Choosing a Project Team: The Effects of Interdependence and Prior Transacting in Engineering, Procurement and Construction (Epc) Projects
Madunic, Marko
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https://hdl.handle.net/2142/84569
Description
Title
Choosing a Project Team: The Effects of Interdependence and Prior Transacting in Engineering, Procurement and Construction (Epc) Projects
Author(s)
Madunic, Marko
Issue Date
2008
Doctoral Committee Chair(s)
Joseph Mahoney
Glenn Hoetker
Department of Study
Business Administration
Discipline
Business Administration
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Commerce-Business
Language
eng
Abstract
This dissertation produces several important findings. First, I find that one needs to treat two key activities/transactions of a customized project---design and manufacturing---on a discrete basis. In specific, technological and architectural uncertainties, typically associated with customized projects, prevent project contractors to specify ex ante finalized outlook of the manufactured component. Because adaptations are frequent on customized projects, a firm with better access to information that facilitates adaptation owns governance advantage. I find that empirical results are consistent with the idea that project designers own an informational advantage over manufacturers in making ex post governance choices. Consequently, contractors choose to internalize design activities as a way of minimizing transaction costs associated with ex post contracting. Secondly, I find that contractors are cognizant of suppliers' capabilities to acquire team-specific problem-solving techniques, which are consequently reused on future projects. Contractors use this information to assemble teams of suppliers with prior joint experience. Which team of suppliers is hired depends on the nature of a component and on the strength of uncertainties that surround component realization. Thirdly, I find that various temporal considerations associated with realization of customized projects affect the selection of supplier teams. In particular, when an individual component requires a modular approach to its realization, the manufacturing process for that component is likely to be chronologically independent from manufacturing processes of other components. Thus, when one of the components is built modularly, architectural uncertainty between interdependent components is likely to increase and exacerbates integration. To minimize the problems associated with integration, contractors hire teams of manufacturers with prior joint experience.
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