sdanish architecture sales to germany in the 1990skaates (2001) phd-thesis

8/11/2019 SDanish Architecture Sales to Germany in the 1990skaates (2001) Phd-Thesis

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Danish Architecture Sales to Germany in the 1990s:

A IMP/INPM Approach to Examining the Professional Service and Project-

Related Internationalization of Danish Architectural Service Firms

Maria Anne Skaates, PhD-thesis

Table of Contents:

0. Foreword 91. Introductory Presentation of Research Questions 11

2. Definition of Key Concepts 162.1. Architectural Services, Internationalization, and Market-

Seeking 162.2. Internationalization Theory 192.2.1. Introduction. 192.2.2. The Network View of Internationalization versus other Inter-

nationalization Theories 202.3.The Knowledge Aspect of Architectural Services 25

2.4. Architectural Services in Relation to General Characteristics ofthe Professional Services 322.5.Architectural Services as Parts of Construction Projects 402.6.Architectural Services seen from an Architectural Project Perspective 50

3. A Review of Project Marketing Literature relevant to the Sale ofProject-Related Architectural Services 54

3.1. Methodology and Delimitation of the Literature Review 543.2. The Historical Development of Non-IMP and -INPM Related

Project Marketing Research relevant to the Sale of Pro-ject Related Architectural Services 583.3. The Contribution of IMP and INPM Group Work on Project Market-

ing relevant to the Sale of Project Related Architectural Services 643.3.1. An Introduction to and Criticism of the IMP Group Work and IMP

Terminology 643.3.2. An Introduction to INPM Work concerning Project Marketing 753.3.3. Boundary Spanner and Relationship Promoter Actor Roles 90


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4. Concerning My Ontological and Epistemological Viewpoints andtheir Influence on My Chosen Methodology and the Operation-alization of Bourdieus Cultural and Social Capital 97

4.1. Introduction 974.2. My Ontological and Epistemological Standpoints 97

4.3. Concerning the Methodology and Methods used in this Dissertation 1054.3.1. Methodology and Case Study Design in Relation to the Objectives 105of the Study

4.3.2. Sources of Data 1074.3.3. Issues of the Validity of Interpretation 1074.4. The Use of Bourdieus Cultural and Social Capital Concepts in

this Dissertation 1134.4.1. The Role of Cultural and Social Capital in Establishing Credibility 1134.4.2. The Commensurability of Bourdieus Field Concept and IMP

Network-Related Concepts 1255. An Elaboration on the Scientific Relevance of the Dissertation ResearchQuestions in Relation to Previous Project Marketing Research1315.1. Introduction: General Remarks concerning the Entire Study 1315.2. Remarks concerning Research Question 1 on the Size and Growth of

the German Market 1345.3. Remarks concerning Research Question 2 on Danish-German

Architectural Export Actors 1355.4. Remarks concerning Research Question 3 on German Project-RelatedKnowledge 137

5.5. Remarks concerning Research Question 4 on the Process of ObtainingProjects 141

5.6. Remarks concerning Research Question 5 on the Role of PreviousProject Work142

5.7. The Scientific Relevance of this Dissertation Study 144

6. A Comparative Economic and Structural Description of the GermanMarket for Architectural Services During the Nineties 147

6.1. Introduction 1476.2. The Development of the German Markets for Architectural Services

and Construction 1506.3. The Development of the Danish Markets for Architectural Services

and Construction 1616.4. A Summary of the Development on the German and Danish Markets

During the Nineties 1726.5. The Implementation of the EU Public Service Directive 1726.5.1. Introduction to the EU Public Service Directive 172


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6.5.2. The German Implementation and Interpretation of the EU Public

Service Directive with regard to Architectural Services 1746.5.3. The Danish Implementation and Interpretation of the EU Public

Service Directive with regard to Architectural Services 177

6.5.3.1.Introduction 1776.5.3.2. Consequences of the Implementation of the Public ServicesDirective in Denmark and Danish Actors Reaction to theDifferences in Implementation in Denmark and Germany 180

6.5.3. Conclusions with Regard to the Implementation of the PublicService Directive 189

7. A Description of Danish-German Architectural Internationalization Actorsin Germany in the 1990s 190

7.1. Introduction 1907.2. The Danish Ministry of Housing and other Danish Ministries 1907.3. Danish Civil Engineering Consulting Firms and their Organizations 1957.4. Danish Contractors 1997.5. The Danish Real Estate Developing FirmKuben 2007.6. The Nature of the Internationalization of the Danish Architectural

Services Industry 203

8. The Knowledge used in Acquiring Architectural Projects in Germany 207

8.1. Introduction 2078.2. Knowledge of the Broader German Construction Industry Environment 2098.2.1. Introduction 2098.2.2. Firm 1s Knowledge of the Broader German Construction

Industry Environment 2108.2.3. Firm 2s Knowledge of the Broader German Construction

Industry Environment 2118.2.4. Firm 3s Knowledge of the Broader German Construction

Industry Environment 212

8.2.5. Conclusion concerning the Knowledge of the German ConstructionIndustry 2138.3. Knowledge related to Specific Actors and Potential Projects 2148.3.1. Introduction 2148.3.2. Firm 1s Knowledge related to Specific Actors and Potential Projects 2148.3.3. Firm 2s Knowledge related to Specific Actors and Potential Projects 2188.3.4. Firm 3s Knowledge related to Specific Actors and Potential Projects 2238.3.5. Conclusion concerning Actor and Project-Specific Knowledge 2278.4. Degree of Knowledge Diffusion in the Case Study Firm and the

Acquisition of General versus Project-Specific Knowledge 2298.5. Conclusions concerning the Knowledge Used in Obtaining Archi-tectural Projects 237


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9. The Acquisition of Architectural Projects by the Case Study Firms 2409.1. Introduction 2409.2. The Process of Architectural Project Acquisition 2409.3. The Role of Accumulated Social Capital in Relation to Project

Acquisition 247

9.4. The Role of Discontinuity in Project Acquisitions 2509.5. Conclusions Concerning the Acquisition of Architectural Projects 256

10. The Role of Previous Project Work in Acquisitions on the GermanMarket 257

10.1. Introduction 25710.2. The Role of References in relation to Cultural and Social Capital 25710.3. The Positioning of the Three Case Study Firms 26510.4. Conclusion Concerning the Relation of Previous Project Work to

Obtaining Projects 272

11. Conclusion regarding the Scientific Contributions of this DissertationStudy 274

12. Managerial Implications for Architectural Firms and other ConstructionIndustry Actors 284

13. Summary 292

13.1. Introduction to the Study and Its Research Questions 29213.2. Introduction to the Theoretical Framework of the Study 29413.3. Presentation of the Empirical Study 30013.3.1. Analysis pertaining to Research Question 1 (Chapter 6) 30013.3.2. Analysis pertaining to Research Question 2 (Chapter 7) 30213.3.3. Analysis pertaining to Research Question 3 (Chapter 8) 30313.3.4. Analysis pertaining to Research Question 4 (Chapter 9) 30613.3.5. Analysis pertaining to Research Question 5 (Chapter 10) 31213.4. Conclusions concerning the Contribution of this Study 317

14. Afhandlingsresum p dansk (Summary in Danish) 32114.1. Introduktion til studiet og dets forskningssprgsml 32114.2. Introduktion til studiets teoretiske ramme 32314.3. Sammenfatning af det empiriske studium 32814.3.1. Analysen af forskningssprgsml 1 (Afsnit 6) 32814.3.2. Analysen af forskningssprgsml 2 (Afsnit 7) 33114.3.3. Analysen af forskningssprgsml 3 (Afsnit 8) 33214.3.4. Analysen af forskningssprgsml 4 (Afsnit 9) 335

14.3.5. Analysen af forskningssprgsml 5 (Afsnit 10) 34114.4. Slutbemrkninger om studiets bidrag 346


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15. Bibliography 350

Appendix A. Pilot Study Research on Danish Architectural Exports toGermany 380

A.1. Chronological Description of the Pilot Study Research 380

A.2. Exclusion of Other Marketing/Economics Perspectives from theResearch Focus 384A.3.The Danish Architectural Service and Construction Industry 391A.3.1. Danish Architects and Their Organizations 391A.3.2. Role of the Architect in the Danish Construction Process 393A.3.3. Degree of Competition and Cooperation between Danish Architects 395A.3.4. The International Competitiveness of the Danish Construction

Industry 395A.4. Structure of the German Architectural Services Industry 396

A.4.1. Number of Architects and Architects Organizations in Germany 396A.4.2. Role of the Architect in the German Construction Industry inComparison with the Danish Construction Industry 397

A.4.3. Degree of Competition and Cooperation between Architectsworking on the German Market 400

A.5. Some Remarks on European-Wide Dynamics 403A.6. The Qualitative Pilot Study Interviews 406A.6.1. Selected Responses of Respondents 406A.6.2. Criticism of Pilot Study Method and Results and Further Delimitation

of my Main Study on the Basis of my Pilot Study 408

Appendix B. Three Case Study Firms of Danish Architectural Firms 411B.1. Introduction 411B.2.Case Study Firm 1: DISSING+WEITLING arkitektfirma A/S 412B.2.1.An Introduction to the Firm 412B.2.2.DISSING+WEITLINGs Architectural Project Acquisition 413B.2.3.DISSING+WEITLINGs Knowledge about the German Market 435B.2.4.The Role of DISSING+WEITLINGs Previous Project Work in

Relation to Acquisitions. 439B.3.Case Study Firm 2: Arkitektfirma C.F. Mllers Tegnestue 446B.3.1. An Introduction to the Firm 446B.3.2. C.F. Mllers Tegnestues Architectural Project Acquisition 447B.3.3. C.F. Mllers Tegnestues Knowledge about the German Market 467B.3.4. The Role of C.F. Mllers Tegnestues Previous Project Work

in Relation to Acquisitions 477B.4. Case Study Firm 3: Almvig & Partnere A/S 479B.4.1. An Introduction to the Firm 479

B.4.2. Almvig & Partneres Architectural Project Acquisition 480B.4.3. Almvig & Partneres Knowledge about the German Market 506B.4.4. The Role of Almvig & Partneres Previous Project Work in


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Relation to Acquisitions 513

Appendix C. A List of Research Interviews 519

List of Figures and Tables:

Figures.

1. Cova, Mazet, and Salles General Marketing Configuration forProject-to-Order Firms 13

2. Architectural Services which may be considered as Exports 183. Levels of Environmental and Structural Determinism in International- 24

ization Theories4. The Knowledge Conversion and Sharing Processes of Nonaka and

Takeuchi 275. Boisots Social Learning Cycle 296. Alajoutsijrvi and Tikkanens Competencies in the Context of

Relationships 317. Architectural Services in relation to Construction Projects 418. The Division of Construction Projects into Design and Construction

Related Phases seen from the Viewpoint of the Architect 42

9. Key Characteristics of Construction Project Related ArchitecturalServices that are a Part of Architectural Project Offerings 53

10. The Actors-Resources-Activities (A-R-A) Model 7111. Hkansson and Johansons Classification of Governance Structures 7412. Karin Holstius Project Marketing Cycle 7813. Cova et al.s Project Marketing Strategy Framework 8114. Salminens Factors that Determine the Usability of a Specific

Reference 8415. Potential Modes of Reference Use in Industry Project Marketing 85

16. Relationship of the Habitus to Structures and Practices 10217. The Embeddedness and Social Construction of Networks in Relation

to Economic and Institutional Factors in this Dissertation 10218. Classification of Governance Structures in the Professional Services 10419. Bourdieus Field and Capital Concepts 11720. The Relationship Between Activities and the Generation of Social and

Cultural Capital 12021. The Positioning of Albertsens Three Architectural Sub-Fields with

Regard to Levels of Accumulated Cultural and Social Capital 123

22. The Hierarchy of Power of Architectural Firms on National Markets basedon Social, Cultural, and Economic Capital Accumulation 125


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23. The Role of History in Relation to a Concrete Project Offering 12624. The Case Study Firms German-Related Knowledge in the Context of

Relationships 23025. The Case Study Firms Germany-Related Tacit Knowledge in the

Context of Relationships Revised Figure 231

26. The Structure of Project Acquisition Work by Case Study Firm ProjectAcquirers 23327. The Architectural Project Acquisition Process in the Private Sector 24428. The Architectural Project Acquisition Process in the Public Sector 24629. The Architectural Project Acquisition Process in a Client Relationship

Situation 25230. The Initial Position of the Case Study Firms on the Danish Market 26831. The Initial Position of the Case Study Firms on the German Market 26932. The Accumulation of Social and Cultural Capital During the Nineties 270

33. The Position of the Three Case Study Firms on the German Market inRelation to Albertsens Three Architectural Sub-Fields 271A.1. Porters Five Forces Driving Industry Competition 385A.2. Characteristics of Storper and Salais Worlds of Production 389A.3. The Hierarchy of Architectural Firms on National Markets 402

Tables.

1. Nonaka and Takeuchis Two Types of Knowledge 26

2. Total Turnover in the German Construction Industry in Billions of DEM 1523. Total Turnover in the Construction of Housing In Germany in Billions of

DEM 1524. Total Turnover: Construction of Buildings for the Private Sector in

Germany (not including Housing) in Billions of DEM 1535. Total Turnover: Construction of Buildings for the Public Sector in

Germany (not including Housing) in Billions of DEM 1536. Total Number of Architects, Interior Decorators, Landscape Architects,

and Urban Planners registered by the GermanArchitekten-

kammer 1557. Number of Unemployed Architects, Urban and Regional Planners, andCivil Engineers in Germany 156

8. Construction Industry Indices of Production 1629. Indices of Construction Permits for Housing 16210. Total Turnover: Construction Firms (e.g. Contracting, Bricklaying,

Carpentry, Plumbing, Electrical Installation Firms) situated inDenmark in Millions of DKK 164

11. Number of Members of DAL/AA, 1989-1998 167

12. Number of PAR Member Firms and Firmed Headed by DAL Members 16813. Number of VAT-Paying Architectural Firms 1989 1994 16914. Expert Turnover of Danish Architectural Firms that are Members or


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Associated Members of the Council of Practicing Architects(PAR) in Millions of DKK 171

15. Percentage of Types of Calls for Tendering and Use of the AcceleratedProcedure in 1997 with regard to Architectural and EngineeringConsulting Services 187

A.1. Normal Allocation of Legal Responsibility in the Construction ofBuildings 398


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0. Foreword.

At the beginning of the previous decade, in January 1990, the Danish constructionmarket, and therefore also the market for architectural services, were in the midst of asevere slump (Eurostat, 1995). At the same time, the German market was beginning to

boom (European Construction Research, 1995:8,12). One of the reasons for this wasfall of the Berlin Wall and the subsequent process to unify the two German states - theFederal Republic of Germany and the so-called German Democratic Republic - inone, larger Federal Republic of Germany.

Due to the poor home market circumstances, many Danish construction industryactors, including individual Danish architects (in most cases those who were unem-

ployed) as well as Danish architectural service firms, decided to attempt to find work

on the German market (Halskov, 1995). However, many of the aspirations of theDanish firms who attempted to sell construction industry related goods and services inGermany were dashed. By 1996, many of the largest Danish civil engineering andcontracting firms had lost billions of Danish kroner, and a great number of small firms,typically architectural firms or subcontractors in the construction process, hadexperienced severe losses, some of which had jeopardized the very existence of thesefirms (ibid.). This turn of events surprised insiders in the Danish construction industryand the general public in Denmark alike, as both groups believed that Denmark has

high construction standards and that the firms that had attempted operations inGermany were generally technically competent and had sound domestic businesspolicies (ibid.).

This doctoral dissertation research will not attempt to explain the reasons for themisfortunes of the Danish construction industry on the German market. Instead it willfocus on the internationalization activities of three Danish architectural firms that haveachieved a degree of success on the German market in the 1990s and are still present

on this market today in three case studies. It is, however, my hope, as well as the hopeof the partners and other employees of the three Danish firms that generouslycontributed many hours of their scarce time to my research project, that other Danishand Nordic construction industry actors, especially architects and architectural firmsas well as civil engineers and civil engineering firms, will benefit by reading andreflecting upon the judgements and choices of the case study firms as they are

presented in this dissertation.

It should be noted that I bear sole responsibility for my case study research and thecontent of this dissertation; thus the interpretations of the eventsand the connections


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made between empirical observations and theories of economics and marketing in thiswork are mine alone. Additionally I think it best to mention that I am a businessadministration graduate and that the main academic aim of my research is to contributeto progress in the discipline of marketing. Several initial chapters of this dissertation

may therefore seem mystifying or very demanding to read to persons who have othereducational backgrounds, such as architects, engineers, or skilled craftspeople. Iwould like to suggest that these persons first read Chapters 6 10, 12-14, and Ap-

pendixes A and B.

Lastly I would like to mention I have chosen to focus a great deal more on ontology,epistemology, and methodology than is common in English language (here, especiallyAmerican) business administration Ph.D. dissertations. There are two main reasons for

this:

1. I have been inspired by German and French academic literature in the fields ofMarketing, Business Administration, Sociology, and Political Science which I haveread in their original language. Many German and French works place a greateremphasis upon these issues. Additionally I draw upon the works of the Frenchsociologist Pierre Bourdieu, whom I have read mainly in English, German, orDanish translation due to my mediocre ability to read French. As steps inconducting research, Bourdieu (1990) requires that the researcher (a) listen but then

distance herself from the informants own life world and (b) scrutinize her ownscientific stance.

2. I have chosen to combine and compare theories and models from severaldisciplines in my work. This requires, in my opinion, explicitly stated ontologiesand epistemologies to insure commensurability (see e.g. Burrell and Morgan,1979).

These points will be further elaborated upon in Chapters 1, 4, and 5 of this disser-

tation.

Maria Anne Skaates, Doctoral candidate at Copenhagen Business School,M.A. in Business Administration and German (Odense University, Denmark, 1996).Oulu, Finland, January 15, 2000.Revised dissertation submitted January 15, 2001


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1. Introductory Presentation of Research Questions.

The purpose of this research is to contribute to scientific progress in the area ofproject marketing through a historical, descriptive, explorative-integrative (Maale,1996) study of the international marketing of architectural services. This researchdraws upon and enriches the present body of theories about project marketing. Theresearch questions for this Ph.D. dissertation were chosen on the basis of initial,exploratory pilot study research about Danish sales of architectural projects on theGerman market undertaken from November 1997 to August 1998. (See Appendix Afor a description of the pilot study.) These research questions and the structure of thisdissertation will be explained briefly in this chapter.

The first two research questions are of a general nature:

1. How did the German market for architectural services develop during thenineties in terms of e.g. institutions, total market size, and growth rates at the

national and federal state (i.e. Lnder) levels?

2. Who were the major actors involved either directly or indirectly in the

Danish internationalization of architectural services to Germany in the 1990s

and to what extent and how did they cooperate with one another? The major

actors will be referred to collectively as the Danish-German Architectural ExportActors; it is expected that the group will include not only architectural firms but alsocivil engineering firms, contracting firms, financial institutions, governmental bodies aswell as professional and industrial organizations.

The purpose of these two questions is to provide a general overview of the situationon the German market for architectural services in the nineties at the macro-economic,macro-structural and key German-Danish actor levels as well as to lay a broad

contextual foundation upon which the specific experiences of the three case studyfirms can be explained. Furthermore question two will also deal with whether thecooperation occurred in a network, as the use of network theories of marketing andinternationalization will be assessed in this dissertation.

The remaining research questions concern the three case study firms. They are relatedto a model developed by three French researchers, Cova, Mazet, and Salle, for firmsthat sell projects. The model, which is a general marketing configuration for project-to-

order supplier firms, is depicted in Figure 1 on page 13 and will be explained in depth


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in Subsection 3.3.2. The term project will be defined and related to architecturalfirms offerings in Section 2.5.

3. What sort of specific knowledge about the German market and specificprojects on the German market did the case study firms use to receive

architectural projects on the German market?This research question relatesto steps 2 - 9 of Cova, Mazet, and Salles General Marketing Configuration asshown in Figure 1 on the next page. At a general level, it concerns the knowledgethat the case study architectural service firms used to interact in specific situationswith important persons, officials, and firms (the network of step 2 in the model)who might have potentially placed a project order or have possessed informationconcerning potential orders (related to the dynamic project screening of the step4) as well as the knowledge that enabled the architectural service firms to under-stand information coming from the broader environment (see the models step 3)of the German construction industry. It also includes the knowledge concerningspecific actors on the German market (in steps 5 9 of Cova et al.s model) oncea concrete project had been found upon which the firm had decided to bid.

4. How were concrete architectural projects obtained by the case study firms? Here the focus of the empirical case research is the steps leading up to thesuccessful creative offering of the three case study firms (steps 2 - 9 of themodel of Figure 1). Key subquestions include: Did the steps undertaken by thearchitectural service firms follow the chronological order listed in the GeneralMarketing Configuration? Does the model leave some important factors out and/orinclude some irrelevant factors? In the case of architectural competitions inGermany and orders from the public sector that have been procured in accordancewith the regulations of the EU Public Service Directive, did network investments(step 2 in the model) and/or negotiations (step 9 in the model) play a role, and ifso, what was their role?

5. What role did previous project work play when case study firms obtained

specific projects on the German market? This question deals with therelationship between the awarded projects-in-progress/already completed projectsand new project awards.

The issues of knowledge of Question 3 will be examined using the frameworks ofAlajoutsijrvi and Tikkanen (1999), Boisot et al. (1997), and Nonaka and Takeuchi(1995) as explained in Section 2.4.


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Figure 1. Cova, Mazet, and Salles General Marketing Configuration for

Project-to-Order Supplier Firms.

1. Analysis and Strategic Priorities

2. Network Investments

3. Environmental Scanning

4.1. Development of a Core Offer 4.2 Dynamic Project Screening

5. Creative Offering

6.1. Choice of Technical Adaptations 6.2. Choice of Socio-Economicto the Project Adaptations to the Project

7. Resource Mobilization

8. Proposal

9. Negotiation

10. Completion

Steps 1 - 5 above and on the thick horizontal line concern marketing-related stepstaken independent of a given project (the phase of the anticipation of a project).

Steps 5 - 10 on and below the thick horizontal line concern marketing andcoordination efforts related to a specific project that has been awarded or is in the

processes of being awarded to the project-selling firm in question (the adaptive

phase).


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Source: Cova et al., 1994, p. 40.

With regard to questions 4 and 5, the analytical framework will comprise of existingproject marketing theories, including network theories and concepts (see Chapter 3)and an operationalization of Bourdieus conceptualizations of the accumulation of

social and cultural capital (explained in Section 4.4.). Additionally the suitability ofdifferent network theories and concepts will be assessed on the basis of the inter-

pretation of the empirical data.

Concerning Figure 1 on page 13, Cova, Mazet, and Salles General Marketing Config-uration for Project-to-Order Supplier Firms is a contribution to the sub-field ofmarketing theory that deals with project marketing and systems selling. This sub-field will be explained further in Sections 2.4 and 3.2-3.3. Within the project

marketing/systems selling sub-field, Cova, Mazet, Salle, and I, as the author of thisdissertation, consider ourselves to be associated with two closely related internationalgroups of researchers, the International Marketing and Purchasing Group(subsequently referred to as the IMP Group) and the International Network for ProjectMarketing and Systems Selling (in the following abbreviated as INPM).

The members of these groups emphasize that both the buying and the selling partiesplay activeand interactive (and thus NOT merely reactive) roles in the marketing/

purchasing of industrial and investment goods, such as buildings (Servais, 1994: 54-62). In the opinion of the researchers associated with the IMP and INPM groups, it istherefore very important to examine the relations between the buyer-seller dyad (akey concept in IMP/INPM terminology, see e.g. Hkansson, 1992:14-18) as well asmore complex networks and positions of actors on a given market (see e.g.Easton, 1992). This will also be explained in much greater depth in Section 3.3.

Having briefly introduced the research questions of this dissertation, the content of the

remaining chapters will now be summarized to help readers orient themselves in theirfurther reading:

Key concepts such as architectural services, internationalization, market seek-ing, knowledge, professional services, projects, construction projects, andarchitectural projects are defined and delimited in Chapter 2 on the basis of relevant

business administration literature.

Chapter 3 contains a review of project marketing literature relevant to the sale ofproject-related architectural services. This review has been written with the aim of


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fulfilling Bourdieus (1990) requirement that the researcher scrutinize her own scientificstance (see the previous remarks on this issue in this dissertations foreword). Itcontains an introductory section on literature review methodology as well as a sectionconcerning contributions from the IMP/INPM researchers and yet another section

dealing with selected research from other project marketing perspectives. Finally itincludes a review of IMP/INPM and non-IMP/INPM boundary spanner literature.

Chapter 4 commences with presentation of my epistemological and ontological view-points. Thereafter, the methodology and methods used in this dissertations empiricalsection are presented and justified. Finally, the use of Bourdieus social and cul-tural capital terminology is justified and the issue of these terms commensurabilitywith key IMP/INPM contributions (e.g. Cova, Mazet, and Salles, 1996a, concept of

the milieu) is examined in keeping with e.g. Burrell and Morgans 1979 recom-mendations (see the foreword to this dissertation).

In Chapter 5, the focus is once again upon the research questions of this study. Theyare linked to the previously mentioned definitions, the literature from the literature re-view, and the chosen methodology, i.e. the literature covered in Chapters 2-4.Furthermore, the scientific relevance of these questions is discussed in some depth inrelation to (a) the current State of the Art of INPM and IMP scientific work,

including relevant on-going scholarly debates among INPM and IMP researchers, aspresented in Subsections 3.3.1. to 3.3.3. as well as (b) the cultural and social capi-tal framework presented in Section 4.4.

Chapter 6 contains the description of the German market for architectural services inthe 1990s, i.e. the answer to research question 1. Chapter 7 deals with research ques-tion 2. Chapters 8 10 deal with research questions 3 5 respectively. Chapter 11discusses the scientific merit of this study. Chapter 12 contains practical and mana-

gerial suggestions for architectural and other project selling and/or professional servicefirms. Chapter 13 is the summary of the dissertation in English, whereas Chapter 14contains the same summary in Danish, and Chapter 15 the bibliography. Appendix Adescribes my pilot study research, Appendix B contains a selection of the statementsof the respondents from my case study firms, and Appendix C lists all researchinterviews undertaken in connection with this study.


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2. Definition of Key Concepts.

2.1. Architectural Services, Internationalization, and Market-Seeking.

In daily conversation, when one speaks of architectural services, images ofarchitects drawing buildings are probably what most often come to the mind of thelayperson. In reality, however, architects around the world offer a wide range of in-dividual services, including design, site and building inspection, renovation work, andconstruction management services, which are combined in various ways depending onagreements with the client in question. Additionally, many architects no longer

predominantly draw manually; instead they use computerized design software such asCAD-programs. Over and beyond that, portfolios of services offered vary from onearchitectural firm to another and from country to country due to e.g. differences in

legal regulations and the organization of the construction industry. According toStevens (1998:29):

In France, architects rarely prepare construction drawings, and may neverset foot on site. In Australia and other Commonwealth nations, themeasurement and costing of large buildings is conducted by quantitysurveyors, an occupation totally independent of architects. Norwegianarchitects also invariably handle town planning. Not only does the divisionof labor vary, but also the sort of client handled by the architect. In Italy,

almost all small-scale construction is handled by the geometria, who wewould consider surveyors, and the division of labor between architects andcivil engineers is very indistinct. Spanish architects deal with highly technical

buildings, such as industrial plants, that English-speaking architects tend toleave to civil engineers. Similarly, architects in the Benelux countries

produce technical drawings that in the U.K. or U.S.A. would be handled byengineers.

Thus it is necessary to specify the exact meaning of the terms architectural services

and internationalization in the German-Danish context of this Ph.D. dissertation.

Seen in very general terms, the individual services offered by architectural servicefirms in Denmark as well as Germany are predominantly related to the following areas1:

1Unfortunately I have not been able to find a good comprehensive definition of architectural services forthe Danish and German market, and thus have deemed it necessary to construct my own definition basedon my literature studies.


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1. Designing new buildings2. Conceptualizing additions or improvements to existing buildings, e.g. renovations3. Managing or assisting in the construction of new buildings4. Managing or assisting in the construction of additions or improvements to existing

buildings

5. Urban planning related services6. Designing lawns, gardens, playgrounds or other outdoor areas (these areas belongto the subfield of landscape architecture)7. Building inspection-related services, e.g. in connection with e.g. property sales/rentals orforces majeure damage8. Management of facilities9. Performing preliminary site studies for clients considering construction projects

With regard to the internationalization of architectural services, it is problematic to

speak of exports defined as e.g. the sale of goods and services in another countrythan the country in which they were produced (Luostarinen and Welch, 1990:20;other business administration scholars provide similar definitions) as the production ofarchitectural services as defined above may or may not take place in the same countryas the sale in question. On one hand, service types 7 - 9 must be performed on siteand thus cannot be regarded as exports. On the other hand, design and urban planningrelated services (types 1, 2, 5, 6) may to some extent be performed at a distance fromthe site, as long as the architect(s) performing the service has the necessary

information about the site from communication with the customer.

With regard to service types 3 and 4, the situation is unclear. The overall managementof a construction project usually requires the on-site presence of the architect on acontinual basis and therefore cannot be considered an export. Yet at the same time,consultant type assistance in connection with specific problems related to a givenconstruction project may or may not require architect presence, depending on thetypes of assistance provided. Thus service types 3 and 4 may or may not fall withinthe above definition of exports, as shown in the depictions of architectural servicesand architectural exports in Figure 2.


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Figure 2. Architectural services which may be considered as exports .

Architectural Services

(3) Architect-(4) ural Exports7 1 28 (3) (4)9 5 6

Source: Authors own conceptualization.

Figure 2 includes all of the nine previously mentioned types of architectural services.Those which may also be regarded as architectural exports in the sense that

production may take place in one country and the sales and delivery in anothercountry are placed in the Architectural Exports ellipse which is encircled by thelarger Architectural Services ellipse.

The relation between exports and an architectural firms international offeringsbecomes even more complex when one takes into account that offerings to individualcustomers often are bundles of the individual services listed and depicted above,which are specified in e.g. subcontracting contracts (see Luostarinen and Welch,1990:112-116 for a definition of international subcontracting). In situations where ar-chitectural service firms have achieved contracts which require the delivery of a com-

bination of design and construction management, only the design-related elements of

this bundle of services may be regarded as exports. On the other hand, if the contractspecifies a combination of design and construction assistance services, the designelement may be seen as an export, whereas the export status of constructionassistance services will depend upon their nature.

Due to the complexity related to the individualized bundles of services offered tospecific customers, I will subsequently speak of internationalization and not of ex-

portsin this dissertation. Majkgrd and Sharma (1998: 9-11) identify two distinct types

of service firm internationalization, client-following and market-seeking:


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[C]lient-following [...] implies that a firm is part of an international networkof exchange. Client-following firms operate in a network in which theirexchange partners operate internationally. These partners both help and

pressure the other members in the network into going international. Client-

following firms have accumulated experiential knowledge of theircounterpart. (ibid.:9)

In the initial year the market-seeking firms operate in domestic exchangenetworks that provide little assistance to go abroad. For a market-seeker,success abroad is contingent upon the ability of the firm to find partners tocooperate with, to detect needs, and to establish relations with firms abroad.Market-seekers lack experiential knowledge of foreign markets and areexposed to more potential problems than client followers. They must also

establish credibility with the buyers (ibid.:10-11).

In this research, the focus will be upon market-seeking internationalization because, asindicated in the foreword to this dissertation and Appendix A, the activities of Danishconstruction industry actors on the German market in the 1990s were mainly market-seeking.

2.2. Internationalization Theory.

2.2.1. Introduction.

The title of this dissertation indicates that the focus of this study is internationalization.The internationalization theoretic perspective must therefore be explained and justified.This will be done by first describing and contrasting several major internationalizationtheories and their ontologies and then discussing the strengths and weakness of thenetwork approach to studying internationalization in relation to the other theories. Thediscussion of internationalization theories in this subsection will, however, be brief

and, in contrast to the literature review undertaken in Chapter 3, methodologicalassessments of the individual contributions will not be undertaken because there existsan excellent, thorough, and comprehensive metatheoretical work on these types oftheories (Strandskov, 1995) which could enlighten persons interested ininternationalization theories with regard to these aspects.


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2.2.2. The Network View of Internationalization versus Other Inter-

nationalization Theories.

As previously mentioned in Chapter 1 (see also e.g. Hkansson, 1982), the research ofthe IMP Group is based on the ontological assumption that interactions between

buying and selling firms on industrial markets as well as in their network influence theirpurchasing decisions and marketing efforts. Correspondingly, the researchers of theIMP Group who have worked with internationalization theory (e.g. Axelsson andJohanson, 1992; Johanson and Mattsson, 1992a and 1988) emphasize that the inter-actions and relationships between a firm and other actors in its national and inter-national environment play a determining role in the internationalization process of theindividual firm in question.

However, the body of IMP literature on internationalization is small, the range of spe-cific internationalization-related topics covered is wide, and the coverage itself is ratherspread and sporadic. Therefore only one IMP conceptualization that is relevant inrelation to describing the cooperation among network actors (see research question 2as presented in Chapter 1) will be dealt with in this dissertation, namely Johanson andMattssons (1988:200) suggestion that there are three ways in which a firm canestablish and develop positions in relation to its counterparts in foreign networks:

1. through establishment of positions in relation to counterparts in national netsthat are new to the firm, i.e.international extension

2. by developing the positions and increasing resource commitments in thosenets abroad in which the firm already has positions, i.e.penetration

3. by increasing coordination between positions in different national nets, i.e.international integration (Theitalicsare Johanson and Mattssons.)

Several other well-known non-IMP internationalization frameworks will be presented

and discussed in the following paragraphs; they will thereafter be compared to theIMP network internationalization ontology. These contributions are as follows:

1. The so-called Uppsala Internationalization Model2. Institutional economic theories of internationalization based upon transaction

cost theory (e.g. Williamson, 1979) as presented in Strandskov (1995) andJohanson and Mattsson (1988)

3. The so-called textbook view of foreign market entry as epitomized by Root(1994); Axelsson and Johanson (1992) coined the term textbook view

The Uppsala Internationalization Model was the result of a number of studies (e.g.Johanson and Vahlne, 1977) on the internationalization of Swedish manufacturing


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firms undertaken at Uppsala University in the 1970s. Their collective outcome was adescription of the internationalization process as a gradual step-by-step commitmentto sell and to manufacture internationally as a part of a growth and experiential learning

process (Johanson and Mattsson, 1988: 209). There are two levels of description of

the final Uppsala model, a level that states that internationalization takes place as aprocess and a level that suggests that the process is a series of incremental steps, asopposed to e.g. continous leaps and bounds in many directions (Petersen andPedersen, 1996: 118).

One of the Uppsala models implicit assumptions is that the firm choosesto begin tointernationalize, e.g. because of an interest in achieving long-term growth. This and thesuggestion that internationalization processes per se are incremental have later been

called into question (see e.g. Strandskov, 1995:82-85; Petersen and Pedersen, 1996:122-123) due to increasing pressure to internationalize in certain industries. For theDanish architectural services industry in the 1990s, this criticism does not seemespecially relevant, due to the fact the European construction sector and thearchitectural services industry are not especially international in comparison with othersectors (see Appendix A). Instead, the lack of projects on the domestic market, asdescribed in the Foreword of this dissertation, is a much more plausible push mecha-nism for the market-seeking internationalization that took place on the German market

in the 1990s. However, it is relevant to mention that the Uppsala model deals in itsinitial phases with exporting, which, as previously explained in Subsection 2.1., issomewhat problematic with regard to architectural and other professional services.

From an IMP perspective, it is interesting to examine the reason proposed by theUppsala Internationalization Model for incrementalism: the experimental learning pro-cess. The Uppsala model suggests that (a) a process of experimentation and learningdetermines the internationalization path of the firm and (b) this process takes place

through interactions with actors on the foreign market (ibid.). IMP theorists ofinternationalization would be willing to subscribe to these propositions; however,neither the Uppsala model nor the IMP internationalization theories say much about thetypes of knowledge necessary for operations on foreign markets. This is thus a

justification of this dissertations research question three (see Chapter 1).

On the other hand, the difference between the Uppsala model as presented inJohanson and Vahlne (1977) and the subsequent IMP work on internationalization is

that the Uppsala models framework for explanation concerning the extent to whichand the way in which the actions of the individual firm are shaped by its interactions


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with other actors is much less sophisticated than the IMP framework of network anddyadic interaction (see e.g. Johansson and Mattsson, 1988 and Subsection 3.3.1. for ageneral description of the IMP framework).

The institutional economic theories of internationalization are based upon thedistinction found in Williamsons (1989:234) transaction cost theory between marketsand hierarchies as well as his ontological belief that firms internalize economictransactions in hierarchies if they are not best governed by the market mechanism(ibid.). On the basis of these foundations, institutional economic theories of inter-nationalization seek mainly to explain to what extent and when firms that operateinternationally will internalize their international transactions in hierarchical forms ofgovernance (e.g. subsidiaries) and to what extent and when these same firms will

externalize them in market transactions (Strandskov, 1995:89-112), through e.g. salesto distributors. Some institutional economic theories of internationalization also seekto explain intermediate modes of organization such as joint ventures or virtualcorporations (ibid.).

From a network point of view, Johanson and Mattsson (1988:209) criticize thetransaction cost approach to studying internationalization for not considering thecumulative nature of activities, the use of external assets, the development potential of

network relationships, or the interdependence between national markets. Theinstitutional economic perspective could also from the IMP perspective be criticizedfor not taking the possible existence of sticky markets (Hedaa, 1996) into account.

The textbook view on internationalization, as epitomized by Root (1994), promotesan ontology common to the strategic management literature of the 1980s (e.g. Porter,1980 and 1985, as well as Boughton, 1987, whose work will be discussed in Section3.2.): The firm can analyze relevant environmental factors and the interconnection of

these on foreign markets, and on the basis of this analysis subsequently develop andimplement a strategy for entry onto the various markets studied. Roots practicallyoriented book (1994) explains in depth how this should be done. A further implicitontological assumption of Roots, which is shared by Porter (1980 and 1985), yetquestioned by Boughton, 1987, is the absence of Hedaas (1996) sticky businessmarkets; thus, Root (1994) assumes that potential buyers on the foreign market buy

products based mainly on discrete assessments of their given physical characteristics,assessments which they repeat when purchasing repeatedly.


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It is obvious that the textbook views exclusion of the role of specific interaction andexisting networks between parties on foreign and domestic markets would be criti-cized by IMP researchers. The strategic planning-related ontological assumptions ofthe textbook view, i.e. the feasibility of strategic planning, are critically scrutinized at a

meta-theoretical level in Hkansson and Snehota, 1989. At a lower level of abstraction,Axelsson and Johansons (1992) case-based qualitative research provides examplesand categorizations of factors related to relationships that play a role in foreign marketentry, yet are omitted in the textbook view (ibid.: 221, 231-233):

Knowledge of specific actors in the network(s) of the foreign country inquestion

Knowledge of the relative positions of the actors in the foreign countrysnetwork(s)

Knowledge of direct and indirect firm relationships to actors in the foreigncountrys network(s)

Knowledge of how the support of these actors could be mobilized in relationto the planned export activities

The ability of the export firms actors to orient itself, i.e. obtain anunderstanding of where different actors including the actor itself stand inrelation to each other (ibid.:231)

The ability of the export firms actors to position their firm in the network of

other firms The ability of the firm to seize export market network opportunities that turnup at irregular or totally unexpected intervals

These factors will be discussed in Chapter 8, in connection with my empiricaltreatment of research question three.

Furthermore, it is worth noting that the above list of factors omitted in the strategicmanagement literature fits remarkably well with the picture painted by Cova, Mazet,and Salle (1994:32) and presented in Subsection 3.3.2 of this dissertation with regardto the neglect of network and relationship factors in textbook project marketingcontributions inspired by strategic management thinking.

Two continua are shown below in Figure 3. They depict the levels of environmentaland structural determinism in the four respective internationalization theories presentedin the previous paragraphs.Figure 3. Levels of Environmental and Structural Determinism in Internation-

alization Theories.

Figure 3a. Environmental Determinism of Internationalization Path.


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Low High

Uppsala Internationalization Model IMP Network TheoriesInstitutional Economic

Theories

Textbook View

Figure 3b. Degree of Structural Determinism in Internationalization Path.

Agents Discretion Pure Structural Determinism

Uppsala Internationalization Model Institutional EconomicIMP Network Theories Theories

Textbook ViewSource: Authors own conceptualization.

As depicted in Figure 3a, the Uppsala models ontology puts the fewest environmentalconstraints on firms internationalization paths. According to the Uppsala theory, theonly constraints the environment places on the internationalization path of firms relateto knowledge. Firms must learn the rules of foreign market operations from and duringtheir internationalization efforts in order to further internationalize.

In the other three theoretical perspectives, factors in the environment play a compar-atively larger role. In IMP internationalization theory, it is interactions within network(s)that determine the path of internationalization; in the institutional economic theories it isthe relative efficiency of markets versus hierarchies, and in the textbook view it is anumber of parameters relating to areas such as target customers, product,competition, and the macroenvironment (Axelsson and Johanson, 1992:220).

With regard to the degree of structural determinism in Figure 3b (see e.g. Bourdieu,1990; Giddens, 1993), by including no structural factors, the Uppsala internation-alization model as epitomized by Johanson and Vahlne (1977) is a pure process model(see Majkgrd and Sharma, 1998:2-6).2In contrast, the IMP internationalization work lies approximately in the middle of thediscretion-determinism continuum; it focuses upon the structural characteristics ofnetworks which (a) limit the internationalization paths and choices of the firm to someextent and (b) offer specific opportunities for cooperation. However the extent of the

2One could also argue that knowledge is a structuring factor which creates structures (see Giddens, 1993).This, however, goes beyond the argumentation of Johanson and Vahlne (1977).


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limit and opportunities is not clearly defined in any IMP contribution and varies amongthe various contributions. The range is depicted by the thick line in Figure 3b.

At the other extreme, the institutional economics approach and the textbook view con-

tain factors that are very structurally determining. In the institutional economicsapproach, the question of markets or hierarchies determines the path of internation-alization; little or nothing is attributed to the preferences of the agent. With regard tothe textbook view, there are a number of calculations for agents to make on the basisof information about the existing structure of the foreign market; these calculationsobjectively determine the firms optimal internationalization path.

On the basis of the above, I perceive that each of the four internationalization

perspectives has its strengths, weaknesses and degree of usefulness for certainspecific purposes. I will therefore not attempt to judge which theory is best from aglobal perspective,3but merely justify my choice of theoretical framework: My pilotstudy research (see Appendix A) indicated that knowledge of the German market had

been a barrier for Danish architectural firms that attempted operations on this marketduring the nineties and that networks of social relationships had played a role withregard to the path of internationalization chosen and the process of acquiring projectson the German market. The findings justify my choice of the IMP framework

(including IMP internationalization theory).

2.3. The Context-Specific Knowledge Aspect of Architectural Services.

In this century, implicit, knowledge and its role in relation to economic phenomenahave been increasingly discussed since the groundbreaking work of AustrianEconomist and Nobel Prize Winner Friedrich Hayek (1937 and 1945; see also Nonaka

and Takeuchi, 1995:33-49 for a historical overview). In the treatment of thisdissertations research question three, the focus is on context-specific knowledge, i.e.knowledge related to the German market as well as its relevant networks and actors. Inrelation to this research question, it is necessary to discuss (a) types of knowledge and(b) potential locations of knowledge. However, aside from the work of Sharma(1992), until recently there has been a lack of IMP studies that incorporate insightsconcerning the role of knowledge and organizational learning in relation to networksand dyadic relations (Mller, 1993:361). This is especially true with regard to the

INPM-sub-field of project marketing; Havila, Hkansson and Pedersen (1998) was the

3Also Strandskov (1995) avoids a global ranking of theories in his meta-theoretical work.


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only IMP/INPM knowledge and project related study I could find. Therefore thissubsection will focus upon the work of researchers not affiliated with the IMP/ INPMGroup.

Knowledge has been defined by strategic knowledge management theorists Sanchezand Heene (1997:4) as the set of beliefs [] about [] relationships amongphenomena. The element of belief is also present in Nonaka and Takeuchisknowledge definition (1995: 58); however, these two Japanese scholars distinguish

between subjective tacit knowledge and objective explicit knowledge (ibid.: 59).In this distinction they make use of Polyanis (1962) term tacit knowledge:

Polyani uses the example of the skater (who can skate beautifully but who

cannot explain how she manages to skate the way she does) to propose thatwe know more than we can say (1962). This example has been invoked bymany writers to suggest that important knowledge within individuals andwithin organizations can be tacit - i.e. incapableof articulation. (Sanchezand Heene, 1997:8, authors italics)

Furthermore, Nonaka and Takeuchi contrast the two types of knowledge as depictedin Table 1:

Table 1.Nonaka and Takeuchis Two Types of Knowledge.

Tacit Knowledge (Subjective) Explicit Knowledge (Objective)Knowledge of experience (body) Knowledge of rationality (mind)Simultaneous knowledge (here and now) Sequential knowledge (there and then)Analog knowledge (practice) Digital knowledge (theory)

Source: Nonaka and Takeuchi, 1995:61.

According to Nonaka and Takeuchi, tacit knowledge has become embedded in anactors bodily actions through the actors experience and practice. Although the actorcannot explain how or why he or she acts the way he or she does at a given point oftime as he or she has not reflected upon this knowledge consciously, the actor knowssomething about how and why to act in the given situation from tacit experience.Explicit knowledge, on the other hand, is of a more theoretical or reflexive nature inthat it has been consciously generated in the aftermath of certain happenings throughthe minds processes of rational thinking. Explicit knowledge may also betransferred by direct, non-metaphorical statements that can be communicated verballyfrom person to person (ibid.: 59-61).


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However, over time, knowledge that at one time is completely tacit may, at least tosome extent, be described or absorbed by others who e.g. study the practice of indi-viduals and groups and/or immerse themselves in a group (see e.g. Bourdieu, 1990).

This allows for the possibility of other persons accessing and using tacit knowledge(Sanchez and Heene, 1997:9). Nonaka and Takeuchi (1995:62-70) depict some possi-ble knowledge conversion and sharing processes in Figure 4:

Figure 4. The Knowledge Conversion and Sharing Processes of Nonaka andTakeuchi.

Dialogue

Tacit knowledge to Explicit knowledge

Socialization Externalization

Tacit (creates Sympathized (creates Conceptualknowledge Knowledge) Knowledge)

Field Linkingfrom Explicit

Building Internalization Combination Knowledge

Explicit (creates Operational (creates Systemicknowledge Knowledge) Knowledge)

Learning-by-Doing

Source: Nonaka and Takeuchi, 1995: 64, 71, and 72.

According to Nonaka and Takeuchi (ibid.:64-5), socialization is process of sharing

experiences and thereby creating tacit knowledge such as shared mental models andtechnical skills. An individual can acquire tacit knowledge directly from others withoutusing language. Apprentices work with their masters and learn craftsmanship notthrough language but through observation, imitation, and practice. [] The key toacquiring tacit knowledge is experience.

Externalization, on the other hand, is:

a process of articulating tacit knowledge into explicit concepts. It is aquintessential knowledge-creation process in that tacit knowledge becomesexplicit, taking the shapes of metaphors, analogies, concepts, hypotheses,


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or models. [] [E]xpressions are often inadaquate, inconsistent, andinsufficient. Such discrepancies and gaps between images and expression,however, help promote reflection and interaction between individuals.

The externalization mode of knowledge conversion is typically seen in the

process of concept creation and is triggered by dialogue or collectivereflection. A frequently used method to create a concept is to combinededuction and induction. (ibid.: 64)

Thirdly, internalization refers to a process of embodying explicit knowledge into tacitknowledge. It is closely related to learning by doing (ibid.: 69). Lastly, in caseswhere explicit knowledge is to be converted into further explicit knowledge, i.e. in thecombination quadrant, both socialization and externalization take place in the

process of scrutinizing and linking both the pieces of explicit knowledge an individualor group possesses and the codified foundations upon which it rests.

Human beings can furthermore move from one mode of knowledge transfer toanother. This potentially partially individual and inherently partially social process isillustrated by the knowledge transfer spiral depicted in Figure 4 (ibid.:71-72). Dialo-gue about otherwise tacitly socialized experiences moves its participants from theSocialization to the Externalization quadrant of Figure 4. Thereafter, the process

of linking pieces of explicit knowledge to one another moves an individual or a groupfrom the Externalization to the Combination quadrant. When a person or a groupseeks to transfer his, hers or its systemic theoretical knowledge into practice in his, heror its daily actions by internalization, experimental processes of Learning by Doingmove the individual or group from the Combination quadrant to the Internalizationquadrant. Finally, when a person or group takes steps to transfer internalizedknowledge to others by way of example or though demonstrative action, thisindividual or group is engaging in field building.

With regard to the location of knowledge, Sanchez and Heene (1997:4) state that whileknowledge originates and exists within individuals, it can also be situated at the level ofthe organization. IMP scholar Sharma (1992) builds upon this suggestion by addingyet other levels; he suggests that a key source of knowledge in a business servicefirm may be its activities in networks. This network knowledge is, according toSharma, contextual, in the sense that it may be (1) industry specific, (2) technologyspecific, (3) function specific or (4) client specific. (Sivula et al.1997:124). Finally,

both Nonaka and Takeuchi (1995:57) and Finnish IMP researchers Alajoutsijrvi andTikkanen (1999) suggest four levels at which contextual knowledge may be found:


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1. The level of the individual2. The level of the group (Alajoutsijrvi and Tikkanen use the word team)3. The organizational level (Alajoutsijrvi and Tikkanen use the term intra-

organizational level)4. The inter-organizational level

The strategic knowledge management researcher Boisot has developed a social learn-ing cycle for firms of all sizes. In contrast to the knowledge conversion and sharingmodel of Nonaka and Takeuchi (1997), the model of Boisot (1997) focuses upon thediffusion of knowledge from individuals to larger groups.

Figure 5. Boisots Social Learning Cycle.

Codified Proprietary 3. Diffusion TextbookKnowledge Knowledge (Spreading the Knowledge

word)

DEGREE OF 2. Problem solving 4. AbsorptionKNOWLEDGE (Creating taxonomies; (Making itCODIFICATION establishing cause and effect) second nature)

Uncodified Personal 1. Scanning CommonKnowledge Knowledge (Acquiring new insights) Sense

Undiffused TARGET POPULATION Diffused(i.e. situation in an indivi- (i.e. situated in a largerdual or small group) population, e.g. a firm)

Source: Boisot et al., 1997:69; Hall, 1997:48.

In comparison with the model of Nonaka and Takeuchi (Figure 4), Polyanis tacitknowledge is, in the terms of Boisot et al.uncoded and either personal knowledgeor a groups common sense. Absorption in Boisots social learning cycle (Figure5) is approximately the same as learning-by-doing and internalization in Nonakaand Takeuchis model. Boisot et al.s subconscious process of scanning to createnew personal knowledge at the level of the individual or very small groups is, how-ever, not included in Nonaka and Takeuchis model. On the other hand, Nonaka andTakeuchis process of socialization (spreading tacit knowledge) is not included in


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Boisot et al.s model, due to Boisot et al.s assumption that tacit knowledge isdifficult to diffuse beyond very small groups (ibid.: 69).

Boisots problem solving and diffusion are encompassed by Nonaka and Take-

uchis dialog and linking explicit knowledge. However, diffusion may also takeplace through one-way communication of codified or explicit knowledge. ThusBoisots proprietary knowledge and textbook knowledge both contain elements ofconceptual and systemic explicit knowledge.

Boisot et al. (1997:69) describe the four steps of their learning cycle as follows:

1. ScanningIdentifying threats and opportunities in generally available but often fuzzy data - i.e.weak signals. Scanning patterns such data into unique or idiosyncratic insights thatthen become the possession of individuals or small groups. Scanning may be veryrapid when the data is well codified and abstract and very slow and random when thedata is uncodified and context specific.

2.Problem solvingThe process of giving structure and coherence to such insights - i.e. codifying them.In this phase they are given a definite shape and much of the uncertainty initiallyassociated with them is eliminated. Problem solving initiated in the uncodified regionof the I-Space [i.e. Information Space] is often both risky and conflict laden.

3.DiffusionSharing the newly created insights with a target population. The diffusion of well-codified and abstract data to a large population will be technically less problematicthan that of data which is uncodified and context specific. Only a sharing of context

by sender and receiver can speed up the diffusion of uncodified data; the probabilityof achieving a shared context is inversely proportional to population size.


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4.AbsorptionApplying the new codified insights to different situations in a learning-by-doing or alearning-by-using fashion. Over time, such codified insights come to acquire a

penumbra of uncodified knowledge which helps to guide their application in particularcircumstances. Where newly acquired uncodified knowledge clashes with already

extant implicit models, a new round of scanning activity may be initiated in order toeliminate the discrepancy.

Alajoutsijrvi and Tikkanen (1999) have built upon Boisot et al.s Social LearningModel by e.g. explicitly incorporating interorganizational relationships in the modeland adding an intermediate level of knowledge as depicted in Figure 6.

Figure 6. Alajoutsijrvi and Tikkanens Competencies in the Context of Rela-

tionships.

Increasing codification/utility

Generic

StructuringPortfolio-

of the specific/

SubstantialInformation

Relationship-specific

Individual Team-based Intra- Inter-Increasing contextuality/ organizational organizationaltacitness

Increasing scarcity Information sharing Increasing sharing

Source: Alajoutsijrvi and Tikkanen (1999).

In Figure 6, the arrows refer to the four directions of knowledge transfer specified byBoisot et al.in Figure 5. Additionally, Alajoutsijrvi and Tikkanen have incorporatedthe four levels at which contextual knowledge can be found. Finally, they have addedan intermediate category of knowledge contextuality, portfolio specific or substantialknowledge which they define as follows (ibid.):


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Portfolio-specific or substantial competence refers to the knowledge andskills that are transferable and applicable across individuals and individualrelationships of the organization. Adapting new technology, for example,may represent a competence within several customer relationships.

Finnish post-doctoral researcher and CEO Marjatta Maula proposed several potential

locations for the knowledge of the architectural services (e-mail from Maula to medated 1998-10-26):

an individual architect is well-educated and knowledgeable (= theknowledge is located in the head of a lonely rider); that the drawings ofthe building etc. are complex (= the knowledge is located on a piece of

paper or as bits in the computer); that the project is complex (= the know-ledge is located partially in the network of different actors and partially in thearchitect/office)

In relation to research question three (see page 6), Section 5.4 and Chapter 8 willelaborate further on the types of knowledge used in the Danish case study architecturalfirms operations on the German market.

2.4. Architectural Services in Relation to the Characteristics of the Pro-

fessional Services.

As a concept, services have been defined in a wide variety of ways in businessadministration literature. However, there are a number of characteristics which have

been included in many definitions, e.g. that services are intangibles as compared togoods and that they must be consumed instantaneously because they are, by nature,

perishable (see e.g. Lwendahl, 1997:16 or Sharma, 1991:21). These general servicedefinitions and characteristics have, in turn, also been highly criticized, on account ofthe fact that services are highly heterogeneous (ibid.), including offerings from

catering to engineering calculations, from family therapy to public transportation.

Due to this extremely wide range of offerings, I do not deem a discussion ofarchitectural services as services fruitful. Instead I will immediately go one step further

by discussing architectural services as professional services4. On the basis ofextensive readings, Lwendahl (1997:18), listed three common characteristics of

4 As I use a number of German works in this dissertation, it must be noted that there is no good direct

German translation of the term profession. In German the term freie Beruferefers to self employedpractitioners with specialist knowledge whereas the akademische Berufe are the old universityeducated professions of the clergy, divinity, law, and high school teaching (Stevens, 1998:27).


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professions that are found in a large number of scientific definitions of the term (e.g.Schriesheim et al., 1977):

1) a vocation founded in a body of knowledge, typically a higher (academic)education2) a vocation concentrated on the application of this knowledge, combinedwith experience, to problems of vital importance in society and in a waywhich involves the altruistic service to clients, rather than self-seekingmotives such as profits or status3) a vocational organization based on a common code of ethics, where selfcontrol is supported by peer reviews, such that members who break the codeof ethics may be excluded

With regard to the above characteristics, I am skeptical towards characteristic two.Problems of vital importance in society is an extremely vague phrase, and, over andbeyond that, I consider the notion that the professions are altruistic and non-self-seeking pretentious5. Lwendahl attempts to justify this claim, but I am loath to ac-cept her elaboration (ibid.:19):

A primary characteristic of a professional service is the altruistic service toclients, meaning that in cases of conflict of interest between what is

profitable for the supplier and what will be the best solution for the client, thelatter alternative must be chosen. This is a difficult constraint to impose on afirm, but it is critical to the long-term reputation of the company.

Although I agree that it is usually is in the long-term interest of the professional inquestion to put his or her clients interests first, I find insufficient justification for eitheran a posteriori or an a priori claim that this is what actually characterizes a profession.

With regard to characteristics 1 and 3, I have no similar objections in principle.However it must be noted that while characteristic 1 can be said to be applicable toarchitecture as it is practiced in both Germany and Denmark (see Appendix A fordetails), characteristic 3 is more true of the architectural profession as it is practiced inGermany. Architects responsible for building plans in Germany must be registered bytheArchitektenkammerof the German federal state orLandin which they are working(Arkitekt- og Byggebladet, March 1995:33), whereas there is no comparable

5 It is interesting to note that Freidson (1983) and Larson (1977) take almost the opposite view ofLwendahl (1997): They view the professions as monopolies that have succeeded in convincing thegeneral public to give a monopoly on the right to perform certain tasks, justified or not.


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organization with both a compulsory membership requirement and the power of peerreview in Denmark.

On the basis of these three characteristics of professions, Lwendahl goes on to de-

fine five common characteristics of the professional service (Lwendahl, 1997:20):

1. It is highly knowledge intensive, delivered by people with higher education,and frequently closely linked to scientific knowledge development within therelevant area of expertise.

2. It involves a high degree of customization.3. It involves a high degree of discretionary effort and personal judgement by the

expert(s) delivering the service.64. It typically requires substantial interaction with the client firm representatives

involved.5. It is delivered within the constraints of professional norms of conduct,including setting client needs higher than profits and respecting the limits of

professional expertise.

Characteristic 5 will be eliminated because of the previously voiced objections to theargument upon which it rests. On the other hand, results from the pilot study (seeAppendix A) indicate that characteristics 1-4 do apply to architectural services. Morespecifically, architects offerings of service types 1-6 and 9 from Subsection 2.1. arecustomized (characteristic 2, above) and therefore require substantial discretionaryeffort on the part of the architectural firm (characteristic 3) as well as substantialarchitect interaction with clients (characteristic 4). Offerings of service types 7 and 8are, in contrast, not necessarily always highly customized, but as the authors pilotstudy results (ibid.) suggest that service types 7 and 8 are currently of relatively minorimportance in relation to the entire portfolio of architectural services, this idiosyncrasywill be ignored in the subsequent discussions of the terms professional services andarchitectural services.

It should be noted that Lwendahls characteristics 2 - 4 are defined in relative andrather vague terms. Thus using her characteristics in defining architectural services

6Starbuck (1992:149-151) and Alvesson (1995:8) note that not all professional services are based upon

judgement. In the case of e.g. doctors, dentists, and lawyers, there is a limit to the discretionary effort andpersonal judgement these professionals may use in their assessments; instead they must use provenscientific or scholarly methods. These two authors therefore make a distinction between professional

service firms and knowledge-intensive firms (KIFs). This distinction will be ignored in my work, as for thecase of architects, decision making does include the discretionary effort and personal judgementcharacteristic of Starbucks (1992) and Alvessons KIFs.


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serves not so much to give a clear picture of what architecture services are exactly,but to differentiate the commonalties that architectural services share with otherprofessional services from the characteristics of other types of goods and services. Itis therefore fruitful to narrow the focus once more and look at architectural services in

relation to technical and engineering consulting services.

Sharmas 1991 work deals with the foreign operations of technical consulting firms(TCFs). Technical consulting, as defined by Sharma (1991:20), refers to industrialservices sold to organizations, public or privately owned. These partly resembleservices, partly industrial markets and still possess their own particularcharacteristics. Sharma then goes on to describe technical consulting services inrelation to characteristics commonly associated with services and professional

services. Many of Sharmas characteristics of technical consulting services arerelevant to some of the nine types of architectural services specified in Subsection 2.1.

With regard to intangibility, Sharma (ibid.:22) states:

The intangibility discussion is only partially relevant to TCFs. As TCFsexecute an assignment, a report containing text, figures and tables is

prepared. These are not absolutely intangible. The client can both see andgrasp the report. The skills consumed in producing the output is [sic!],

nevertheless, invisible and difficult to touch and grasp. Consequently, someof the consequences attached to the intangibility dimension hold for TCFs aswell.

Concerning architectural services, these remarks are highly relevant with regard to thedesign-related services (service types 1 and 2) as well as preliminary site studies(service type 9).

Sharma goes on to deal with the issue of inseparability (ibid.:23):

The production of technical services cannot be separated from its producer.As stated in the previous section, technical advice can, nevertheless, bestored on a piece of paper in the shape of figures and text. These aretransportable. However, [...] a proper interpretation of the advice andrecommendations demands a close interaction and exchange between the

producer of the service and its user. [...] In this sense even in the field oftechnical consultancy, a separation of service from its producer is difficult

and indeed undesirable.


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These observations are worth considering with regard to the relations of the differenttypes of architectural services to each other, especially as applies to the relationship ofthe architectural design work (service types 1 and 2) and the implementation of thedesigns in the building work (service types 3 and 4). In Denmark, Germany, and the

other EU countries, a de facto separation between design and production is oftenseen, as general contractors, construction management firms, or yet other actors oftenorganize the construction process without consulting the architect who designed the

building (see Section 6.2. and Appendix A). Danish and European architects bemoanthis situation (see e.g. Arkitekt- og byggebladet, November 1992:31 and Eurostat,1995:24-39), whereas certain customers as well as other actors in the constructionindustry apparently prefer it. Thus the general undesirability of inseparability cannot beas categorically determined for the architectural services industry as Sharmas

statement suggests.

As for the standardization debate, Sharmas remarks are as follows (Sharma, 1991:23):

For TCFs, the issue of standardization is made still more problematic as notwo assignments are absolutely identical, especially not in the internationalmarket. In international markets due to differences in taste, climaticconditions, cultural values, traditions, topology etc. the technical solutions

called for vary. As a consultant gains insight into a field and obtains feed-back from others (in the network), his performance and the quality of theservices rendered may improve and vary. Thus brand name is difficult if notimpossible to establish. Among TCFs, use of brand name is non-existant[sic!] and consumer loyalty must be ensured through alternative means. [...] itis more important to build up good-will, establish reputation and nurturerelationships.

Articles from Danish architectural magazines (Arkitekt- og Byggebladet andArkitekten) as well as the pilot study interviews (see Appendix A) confirm theseobservations with regard to standardization and the difficulty of the establishing ofones name in the architectural services industry. These conceptual remarks willtherefore be included in the further delimitations of the term architectural services.However, Sharmas statement about non-existent brand name use is probably tooextreme with regard to both technical consulting and architectural services. Some largetechnical consulting firms such as the Swedish-Swiss multi-national company AseaBrown Bovery (ABB) may in fact have established names for themselves that functionas de facto brands. Additionally one could argue that certain architects (e.g. British Sir

Norman Foster, the Dane Jrn Utzon, the Finn Alvar Aalto, the American Frank Lloyd


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Wright, or the German Walter Gropius) or architectural firms throughout history haveestablished brand-like names for themselves on the basis of broad artistic recognitionand, in some circumstances, exceptional technical expertise in specific fields such asairport or concert hall construction (see also Gerkan inDer Architekt, May 1990).

The last characteristic commonly associated with services and professional servicesthat will be covered in this dissertation on the basis of Sharmas work is perishability.Sharma (1991:24-5) comments upon the specifics of the perishability issue with regardto TCFs in the following way:

In the work on service industries, it is argued that services can not [sic!] bestored [...] and thereby create problems of demand management. [...]advance production is not feasible [...] The issue of perishability is,

consequently, different in service industries. The above argument holds forTCFs as well. Managing demand fluctuation is difficult for TCFs at the sametime as capacity utilization must remain high (85-90%) to avoid losses. Theavoidance of excess capacity is important. [...]

TCFs borrow consultants from each other. [...] it is frequently difficult for aTCF to maintain all its experts. Borrowing experts from outside is commonand the network is important. The network helps TCFs to balance their ownexcess capacity through lending people to other parts of the network. TCFs

who have worked together borrow from each other to reduce time andresource investment.

The authors pilot study (see Appendix A) confirmed that the perishability problemsof the architectural firms are large, due to the cyclical fluctuation of the constructionindustry and the project nature of the business (see also Subsection 3.3.2); one of thearchitects interviewed in the pilot study bases his one-man practice on providing ser-vices to other, larger architectural service firms that regularly experience demand fluc-

tuations.

Furthermore, Alvesson (1995:6) lists three characteristics common to knowledge-intensive services, which also apply to architectural services:

heavy reliance on individuals (and less dependence on capital) and a high degreeof independence on the part of practitioners

traditional concrete (material) assets are not a central factor. The critical elements

are in the minds of employees and in networks, customer relationships, manualsand systems for supplying services


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heavy dependence on the loyalty of key personnel and this is the other side ofthe picture considerable vulnerability when personnel leave the company

Finally, it is relevant to mention one characteristic that distinguishes architecturalservices from most other professional services as well as the services provided byother actors on the construction market: Architectural projects are influenced both bythe governance structure of the construction market and by rules that are common toartistic fields, as architects judge each others work on the basis of artistic qualities aswell as other criteria (Albertsen, 1996:3), such as user-friendliness, good use oftechnological solutions, and energy efficiency. I will elaborate further upon thetheoretical implications of this point in relation to research questions 3 5 in Section4.4.

Before going on to a discussion of construction projects in the next subsection, char-acteristics inherent to architectural services as a sub-field of the professional servicesare listed below to summarize the discussion of this subsection; they are thereafter re-lated to case study research questions three and five, as presented in Chapter 1:

1. Architectural services are highly knowledge intensive.2. Architectural services involve a high degree of customization and thus are non-

standardized.3. Architectural services involve a high degree of personal judgement on the part of the

architect(s).4. Architectural services involve substantial interaction with clients or their

representatives.5. Architectural services involve both intangible and tangible elements; however, most

inputs in the production of the tangible elements are intangible.6. Architects perceive a problem of inseparability in relation to architectural services,

whereas other actors do not necessarily perceive this problem.7. Brand name is extremely difficult to establish in the field of architectural services.8. Architectural services are perishable in the sense that advance production is not

possible.9. Architectural services are highly dependent upon the efforts of individual architects.10. Architectural services are less dependent on material assets than they are on

elements in the minds of the architect(s), their networks, and the routines related toarchitectural services.

11. The production of architectural services requires loyalty f

sdanish architecture sales to germany in the 1990skaates (2001) phd-thesis

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