THE SIGNIFICANCE OF JOINT VENTURES IN THE CONSTRUCTION INDUSTRY FOR THE DEVELOPMENT INTO A TRANSNATIONAL ENTERPRISE

It is, however, true that in the analysis of the internationalisation of companies and in the formation of joint ventures most authors have considered other sectors than the construction industry. A good example of this is the description by Bartlett and Ghoshal (1990) of the development towards transnational enterprises. A transnational company combines the advantages of a strong, efficient head office with the capability of regional units to react appropriately to the circumstances given on the according markets, due to these units flexible and dynamic organisation. The competencies and responsibilities it accords to the individual units of that enterprise are clear-cut but not stereotyped. By this it can make use of all the abilities existing within the enterprise, independent of where they are to be found. Nor does it base its mediation and control of the company's targets on either formal structures or individual commitment. Its structures and tasks are rather established in such a way that the efficacy of the processes and the commitment of the persons in the company are supported and not hampered by them. Yet when developing their concept of a transnational enterprise, Bartlett and Ghoshal quite obviously had only those markets in their mind for which the product is defined and offered by the manufacturer. The task of a transnational company or even the purpose of the development will then consist in launching and establishing this product on a given market as fast and as widespread as possible (cf. Bartlett, Ghoshal 1990 p 149). In the construction industry, however, it is generally the client who defines the product and on whose order production usually is taken up. Thus closeness to the market is traditionally one of the most salient features of construction companies in all countries. When classifying companies that are active across their own national borders, construction companies at first glance therefore seem to belong to the category of the multinational enterprise, characterized by strongly decentralized units, which by their head office are regarded and treated as portfolio of independent national companies (cf. Bartlett, Ghoshal 1990 pp73-4). Construction companies, however, that want to be successful on the international market, cannot manage with such an organisational structure alone. This above all holds true when a considerable part of the international market consists of infrastructure projects, for the construction of which the capacity of a single company does not suffice anyway. Especially for the accomplishment of such tasks a single subsidiary would hardly be able to develop enough strength. Though it might be able to win orders on the international market, it would not be able to carry them out alone. On the other hand it would make little sense to make the capacities for carrying out such big infra-structure projects permanently and simultaneously available at various sites, if in any one country such orders are maybe placed only once in several years. Therefore the market adjustment of a company's decentralized national sectors has to be complemented by other areas in the company - preferable at the head office - which for international competitiveness can supply the decentralized units with special competencies in individual areas of performance, yet without using the occasion to dominate them. This co-ordination between centralized and decentralized units, however, is rather similar to a first step towards the development of a transnational enterprise as defined by Bartlett and Ghoshal. An analysis of internationally operating construction companies might thus result in the observation that some of these companies have already made considerable progress on the road towards a transnational organisation. By participating in international joint ventures for executing a construction project the construction companies might therefore pursue a double goal. First this might consist in the externally oriented aims described, mainly the pursuit of entry into a foreign market. A joint venture is the form of organisation by means of which a company can make this entry accessible without letting the financial burden and the financial risk grow too high. Market entry can consist in the opportunity to learn how to deal with the ways in which construction projects are handled on certain national markets. Or it can supply insights into the habits, norms and expectations that native co-operation partners, such as for instance local authorities or engineering offices, have when fulfilling their tasks. Besides this for some companies learning from their partners could have a certain priority. Here learning might relate to certain technical procedures, to managerial skills, or quite generally to the ability to be internationally active. Secondly the participation in a joint venture might be pursued with the aim to advance the company's own internal organisational development. In this case a joint venture would be one form of advancing operative, decentralised units (such as they usually already exits on the domestic market). In order to fulfill its tasks according to a company's strategy the joint venture on the one hand has to be granted all resources and decision-making competencies that permit it to react fast and competently to changing market demands. It will be enabled to do so if there is an efficient head office which provides it with all the necessary staff-related, organisational and technological means. At the same time the regional subsidiary as an intermediate level would take on the task of continually observing and cultivating the market without, however, requiring the implementation of extensive production capacities. At this stage of development a transnational construction company would thus have a three-step set-up. A strong head office would support the decentralized units with the total staff-related, technological and organisational competence of the company. The task of regional subsidiaries would be to secure market sensitivity. The operative units would be established in close proximity to the order and would be equipped with all competencies and all decision-making possibilities for carrying out the construction projects. Wherever the market volume permits they could be established on a permanent basis or establish their own labour-related, technological and organisational competencies, which - if need be - could in turn be made available to other parts of the company. Other market conditions given they could be newly formed, reorganised or relocated, depending on the order to be carried out. At any time these operative units could consist of joint ventures with other construction companies, be they domestic or foreign. Of course one should not forget that the partners in a joint venture for a construction project might at the next call for tenders be competitors again. But even this does not place the situation of a construction company participating in a joint venture into complete contrast to a world-wide operating transnational enterprise. Though the latter - and this is of course the difference - forms a unit in the strategic sense and as far as proprietary rights are concerned, operatively it consists of single, often national, companies and sectors between which there might well exist coalitions and competitive relationships, which in consequence might also lead to the rise, or yet reduction and sometimes even the shut-down of individual units. If then for construction companies the participation in an international joint venture is a form in which they might develop towards a transnational company it seems worth-while to consider more closely the factors that are of relevance for this development.