Growth-survival tradeoffs of Queensland licensed homebuilders 1986-1996: An event history study

This thesis focuses on the survival rates of licensed homebuilders in the state of Queensland. Homebuilders are interesting in that traditionally, they have been very small firms, achieving much of their production through mutually beneficial relationships with teams of subcontractors. This offers some protection against the vagaries of volatile demand by providing the flexibility to expand and contract productive capacity relatively quickly. The research is justified on several grounds. While the nature of homebuilder / subcontractor relationships is well documented, the survival implications of these relationships for homebuilders are not. The research not only provides an opportunity to measure survival rates specific to homebuilders, but also, to compare them with those in more conventional settings where subcontracting is not substantially relied upon. Homebuilder failure creates significant economic, social and political problems. A systematic, longitudinal analysis of influences on survival potentially informs homebuilding industry regulatory policy and homebuilder warranty insurance practices. As to theory, the thesis provides a platform to apply both the strategic management and ecological perspectives of the firm to an operating environment with particular defining conditions. Accordingly, the research question studied in the thesis is: How do the strategies pursued by licensed homebuilders in Queensland from 1986 through to 1996 influence their growth and survival prospects? A quantitative event history methodology is used. Within the limitations of the data, cumulative survival rates are calculated for all licensed homebuilders operating during the study period, controlling for strategy, size, temporary exit, and age. The research methodology strongly reinforces the importance of appropriate level of analysis, and highlights the potential problems of unobserved heterogeneity. The research finds that strategy contingently mediates a set of trade-offs between growth and survival. Indeed, a paradox emerges. The same strategies aimed at growth and enhanced competitiveness are concurrently likely to reduce survival chances. These findings are consistent with those of a prior longitudinal study in the information technology industry, that is - they explain the sometimes complex interaction of age, size, strategy, environment and survival. The primary strategy available to homebuilders is choice of operating environment. It is a key first choice, thereafter committing those that make it to the same hazards and opportunities faced by all those making similar choices. The research reinforces the long-standing structural contingency view that volatile environments favour generalism. However, it finds that in the particular environment of homebuilding,large relative size generally reduces survival chances. This is inconsistent with findings from most prior research in other environments. The capacity to temporarily escape both competition and environmental shocks was found to be a strong mediator of a builder's chances of converting experience into older age. These initial findings as to temporary exit in homebuilding provide an entry point for a wider research program on the nature and consequences of itinerancy generally. As to public policy, the research provides guidance in several areas. Firstly, it suggests that overall risk in the industry may be a function of both the number of licenses on issue and the way those licenses are deployed. Secondly, the findings highlight those pathways along which builder-licensing authorities may choose to impose or modify size-based license conditions. Thirdly, the findings may assist builder-licensing authorities in allocating scarce resources in the monitoring of compliance with license conditions. Fourthly, the research highlights the importance of the army of itinerant builders that act as reliable, low risk circuit breakers to ease the community pain of cyclical booms and busts. Fifthly, it shows that as a population, homebuilders have dissolution rates no worse than t ose for all retail startups. Finally, it provides statistical evidence for the consideration of differential premium scales in home warranty insurance based upon risk of termination. The characteristics of the focal population in this thesis - licensed homebuilders - are unusual and somewhat idiosyncratic. Accordingly, the contributions of the thesis to theory need to be viewed through a relatively narrow lens and with appropriate caveats. These are set out in detail, along with opportunities for future research.