly to the changes in the business environment within which they operate It also offers the industry practitioners in- depth insight into different flexibility building practices and their roles in determining firms’... integrated the unique characteristics of the construction industry with these perspectives of organizational studies in finding ways to attain organizational flexibility These four theoretical perspectives on the organization-environment relations were integrated to collectively explain how contractors behave, learn, adapt, compete and evolve in response to changes in the business environment within... there appears to be no single explanation of how an organization gains flexibility; what influences the organization could be due to the collective effect of several possible determinants, each posing certain degrees of influences towards achieving organizational flexibility Also, some of the determinants could be used to examine the behaviour of other determinants on organizational flexibility, for example, . Face-to-face interview approach 199 5.3.2 Development of interview guide question 201 5.3.3 Preliminary interview findings 203 5.3.3.1 Business environment in the Singapore construction industry. management in construction 52 2.6.1.1 Flexibility within corporate-level management 52 2.6.1.2 Flexibility within project-level management 54 2.6.2 Flexibility as a challenge in construction. THEORETICAL FRAMEWORK OF FLEXIBILITY MANAGEMENT 3.1 Introduction 60 3.2 Concept of flexibility 60 3.3 Definitions of flexibility 63 3.4 Formulating the definition of organizational flexibility 68