A study of inter-firm opportunism in the construction industry

The construction industry has been identified with fragmentation, adversarial relationships, opportunism, and high rates of disputes. Therefore, there has been a call for the improvement of inter-firm relations in the sector through more appropriate governance strategies. This study drew upon transaction cost economics theory and new economic sociology in relation to the problem of inter-firm opportunism in economic relations. The study argues that depending on how patterns of inter-firm opportunism are viewed, different governance strategies may be formulated. Through a critical review of the prior publications concerning the problem of opportunism in the sector, the study argues that the construction management literature used theoretical works at both normative and explanatory levels. However, little is known about the construct of inter-firm opportunism itself and how it materialises within the construction industry. Therefore, this study aimed to provide insights into how practitioners in the construction industry conceptualise inter-firm opportunism and its patterns. Such insights extend the knowledge of how they approach governance strategies, and generally why they do what they do. To build a conceptual framework of inter-firm opportunism in the construction industry, this study was guided by a constructivist grounded theory. Rich qualitative data were constructed through 20 semi-structured interviews with practitioners involved in the construction industry who were working in the UK in either construction law firms, construction companies, construction development companies, or construction consultancy firms. The qualitative data were analysed following the Charmaz (2003 and 2006) guideline. In relation to the construct of inter-firm opportunism, the findings of the study indicate that there are considerable variations between the constructs of inter-firm opportunism. However, regardless of these variations, a win-lose relationship feeling is central to practitioners' construct of inter-firm opportunism. The study argues that in response to the risk of inter-firm opportunism through setting up contractual governance, parties usually conduct a casual cost-benefit trade-off. In relation to the patterns of inter-firm opportunism from the points of view of the practitioners in the sector, the study provides a conceptual framework grounded in the data. This framework places emphasis on the dynamics of different types of power constructed between the client and its first tier suppliers in the pre- and post- contract stages. This framework is the study’s contribution to the body of knowledge concerned with the inter-firm relations in the construction industry.