Innovation strategy: Choosing a central or decentral approach in construction business?

A construction process is often complex and requires a large number of skills and responsibilities, which can be organized in different ways. Construction companies differ in their philosophy in how to manage and control the construction processes effectively and efficiently. It seems that their organizational structure and its control systems create different organizational cultures that influence the way a company functions. In this paper a comparison is made between the organizational cultures of two Dutch construction conglomerates, and it discusses its implications for organizational learning and the ability to innovate. The analyses and outcomes are based on several in-depth interviews within both companies, companies (A) and (B). Construction company (A) is centrally controlled; decisions are made centrally in the aim to maximize efficiency and reliability. The organization of the construction proces is tightly structured in a hierarchical way, and responsibilities are well defined. The employees are judged on the way they fulfill their tasks. Construction company (B) is organized differently, authority is decentrally organized and the headquarter merely guides and supports. Within this company, construction proceses are managed by people with broad responsibilities that overlap. The organization is kept together by mutual trust and loose control, employees are highly involved by what is happening within the organization. Both construction companies have invested in facilities to support organizational learning. The different organizational cultures result in a different organizational development and innovative opportunities. Company A`s innovation activities are shed away from production activities which improves the development of specialised knowledge. Company B`s decentral and integrated approach to innovation development ensures that the company as a whole develops a dynamic and innovation oriented culture.