Modelling capability-based risk assessment for international construction project ventures / Loo Siaw Chuing
Globalization has created more opportunities for contractors to enter international construction markets. Despite the financial markets meltdown in the autumn of 2008, international contractors are still finding opportunities in the international marketplace. International projects are exposed to...
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Format: | Thesis |
Published: |
2015
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Online Access: | http://studentsrepo.um.edu.my/6130/4/siaw_chuing.pdf http://studentsrepo.um.edu.my/6130/ |
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Summary: | Globalization has created more opportunities for contractors to enter international
construction markets. Despite the financial markets meltdown in the autumn of 2008,
international contractors are still finding opportunities in the international marketplace.
International projects are exposed to more diverse and complex risks, thus higher
possibility of loss, than domestic projects. Similarly, the vast uncertainties and
complexities in international construction would render project selection decisions to be
intricate as compared to domestic construction. As a result, copious risk assessment
tools and methods have been proposed to assist this decision making, most of them
based on Probability-Impact (P-I) risk model. Although P-I risk model is useful to
assess risks, firm’s capabilities are missing in the early assessment to provide accurate
risk picture to decision makers for project selection decision in the international
construction. This study aims to develop a risk assessment model, through the
determination of the extent to which firm’s capabilities impact on international
construction project risk significance values, for improved productivity and
performance. The international construction firm’s capabilities are explored using
resource-based view, dynamic capabilities, and Porter’s generic value chain theories.
The conceptual framework postulated that international construction firms could lower
the exposure to risks in the international construction foray by a combination of firm’s
capabilities. A total of 252 survey questionnaires were sent out in 2013 to 2014 to 155
international construction firms and 65 firms responded via either structured interview
or questionnaire survey. The respondents are project selection decision makers in their
firms and thus are approached through face-to-face interviews if they are based in
Malaysia or contacted via email if they are based in their home countries. The data
collected were analyzed using SPSS and PLS-SEM software. The results from structural
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model evaluation found that only 53 out of 110 hypothesized relationships were
significantly important. It was discovered that four firm’s capabilities have less
influence on the risks studied; they are financial, innovation, physical, and procurement
capabilities. This suggests that human resource, organizational, business management,
organizational learning, construction, and project management capabilities are more
influential towards international construction risk significances. A novel Capability-
Risk Assessment (CapRA) model was developed and validated using the PLS-SEM
technique. The model was then formulated into modified P-I risk model equations and
computerized into a CapRA calculator to facilitate construction firms in selecting
international construction projects. The Mean Absolute Percentage Error found that
CapRA is able to improve prediction accuracy by 16% to 21%. International contractors
are recommended to use CapRA to conduct preliminary assessment on their firm’s
capabilities and risks of potential projects. This study contributes to the knowledge of
risk assessment by enhancing the P-I risk model with firm’s capability component. The
model developed enables firms to be informed of the combination of firm’s capabilities
needed to lower the exposure to certain risks. Thus, a proper assessment of firm’s
capabilities and project risks before coming into any decision can be achieved. Future
study could incorporate other influencing variables such as various contract clauses to
refine CapRA. |
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