Knowledge acquiring decisions in the Dutch construction industry – uncovering the deciding factors

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Knowledge Acquiring Decisions in the Dutch Construction Industry –

Uncovering the Deciding Factors

“The company that claims to be able to do everything will not be able to do anything right!”

(Pries & Janszen, 1995, p.50

Master Thesis

Author: Ruben Medina van Marle Student number: 11206020

Institution: University of Amsterdam, Amsterdam Business School Program: Executive Programme in Management Studies

Track: Strategy

Supervisor: Dr.ir. Jeroen Kraaijenbrink Date: 29-06-2018 (final)

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Statement of Originality

This document is written by Student Ruben Medina van Marle who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is

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Abstract

In light of upcoming legislative changes that lead to new (stricter) product requirements for construction firms in the Netherlands, a research is conducted that focusses on changes in a firm’s knowledge base in dynamic market conditions. With the importance of knowledge in relation to firm competitiveness widely supported, the study uses an explorative approach to gain insight in the way that new knowledge is acquired. Based on a qualitative data collection process among Dutch contracting firms the study uncovers the decision-making process that occurs in this specific context, which is the main contribution of the research. While most of the findings can be traced back to the existing body of literature, a new moderating variable is uncovered that directly determines the outcome of the final knowledge acquiring

consideration of either making or buying knowledge. This factor is the role of feeling/intuition of the decision maker.

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1. Introduction

As society has been turning into a knowledge society (Nonaka, 1994), the interest in creating and processing knowledge has been developing over the years. According to a knowledge based perspective of the firm that fits with this development, the main reason firms exist is to create and apply knowledge because this is seen as the most likely source of a sustained competitive advantage (Bierly & Daly, 2007; Grant, 1996). When the requirements to participate in any market change, the whole competitive landscape needs to adhere to new standards that can render previous market propositions obsolete (R. E. Miles, Snow, Meyer, & Coleman, Jr., 1978). These changes are described by Winter (2000) as events that cause sustained competitive pressure and they stimulate a firm to respond through acquiring and internalizing new knowledge. This can be done by creating knowledge within the firm (make) or seeking the knowledge in the market (buy) (Leiblein, Reuer, & Dalsace, 2002). A current example of such an event is the combination of several legislative and regulatory changes in the Dutch construction industry – gasless buildings (Postma, 2016), BENG-calculations (Valk & Haytink, 2017) and larger contractor accountability (wet kwaliteitsborging) (Rijksoverheid, 2017) - that lead to a knowledge acquiring challenge for the firms that operate in this industry. This challenge comes from acquiring the necessary knowledge to keep operating within the new boundaries of regulations and also to be able to apply this knowledge to an ongoing stream of unique projects (Kogut and Zander 1992). Researchers have thus far not been able to comprehensively review competitiveness in the construction industry and they are

struggling to find a research approach that avoids duplication of previous efforts (Flanagan, Lu, Shen, & Jewell, 2007). The research that is done in this area lacks specificity and the need for context specification is expressed in the literature, because this might be of influence to

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findings in prior research (Man, Lau, & Chan, 2002; Nieto & Santamaría, 2010). The context within the thesis will therefore be created by focusing on a knowledge intensive market, that is the Dutch construction industry. This industry has a revenue of more than € 60 billion and representing 4.5% of the GDP in the Netherlands, employed 302000 people at the end of the year 2017 (Bouwend Nederland, 2017) . This scale also makes it an interesting sector to focus research on because the findings will be widely applicable and the fact that order books and employment are still rising is a sign that the market size will remain large. The current body of literature recognizes an informal side of knowledge that states all knowledge in the end lies with the individual employees and that these individuals have their own personal traits that influence knowledge acquiring. For instance their commitment/engagement to knowledge acquiring, their bounded rationality and tendency to behave opportunistically (Grant, 1996; Leiblein, 2003; Nonaka, 1991; Riege, 2005; Williamson, 1979, 1981). The formal side of knowledge is similarly well represented in research and focusses on knowledge storage and utilization within the firm (March, 1991; Sadler-Smith, Spicer, & Chaston, 2001; Thorpe, Holt, Macpherson, & Pittaway, 2005) and sees costs as the main determinant in knowledge acquiring decisions (Barthelemy, 2001; Lam & Chua, 2009; Prahalad & Hamel, 2000; Rindfleisch & Heide, 1997). A paper by (Nonaka, 1994) suggests the importance of a combination of knowledge creation by the individual and the organization as a joint effort to generate synergetic knowledge expansion. Based on similar findings, (Harrison & Leitch, 2005) concluded that future research is needed on the relationship between a firms knowledge stock and the process through which this knowledge has been created. The research in the construction industry is mainly focused on formal knowledge aspects but also recognizes that there is an influence of the individual on performance (Phua, 2013; Rezgui, Hopfe, &

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buy decisions (governance choices) in a high-tech engineering corporation, found that this decision in a knowledge intensive industry does affect firm competitiveness. It is not however not the decision itself that influences firm’s competitiveness, but the underlying factors

determining the governance choice that influence performance. Their study focused on factors that find their origins in the cost efficiency focused transaction cost theory but concluded their own limited scope in this approach by stating that a broader acknowledgement of influencing attributes – namely those of the resource-based view - is necessary. This thesis will therefore focus on this industry and the knowledge-based aspect that defines competitiveness. An exploratory approach will lead to outcomes that go beyond the observable and measurable way that knowledge acquiring decisions are made. It will primarily aim to explore the

underlying motives that define the relation between knowledge and knowledge acquiring and by building on existing theory find an answer to the question:

“What factors determine the approach to knowledge acquiring decisions in Dutch construction firms and how are they related?”

To reach an answer, the thesis will use a qualitative explorative approach to uncover what the existing body of literature can tell us about knowledge and the acquisition thereof, whether existing theory about knowledge acquiring decisions holds in the specified context, what the motives of construction firm are behind the decision-making process and finally analyze this all to reach a concluding answer to the research question in the form of either new insights that can be further researched or an expansion of the applicability of existing literature.

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2. Literature review

Building on the subjects that were addressed in the introduction, the literature review will further uncover that which influences the knowledge acquiring decision process. By analyzing what has already been uncovered in prior research, a well-founded understanding about the theoretical process that induce the acquiring decision will emerge. When the scope

subsequently becomes slightly reduced within the context of the research question, an unknown area is entered that shall further be explored in the research part of the thesis.

2.1. Knowledge

According to a knowledge based perspective of the firm, the main reason firms exist is to create, integrate and apply knowledge because this is seen as the most likely source of a sustained competitive advantage and a process that the free market cannot perform efficiently (Bierly & Daly, 2007; R. Grant, 1996; Teece, 1998). In this way the theory deviates from neoclassical approach to economics (Nonaka & von Krogh, 2009) and recognizes the possibility for firms to create above normal returns. This leads product markets becoming comprised of obsolete outputs which are no longer the source for building a competitive advantage, and instead competition originates in the intangible knowledge assets (Lee, 2000; Nonaka, 1991; Teece, 1998). To cope with dynamics in markets, firms must constantly create, disseminate and absorb new knowledge to maintain a position where their knowledge can provide a sustained competitive advantage (Nonaka, 1991; Teece, 1998). It is even argued that there is a fallacy in the shareholder value approach to firm ownership, because if knowledge is the most important resource then the owner of this resource holds the value of the firm (R. Grant, 1996). As will be further elaborated, knowledge is not necessarily owned

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by a firm as it can also be argued that most knowledge is held by individuals (the employees).

2.1.1 Data, information and knowledge

To clarify and explain what is meant by “knowledge” a distinction is made that separates similar concepts and distinguishes that which constitutes data, information and knowledge. Data is that which can be observed and subsequently quantified and consists of basic numeric content and facts. Data is highly transferable, but also purposeless until some form of (human) intervention transforms it to information (Lee, 2000). Information is what happens when the data is processed and context is added to the data to make it useable for some specific purpose (relevance), which makes it more valuable. Until a meaning with consensus (or

authentication) is given to the information and it turns into knowledge it does not reach is maximum value. When this human intervention happens, knowledge becomes richer and thus harder to structure and transfer due to personal traits. Those parts of knowledge that can be translated back to transferable information are considered “explicit” knowledge, where this is not the case it is considered “tacit” knowledge (Lee, 2000; Rezgui e.a., 2010; Smith, 2001).

2.1.2 Tacit and explicit knowledge

Knowledge that is tacit (know-how) cannot be put into words which makes communicating it difficult, resulting in uncertain and costly transferring of knowledge (Kogut & Zander, 1992; Teece, 1998). This type of knowledge is accumulated inside the employee and is only

revealed though practice or application, which makes it difficult to access this knowledge by others or exchange (share or trade) it and in this way creates a strategically important resource for a firm (R. Grant, 1996; Riege, 2005; Smith, 2001). By which is meant that it meets the characteristics that were defined by Barney (1991) that this is a valuable, rare, inimitable and

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non-substitutional resource. Nonaka (1991) adds to this that the mental models, beliefs, insights, and perspective that shape tacit knowledge are often so integrated in personal cognitive element of knowledge, that this value can also be taken for granted. Other than explicit knowledge that is gained through accessing formal information, the knowledge creation consist of a personal learning curve that is enhanced by experiences within the firm such as conversations, stories and working practice (Cohen & Levinthal, 2000; Smith, 2001; Teece, 1998). Tacit knowledge is hard to replicate and imitate because this requires a deep understanding of specific underlying processes, thus making it more likely to generate a sustained competitive advantage (Teece 1998)

When knowledge can be articulated and thus formalized in a way that makes it easy to communicate, the knowledge is seen as explicit (know-what) (Nonaka 1991). This characteristic that allows for observable ease in communication is how knowledge of an explicit nature is revealed (R. Grant, 1996). It is possible to express and record this knowledge through numerical, symbolic or verbal communication in a way that it is

understandable for others, sometime requiring a prior level of knowledge that can be gained through formal education and it consists of technical or academical data (Smith, 2001; Teece, 1998). Once this type of knowledge is coded it can be appropriated by different users and put to difference uses, which are fundamental property that distinguishes it from tacit knowledge (R. Grant, 1996; Nonaka, 1991; Smith, 2001; Teece, 1998).

Even though both types of knowledge are distinguishable through their unique characteristics and this separation serves a goal in structuring knowledge related research, a more practical approach to knowledge must be kept in mind wherein tacit and explicit knowledge are not

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mutually exclusive which is how it occurs in practice (Nonaka & von Krogh, 2009). In this case the tacit knowledge represents how work is actually done and explicit knowledge the theoretical process of how things should be done. Both are an interrelated part of the organizational functioning and uniquely combined within each firm (Smith, 2001).

2.2 Perquisites for knowledge acquiring/operationalization

In order for a firm to be able to acquire new knowledge, different theories have emerged as to the perquisites that firms and even the knowledge itself need to adhere to in order for the expansion of the knowledge base to occur. These are considerations, as identified in the literature, that occur after the knowledge acquiring need is established and serve as the first piece of guidance in order to eventually make a definitive acquiring decision.

2.2.1 Absorptive capabilities

A requirement that focusses on the ability or possibility for a firm as well as an individual to assimilate knowledge is the absorptive capacity, which is about the ability to identify, create, assimilate and use new knowledge (Rezgui e.a., 2010; Zahra & George, 2002). Studies show that the initial amount of knowledge that is present serves as a enhancer for the accumulation of new knowledge, where the observation is that higher amount of prior knowledge leads to the more successful acquiring and applying of new knowledge due to the commonalities in complementary knowledge. (W. M. Cohen & Levinthal, 2000; Zahra & George, 2002). When the firm is approached as a knowledge integrator, the importance of the common knowledge base becomes more apparent and it is argued that focusing efforts of employees on learning how to communicate knowledge intra-organizationally can become more important than constantly expanding the individual knowledge base (R. Grant, 1996; Nonaka, 1991;

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Parmigiani, 2007). The overlap of increasingly more specialized knowledge leads to communication of a higher complexity (it would otherwise be limited to recognition of language and symbolic communication) and thus enhances the knowledge base and increases the absorptive capacity (Cohen & Levinthal, 2000; R. Grant, 1996; Riege, 2005; Teece, 1998). Overlapping of knowledge implies a certain degree of organizational slack that is required for firms to successfully acquire knowledge and is described by Nonaka (1991) as “Redundancy”. This not only includes knowledge overlaps – common knowledge - (R. Grant, 1996), but also overlaps in activities and responsibilities and practical solutions like job-rotation (placing employees in varying positions to understand the firm from multiple perspectives) and internal competition (having different teams perform the same task and discussing their results in order to learn from each other) (Nonaka, 1991). The essence to being successful in absorbing knowledge is however not the sharing of knowledge (everybody knows everything), but about creating interfirm awareness of the available knowledge so that individual diversity is maintained and this leads for instance to the emerging of cross

functional teams (Cohen & Levinthal, 2000; R. Grant, 1996; Huang & Newell, 2003; Riege, 2005; Simon, 1991). There will however always remain a certain degree of common

knowledge (that everybody has), redundant knowledge (that has no use within the firm) and unavailable knowledge (that nobody has), which leads to the knowledge acquiring decision (R. Grant, 1996). To be effective at storing new knowledge, the frequency of the application (practice/experience) is shown to influence the absorptive capacity positively when it

becomes higher (Argote & Epple, 1990; Huber, 1991) also human limitations (cognitive and rationality) are of influence to the absorptive capacity (Cohen & Levinthal, 2000; Grant, 1999a; Zahra & George, 2002), both will be discussed in detail in later sections of the review. A final distinction is made between potential and realized absorptive capabilities, where the

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first focusses on acquiring and assimilating external knowledge and the latter is about transforming and exploiting the existing knowledge base (Zahra & George, 2002). In a

reconceptualization of what absorptive capacity is, Zahra & George (2002) describe a process of knowledge -acquiring, -assimilating, -transforming and finally -exploiting. In their research a separation emerges between potential absorptive capacities (acquiring and assimilating) that revolves around external knowledge and the ability of the firm to successfully integrate it and realized absorptive capacity (transform and exploiting) that revolves around leveraging knowledge that exists within the firm. Both approaches are described as separate but interdependent, since knowledge cannot be exploited if it is never acquired and acquiring knowledge does not guarantee successful exploitation. This does however questions the firm’s knowledge objectives and thus it’s underlying motivations for acquiring knowledge because they can acquire external knowledge with the goals to assimilate it so that it can be exploited, but also apply an explorative approach where they focus on transforming and subsequently exploiting internal knowledge.

2.2.2 Acquiring objective

When existing knowledge is used to create value through efficiency or refinement, the firm has a exploitative objective (March, 1991). The efforts that are made, focus on becoming more successful within the existing scope and create direct (short term) success at low costs (Bierly & Daly, 2007; Huber, 1991). Strategically this creates an advantage that is most in line with a cost leadership strategy where reducing expenses to maximize profits is the central theme, or a focus strategy where a supra normal amount of specialist knowledge leads to a competitive advantage (Porter, 1980). This is regarded as “lower level” or “Acquisitive” learning and is aimed at adapting to the environment in better ways with the knowledge that is

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already present (Dess e.a., 2003; Sadler-Smith e.a., 2001). Limiting the knowledge scope to that which is already known means that in addition to being reaped quickly, uncertainty regarding the returns is also reduced since very limited new information is introduced (March, 1991). Firms do however require a way to create firm wide availability and understanding of the available knowledge. This means that knowledge needs to be formalized (made explicit), which is resource intensive to achieve and remain up-to-date (Thorpe e.a., 2005). This

approach is however agued to be unsustainable, because only the first returns on this approach are easy to yield and they will diminish over time (March, 1991). The disregarding of new information will lead to a gap between that which is supplied and that which the market values (Bierly & Daly, 2007; March, 1991) and an inability to adapt to changes in the environment, also known as active inertia (Sadler-Smith e.a., 2001).

When new knowledge is sought for through search, discovery or innovation, the firm has a explorative objective (March, 1991). Cost are made to acquire new knowledge, however not every attempt results in a valuable outcome which does not necessarily mean that there has been an explorative failure but can also mean that the knowledge has value in another context, time or firm (Bierly & Daly, 2007; March, 1991). To fully exploit the generated knowledge stock of the firm, it would need to diversify in all the knowledge related product domains and this lead to problems of organizational fit (R. Grant & Baden-Fuller, 1995). As a result of this uncertainty the cost of exploration are not always covered by a return and so making this a more costly approach (Bierly & Daly, 2007; Inkpen, 1996). The idea is to eventually find unique knowledge that is best suited for that which the market requires and thus provide the solution that is of most value, which fits a differentiation strategy to achieve a sustained competitive advantage (Dess e.a., 2003; Porter, 1980; Yli-Renko, Autio, & Sapienza, 2001).

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This approach goes beyond adapting to the environment and also involves finding new ways to approach the market when it is going through changes though “higher lever” or

“experiential” learning (Dess e.a., 2003; Sadler-Smith e.a., 2001). Where the knowledge exploiting approach has the drawback that it is not a sustainable approach, exploration can lead to the situation where returns are never generated by constantly creating new knowledge and never putting it to practice (March, 1991). Exploration leads to long term returns by creating new knowledge and alternative approaches in order to use this to then gain a competitive advantage by exploiting it (Bierly & Daly, 2007). Both exploration and

exploitation are therefore seen as critical for organizations to function in their environment (Nonaka, 1994). Resource limitations, or lack of slack (March, 1991), force firms to find a balance between both of them which results in unique/inimitable combinations of proportions and outcomes that can also lead to a competitive advantage (R. Grant, 1996; March, 1991).

2.2.3 The individual

Even though it is the firm that eventually competes through knowledge, there is a large influence on their performance that can be allotted to the individual employees that the firm is composed of (Nonaka, 1991). This starts with the recognition of the location where

knowledge is created and there is a wide accordance in the literature that this is done by the individual through personal experiences with tacit and explicit knowledge (Nonaka, 1994; Thorpe e.a., 2005). Within this approach two ways exist for a firm to acquire new knowledge and that is for employees to acquire new knowledge, or for the firm to acquire new employees (Huber, 1991; Simon, 1991). The creation of knowledge therefor always begins with the employee and every employee is a knowledge worker. Frontline employees possess specific knowledge related to the day-to-day activities. Middle managers are knowledgeable in the

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translation of the practical frontline knowledge to fit the more theoretical knowledge objectives of the firm and on the other hand translate the theoretical objectives in practical guidance for the frontline employees. Finally top management is knowledgeable in theorizing future direction of the company and the necessary knowledge objectives (Nonaka, 1991; Thorpe e.a., 2005). The idea that (especially frontline) employees play such a crucial role in knowledge creation, means that the commitment, engagement and empowerment of

employees to a knowledge creating objective is crucial to its success (Nonaka, 1991; Phua, 2013). This stimulates them to move beyond the formalized (explicit) knowledge that their job description comprises and search for ways to make their ever growing tacit knowledge, explicit and exploitable (March, 1991; Nonaka, 1991, 1994; Smith, 2001) as well as creating an environment where the employee feels valued so employee turnover is limited (Egbu, 2004). This is additional effort is however found not to be possible for each employee due to cognitive limitations and bounded rationality, there is a limited capacity (Cohen & Levinthal, 2000) in each employee that determines their ability to comprehend and absorb knowledge (Grant, 1996, 1999a). In relation to the knowledge and capabilities that employees do have, they are often unaware of this and this leads to them being unconsciously skilled (Smith, 2001). Similarly the bounded rationality of top management leads to a decentralization of core operational knowledge and as a result also the decision making regarding the use of this knowledge (R.M. Grant, 1996). Decision making thus also becomes dependent on the specific knowledge of an individual (Walker & Weber, 1984). This has also led to an alternative approach to firm ownership in which the firm resources are seen as representative for the value of the firm and since the employees are the (unconscious) owners of this resource, this theoretically means a position of power from ownership that makes employees entitled to returns on this resource (R.M. Grant, 1996). This redistribution of power, or fear thereof, can

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even lead to self-preserving behavior, leading to divestments in the broadening of the knowledge base because top management can no longer oversee the impact of it on his own power and influence (Thorpe e.a., 2005). For this reason the willingness to collaborate and trust between employees are seen as difficulties in knowledge driven firms (Prystupa, 2017). Contracting views have emerged that on the one side see the employee as the knowledge owner, but the firm unable to own the employee so that challenges in sustaining the competitive advantage of this knowledge arise due to turnover (Riege, 2005). On the other side, based on the distinction between tacit and explicit knowledge, the competences and routines that are shaped within the firm through the efforts of employees differentiate the firm itself from the competitive landscape (Teece, 1998).

2.2.4 The firm

The literature also recognizes the need for a formal structure to provide a translation from the informal to a more formal knowledge (making it explicit) to achieve transferability and wide application within the firm. (Huber, 1991; March, 1991; Thorpe e.a., 2005). While the individual – tacit - knowledge is recognized as a valuable, rare in inimitable and

non-substitutable (VRIN) resource (Barney, 1991) on its own (Riege, 2005), the benefits of it can only be reaped at a large scale by making the knowledge explicit and formalizing it in

procedures, routines, patters and training (Sadler-Smith e.a., 2001; Simon, 1991; Thorpe e.a., 2005), or what is otherwise called the organizational design (Cohen & Levinthal, 2000; R.M. Grant, 1996). The firm is therefore seen as the product of the interactions between its

employees that organizes the created knowledge through its coordinating role (Grant, 1999a; Harrison & Leitch, 2005). The value of the firm then comes from providing the necessary resources in the form of physical- and social structure (context) so that knowledge can be

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turned into competences fitting the strategy that lead to a competitive advantage (Nonaka, 1994; Teece, 1998; Zahra & George, 2002). This is also described as the organizational culture and is reflected in the values, norms, routines and practices of the organization, that shape the process of knowledge acquisition (Grant, 1999a; Prystupa, 2017). It helps individuals understand the way the organization functions and how they are expected to behave. It also provides knowledge specific expectations regarding the importance of knowledge (what is and is not important), communication of knowledge and internal relationships among employees (Inkpen, 1998; Prystupa, 2017; Simon, 1991). These contributions of the firm lead to a simplification of the learning process and a distribution among the employees of the pressure that would normally be present for each employee to have all knowledge (Levinthal & March, 1993). This also leads to the avoidance of inefficient knowledge transferring by striving to have all knowledge available in all employees (Cohen & Levinthal, 2000) and instead creates the possibility to work with cross functional team whose members all offer specific expertise (R.M. Grant, 1996). In this case employee turnover would be a problem since not all knowledge can be formalized and until the knowledge that can be made explicit is transformed, there is a risk of losing important knowledge (Levinthal & March, 1993). This then also leads to the increased cost to socialize (in the culture) an external- or train and internal employee (Simon, 1991). The employee becomes part of the (knowledge) capital of the firm leading to a task of satisfying the employee to avoid them leaving the organization (commitment/engagement) (Egbu, 2004) and in the meantime

formalize as much knowledge as possible. An important consideration when doing this is that a too large focus on making knowledge formalization, will lead to a focus on knowledge exploitation and thus reduce the ability of the firm to explore knowledge and make the competitive advantage sustainable (Bierly & Daly, 2007; March, 1991; Thorpe e.a., 2005).

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The competitive advantage in the end does not come from the knowledge itself that is present with the employees, but from the integration of this knowledge within the firm (Grant, 1999a).

2.3. Knowledge acquiring

As also indicated in the introduction, two main theories exist that explain considerations that are made we engaging in knowledge acquiring decision, both shall be further analyzed in this section.

2.3.3 Transaction cost theory

Transaction cost theory (TCT) originates in the explanation of why firms exist and the answer lies in a deviation from the assumptions in the neoclassical-model of perfect competition, because transactions are not costless (Coase, 1937). Since costs are involved, the main idea of Coase (1937) is that the market pricing system is not always the best method to manage an economic transaction, which is the case when the costs of using the market pricing system are higher than coordinating the transaction within a firm (hierarchy). These cost involve

searching, contracting and managing the efforts of the vendor (Barthelemy, 2001; Coase, 1937). TCT approaches a make or buy decision from a financially efficient perspective, where the acquiring decision is made based on a cost efficiency consideration (Walker & Weber, 1984).

The theory contains two assumptions about employees that can lead to cost consequences which are bounded rationality and opportunism (Williamson, 1981). Bounded rationality means that limitations exist to the capabilities of people with regards to the processing of information and as a result perfect processing does not exist. Consequently, it is not possible

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to create contracts that cover the full scope of possibilities and variability regarding a transaction. This itself is not an issue, however the opportunistic tendencies of people make every deviation from a perfect contract a potential risk. Opportunistic behavior is engaging in self-interested behavior with guile and means that people deliberately make false promises, underperform or hide information which increases the complexity of contracting. All transactions are influenced by these characteristics of human behavior and there are three factors that characterize a transaction and its exposure to this behavior which have an effect on costs, which are uncertainty, transaction frequency and specificity (Williamson, 1979, 1981).

Specificity is a way of describing the applicability of a resource, where low specificity means that the buyer in a transaction can get the same resources elsewhere and the supplier can sell the resource elsewhere. On the other hand, a highly specific resource means that the supplier creates a unique resource that is tailormade for the buyer and that the buyer cannot acquire elsewhere. Within the context of a knowledge transaction the link can be made between explicit knowledge (low specificity) and tacit knowledge (high specificity) (R.M. Grant, 1996), based on the characteristics described earlier. Both buyer and supplier are bound to each other in the transaction and where one party would try to take advantage of this

(opportunistic behavior), it could result in hold-up and costly renegotiations (Leiblein, 2003). The buyer as well as the seller will engage in tailor made transactions and as a result of this customization, the transaction cost for setting up the knowledge exchange will increase. When a resource is highly specific, the cost of a market transaction rise and the resource should be internalized (make).

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Uncertainty comes in the form of behavioral and environmental uncertainty (Rindfleisch & Heide, 1997; Slater & Spencer, 2000; Watjatrakul, 2005; Williamson, 1985). Behavioral uncertainty can be linked back to the characteristics of human behavior and thus the risk of opportunistic behavior to exploit contractual discrepancies, leading to higher monitoring costs (Barthelemy, 2001). The inability to successfully define the knowledge need (bounded

rationality) similarly limits the internalization of knowledge (Lam & Chua, 2009).

Environmental uncertainty has to do with the impossibility of predicting the future and the risk of opportunistic behavior to exploit new circumstances. For knowledge it is recognized that new knowledge can have an immediate purpose (positive) or an indirect use has to be found because it initially seems invaluable (negative) (Teece, 1998). Additionally

environmental influences can be the lack of suppliers for the required knowledge or the quality of the delivered knowledge is below the necessary standards (Lam & Chua, 2009). Uncertainty is therefore essentially about an inability to make fully informed decisions and all deviations from being perfectly informed result in costs (Coase, 1937; Walker & Weber, 1984). To avoid both types of uncertainties, contracts should cover any and all or future circumstances and this in turn is not possible due to bounded rationality (Williamson, 1981). The result is that this leads to monitoring and contract enforcement costs to control these risks (Rindfleisch & Heide, 1997; Williamson, 1973). In situations of high resource uncertainty, the cost of risk control rise and the resource should be internalized (make) so that the firm has full control over the knowledge creation and these risks are controllable (Walker & Weber, 1984).

The frequency at which a transaction occurs is the final determinant of cost. Consider that the transactions are freely occurring in the market and the influence of a trading partner is left out of the scope to remain focused on that which a firm can accomplish on its own. The influence

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on the make or buy decision depends on the characteristics of the transaction where specialized (complex), reoccurring transactions are best internalized (make), and when a transaction is not as complex it is best left to the market pricing system for which scale benefits are then present.

The application of the theory is not however not so straightforward. For instance, when the need occurs to acquire new knowledge but it is not possible to uncover who knows what. Identifying market parties and approaching them becomes impossible with the result of a forced decision of making the knowledge internally(Grant, 1996; Teece, 1998). When we look at the supply side of the knowledge there are different approaches to the marketing of the knowledge product and this influences the transaction costs. This influence in industry

specific and using patents appear to be a successful approach in the pharmaceutical industry because it excludes other parties from selling similar products which however leads to problems of recognition and disclosure (Teece, 1998) and make the total cost of the

transaction less certain. Whereas the use of copyrights does not prevent other market parties from independently finding similar knowledge (Teece, 1998), thus creating a larger market for similar knowledge which lowers its specificity. With the market for electronics as an example another pitfall is exposed, where it is not the unexpected royalty costs but the organizational adaptations needed to successfully implement or combine external knowledge that drive up costs (Teece, 1998).

2.3.4. Resource based view

Similar to the TCT, the resource based view (RBV) also focusses on a deviation from the neoclassical model of perfect competition, specifically the homogeneity and mobility

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assumptions (Barney, 1991; Grant, 1999b; Peteraf, 1993). The RBV looks into the

organization and describes that firms strive for a sustained competitive advantage that can be achieved when firms poses/control resources that are VRIN (Barney, 1991). As a result, the resource-based theory does not focus on cost considerations but on value propositions or the creation of value. The competitive advantage then does not come from the market or industry structure, but is created inside the firm (Flanagan e.a., 2007). This is however also a weakness of the approach by ignoring the dynamics of the market a firm is operating in, blind spots emerge to market opportunities (Flanagan e.a., 2007). In this theory, resources are described by Barney (1991) as organizational capabilities, processes and also knowledge which is where the further focus will go towards. The decision to make or buy a resource depends on the strategic value of the resource, which draws a separation between core- and peripheral resources (Lam & Chua, 2009)

When a resource is considered a “core-resource” it has a function in the establishment of the unique proposition of the firm (sustained competitive advantage) and because in the RBV firms compete on heterogeneric resources it should not be outsourced (Barthelemy, 2001; Gilley & Rasheed, 2000; Lam & Chua, 2009; Prahalad & Hamel, 2000). These core-resources can also be capabilities, that consist of the dimensions that have been described earlier

regarding employees, processes, norms/values and systems (Ferreira & Serra, 2010; Leonard-Barton, 1992). They are identified through earlier successes and should adapt to changes in the environment to avoid organizational inertia (Leonard-Barton, 1992).

When a resource does not play this role it is considered a peripheral resource and since this will not be a VRIN, which indicates that markets compete on this resource and buying will be

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the best option (Gilley & Rasheed, 2000). An additional distinction stated by Lam & Chua (2009), adds an extra layer of depth to the outsourcing decision of knowledge that identifies a “functional” and a “dysfunctional” outsourcing decision. Functional outsourcing is done with the motivation to capitalize on scale benefits or specialize in a new area, dysfunctional

outsourcing happens when a firm wants to outsource (reduce) responsibilities that they cannot control leading to a TCT consideration.

Another risk of buying core knowledge resources is the danger of knowledge spill-over (Inkpen, 1998; Prahalad & Hamel, 2000; Thorpe e.a., 2005). Suppliers of the resource may decide to seize the opportunity of further exploiting the resource by selling it to competitors. In this case the resource loses its VRIN-characteristics and competitors can get access to the same information (Cohen & Levinthal, 2000). The required effort and the degree to which this VRIN knowledge can be used by other firms, is also known as the appropriability of the knowledge and this industry dependent characteristic influences the spill-over risk in two ways (Cohen & Levinthal, 2000; Zahra & George, 2002). In high appropriability situations firms will have to, be able to protect against knowledge spill-over, but also lose their incentives to create new (VRIN) knowledge thus leading to a loss of sustained competitive advantage. Finally, the successful exploitation of resources and thus the effort that is required to coordinate the content of the resource which can vary due to communication,

transportation, and unexpected expediting cost (Gilley & Rasheed, 2000; Levy, 1995) . Based on these characteristics, tacit knowledge and know-how would be internalized and explicit knowledge and know-what can be outsourced.

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2.3.1 Make or buy

Two main approaches to knowledge acquiring appear in the literature that shall be placed within the context of this research that is to “Make” or to “Buy” knowledge. The “buying” (or outsourcing) of knowledge is about contracting external experts for knowledge assets in order to internalize their knowledge in the organization with the goal to further exploit it (Lam & Chua, 2009) and close a knowledge gap (R.M. Grant, 1996). The advantage of buying is the flexible availability of knowledge, where large amounts of knowledge can be accessed without hiring a large workforce to generate it, only when this is required (Gilley & Rasheed, 2000; Lam & Chua, 2009). This flexibility also means that a firm can respond quickly to changes in the market by integrating innovations without the efforts to reassign resources that were in place for the outdated knowledge (Gilley & Rasheed, 2000) and as a result the firm can focus its resources on core knowledge activities. Since outsourceable knowledge is available in the market it is also accessible for competitors and subject to substitution when alternative suppliers start marketing similar knowledge after a spill-over has taken place. The acquired knowledge will rarely be a VRIN resource and won’t lead to a sustainable

competitive advantage (Dess e.a., 2003). The knowledge will be externally created aimed at a specific knowledge need, but not a specific firm. The knowledge will thus also not be

personalized to the firms characteristics and requires an effort to internalize it (Cohen & Levinthal, 2000; Lam & Chua, 2009). The cost advantages that buying lead to are thus most interesting for improving short term performance (Gilley & Rasheed, 2000). This short term focus is also seen in the loss of the firm’s own innovative capabilities due to their dependency on the willingness and capability of knowledge suppliers to generate the knowledge they require (Gilley & Rasheed, 2000) leading to increased transaction cost.

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The “Making” of knowledge is about creating knowledge by the employees within the

organization, which results in firm specific knowledge resources that need to be formalized by the firm so that it can be used throughout the organization (Inkpen, 1998; Lam & Chua, 2009). The ability of the firm to independently create its own required knowledge means that the firm can adapt to changes in the environment without depending on external markets (Gilley & Rasheed, 2000). Since the knowledge is firm specific, it is likely to be a VRIN resource and the competitive advantage that a firm can achieve through the knowledge will thus be sustainable (Dess e.a., 2003). This high degree of fit that internally created knowledge has with the organization also means that less effort is required to internalize the knowledge (Leiblein, 2003). The intra-organizationally created knowledge is generally focused at something that the firm finds strategically important and is worth to invest in thus leading to core knowledge resources (Quinn, 1999). Therefor this exploratory approach to the creation of knowledge is seen as a critical function for organizations (Teece, 1998). Keeping

knowledge and the creation of knowledge within the firm also limits the risk for knowledge spill-overs and thus loss of a sustained competitive advantage, apart from employee turnover (Quinn, 1999). The making of knowledge assumes the ability of the firm to create its own knowledge, which isn’t a matter of course and depends on the availability of firms resources involved in knowledge creation (knowledge exploration) (Inkpen, 1996).

2.3.2 Ally

The literature describes an alternative approach to knowledge besides make and buy which focusses on a grey area in organizational theory between the functioning of markets and hierarchies, that is the use of alliances (Grant, 1999a; Grant & Baden-Fuller, 1995). A clear distinction is however made where the role of alliances is not supportive in acquiring

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knowledge, but the efficiently accessing of knowledge (Robert M. Grant & Baden-Fuller, 1995; Yli-Renko e.a., 2001). The solution of the alliance is an example of how firms can cope with the challenges surrounding their knowledge acquiring approach, that have been

discussed up until now. Theories regarding alliances are focused on efficiency advantages (compared to the use of markets and hierarchies), aimed at overcoming market power

disadvantages, costs of market transactions, opportunistic behavior (by creating a longitudinal relation), exploration costs (by finding a purpose for extent knowledge), entrepreneurial and environmental dynamics risks (by spreading the consequences of failed knowledge endeavors and creating fast access to external knowledge) (Robert M. Grant & Baden-Fuller, 1995; Thorpe e.a., 2005; Yli-Renko e.a., 2001). The access to the knowledge of the ally is seen as exploratory, and exploitation is achieved through finding complementarities between the knowledge stock of two firms (Robert M. Grant & Baden-Fuller, 1995). The only unique advantage that is mentioned, is the early mover advantage that comes from a faster identifying and exploiting of knowledge opportunities by doing so collectively (Robert M. Grant & Baden-Fuller, 1995). A such, no new factors are identified that can contribute to an understanding of knowledge acquiring decisions.

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4. The construction industry

It is characterized as a knowledge intensive industry, thus making knowledge a particular field of interest because of the possibilities to create a sustained competitive advantage (Rezgui e.a., 2010) and the general lack of empirical research to the sources of

competitiveness in the industry so far (Flanagan e.a., 2007). It is unknown if the broadly oriented (large scope) literature and the described management techniques for, in this case, knowledge acquiring apply in the industry when all the peculiarities of the industry are accounted for (Dubois & Gadde, 2002). As described in the introduction, the size of the construction industry in revenue as well as people employed make it interesting for research due to its large presence in the economy. It has to be noted that no clear definition of the construction industry exists and while existing literature does often refer to the “construction industry”, it fails to provide a uniform description. Differences occur in the included scale that can vary from global to local, the majority of firms being small- and medium-sized firms that lead to only their inclusion and the types of firm by mostly only including (sub)contractors and overlooking consultants, developers, banks, and so on (Flanagan e.a., 2007). Within this thesis the construction industry will include only the firms and their operations in the

Netherlands, and only contracting firms are included. The reason for this is that the essence of their existence is that they contract all responsibilities related to the creation of a project and are thus most exposed to the risks regarding the complexity of these projects (Eccles, 1981). Their performance depends on successfully managing the efforts of all parties involved controlling for any occurring risks throughout the completion of that which is contracted.

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4.1. Maturity

In their research to innovation in mature industries, Spithoven, Clarysse, & Knockaert (2010) find evidence for the importance of absorptive capabilities. While their focus is on the

subsequent innovative possibilities, they first recognize the importance of acquiring

knowledge to remain competitive in these industries. Most importantly they uncover a general lack in the absorptive abilities of firms in mature industries due to resource constraints (lack of slack resources). The performance in mature markets is generally regulated by well-developed institutions and consist of efficiently (cost) competing firms, thus limiting the scope for creating a competitive advantage to competing on intangible assets like (unique) knowledge and also on efficiency (Ferreira & Serra, 2010). This is also the case in the construction industry where especially the dominance of regulations and licensing criteria lead to a pre-determined building quality that limits opportunities for product variation (Pries & Janszen, 1995). These characteristics lead to a market that has many suppliers offering similar knowledge products/services, the competition between suppliers leads to more bargaining power on the buyer side, in this case the contractor, thus making its case for knowledge buying to enable the firms to focus on their core activities (Ferreira & Serra, 2010). As a result innovation in the industry is driven by regulatory changes and is generally limited to abiding to the new mandatory standards for the lowest cost possible (Pries & Janszen, 1995). Competition on value creating criteria is however becoming an alternative approach where for instance shortening the time to delivery of the project, providing additional services such as maintenance contracts or increasing the quality of the delivered product beyond the regulated minimal standards are becoming sources for competition (Flanagan e.a., 2007), the success of this approach depends on the successful sale of such

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more costly projects (Flanagan e.a., 2007; Pries & Janszen, 1995).

4.2. Complexity

The variation in project size, design, location, construction type, creation of immobile and generally long lasting projects in this industry are approached through cross-functional teams that due to the uniqueness of projects rarely consist of the same members on an intra- as well as interfirm level (Dubois & Gadde, 2002; Eccles, 1981; Pries & Janszen, 1995). This leads to a high degree of complexity that comes from three factors (Dubois & Gadde, 2002). Firstly, the unfamiliarity with location-based characteristics like specific municipality demands or the consequences of ground composition with regards to the buildings foundation. Secondly the impossibility to provide a full specification of every detail of the project in advance due to bounded rationality and high costs if one were to attempt to achieve this. The approach to many small construction details is decided on-site, this includes the technical solution but also the consequences in planning and involved parties. Finally, the environment that cannot be predicted, but weather influences play a large role in the determination of the means through with a project is constructed. Rain will result in extra provisions to avoid damaging products and frost (and rain) will result in problems when trying to work in the soil. The process that leads to the delivered product (a building) is segmented and for instance the design and production of a building are usually done by separate parties. The design is mainly done by an architect, with the assistance of consultants, and leads to the specifications of the building. The Contractor then executes the design with the assistance of suppliers, subcontractors and consultants. (Pries & Janszen, 1995). The involved parties usually differ per project and the unique combination of involved parties, parts and their interdependencies, leads to a high degree of complexity that is constantly growing due to changes in regulations (Gidado, 1996).

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As a result there is little reason to invest in innovation, because the benefits of economies of scale or learning curves of a product will not occur (Argote & Epple, 1990; Flanagan e.a., 2007). The way that these unique projects are approached (the process) is the only thing that does reoccur. Because this is always a comparable process due to a linearity (the next part cannot start until the previous part is finished) of information requirements within the engineering and constructing process, the refinement of it becomes a potential source of a competitive advantage (Pries & Janszen, 1995). This uniformity in process also partly occurs in suppliers who supply standardized products and even though the combination of applied products in a building is always unique, the formalization of the knowledge that is required to apply these products is an importance means to manage project complexity (Dubois & Gadde, 2002)

4.3. Project-focused approach

The industry is characterized by a project-focused approach (Dubois & Gadde, 2002; Pries & Janszen, 1995), which means that that firms barely plan further ahead than the moment of completion of a project and as a result there is a strong focus on project management. This makes sense in light of the specificity as well as complexity of projects which requires hands-on (tacit) knowledge and as a result, top management cannot be closely involved in the decision-making process due to time restraints and cognitive limitations (Dubois & Gadde, 2002; Williamson, 1981). This leads to decentralized decision making and thus delegation of authority to actors on the project level and in a similar way the actions based on explicit knowledge like financial control occur under supervision of top management’s (Dubois & Gadde, 2002; R.M. Grant, 1996) of which the result find their way to top management through a bottom up route through the organization. While the decentralization of

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responsibilities comes from cognitive limitations, it does have an advantage in motivating employees by giving them more control over their own tasks (Ling, Simsek, Lubatkin, & Veiga, 2008). In this way it contributes to the knowledge creating requirement that was stated earlier and mentions that employees need to be engaged and motivated in order to engage in transforming and sharing of their tacit knowledge.

4.4. Role of the employee

In a research by Cooke-Davies (2002) to the critical success factors in project-focused industries it was concluded that none of the used factors were related to “human factors” and instead were focused on the generally mentioned factor of cost (Gidado, 1996; Phua, 2013). Regardless of the existing evidence that those factors can lead to performance improvement, there is still little research that has tried to uncover and document these effects for the construction industry (Phua, 2013). Additionally, a research to knowledge integration in cross-functional projects by Huang & Newell (2003), found that efficient knowledge integration through organizational structure only occurs if the performed tasks are routine. The contribution of the firm in relation to the individual in these complex and cross-functional projects doesn’t come from only the structure, but from the firms approach to the

communication of knowledge (Huang & Newell, 2003). This is then seen as an organizational capability that a firm can improve through practice to achieve a competitive advantage, which in addition to the influence of employees on successful knowledge acquiring that was

uncovered earlier, creates uncertainty regarding the external validity of the findings of Cooke-Davies (2002).

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4.5 Knowledge acquiring

One of the most important decisions that a contractor makes is deciding what tasks will be executed by the contractor, what will be outsourced to a subcontractor and what will be coordinated by the contractor but purchased from a supplier (Dubois & Gadde, 2002; Eccles, 1981). The highly specialized knowledge that is required to perform certain specific tasks are the source of this consideration. The contractors needs to assess its ability to perform these tasks with the firms and the employees capabilities, but also the continuity of the specialized workforce if they were to perform these activities themselves and the consequences for their competitive position if too many specific tasks are outsources (Eccles, 1981). This in essence creates the challenge of the knowledge acquiring decision that will be further assessed in the contractor specific context in the research section. The distinction between the tacit

knowledge required to succeed on the project-level, and the explicit knowledge required for top management to successfully perform their firm-level budgeting and strategic tasks needs to be coordinated (Grant, 1999a). The compartmentalization of knowledge leads to the challenge within the cross-functional teams to fully access and exploit the available knowledge (Grant, 1999a). As Dubois & Gadde (2002) have also stated, performance improving approaches and techniques that work in other industries might also improve performance in the construction industry regardless of its peculiarities. Until it is tested, they state, there is no way of knowing whether these approaches hold up in a case-specific context. This is an encouraging sign for the research in the thesis (to explore the approach and

reasoning behind make or buy decisions in a specific contexts), since the industry characteristics and research theory applicability in the sector are an important part of the contribution of the thesis.

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5. Research method

5.1. Research design

Now that the existing literature has provided an understanding of how knowledge acquiring decisions can be motivated theoretically, the research will be designed in such a way that it adapts to the scope of the research question. This will similarly result in an understanding of knowledge acquiring decisions, but now in practice within the Dutch construction industry. The separate uncovering of both motivations allows a comparison between the two to made so that conclusions can be drawn based on pre-existing literature without having to repeat

previous research efforts (Flanagan e.a., 2007). This section will provide a description of the approach of this research and the reason why this approach has been chosen in order to create research reliability by facilitating future replication/repetition of the research (Saunders, Lewis, & Thornhill, 2016).

We can observe the acquiring decision for knowledge by observing the chosen approach, however what motivates the decision is not observable. The broad possibilities of the motives in the research question, means that socially constructed knowledge (interpretivist) as well as real/reality driven (positivist) knowledge is of interest. The most important characteristic of knowledge in this research is that it is practical or focused on practice and whether this comes from a socially complex or observable/measurable origin is not a reason to exclude

information. There is a decision-making process that runs through people and thus their behavior influences the knowledge acquiring approach. The idea is to study this phenomena in its natural environment and thus create an understanding of how these decisions are actually made in an organization (Saunders e.a., 2016). For this kind of research the case

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study is best suited since the knowledge objective is aimed at answering a “what” question (Saunders e.a., 2016). There will be no manipulation of behavior of those involved in the study and the focus is on uncovering unique contextual conditions (Baxter & Jack, 2008; Saunders & Lewis, 2012) that in this case influence the knowledge acquiring decision and not test the effects of manipulations of these conditions. This approach means the research will have a dominantly pragmatic philosophy (Saunders e.a., 2016). This all links back to the contribution of the research which is based on a degree of contextual specificity, but striving for these in-depth findings will however have the consequence that the generalizability of whatever findings it will lead to, are predicted to be low (Saunders & Lewis, 2012).

In order to gain insight in that which induces the method for acquiring new knowledge, an inductive approach is chosen. The reasoning is that it is dynamic nature, by which the ongoing development of the theory throughout the data collection process is meant, will leave room for explanations alternative the those suggested in the literature (Saunders & Lewis, 2012). Data will subsequently be collected through semi-structured interviews because of their ability to expose the motivations behind a phenomenon, but also create a possibility for probing when the conversation goes in a direction that has not yet been considered within the scope of the research (Saunders & Lewis, 2012; Saunders e.a., 2016). This is done since the research is of an exploratory type and can thus lead to any finding (Baxter & Jack, 2008), for instance to eventually find that the relevant theory as found in the literature review applies in the

construction industry and reliable application of existing theory will be the contribution of the research. Alternatively, motivations that deviate from the literature might emerge and form a specific starting point for future research where there influence on the knowledge acquiring decision can be tested deductively, in which case these specific motives become the

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contribution.

By translating the knowledge objective to something that can be operationalized in a research and thus avoids the pitfall of a scope that is too broad to be achievable within the thesis (Baxter & Jack, 2008), the case that is going to be studied emerges. This research will focus on the case of “the decision-making process for knowledge acquiring in construction firms”. The goal of the research to uncover knowledge acquiring motivations of specifically

knowledge and specifically in the construction industry, this means that the data will be collected within this unique context (Yin, 2003). As a result, no data will be collected outside this context and what this means is that no comparison of measurements will be made based on contextual differences and thus there are no different cases to compare. The research will therefore be a single case study and the measurements within the case (the sample) will be analyzed independently (within the measurement) and then across all the measurements to create a rich understanding of the knowledge acquiring motivations within the case (Yin, 2003).

Prior to the interviews the motivations for knowledge acquiring will be translated to a structure of characteristics that originate from the literature, this will be referred to as the “conceptual framework”. The reason is that the body of literature that has been included in this thesis provides a combination of factors that al have a function in the eventual acquiring decision, but they are never combined into a holistic framework. By creating this, all the analyzed literature can be visualized in a figure that represents the full decision-making process. This framework will later serve as a tool on which all the data collected from the interviews will be mapped out in order to simplify their decision making process in a similar

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way and thus provide a tool for a reliable compassion within the sample and against the theory (Baxter & Jack, 2008). This conceptual framework will be created a priori based on the reviewed literature with the goals to be a holistic representation of the reviewed literature (Fereday & Muir-Cochrane, 2006) and to subsequently be formed based on the theory driven codebook (DeCuir-Gunby, Marshall, & McCulloch, 2011).

The conceptual framework and theory driven codebook will provide structure to the semi-structured interviews by providing information to question interviewees about. By doing so, the data that is gathered from the interviews can be initially coded based on the same themes that emerged in the literature. The idea behind this approach is that, especially by carefully referencing the origins of the code/themes in the codebook, the methodology will be rigorously recorded and lead to a reliable research. It is also assumed to lead to a higher degree of content validity by having the origins of the research grounded in the literature (Saunders e.a., 2016). This is assumed to outweigh the pitfall of interviewer bias that comes alongside this approach, because the structure of themes might imply to the interviewee that there is a “right answer” (Saunders & Lewis, 2012). Those pieces of data that cannot be placed within the conceptual framework will also be coded, but since this will lead to deviations from the theory driven codebook they will be shaped in to a second data-driven codebook (DeCuir-Gunby e.a., 2011) which will create the possibility for a comparison between the literature (theory) and the data (practice) (Fereday & Muir-Cochrane, 2006). Those motives that cannot be placed within the framework will be further analyzed, the result might be that a motive does not fit within the theoretical argumentations and needs to be further researched and tested in future research.

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5.2. Sample

In order to be able to use the sample as a representation of the population, because no

complete list of the population is available nor is it possible to include the whole population in the research, a purposeful sampling technique is chosen. By applying this technique the characteristics of firms and employees are used to select the sample that logically fits within the research (Saunders & Lewis, 2012). As explained in the research design a comparison of characteristics of the sample as thus deliberately creating groups (or cases) to compare critical, extreme, homogenous or heterogenous measurements is not the goal in the sample selection. Instead the cases are sought out within the research context to remain within the boundaries of the research case and form a representation of the relevant population (Saunders & Lewis, 2012). According to Saunders & Lewis (2016), a case study for which data is

collected through semi-structured interviews should include a sample size of between 5 and 25 measurements. They also state that when research requires comparison between groups the sample should be larger in order to create groups that on their own can be treated as a

homogenous population. Since that is not the case here, a sample size of 5 measurements should be sufficient. Another approach that is often used is to keep collecting data until

saturation occurs, which means that no (or little) new information is collected through the data which means no new themes are being uncovered (Saunders & Lewis, 2012). Because

identifying an interviewee and then approaching them and planning an interview takes time, the interviews have been planned prior to the full analysis of the data. As a result, data saturation that already occurred at the 8th interview was not the end of the data collection. The goal was set a-priori to include at least 3 additional interviews to ensure data saturation but the availability of a ninth approached data source has led to a final sample size of 9. Had

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data saturation not occurred by the ninth interview, additional participants would have been approached.

Given the context of the research, participants in a variance of firms that specifically operate in the contracting market of the construction industry will be sought. This decision is made because of their integral (contracted) responsibility for the completion of construction projects (Eccles, 1981). This leads to larger risks due the uncertainty of factors that can influence the project performance compared to other firm types in the industry who don’t contract this type of responsibility. As a result most research focusses on contracting firms when they are focusing on the construction industry (Dubois & Gadde, 2002; Eccles, 1981; Flanagan e.a., 2007; Gidado, 1996). Given their position in the industry a larger recognition regarding the importance of the direct influence of knowledge to their competitive position is assumed, thus making these the most suitable firm types to research. An important finding so far is that there is a high degree of authority delegation (Dubois & Gadde, 2002) in the construction industry, which has its consequences for the sample of the participants. The higher management layers are focused on managing financial results and delegate the (knowledge) coordination on the operational level downwards in the hierarchy (Dubois & Gadde, 2002). Given this

information, I have decided to focus on those who are both influencing and informing the acquiring decisions. This guides me to participants that are in a function comparable to a project manager/coordinator. Their position within the hierarchy makes them the link between frontline employees and the higher management layers, thus the ones responsible for the translation and transformation of the knowledge of frontline employees and knowledge ambitions of top management (Gidado, 1996; Nonaka, 1991; Thorpe e.a., 2005) and therefor the most influenced by the role of knowledge in the firm. The strong focus on project based

Knowledge acquiring decisions in the Dutch construction industry – uncovering the deciding factors