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Understanding the organizational integration of subcontracted tasks in inter-firm projects

Listed author(s):
  • Stephan Scheuner

    (University of Siegen)

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    Project management researchers have recently emphasized the prevalence of inter-firm projects, i.e. projects which are carried out by multiple partners and hence cut across the organizational boundaries of one firm, in today’s business world (Bakker, Knoben, de Vries, & Oerlemanns, in Press). Especially in projects concerned with the delivery of what Hobday (Hobday, 1998) named complex products and systems (CoPS), where a diverse set of technological competences and high project budgets often surpasses the capabilities of one single company, such inter-firm ventures are rather the norm than the exception (e.g. Ahola, 2009). In most cases, the responsibility for the turnkey delivery of these projects lies with one single company, often termed the prime or main contractor, which contracts several parts of the project out to subcontractors and suppliers and thus builds a temporary network of firms: the project network (Martinsuo, & Ahola, 2010). Within this network the prime / main contractor cannot only focus on delivering his “own” (i.e. not subcontracted) share of the project scope but, due to his turnkey responsibility, has to put significant effort into coordinating the subcontracted tasks and their respective contractors (Martinsuo, & Ahola, 2010). While extant literature in the field of CoPS projects has mainly focused on examining the effects of certain contractual arrangements (e.g. partnering agreements) on the relationship between project partners (e.g. Reinstein, 2009), identifying supplier integration mechanisms (Martinsuo, & Ahola, 2010), or investigating the role of information technology in collaborations (e.g. Langlo, 2010), the question of how the management effort required to coordinate subcontracted tasks varies according to the (project and task) context (i.e. the complexity or novelty of the subcontracted tasks) has not yet been thoroughly investigated in the CoPS sector. Taking plant engineering and construction projects as a case in point for CoPS projects, this paper focuses on the research question: How, and to which degree, is the effort for the operative management of partners (i.e. subcontractors and suppliers) in plant engineering and construction projects influenced by the project and task context? In order to address the research question this paper draws upon the results of a literature review and a multi-case study of explorative nature in the German plant engineering and construction sector2, and offers three contributions. First, the inter-firm relationship between the prime / main contractor and subcontractors is identified as an inter-firm division of labor and consequentially described through the theoretical lens of organizational design, which deals with the structuring of tasks (Schreyögg, 2008). In this context the concepts of “Organizational Differentiation” and “Organizational Integration”, put forward by Schreyögg (2008, p. 92) to explain the division of tasks across organizational units, will be applied to the specific situation. Following this theoretical approach, the prime / main contractor’s effort of managing subcontracted tasks and coordinating partners will be conceptualized as the “Costs of Organizational Integration”. Second, by analyzing existing literature and the case study data, factors influencing these costs were identified. These factors (“Geographical and Cultural Distance”, “Task Type” and “Previous Experience in Working Together”) will be described in this paper and a conceptual framework attempting to explain the interrelationships between the factors and the “Costs of Organizational Integration” will be presented. The third contribution of this paper is a set of propositions which hypothesize on the behavior of the “Costs of Organizational Integration” as a function of the aforementioned influencing factors, focusing mainly on the value of “Previous Experience in Working Together” when coordinating tasks that have been subcontracted to partners with a high “Geographical and Cultural Distance”. These propositions will be used as the basis for a forthcoming quantitative study aiming to investigate further the degree to which the managerial effort of managing subcontractors is contingent upon the context of the project and the subcontracted task. Les chercheurs du domaine de la gestion des projets ont récemment souligné l’importance des projets inter-entreprise, ca veut dire des projets qui sont effectués par plusieurs partenaires et de cela franchis les limites organisatrices d’une entreprise, dans l’économie d’aujourd’hui (Bakker, Knoben, de Vries, & Oerlemanns, in Press). Notamment dans le cadre des projets visant à fournier ce que Hobday appelle des produits et systèmes complexes (anglais : complex products and systems, CoPS) (Hobday, 1998), les arrangements inter-entreprise sont la norme plutôt que l’exception (Ahola, 2009). Dans la plupart des cas une seule entreprise, le mandataire principal, est responsable pour l’achèvement « clé en main » de ces projets envers le client (Martinsuo, & Ahola, 2010). En mandatant des sous traitants pour fournier plusieurs parties du projet, le mandataire principal de son coté, crée un réseau d’entreprise temporaire, souvent appelé le réseau de projet (anglais : project network) (Martinsuo, & Ahola, 2010). Pour le mandataire principal, la coordination de ce réseau d’entreprise est une tâche importante qui demande un effort signifiant pendant le déroulement du projet (Martinsuo, & Ahola, 2010).En utilisant l’exemple des projets du secteur de la construction d’équipements industriels (anglais : plant engineering and construction projects) cette communication se concentre sur la question de recherche : Comment, et à quel ampleur, est-ce que l’effort nécessaire pour gérer le réseau de partenaire est influencé par le contexte du projet et de la tâche sous-traitée ? Afin d’adresser cette question cette communication est basé sur les résultats d’une étude de cas et une recherche bibliographique. La communication offre trois contributions: Premièrement, la relation entre le mandataire principal et les sous-traitants est classée en tant qu’une division du travail inter-entreprise. En conséquence, cette relation est décrite en utilisant l’approche théorétique du champ de la théorie des organisations qui s’occupe de la structuration des tâches (anglais : structuring of tasks) (Schreyögg, 2008). Deuxièmement, un groupe de facteurs qui influencent la gestion de cette division du travail inter-entreprise est identifié. Ces facteurs et leurs interrelations sont décrits dans cette communication. Troisièmement, la communication offre plusieurs propositions / hypothèses sur le comportement de ces facteurs qui vont constituer le fondement d’une investigation quantitative.

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    Paper provided by Département des sciences administratives, UQO in its series RePAd Working Paper Series with number UQO-DSA-wp2802011.

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    Length: 36 pages
    Date of creation: 01 Nov 2011
    Handle: RePEc:pqs:wpaper:282011
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    1. Hobday, Mike, 1998. "Product complexity, innovation and industrial organisation," Research Policy, Elsevier, vol. 26(6), pages 689-710, February.
    2. M. Bensaou & N. Venkatraman, 1995. "Configurations of Interorganizational Relationships: A Comparison Between U.S. and Japanese Automakers," Management Science, INFORMS, vol. 41(9), pages 1471-1492, September.
    3. L Oerlemans & R M Bakker & J. Knoben & Nardo de Vries, 2010. "The Nature and Prevalence of Inter-Organizational Project Ventures: Evidence from a large scale Field Study in the Netherlands 2006-2009," Scales Research Reports H201016, EIM Business and Policy Research.
    4. Davies, Andrew & Brady, Tim, 2000. "Organisational capabilities and learning in complex product systems: towards repeatable solutions," Research Policy, Elsevier, vol. 29(7-8), pages 931-953, August.
    5. Michael Hobday & Andrew Davies & Andrea Prencipe, 2005. "Systems integration: a core capability of the modern corporation," Industrial and Corporate Change, Oxford University Press, vol. 14(6), pages 1109-1143, December.
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