Han, S H; Diekmann, J E and Ock, J H (2005) Contractor's risk attitudes in the selection of international construction projects. Journal of Construction Engineering and Management, 131(3), pp. 283-292. ISSN 0733-9364
Abstract
International construction involves all of the uncertainties common to domestic construction projects as well as risks specific to international transactions. Consequently, despite the worldwide trend toward globalization, a very small portion of contractors actively seek international contracts due to concerns of probable failures. This paper describes findings from experiments done to investigate the risk attitude and bid decision behavior in the selection of international projects. The participants demonstrated either weak risk seeking in profit situations or strong risk seeking toward loss situations when choosing between conflicting options of risky opportunities and sure payoffs. On the other hand, another experimental test attempting to investigate bid behavior when making a realistic bid or no-bid decision in a complicated international construction project reveals the prevailing risk aversion. Further, this paper finds the experimental supports for some of the errors and biases due to risk attitude that commonly exist in bid decisions in this area. Finally, we present lessons learned and guidelines to make a qualified bid decision through feedback with the participants.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | contractors; decision making; foreign projects; international factors; project evaluation; risk management |
| Index terms: | risk attitude, experiment, profit, globalization, decision-making, bias, international construction project, lessons learned, international project, domestic construction, international construction, risk management, option, project evaluation |
| Subjects: | probability and distributions, professional development, decision-making and reasoning, economic factors, decision analysis, value management, data collection methods, risk assessment, construction type, strategic management, economic analysis |
| Topics: | International Construction, Business Strategy, Research Practice, Project Management, Information Management, Risk Management, Construction Technology |
| Descriptive scope: | 4 PCEA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here