THEORETICAL AND CONCEPTUAL FRAMEWORK OF THE STUDY
3.4 HYPOTHESIS DEVELOPMENT
3.4.2 Relationship quality and firm growth performance and development
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Hypothesis 1b: Targeted Procurement strategies have a direct and significant relationship with application of innovation and technology.
Hypothesis 1c: Targeted Procurement strategies have a direct and significant relationship with skills transfer.
Hypothesis 1d: Targeted Procurement strategies have a direct and significant relationship with advancement on the cidb Register of Contractors.
Hypothesis 1e: Targeted Procurement strategies have a direct and significant relationship with JV partnerships.
Main Hypothesis 2: Targeted Procurement strategies have a direct and significant relationships with economic indicators of construction SMC development.
Hypothesis 2a: Targeted Procurement strategies have a direct and significant relationship with turnover.
Hypothesis 2b: Targeted Procurement strategies have a direct and significant relationship with company assets.
Hypothesis 2c: Targeted Procurement strategies have a direct and significant relationship with number of employees.
Hypothesis 2d: Targeted Procurement strategies have a direct and significant relationship with company profits.
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dependent on their structural position within project networks. For instance, a contractor that includes an intermediary (broker) in its project network is likely to derive more benefits from the relationship than the broker itself (Sedita and Apa, 2015). Moreover, Park et al. (2011) verified that firm performance is strongly related to diverse network attributes. Anumba et al.
(2005) contended that the construction industry is a knowledge-based sector requiring increased knowledge levels and high skills which are dependent on the formation of network hierarchies. Hence, the relationship quality and efficient functioning of the entire project network is an important factor influencing organisational performance (Gann and Salter, 2000).
Emuze and Smallwood (2014) noted that the significance of relationship quality and merits of collaborative working to organisational development is encapsulated in the successful completion of the of the five-year construction phase of London Heathrow airport’s Terminal 5, which was built on three success themes, operationalised through integrated project teams, and through shared liabilities, good industrial relations, fair employment policies, commitment to people and a culture that actively promoted opportunities (see Wolstenholme et al., 2008 for discussion).
3.4.2.1 Relationship quality and firm growth performance and development (social) Previous research has explored the relationship between inter-firm networks and subjective indicators of firm performance used in this study. According to Park et al. (2011), sustaining long-term cooperative alliances with partner firms based on trust and reliability enables accessibility to advanced technology and tacit knowledge. Moreover, firm performance enhancement and innovative output through technology exchange, and knowledge, experience and skills sharing were found to be positively influenced by direct and indirect ties (Ahuja 2000; Gulati 1995; Powell et al. 1996). Using social network analysis (SNA), Park and colleagues (2011) also described how a dense inter-firm network contributed to innovation, knowledge diffusion, and performance enhancement of firms in the network. Sedita and Apa (2015) later reported contrasting findings in the context of public construction projects, suggesting that quality is better than quantity.
Beyond Penrose’s seminal contribution to firm growth theory, it has since been conceived as an outcome of inter-firm knowledge creation. Relationship quality elements such as trust were found to be statistically significantly related to knowledge-sharing behaviour among parties (Nesheim and Hunskaar, 2015). Continuous inter-firm collaboration with reliable well-known large contractors enables SMCs to mitigate their limited resources and market presence, thus
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leading to the sustainable success and advancement of such small firms (Park et al., 2011).
Supply chain integration and quality of relationships between the parties strongly influences innovation and knowledge diffusion acquisition dynamics in the construction industry (Emuze and Smallwood, 2014; Dubois and Gadde, 2002; Miozzo and Dewick, 2004; Park et al., 2011).
However, the fragmented and project-based nature of the construction industry, coupled with the complexity of the supply chain relationships, makes the diffusion of information and innovation slow and inefficient (Geneste, 2010; Heintz and Wamelink, 2015; Kulatunga et al., 2006).
Therefore, based on the discussion presented, the following research hypothesis was formulated towards answering Research Objective Four:
Hypothesis 3a: Supply chain relationship quality has a direct and significant relationship with social indicators of construction SMC development.
3.4.2.2 Relationship quality and firm growth performance and development (economic) Sedita and Apa (2015) suggested that attention should be given to relational aspects and social dimensions of project organisations such as interpersonal and inter-organisational relationships of contractors, which are important to understanding the economic behaviours of firms in a project network. Several authors (for example, Allens, 1994; Emuze and Smallwood, 2014;
Henry, 1994; Lobelo, 1996; Smallwood, 2000) have cited poor working relationships as one of the causes of poor contractor performance in South Africa. According to Park et al. (2011), direct and indirect ties in a collaboration network enhance firm capabilities and benefits, implying that a firm’s involvement in a collaborative network characterised by good quality of relationships significantly affects the performance of that firm. London and Kenley (2001) suggested that close-knit inter-organisational networks produce superior economic performance and quality.
Researchers have examined the connection between relationship quality assessment criteria and economic performance of firms. Zuppa et al. (2016) reported that trust augments team integration and leads to higher profits. Park et al. (2011) explored the connectivity between inter-firm relationship attributes based on long-term collaboration and company profit; they found that focused long-term relations with targeted firms led to higher profits for small contractors. Park et al. (2011) further reported that small contractors have a better chance of acquiring good quality projects from larger partnering firms based on strong ties and long-term
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relationships thus substantially increasing company turnover. Moreover, firms embedded in a network of stable and repeated relationships garner experience from previous projects, which contributes to their selection for involvement in future projects (Eccles, 1981; Sedita and Apa, 2015) thereby boosting company turnover. Therefore, considering the evidence from the literature, the following research hypothesis was formulated towards answering Research Objective Four:
Hypothesis 3b: Supply chain relationship quality has a direct and significant relationship with economic indicators of construction SMC development.
3.4.3 Nexus between procurement, supply chain relationships and firm growth