An-Najah National University Faculty of Graduate Studies Assessing Innovation Practices in Project Management: The case of Palestinian Construction Projects By Rawan Khader Ghaben Supervisor Dr. Ayham Jaaron This Thesis is submitted in Partial Fulfillment of the Requirements for the Degree of Master in Engineering Management, Faculty of Graduate Studies, An-Najah National University, Nablus, Palestine. 2015 iii Dedication To my mother and father Rawan iv Acknowledgement First of all , I praise God, the Almighty, for providing me this opportunity and granting me the capability to proceed successfully. My deepest gratitude to Dr. Ayham Jaaron, my supervisor, for his support, constructive comments, quick responses, valuable guidance and assistance throughout this research. Many thanks to my parents and family for their endless support, love, and encouragement. I would like also to express my appreciation to all the academic staff of the Engineering Management program at An-Najah National University. My dear colleagues, thank you for the friendly and many unforgettable memories inside the University. At the end, I would like to thank all those people who made this thesis possible and an enjoyable experience for me. vi Table of Contents No. Subject Page Dedication iii Acknowledgement iv Declaration v List of Tables viii List of Figures ix List of Abbreviations x Abstract xi Chapter One: Introduction 1.1 Chapter Overview 1 1.2 Background 1 1.3 The Research Problem 3 1.4 Aim and Objectives of the Research 3 1.5 Research Questions and Hypotheses 4 1.6 Thesis Structure 6 Chapter Two: Literature Review 2.1 Chapter Overview 7 2.2 Project Management 7 2.3 General Overview of the Construction Environment 11 2.4 Innovation in Construction 19 2.5 Research Conceptual Framework 36 2.6 Research Hypotheses 45 Chapter Three: Research Methodology 3.1 Chapter Overview 49 3.2 Research Design 49 3.3 Research Strategy 50 3.4 Research Methodology Flow Chart 51 3.5 Research Population and Sample Size 53 3.6 Field Survey and Data Collection 57 3.7 Normality Test 66 Chapter Four: Data Analysis 4.1 Chapter Overview 68 4.2 Study Population 69 4.3 Innovation Value Chain 73 4.4 Bivariate Analysis 84 Chapter Five: Framework Development 5.1 Chapter Overview 90 5.2 Hypotheses Testing 90 5.3 Innovation Assessment 96 vii 5.4 Interview Analysis 102 5.5 Framework Development 103 Chapter Six: Conclusions and Recommendations 6.1 Chapter Overview 109 6.2 Conclusions 109 6.3 Research Contribution 113 6.4 Recommendations 113 6.5 Suggestions for Further Research 115 References 116 Appendixes 137 ب الملخض viii List of Tables No. Title Page 2.1 Nature of Projects in Developing and Developed Countries 16 2.2 History of Radical Innovations in the Construction Industry 21 2.3 Theoretical Practices of Innovation 38 3.1 Correlation Coefficient of Each Field of Innovation Value Chain 61 3.2 Correlation Coefficient of Each Field of Innovation Practices 62 3.3 Cronbach's Alpha Test 63 3.4 Cronbach's Alpha 64 3.5 Normality Test 67 3.6 Parametric vs Non-Parametric Tests 67 4.1 Drivers of innovation ranked in descending order 75 4.2 Enablers of innovation ranked in descending order 78 4.3 Barriers of innovation ranked in descending order 80 4.4 Impacts of innovation ranked in descending order 82 4.5 Bivariate analysis according to the position of participants 86 4.6 Bivariate analysis according to the experience in the construction 88 4.7 Bivariate analysis according to the company‟s geographic location 89 5.1 Correlation Coefficient among innovation practices 93 5.2 Correlation Coefficient among innovation PM practices 95 5.3 Scaling Degrees 97 5.4 Application Degree for Best Innovation Practices 98 5.5 Application Degree for Innovation Practices 101 ix List of Figures No. Title Page 1.1 Aim, Objectives & Expected Outcomes of the Research 5 1.2 Thesis Structure 6 2.1 Projects Attributes 8 2.2 PMI‟s Nine Project Management knowledge Areas 10 2.3 Innovation Space 23 2.4 Innovation Value Chain 26 2.5 Framework for analyzing innovation in construction 27 2.6 Innovation Value Chain Model 28 2.7 Drivers of Innovation 30 2.8 Enablers of Innovation 32 2.9 Barriers of Innovation 34 2.10 Impacts of Innovation 36 2.11 The AT Kearney House of Innovation 37 2.12 Innovation Best Practices 39 2.13 Research Conceptual Model 48 3.1 Research Methodology Flow Chart 52 3.2 Firms‟ Geographic Distribution 55 3.3 Questionnaire‟s Response Rate 57 4.1 Important of innovation 68 4.2 Gender Distribution 69 4.3 Distribution of organization 70 4.4 Company location 71 4.5 Respondents experience 71 4.6 Respondent position 72 5.1 Research Conceptual Model 91 5.2 Hypothesis Testing 96 5.3 Conceptual Framework for Project Management Innovation 105 6.1 Innovation Value Chain Model 110 6.2 Research Conceptual Model - Hypothesis Testing 112 x List of Abbreviations ANOVA Analysis of Variance BIM Building Information Modeling CAD Computer Aided Design DCI Dimensions Construction Innovation GDP Gross Domestic Product Ho Null hypotheses IVC Innovation Value Chain NASA National Aeronautics and Space Administration PCBS Palestinian Central Bureau of Statistics PCU Palestinian Contractors Union PECDAR Palestinian Economic Council for Development and Reconstruction PM Project Management PMBOK Project Management Body of Knowledge PMI Project Management Institute PPP Public Private Partnerships P-value Probability Value R Rank R&D Research and Development RII Relative Importance Index SPSS Statistical Package for the Social Sciences SWOT Strengths, Weaknesses, Opportunities and Threats U.S. Navy United States Navy UK United Kingdom USAID United States Agency for International Development WB West Bank WW II World War II BIM Building Information Modeling PPP Public Private Partnerships AEC Architecture Engineering Construction CERF Civil Engineering Research Foundation xi Assessing Innovation Practices in Project Management: the case of Palestinian Construction Projects By Rawan Khader Ghaben Supervisor Dr. Ayham Jaaron Abstract Project management is one of the most important tools that have been used to maximize the probability of having a successful construction project. A successful project management requires effective controlling and alignment with innovation. Thus, the study takes the approach that project management can be improved if the construction industry is more innovative. From this point forth, this study is concerned with two topics and the interplay between them, namely “Innovation” and “Project Management”. The study relies on the exploratory research inquiry of structured questionnaires with interviews to achieve the objectives of the study, as it consists of two parts: The first part is prepared to present a clear picture of the relative importance of the key drivers, barriers, enablers and impacts of innovation in construction, the second one is prepared to explore the best innovation practices in construction project management. A survey for the questionnaire has been submitted to 365 consulting and contracting firms that reside at WB- Palestine, where the SPSS statistical program has been used for the data analysis. The data was analyzed through two phases of analysis: descriptive analysis and hypotheses testing. xii The results of the descriptive analysis showed that the main driver of innovation is “reducing the costs”, the main enabler of innovation is “the rewards system”, the main barrier of innovation is “lack of effective management” and the main impact of innovation is “getting a competitive advantage”. Furthermore, the results of hypotheses testing showed that there is a statistically significant relationship at a significant level (α ≤ 0.05) among five practices: (1) Strategic Management, (2) Internal Innovative Working Environment, (3) External Innovative Working Environment, (4) Stakeholders‟ Management, and (5) Project Management. The focal point of this research is to assess the extent of applying these five practices in West-Bank Palestine. The total average response is (3.60) out of (5.00) which is considered high. Based on the findings of the research, the researcher devised a framework that is intended to be an effective management tool for supporting construction project management. It is recommended for the organizations to apply such framework and to be aware about the positive impacts of innovation and participate actively to implement it rather than to resist it. Finally, the findings of this research are expected to provide useful information for future research directions, especially as an indicator for the development of frameworks for innovative project management. 1 Chapter One Introduction 1.1 Chapter Overview This chapter sets the background to the research and discusses the problem of the study. It also states the aim, objectives, questions and hypotheses of the research. Finally, the structure of the thesis is outlined. 1.2 Background Construction is a powerful sector that provides jobs and stimulates growth for other construction-related economic activities. It plays a significant role in the Palestine‟s economy. According to PCBS (2014), it contributes to around 15.4% of Palestine GDP and 14.9% of its workforce. The desire for innovation in the construction sector has been recognized by different authors (e.g. Barrett et al., 2001; Eaton, 2001; Gann, 2000). Barrett et al. (2001) remark that successful innovation enables construction firms to better satisfy the aspirations and needs of society and clients. Eaton (2001) declares, without innovation a business does not have a rational source of competitive advantage in construction. In addition, Gann (2000) states that construction firms need to improve their capabilities of managing innovation if they are to build reputations for technical excellence that set them apart from more traditional players. 2 According to Blayse and Manley (2004), organizations need to innovate to win projects. However, a major dilemma is how to stimulate innovation in the construction sector! Kavanagh and Naughton (2009) argue that project management can drive a nation‟s capability of innovation. Project management is one of the most important tools that have been used to maximize the probability of having a successful construction project. It plays an important role in planning, coordination, control and execution of construction projects and has provided efficient tools and many techniques for engineering and construction firms, such as work breakdown structure, Gantt chart and critical path method. In response to development and change in construction environment, organizations need to challenge conventional construction project management applications and look for modern applications to improve their competencies. Organizations need to integrate project management with innovation to increase their effectiveness and gain a competitive advantage. Tushman and Nadler (1986) stressed that organizations can gain competitive advantage only by managing effectively for today while simultaneously creating innovation for tomorrow. Moreover, Hamel (2006) stated, while not every management innovation will result in competitive advantage, it is not an excuse not to innovate because the more you are innovative, the greater the chance of reaping a huge return. 3 1.3 The Research Problem The local construction industry is one of the main economic engine sectors that supports the Palestinian national economy. Nevertheless, the construction project management has long been suffering from its lack of innovation, that leads to negative effects on capability of the organizations and creativity of the employees. Thus, there is really need to embrace innovation throughout the life cycle of construction projects. Moreover, the construction industry consistently had a poor score against evaluation practices of innovation. Such evaluation is very important to assist firms to understand their strengths and weaknesses, and so to enhance their ability to move from survival strategies to innovative culture with long- term sustainability. 1.4 Aim and Objectives of the Research From a construction industry perspective, it is widely believed that due to the continuous changing conditions, construction innovation may become a fourth performance dimension in the future in addition to the traditional dimensions of cost, quality and time (Newton, 1999). Thus, this study aims to explore the best innovation practices that are suitable for the construction industry and then to assess the extent of applying these practices in WB- Palestine in construction and engineering firms. The primary aim, the two main objectives and the expected outcomes of this thesis are shown in Figure (1.1). 4 1.5 Research Questions and Hypotheses The research project consists of two phases of analysis: The first phase is an exploratory research question, and the second is hypothesis testing. Phase One: To consider objective one, to identify the shape of innovation value chain in the construction industry, the research questions are:  What are the key drivers of innovation in the construction projects?  What are the key enablers of innovation in the construction projects?  What are the key barriers of innovation in the construction projects?  What are the key impacts of innovation in the construction projects? Phase Two: To consider objective two, to investigate the innovation practices; the research is based on the hypothesis that project management, when integrated with innovation, can offer potential solutions to PM problems, satisfy the needs of clients, enable organizations to get a competitive advantage and can, at the end, lead to real successful construction projects, from the point view of all the stakeholders involved to complete a specific project. 5 Figure (1.1): Aim, Objectives & Expected Outcomes of the Research Based on the above, there were ten research hypotheses that were developed to explore the relationships among the innovation practices and project management, but the research main hypothesis is: “Innovation correlates positively with Project Management” Primary Aim Assessing Innovation Practices in Project Management: the case of Palestinian Construction Projects Objective 1 Present a clear picture of the relative importance of the key drivers, barriers, enablers and impacts of innovation along the construction innovation value chain. Objective 2 Investigate the best innovative practices that must be integrated with project management applications in order to enhance project management competencies. Expected Outcomes  Provide a useful framework that allows companies to learn about innovation PM best practices that offer a roadmap for sustainable competitive advantage.  Assist companies in understanding their current level of innovation to help them in identifying their strengths and weakness.  Spread the innovation culture in the organizations to maximize innovation success.  Provide key recommendations for future works. 6 1.6 Thesis Structure The thesis is organized into six chapters as shown in Figure (1.2). Figure (1.2): Thesis Structure 1. Introduction 1.1 Chapter Overview 1.2 Background 1.3 Research Problem 1.4 Aim and Objectives 1.5 Research Questions and Hypotheses 1.6 Thesis Structure 2. Literature Review 2.1 Chapter Overview 2.2 Project Management 2.3 General Overview of the Construction Environment 2.4 Innovation in Construction 2.5 Research Conceptual Framework 2.6 Research Hypotheses 3. Research Methodology 3.1 Chapter Overview 3.2 Research Design 3.3 Research Strategy 3.4 Research Methodology Flow Chart 3.5 Research Population and Sample Size 3.6 Field Survey and Data Collection 3.7 Normality Test 4. Data Analysis 4.1 Chapter Overview 4.2 Study Population 4.3 Innovation Value Chain 4.4 Bivariate Analysis 5. Framework Development 5.1 Chapter Overview 5.2 Hypotheses Testing 5.3 Innovation Assessment 5.4 Interview Analysis 5.5 Framework Development 6. Conclusions and Recommendations 6.1 Chapter Overview 6.2 Conclusions 6.3 Research Contribution 6.4 Recommendations 6.5 Suggestions for Further Research 7 Chapter Two Literature Review 2.1 Chapter Overview Solid academic work cannot be created without a thorough investigation of the existing body of knowledge in the area of the chosen studies (Stadnick, 2007). Thus, this chapter will discuss some of the previous studies in the field of project management, construction environment and innovation in construction, which are the main three topics of this particular research. It also states the research conceptual model and research hypotheses. 2.2 Project Management 2.2.1 Project Definition According to Lockyer and Gordon (1996), a project is a unique process, consisting of a set of coordinated and controlled activities with start and finish dates, undertaken to achieve an objective conforming to specific requirements including constraints of time, cost and resources. In general, projects can be characterized by several attributes. These attributes can be divided into two categories: static and dynamic (Adeli and Karim, 2001), as shown in Figure (2.1). 2.2.2 Project Management Definition The beginning of project management can be traced back to a report published by the UK Institution of Civil Engineers on post WWII national development. The document pointed out the need for a „systemic approach‟ 8 with a planned break down of activities to achieve a fixed objective (Wideman, 1995). To answer to that demand, construction projects such as the Polaris program by the U.S. Navy and the Apollo Program by NASA were initiated (Stadnick, 2007). Figure (2.1): Projects Attributes; Adapted from (Adeli and Karim, 2001) Project management today is a matter of survival for many organizations. Today, organizations do not have the option whether or not to adapt to project management, but on how well project management is implemented (Levi, 2009). Project management is the work methods that are used to control and manage activities in a project. It involves the application of knowledge, skills, tools and techniques to project activities in order to meet or exceed stakeholders‟ needs and expectations from a project. Generally, managing a project includes: identifying requirements, establishing clear and achievable objectives, balancing the competing demands for quality, scope, time and cost; adapting specifications, plans, and approach to the different concerns and expectations of the various stakeholders (PMBOK, 2004). According to Hendrickson (1998), the Project Management Institute Dynamic Attributes are those that change during the execution of the project. As such, they define the current state of the project. Examples of dynamic attributes include resources utilized, time elapsed, and number of tasks completed. Static Attributes are those that typically do not change during the execution of the project. These attributes are derived from the project specifications. Examples of static attributes include project goal, cost, duration, and number of tasks. 9 focuses on nine distinct areas requiring project manager knowledge and attention: (1) Project integration management to ensure that the various project elements are effectively coordinated, (2) Project scope management to ensure that all the work required (and only the required work) is included, (3) Project time management to provide an effective project schedule, (4) Project cost management to identify needed resources and maintain budget control, (5) Project quality management to ensure functional requirements are met, (6) Project human resource management to develop and employ project personnel, (7) Project communications management to ensure effective internal and external communications, (8) Project risk management to analyze and mitigate potential risks, and (9) Project procurement management to obtain necessary resources from external sources. The summary of the nine areas from the basis of the Project Management Institute is shown in Figure (2.2). 10 Figure (2.2): PMI‟s Nine Project Management knowledge Areas 11 2.3 General Overview of the Construction Environment 2.3.1 Construction Environment The construction industry has been built on the needs of the world‟s inhabitants to provide shelter, harness energy, and create public access (Kadjr, 2006). The construction industry is that part of the economy that deals with the design, construction, maintenance, utilization, modulation, modification and demolition or deconstruction of constructs (Rußig et al., 1996). Construction is a powerful sector that provides jobs and stimulates growth for other construction-related economic activities. It provides job opportunity for large number of skilled as well as unskilled workforce (Devi and Kiran, 2013). Moreover, it is directly linked to many economic activities, such as: stone saws, factories of ready mix concrete, brick, aluminum, paint, tiles and other factories, as well as establishments of Blacksmithing, carpentry, aluminum and others (GIZ, 2011). Construction is a unique environment and by definition is a creative industry (Dale, 2007). It plays a central role in the nation's welfare, including the development of residential housing, office buildings and industrial plants, and the restoration of the nation's infrastructure and other public facilities (Hendrickson, 1998). In one word, construction plays a unique role in economic growth and is often a key parameter of economic conditions (Sun et al., 2013). On the other hand, construction is a tough business with a very demanding and stressful process (Lingard and Sublet, 2002). It is often viewed as 12 being stubborn, risk averse and old-fashioned (Barthorpe et al., 2000). It is characterized by continual changes and poor working conditions that is generally thought to stem from the nature of the work, which is often described as dirty, difficult and dangerous (Geneva, 2001). It is also characterized by the presence of multi players of different disciplines, who are brought together at various stages throughout a single project (Forese, 1997). Moreover, construction is ultimately a very complex and multi- disciplinary activity (Cushman et al., 2002). Compared to most other industries, construction projects involve relatively intensive labor use, and consume large amounts of materials and physical tools (Jekale, 2004). They are also subject to a variety of laws and regulations that aim to ensure public safety and minimal environmental impacts (Bennett, 2003). All these characteristics suggest that this industry is confronted by „wicked problems‟ (Green, 1999). Becker (2002) defines problems as being wicked in the sense that they are very difficult to solve. 2.3.2 Nature and Characteristics of Construction Projects The goal of construction project is to build something (Elbeltagi, 2009). Construction projects consist of processes, a process consists of a series of actions and tasks which leads to certain goals. The “input” to the construction system is the injection of resources including funding, design expertise, material and labor in the construction process while the “output” is the finished product that meets the required project objectives (Chan, 2007). 13 A construction project is considered successful if it applies the iron triangle‟s constraints: cost, time and quality, conceived by Martin Barnes in 1969. While Nitithamyong et al. (2004) remarked that the success of construction projects depends upon technology, process, people, procurement, legal issues, and knowledge management, which must be considered equally. Baccarini (1999) uses the concept project success in a different approach, viewing it as product success, which implies the quality and impact of the product to the end user, in terms of satisfaction of user‟s needs, meeting strategic organizational objectives and satisfaction of stakeholders‟ need, when a project execution is finished. Therefore, we can conclude that the main characteristics of the construction project are: 1. Project-based: The construction sector is to a large extent, project-based. Engineers, contractors, and workers are formed for a limited time to complete a specific project. 2. Fragmentation: In the construction industry, design and production are often separated (Widén, 2002). Broadly speaking, design is a process of creating the description of a new facility, usually represented by detailed plans and specifications while construction planning is a process of identifying activities and resources required to make the design a physical reality. Hence, construction is the implementation of a design envisioned by architects and engineers (Hendrickson, 1998). 14 3. Complexity: The tendency in construction towards the production of unique, non-standard products led to buildings that are complex to construct (Benmansour and Hogg, 2002). Complexity in construction arises from both uncertainty and interdependence (Gidado, 1996). Uncertainty relates to the resources employed, the environment in which construction takes place, and the level of scientific knowledge required. Interdependence refers to the heterogeneous background of the actors involved (Loikkanen and Hyvönen, 2011). 4. Uniqueness: There is no place for standardization; each project is unique. Its characteristic features include flexibility, openness to change, searching for information and resources in the external environment, anticipation, creativity, experimenting and informal communication (Lukášová, 2010). 5. Risky: Construction projects are subject to many risks due to the unique features of construction activities, such as long period, complicated processes, abominable environment, financial intensity and dynamic organizational structures (Zou and Zhang, 2008). 2.3.3 Construction Project Management According to Casey (2008), construction is translating designs into reality. Management controls a process subject to limited resources or constraints. Construction Management delivers a product according to specifications and stakeholder expectations. Walker (2007) defined construction 15 management as the planning, co-ordination and control of a project from conception to completion on behalf of a client. 2.3.4 Construction Industry in the Developing Countries Construction activities and its output are an integral part of a country‟s national economy and industrial development. The construction industry is often regarded as a driver of economic growth, especially in developing countries (Anaman and Amponsah, 2007). However, projects in developing countries are highly uncertain, and operate in a highly unstable, unpredictable and poorly resourced environment (Cusworth and Franks, 1993; Jekale, 2004). The nature and characteristics of the construction industry in developing countries, is different from that of the developed countries in many aspects (Yimam, 2011). According to Jekale (2004), the construction industry in many developing countries is characterized by too fragmented and compartmentalized, public sector dominated market, considerable government interventions, considerable foreign finance, and low development of indigenous technology. Moreover, the construction industry in developing countries depends on imported inputs such as construction materials, machinery, and skilled work force. Table (2.1) presents a summary of the major differences in the nature of the projects in developing and developed countries. 16 Table (2.1): Nature of Projects in Developing and Developed Countries. Criteria Developing Countries Developed Countries Ownership Most projects are public owned* Most are private* Type Infrastructure projects dominate** More or less mix of projects* Time Private projects are short time* Medium time* Environmen t issue Highly sensitive to the environment** Moderately sensitive to the environment Complexity Complex, uncertain, unstable and unpredictable environment** Complex, dynamic, relatively stable and to some extent predictable environment*** Availability of Resources Extreme scarcity of resources*** Resource available at cost (constrained) Privacy Under - developed private sector and forces of market* Developed private sector and forces of market* Government al Issue Significant involvement of government in business* Market economy* * (Voropajev, 1998), ** (Jekale, 2004), *** (Cusworth and Franks, 1993). Unfortunately, project management in developing countries is facing many challenging problems and non-conducive environment (Jekale, 2004). Many projects in such countries end up uncompleted, abandoned or unsustainable (Andersen, 2008). According to Cusworth and Franks (1993), most of the special problems of project management in developing countries are related to the environment, which can be attributed to the turbulence and rapid change in the project environment, and severe scarcity of resources in those countries. Lack of institutional capacity and trained personnel are other main reasons why projects fail in developing countries 17 (Voropajev, 1998). Furthermore, the lack of awareness about the benefits and applications of project management in many developing countries, combined with the presence of few trained project managers and wrong perception that sees project managers as an unnecessary expense, has contributed to the low level of development of project management in those countries (Andersen, 2008). In addition, political instability in developing countries severely affects economic development in the construction industry. 2.3.5 Construction Industry in Palestine In Palestine, as in other developing countries in the world, there is a natural high increase in population. Such population growth requires constructing facilities such as housing, infrastructure, education, medical care and other services (Al-Sabah, 1997). Construction is one of the largest sectors in the Palestinian economy and an important driver of job creation. The construction sector in Palestine experienced a considerable growth in the aftermath of 1967; its share of GDP increased from less than 9 % in 1985 to more than 23 % in 1995. During that period the sector‟s contribution fluctuated in an upward long- run trend bounded by 9 % and 19 % from 1970 to 1980, and by 15.2 % and 23 % from 1989 to 1995 (PECDAR, 1997). However, it appears that in 2004 the construction sector‟s contribution to the GDP was reduced to 9 % due to the second Intifada in Palestine (The World Bank, 2004; PCBS, 2004). After that, the sector has grown at an annual rate of 20.5% and made 18 the largest sectorial contribution to overall GDP growth since 2006 (The Portland Trust, 2013). It is roughly estimated that the total number of industrial firms working in this sector is 350 construction- related production, regardless the size of the enterprise and the field of specialty. These are ready mix concrete, bricks, stone crushers, asphalt products, cement precast manholes, cement pipes, curb stone and cement tiles (USAID, 2009). Like the construction industry in other developing countries, the construction industry in Palestine is in a crisis. It is challenged by many problems. Generally, the current state of the industry is characterized by:  The practitioners are with limited personal experience in project management.  The practitioners are with limited personal experience in strategic management.  The practitioners are with limited personal experience in stakeholders‟ management.  Lack of internal innovative working environment.  Lack of external innovative working environment.  Most projects fail to finish on time, on budget and to achieve required quality.  Fluctuation in the price of construction materials.  Outdated technology.  Dominance to the Israeli economy that is a fatal threat to the industry. 19  The Construction industry has high competition in bids.  Construction workers are almost unskilled and with little education.  No social security benefits and no health care for construction workers. 2.4 Innovation in Construction 2.4.1 Definitions of Innovation When defining innovation it is necessary to recognize that innovation is not invention (Burmester, 2005). According to some, invention is a new product, innovation is a new customer benefit. Invention is the conversion of cash into ideas and innovation is the conversion of ideas into cash. Projects are vehicles of the transition from invention to innovation (Fagerberg et al., 2004). Many definitions and interpretations of innovation can be found within the innovation literature. For instance, Galbraith (1984) defines innovation as the application of a new idea to create a new process or product that can differentiate a company and maintain it fit as environmental forces and competitors‟ strategies change. Drucker (1985) sees innovation as the process that creates markets that nobody before even imagined. Whereas Pinchot and Pinchot (1996) enlarges the scope of the term by relating it to the methods, relationships and processes of the organization. In general, DOC Department of Commerce (2008) defines innovation as the design, development, and implementation of new or altered products, services, 20 processes, organizational structures, and business models to create value for the customer and financial returns for the firm practicing innovation. In order to stimulate innovation in the construction sector, it is important to recognize that innovation in construction is not confined to new technological inventions (Slaughter, 2000). According to Civil Engineering Research Foundation CERF (2000), innovation in construction is perceived as:“The act of introducing and using new ideas, technologies, products and/or processes aimed to solve problems, viewing things differently, improving efficiency and effectiveness, or enhancing the standard of living” 2.4.2 Dimensions of Innovation In order to develop an understanding of innovation that is reflective to the construction projects environment, there is a need to split innovation into several dimensions.  Dimension (1): Scale of Innovation Tidd et al. (2003) defines the scale of innovation as incremental or radical. According to Norman and Verganti (2012), incremental innovation includes improvements within a given frame of solutions (doing better what we already do) while radical innovation refers to change of frame (doing what we did not do before). Minor incremental changes are more frequent in the construction industry, but radical changes are the most 21 powerful (Koskela and Vrijhoef, 2001). Few examples of radical innovations in the construction are illustrated in Table (2.2). Table (2.2): History of Radical Innovations in the Construction Industry Period Description Benefits 18 th Century – early 19 th century Creation of factories and improvements in metal work *Less work had to be performed by the hands. *Rapid increase of the rate at which building could be completed. 19 th century Creation of high- speed electric elevator * Rapid way to reach the heights in the skyscrapers. * Efficiency, relatively low installation cost. 19 th -20 th century Creation of new materials: structural steel and reinforced concrete *Steel is a strong material that is needed for the interior of the large- scale building projects. *Combination of steel and concrete provides a strong support system that cost lower than using brick or other materials. 21 st century Introduction of Computer-aided design (CAD) *Design of all types of buildings with the benefits of lower product development cost and saving time for their drawings. Future Issues of sustainable development and ecology *The issues of sustainability have become important for the construction industry. Gann and Salter (2000) and Wolstenholme (2009)  Dimension (2): Objectives of Innovation From a construction industry perspective, innovation can be broadly classified as either „Organizational innovation‟ or „Technical innovation‟. Organizational innovation may result from the introduction of changes to the organizational structure, introduction of advanced management techniques, and implementation of new corporate strategic orientations (Anderson and Manseau, 1999). Technical innovation can take the form of either „product‟ or „process innovation. Product innovation describes the 22 case where a new product is the outcome. Process innovation denotes innovation where the process by which a product is developed is exposed to new ideas and, therefore, leads to new and often more sophisticated methods of production (Egbu, 2004).  Dimension (3): Types of Innovation As shown in Figure (2.3), three innovation types were identified within the construction project environment; system, process, and components. The three definitions differ because of the nature of interaction with the construction project. The system innovation exists at a higher level than the project, and governs the project. The process innovation exists as the function and purpose of the project, whereas the component innovation exists only as an element of the project (Rogers, 1983; Freeman, 1984). According to Prieto (2009), a systemic innovation produces the largest productivity gains. Systemic innovation is that form of innovation that requires multiple specialist firms to change their processes in a coordinated fashion (Taylor and Levitt, 2005). Examples of systemic innovation in the engineering and construction industry include: Integrated Supply Chain Management, BIM and PPP. 23 Fig (2.3): Innovation Space; Adapted from Rogers (1983) and Freeman (1984) Recently, the Conference Board CEO Challenge (2012) has realized innovation in construction by seven Dimensions Construction Innovation (7-DCI):  D1: Construction Materials: referring to innovations in materials, i.e., the development of ultra-strength concrete.  D2: Construction Machinery/Production Technology: referring to incremental and disruptive innovations in the area of production technology used off-site or on-site.  D3: Construction Components: This dimension refers to the modular structure of a building.  D4: Construction Time: This dimension refers to the time necessary for planning, setting up of the site, construction and finishing.  D5: Construction Ecology: This dimension refers to ecological factors related to the construction process itself or the construction product. 24  D6: Construction Product Performance: This dimension refers to innovations related to the construction products performance or services related to those products.  D7: Construction Management: This dimension refers to innovation created on the managerial level. 2.4.3 Innovation in the Construction Industry in Palestine In spite of the political situation and the conflict between Israel and Palestine, the participants in construction sector still invest every opportunity to survive. Globally, Palestine occupied the 12th rank of the stone producers worldwide in 2002 (Sultan, 2014). The topic of recycling the stone slurry in Palestine has occupied a significant promising field in Palestine recently. According to the most updated and comprehensive study in stone waste management field that examined the quantity of the slurry generated in Palestine, there is 750,000 cubic meters of liquid slurry generated annually in the West Bank (Al-Joulani and Salah, 2014). Moreover, one of the most expensive and important components of construction is the steel used to reinforce building structures. Thousands of tons of steel throughout the lifespan of the project will be used, so careful accounting of this expensive building resource is required. Palestinian construction workers trained in the handling, cutting and bending of steel take great care to use precise measurements to minimize errors and waste. Small leftover pieces of steel are gathered up and sent back to steel 25 factories to be melted back down to liquid form and reused in another larger rod or sheet (Rawabi, 2015) Currently, there is also mobilization for the water in the stone-cutting factory. Stone-cutting is a water intensive process. Water is used to control dust, to cut, wash and polish stone surfaces and to cool high-heat machine grinders in the stone-cutting operation. A stone-cutting factory like Rawabi's, which operates around the clock, would consume 10,360 liters of water per day. Recycle and reuse is the only way to avoid unnecessary water consumption of water. Rawabi‟s water recycling system reduces the level of water consumption to less than 10% of the quantity required without reuse. Water comes out of the stone factory and flows into a special collection system. Used water, which is contaminated with stone dust, cannot be permitted to seep into the soil where it would cause damage to groundwater, aquifers and the water table. Instead, all the wastewater byproducts are run through a special filtration and compression system which removes the stone dust and large particles from the water. The cleaned water is returned to the factory for reuse in a continuous closed loop (Rawabi, 2015) 2.4.4 Innovation Value Chain IVC Hansen and Birkinshaw (2007) recommend to view innovation as a value chain. The innovation value chain IVC offers a tailored and systematic approach to assessing firm-level innovation performance (Hansen and Birkinshaw, 2007). It breaks innovation down into three phases: idea 26 generation, idea conversion and idea diffusion of developed concepts, that includes six critical tasks, namely, internal sourcing, cross-unit sourcing, external sourcing, selection, development, and company- wide spread of the idea (Yokomizo et al., 2013). Figure (2.4) shows the links of the value chain and key questions to measure each link. Figure (2.4): Innovation Value Chain; (Hansen and Birkinshaw, 2007) Based on the innovation value chain (IVC) approach, Salford Centre for Research and Innovation (Ozorhon et al., 2010)) developed a framework for analyzing innovation in construction. It is considered as a strategic approach tool that a manager can use in order to assess the strength and weakness of the whole innovation process (Hseih et al., 2011). In this framework, as shown in Figure (2.5), based on the level of innovation capacity, ideas are generated through the acquisition of necessary knowledge and investment, then these ideas are converted into 27 product/process/service innovations within the company. Finally, these innovations are exploited to achieve performance benefits and impacts (Ozorhon et al., 2010). Figure (2.5): Framework for analyzing innovation in construction; (Ozorhon et al., 2010) To consider the first objective of this thesis; to identify the shape of innovation value in construction projects, the innovation value chain model is developed, as shown in Figure (2.6). In this model, innovative activities depend extensively on the factors that create the need for organization to innovate (drivers), the factors that facilitate innovation within an organization (enablers), the factors that impede the uptake of innovation (barriers), and to what extent does the organization derive the outcomes of innovation (impacts). 28 ENABLERS DRIVERS BARRIERS Figure (2.6): Innovation Value Chain Model In the following sections, there is enough information about these four factors; 2.4.4.1 Drivers of Innovation Organizations need to drive more innovation in their products and services. They need to innovate rapidly and they need to do it cost-effectively (PwC Advisory Oracle Practice, 2012). The drivers of innovation are, of course, constantly changing. In construction, cost, time and efficiency are often quoted as overriding priorities (Loosemore and Holliday, 2012). According to Xu and Quaddus (2013), in order to stay ahead of the competition, organizations have to continually develop new competitive advantage. However, competitive advantages do not tend to stay competitive advantages without significant effort. Over time, the edge may erode as competitors try to duplicate a successful advantage for themselves and as the market changes (Ehmke, 2008). A number of studies have been carried out to determine the drivers of innovation in construction projects. Bossink (2004) carried empirical research on innovation in the Dutch construction industry. He concluded IMPACTS & BENEFITS INNOVATION 29 that drivers of innovation are classified into four distinctive categories: environmental pressure, technological capability, knowledge exchange, and boundary spanning. Gambates et al. (2007) conducted research to benchmark the current level of innovation in the US construction industry. The findings suggest that the motives behind innovation are cost savings. Followed closely in order by increasing productivity/efficiency, improving quality, schedule reduction, creating a competitive advantage, safety, and entrance into a new market. While Nam and Tatum (1997) stated that the requirements of clients can drive the creative ideas and innovative designs that are necessary to deliver some projects. Salford Centre for Research and Innovation (Ozorhon et al., 2010) conducted a survey to the applicants of the 2009 North West Regional Construction Awards. The results showed that the main driver was performance improvement. Followed in order by environment/sustainability factors, meeting end-user requirements, technological developments, competition, regulation and design trends. As shown in Figure (2.7), based on the literature review and several interviews with experts, who having good experience in the field of construction, this research assumes that the drivers of construction innovation are: (1) Reducing time, (2) Reducing costs, (3) Improving quality, (4) Competition, (5) Responding to client/customer needs, (6) Improving efficiency/productivity, and (7) Rapid development of technology. 30 Figure (2.7): Drivers of Innovation 2.4.4.2 Enablers of Innovation Three factors are necessary to achieve innovations: motivation, time and money. Those participating in the process must be motivated and provided with sufficient time and money to carry out the task. All three factors are necessary to some extent. No matter how motivated, no one can achieve anything without time and money. Similarly, an infinite amount of time and money will achieve nothing if there is no motivation (Wide‟n, 2002). A number of studies have been carried out to determine the enablers of innovation in construction. Loosemore and Holliday (2012) undertook semi- structured interviews and focus groups with thirty of the UK‟s recognized leaders. The interviews and focus groups were guided by one simple question, "What would enable more innovation to happen in the construction sector?” The results showed four main innovation enablers, namely: (1) collaboration; (2) regulation; (3) skills, education & research, and (4) leadership. According to Salford Centre for Research and Innovation survey (Ozorhon et al., 2010); the main enabler of innovation is leadership. Followed in order by supportive work environment, collaboration with partners, deep understanding of the customer, education 31 & training policy, knowledge management practices, encouraging staff to get involved with external networks, use of problem solving techniques, awards, grants, funds, government schemes, reward schemes and at last emphasis on research & development. Barlow (2000) states: the presence of „champions‟ within firms is commonly cited as a necessary ingredient for innovation. While Prather (2010) agrees that, the working climate that the leaders create is the single biggest factor governing the success of the organization‟s total innovation effort. Based on the results of a survey conducted by Romero and Martinez-Roman et al. (2012), other features that influence innovation are: education, experience, internal motivation, stimulation, the size of the organization and the economic sector. As shown in Figure (2.8), based on the literature review and several interviews with experts, who having good experience in the field of construction, this research assumes that the enablers of construction innovation are: (1) Incentives, reward and bonuses, (2) Organizational innovative culture, (3) Involvement of the client, (4) Top management support, (5) Work experience, (6) Training & development, and (7) Leadership. 32 Figure (2.8): Enablers of Innovation 2.4.4.3 Barriers of Innovation Experimenting with new ideas and seeking innovative alternatives are often considered as endeavors that increase uncertainty and may put at risk the project success. Such a culture of risk avoidance has led to the situation where people are not bothered to think of performing innovatively (Maqsood et al., 2003). Thus, innovations are often confronted with different types of barriers that might terminate, or at least, harm innovative projects (Barlow, 2000). A number of studies were carried out to determine the barriers of innovation in construction. Construction Productivity Network (1997) agreed that the temporary nature of the project teams and the short-term relationships between organizations makes the transfer of innovations from project to project and firm to firm extremely difficult. Barrett and Sexton (2006) illustrated that project-based nature of the construction industry is a significant barrier to innovation, while Pries and Janzen (1995) identified the fragmented nature of the process, the uniqueness of each project and the long life spans of the products as three factors that limited innovation 33 within construction. Pries and Janszen (1995) also illustrated that innovations within construction were restricted by a resistance and inability to diffuse innovations throughout the industry. Blayse and Manley (2004) argued that regulations and standards (e.g., building codes) may influence the propensity to adopt innovations and shape the direction of technological change. Moreover, construction has the ability to absorb the excluded (DeSouza,2000). It provides employment for those with little education or skill, many of them from the poorest sections of society (Geneva, 2001). According to Salford Centre for Research and Innovation survey (Ozorhon et al., 2010), the top ten barriers of innovation, in order, are economic conditions, availability of financial resources, fragmented nature of the construction business, unwillingness to change, lack of government role model, inappropriate legislation, risk in commercializing innovations, temporary nature of construction projects, extensive inter-organizational change required and lack of awareness. As shown in Figure (2.9), based on the literature review and several interviews with experts, who having good experience in the field of construction, this research assumes that the barriers of construction innovation are: (1) Lack of Effective Management, (2) Time pressure and deadlines, (3) Limited budget, (4) Poor coordination and communication between project participants, (5) Construction clients lack of interest in innovations, (6) Low Salaries and job insecurity, (7) Inadequate planning, (8) Content with success and fear of unknown, (9) Work overload or under 34 load, (10) Work-life balance problems, (11) Lack of collaboration due to competition, (12) Accidents during construction, (13) Too many restrictive building codes, (14) Lack of required construction material/ tools/equipments, and (15) Israel‟s occupation and related obstacles. Figure (2.9): Barriers of Innovation 2.4.4.4 Impacts of Innovation By obtaining a better idea of the expected benefits of innovation, we can improve our understanding of why a company would choose to innovate and how it might measure its success (Ozorhon et al., 2010). Innovation, whatever type or extent, has a purpose to create or develop a new product or process that would increase company‟s profit and strengthen it‟s position in the market. Competition is the main reason of innovation, therefore different firms innovate differently (Šakalytė and Bartuševičienė, 2013). The innovative practices didn‟t only lead to a number of project level benefits such as reduction in duration and cost, improved quality and 35 environmental performance, but also wider benefits such as enhanced corporate image, client and end-user satisfaction, and improved quality of life. With respect to Eaton et al. (2006), the benefits of innovation in construction included the improvement of working conditions, lower construction costs, quicker construction times and better value for clients. Innovation can also result in increased organizational commitment and higher organizational motivation (Dulaimi et al., 2002). According to Salford Centre for Research and Innovation survey (Ozorhon et al., 2010), the top ten impacts of innovation, in order, were better company image, improvement of services, improvement of client satisfaction, improvement of product quality, improvement of processes, increase in technical capability, increase in organizational effectiveness, new services, new products and new processes. As shown in Figure (2.10), based on the literature review and several interviews with experts, who having good experience in the field of construction, this research assumes that the impacts of construction innovation are: (1) Creating a competitive advantage, (2) Increase the profitability, (3) Improving staff motivation and working conditions, (4) Improving customer satisfaction, (5) Develop an integrated stakeholder communication, (6) Increase in organizational effectiveness, and (7) Flexibility to change. 36 Figure (2.10): Impacts of Innovation 2.5 Research Conceptual Framework 2.5.1 Innovation Best Practices in Construction Project Management According to some, if the invention is compared with a seed of a plant, the innovation is the fruit of a tree that will result from planting the seed. Planting the seed only is not enough. The seed must be planted in the right place, time, and environment. An increased interest has been placed on understanding which practices affect more substantially the innovation capability of the company (Verhaeghe and Kfir, 2002). Based on experiences in innovation consulting for different branches, as shown in Figure (2.11), Kearney (2006) has developed the “House of Innovation” model. This model depicts the most important building blocks of successful innovation management. It tests innovation practices, according to four dimensions: (1) An innovation strategy that is aligned with the business strategy, (2) An organization that drives innovation by its structure and culture, (3) A product-life-cycle process that continually develops the capabilities for idea generation and (4) Enabling factors for 37 innovation management. In the same context, Neely and Hii (1998) posit that the innovation capacity of a firm regards three interrelated perspectives: (1) Culture, (2) Internal processes and (3) External environment. Figure (2.11): The AT Kearney House of Innovation; (Kearney, 2006). From construction perspective, Dikmen et al. (2005) developed a conceptual framework to investigate value innovations and the four elements of their framework are: (1) Objectives, (2) Strategies, (3) Environmental barriers/drivers and (4) Organizational factors. While Seaden and Manseau (2001) argue that innovation in construction regards the linkages between four other factors: (1) Business environment, (2) Business strategy, (3) Innovative practices and (4) Business outcomes. To consider the second objective of this thesis, to investigate the best innovation practices that must be integrated with project management applications in order to enhance project management competencies. As shown in Table (2.3), 26 factors that may affect innovation were identified through an extensive literature review. Factors of similar nature were 38 grouped together; giving rise to four main groups, as shown in Figure (2.12), that are: (1) Strategic Management, (2) Internal Innovative Work Environment, (3) External Innovative Work Environment and (4) Stakeholder Management. In the following sections, there is enough information about these four practices. Table (2.3): Theoretical Practices of Innovation Strategic Management Stakeholder’s Management 1. Establishing a vision which embraces innovation 2. Establishing SMART objectives 3. Formulating Strategies 4. Conducting internal audit “Strength & Weakness” 5. Conducting external audit “Opportunities & Threats” 1. Identifying Stakeholders 2. Exploring stakeholders‟ needs and constraints to projects 3. Analyzing conflicts among stakeholders 4. Ensuring effective communication between stakeholders 5. Evaluating the stakeholder satisfaction 6. Stakeholder involvement in decision-making 7. Keeping and promoting an ongoing relationship with stakeholders Internal Innovative Work Environment External Innovative Work Environment 1. Employee motivation and job satisfaction 2. Providing appropriate internal conditions for workers in terms of ventilation, lighting, services, tools, etc. 3. Providing innovative culture in the organization 4. Dynamic, open minded and supportive top management 5. Providing rewards and recognition for creative work 6. Workloads are managed to ensure staff have sufficient time to pursue innovation 7. Providing training for employees 1. Responding to change in customer needs 2. Utilizating of new technology 3. Dealing with social and environmental variables 4. Dealing with the economic and political variables 5. Collaborating and communicating with competitors 6. Collaborating and communicating with suppliers 7. Reacting to market changes and consequently competitiveness 39 Figure (2.12): Innovation Best Practices 2.5.1.1 The First Innovative Practice: Strategic Management Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain a competitive advantage. Thus, strategic management is concerned with the analysis of strategic objectives (vision, mission, and strategic objectives), along with the analysis of the internal and external environment of the organization. To make strategic analysis, this requires managers to define the corporate vision & mission, specify SMART (Specific, Measurable, Achievable, Realistic and Time scaled) objectives, develop strategies and set policy guidelines. Without a vision of where is the company going, often there can be limited success in innovation (Baldwin, 2014). Furthermore, the identification of a clear mission for a project is widely considered essential for the effective management of stakeholders (Winch, 2002). To have a good strategic analysis, also objectives should be stated as action verbs and appropriate strategy is needed to state how the corporation will achieve its objectives. In addition, using policies can make sure that employees throughout the firm make the right decisions and take actions that support 40 the company‟s mission, objectives and strategies (Wheelen and Hunger, 2010). On the other side, to make environmental analysis, SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is the most important environmental scanning technique. A good SWOT analysis can help a company to understand itself better. It is an important guideline for making a proper marketing strategy plan (Huiru, 2011). 2.5.1.2 The Second Innovative Practice: Internal Innovative Work Environment Prather (2010) agrees that human factors are critically important in the innovation process, but adds that they need the right work environment. Innovation needs a good atmosphere to develop in (Baldwin, 2014). Innovation cannot flourish in a climate of job dissatisfaction where people do the minimum to keep their jobs (Chen and Huang, 2009). For innovation to flourish, people need to be intrinsically motivated to perform (Prather, 2010). There are a number of key internal factors to the construction firms that influence innovation, including the organizational climate for innovation, skills and capabilities of the workforce, availability of resources, top level commitment, processes to facilitate and integrate innovation, and company strategy (Nam and Tatum, 1997). 41 According to Ahmed (1998), organizational culture is a major determinant of innovation. This statement recognizes that whatever actions are taken and whatever money is spent on innovation, if employees in organizations and institutions are not interested in creative and innovative activities, the end result will be less than desirable (Engineers Australia, 2012). Moreover, providing the hygienic factors (pay and benefits, job security, status, company policy and administration, relationships with co-workers, physical environment and supervision) will not result in job satisfaction but rather not dissatisfaction (Maughan, 2012). Later, Hana (2013) stated that innovations could only turn out to be successful if they are supported by top management and if an innovative creative team is developed and composed of people that may be considered knowledge employees. Top management must encourage innovation by setting forth one or more challenges to the appropriate people. Without a challenge, there may be no drive to innovate, nothing to provide the impetus (Baldwin, 2014). Baldwin (2014) argued that the better everyone in the company understands the goals and objectives of the company, the better this process of innovation should be. While Dulaimi et al. (2002) found that companies should give employees freedom in their workload so that they have an opportunity to develop and experiment with new ideas. 42 2.5.1.3 The Third Innovative Practice: External Innovative Work Environment Innovative companies have strong links with their suppliers, are always finding out what customers want, and are always comparing themselves with existing competitors or with companies of other industry sectors (Yokomizo et al., 2013). Thus, a critical component of successful innovation is the ability of a firm to exploit and utilize external knowledge from different sources of innovation (Lin et al., 2002). The generation and utilization of knowledge depend on the frequency and density of the interactions with external sources of innovation and the firm‟s openness to external knowledge (Caloghirou et al., 2004). Organizations that do not recognize the impact of various innovations and have not adapted to changing environments have justifiably been forced out of the mainstream of construction activities (Hendrickson, 1998). Milliken (1987) argued that the environmental uncertainty arises from the organization‟s inability to predict its environment, or in other words, to predict the factors that characterize its environment. According to Bourgeois (1980), these factors are usually classified into two groups; general and task external business environment factors. The general environment is typically composed of factors such as social values, educational, political, economic, legal, behavioral, demographic, natural environment, natural resources, and technological (Grant, 1999). Asheghian and Ebrahimi (1990) argued further that the task environment is 43 the closest environment of the organization and the elements that made it is influencing the organization directly. This environment is made up of factors such as consumers, competitors, suppliers, labor market, industrial and financial resources. The construction literature provides insight into a number of possible variables from the external environment of construction organizations that could influence creative and innovative behavior. According to Hana (2013), in the process of innovation, knowledge is an essential element, that helps to gain an advantage over other organizations. Gann and Salter (2000) stated that government has a key role to play in promoting and supporting innovation in the production of the built environment. While Tatum (1991) argued that development and effective use of new technology can provide important competitive advantages for engineering and construction firms. These advantages stem from distinctive technical capability, improvements in operations, and image as a technically progressive company. 2.5.1.4 The Fourth Innovative Practice: Stakeholder Management Project Management Institute PMI (2008) defined project stakeholders as individuals and organizations who are actively involved in the project, or whose interests may be positively or negatively affected as a result of project execution or successful project completion. The checklist of stakeholders in a construction project is often large and would include the owners and users of facilities, project managers, facilities managers, 44 designers, shareholders, legal authorities, employees, subcontractors, suppliers, process and service providers, competitors, banks, insurance companies, media, community representatives, neighbors, general public, government establishments, visitors, customers, regional development agencies, the natural environment, the press, pressure groups, civic institutions, etc. (Newcombe, 2003). To ensure a successful project, the project team must identify the stakeholders, determine their requirements and expectations, and manage their influence in relation to the requirements (Othman et al., 2011). Stakeholder analysis should be carried out in an early phase of the project, where stakeholders are identified and classified into key, primary or secondary stakeholders. The classification is based on their potential motivation and power to influence the outcome of the project (Antvik and Sjöholm, 2007). More often than not, the diverse interests of project stakeholders exacerbate the changeability and make management very difficult, if not impossible (Zou and Zhang, 2008). An increasing number of studies have identified the importance of stakeholder management in construction projects. Freeman et al. (2007) believe that identifying stakeholder interests is an important task to assess stakeholders. Freeman et al. (2007) also consider analyzing the conflicts and coalitions among stakeholders as an important step for stakeholder management. Walker et al. (2008) consider identifying stakeholder, prioritizing stakeholders, visualizing stakeholders, engaging stakeholders, 45 and monitoring effectiveness of communication as the basic steps for stakeholder management. Elias et al. (2002) proposed eight steps for managing the stakeholder process started by: developing a stakeholder map of the project, preparing a chart of specific stakeholders, identifying the stakes of stakeholders, preparing a power versus stake grid; conducting a process level stakeholder analysis, conducting a transaction level stakeholder analysis, determining the stakeholder management capability of the R&D projects, and analyzing the dynamics of stakeholder interactions. Olander and Landin (2008) found that the project managers should be highly skilled negotiators and communicators in order to be capable of managing individual stakeholder‟s expectations and creating a positive culture change within the overall organization project. Consequently, the results of the stakeholder management are dependent on the project manager‟s experience, relationships, and capability (Karlson, 2002). 2.6 Research Hypotheses Based on the above, a successful project management requires effective controlling and alignment with innovation. It is therefore worthwhile to integrate innovation practices with project management applications to maximize the success of construction projects. From this point forth, this study is concerned with two topics and the interplay between them, namely “innovation” and “project management”. In this study, the relationships were established by assessing the correlations between the four previous 46 innovation practices and project management. The research conceptual model, shown in Figure (2.13), was used to identify research hypotheses. Ten hypotheses were developed to explore the relationships among the five constructs that are:  H1: There is a positive relationship between strategic management and project management.  H2: There is a positive relationship between internal innovative work environment and project management.  H3: There is a positive relationship between external innovative work environment and project management.  H4: There is a positive relationship between stakeholders management and project management.  H5: There is a positive relationship between strategic management and internal innovative work environment.  H6: There is a positive relationship between internal innovative work environment and external innovative work environment.  H7: There is a positive relationship between external innovative work environment and stakeholders management.  H8: There is a positive relationship between strategic management and external innovative work environment 47  H9: There is a positive relationship between internal innovative work environment and stakeholders management.  H10: There is a positive relationship between strategic management and stakeholders management. 48 Figure (2.13): Research Conceptual Model Based on the above, the main research hypothesis is: “Innovation correlates positively with Project Management” 49 Chapter Three Research Methodology 3.1 Chapter Overview In order to test the hypotheses and answer the questions of the research, a convenient research methodology was chosen. A description of the characteristics of the methodological approach and data collection technique is provided in this chapter. 3.2 Research Design Burns and Grove (2003) define a research design as a blueprint for conducting a study with maximum control over factors that may interfere with the validity of the findings. Depending on the objectives of research, research projects can be grouped into three types: exploratory, descriptive, and explanatory. Exploratory research tends to tackle new problems on which little or no previous research has been done (Brown, 2006). Descriptive research is used to justify current practices and identify factors that hinder or enhance practice as one gets a whole picture from the informants (Burns & Grove, 2003). Explanatory research attempts to go above and beyond what exploratory and descriptive research to identify the actual reasons a phenomenon occurs, it attempts to “connect the dots” in research, by identifying causal factors and outcomes of the target phenomenon (Bhattacherjee, 2012). This thesis attempts to contribute towards developing a framework that will eventually be useful to increase the competencies of project management in 50 the construction sector. In order to reach this purpose, an exploratory research inquiry was used to identify and analyze best practices related to innovation in construction. 3.3 Research Strategy Bryman (2008) identified research strategy as a general orientation to the conduct of research. There are two types of research strategies: quantitative research and qualitative research. Qualitative and quantitative approaches should not be viewed as polar opposites; instead, they represent different ends on a continuum (Newman & Benz, 1998). Qualitative research is a type of research where the data are not in the form of numbers (Blaxter et al., 2001). According to Creswell (2003), the qualitative approach is based on constructivist perspectives (i.e., individual experiences) or advocacy/participatory perspective (i.e., political, collaborative or change oriented). Quantitative research is a type of research where the data is in the form of numbers (Blaxter et al., 2001). The quantitative approach basically uses post-positivist claims for developing knowledge (i.e., cause and effect thinking, reduction to specific variables, use of measurement and testing of theories). In this research, a mixed method that combines both qualitative and quantitative forms were used in data collection. A structured questionnaire and closed personal interviews were used in this research. The questionnaire was used to get valid data needed to complete the research, 51 as well as, the interviews were conducted with experts to explore their opinions and benefits from their experiences. 3.4 Research Methodology Flow Chart Figure (3.1) illustrates the methodology flow chart of the research that consists of (5) phases.  The first phase of the research includes a literature review that was undertaken to review the basic concepts of innovation and project management in a construction environment. 52 Figure (3.1): Research Methodology Flow Chart  The second phase includes a survey and data collection. A survey can be conducted via interviews or questionnaires (Fellows & Liu, 2003). In the case of this research, both interviews and questionnaires were used. A questionnaire was used to get the required information needed to complete the research as well as the interviews were conducted with experts to Literature Review Field Survey & Data Collection Questionnaire Design Focus group Pilot Questionnaires Questionnaires Validity Questionnaires Reliability Conclusions & Recommendations Interview Analysis Framework Development Structured interviews: Pre-study Semi-structured interviews: After-study Data Analysis Hypothesis Testing Exploratory Research Questions 53 collect in-depth information and enrich the analysis. Through questionnaire design, a pilot study was conducted by experts to test whether the questions were clear, valid and easy to answer. The data was collected from a large- scale survey of 365 actors in construction and engineering firms.  The third phase of the research is a data analysis and discussion. The statistical software (SPSS) was used to perform the required analysis. The data was analyzed through two phases: exploratory research questions and hypothesis testing.  The fourth phase of the research is framework development. Based on literature reviews and findings of the research conceptual model, the researcher devised a framework to be applied in the engineering and construction firms.  The fifth phase of the research includes the conclusions, recommendations to the construction industry practitioners, and suggestions for future research. 3.5 Research Population and Sample Size The target population of this study was the consulting and contracting firms that reside at WB- Palestine. Unfortunately, there are no official reports mentioning the number of projects' owners in the West-Bank such as government, agencies, ministries, municipalities and international agencies. Therefore, construction clients were excluded. 54 The selected contractor companies had a valid registration according to the Palestinian Contractors Union (PCU) records. The PCU divided the contracting companies into five major categories depending on their size, executed projects, capitals, and qualifications of the staff, where class 5 designates the smallest contractors and class 1 designates the largest. The selected contractors are classified under the first and second classes in the following fields: building, roads, water and sewage. Contractors that are registered under the third, fourth, and fifth classes were neglected because some of them did not have sufficient experience in construction field. The selected consultant companies consist of all consulting offices that had a valid membership of the Engineering Association in WB- Palestine. Consulting engineers had a valid registration in the following fields: building, roads, project management, water, and sewage feild. At the end of 2013, there were 220 construction companies registered with the PCU under the 1 st and 2 nd classes and 477 consulting/engineering firms registered with the Engineering Association. The companies were distributed through the cities as shown in Figure (3.2). 55 Figure (3.2): Firms‟ Geographic Distribution According to the targeted area, the total number of available population is 697 (220 construction companies and 477 consulting firms). To obtain statistically representative sample size of the population, the researcher used the following simple formula as advanced by (Kapoor, 2010). Where  n = correction for limited population  N= population  m = sample size, m is calculated by following equation Where 56  z = value related to the confidence level (e.g. 1.96 for 95% confidence level)  p = degree of variance between the elements of population (0.5)  ε = maximum error (0.05)  The total number required was 249 questionnaires.  The total number returned and useable from the consultants was 220 questionnaires.  The total number returned and useable from the contractors was 140 questionnaires. Based on the results of sample size computation, this study needed 249 participants to complete the survey. For this study, more than 1000 postal and electronic questionnaires were distributed among top managers, project managers and engineers of each participated organizations. However, the total number returned and useable was only 360 questionnaires. This represented a response rate of 52.4%. Figure (3.3) shows that the consultants‟ response rate is 46.1%, while the contractors‟ response rate is 63.6 %. 57 Figure (3.3): Questionnaire‟s Response Rate 3.6 Field Survey and Data Collection Data used for the survey were both primary and secondary. The primary data of research included: (1) structured questionnaires on a 5- point Likert scale and (2) interviews with some stakeholders‟ experts to collect in-depth information. The Secondary data of research included a literature search. The literature review was conducted through books, internet, international journals and PCU & PCBS publications. As shown in Figure (3.1), the field survey and data collection in this study were explored using both questionnaire survey and interview analysis technique. 3.6.1 Questionnaire Survey The questionnaire survey is the most commonly used research method and can be used to gather information on any topic from large or small numbers of people. It is a written list of questions and the answers are recorded by respondents (Frankfort-Nachmias & Nachimas, 1992). The main advantages of questionnaires are the ease of completion and analysis, access to dispersed respondents and accuracy. On the other hand, the main 58 disadvantages of questionnaires are low response rate and some delay in getting results (Kumar, 1999). 3.6.1.1 Questionnaire Design Data for this research was primarily gathered through a structured questionnaire. The questionnaire was designed actually for assuring obtaining accurate results. Thus, questionnaire parts were constructed based on literature review, local publications reviewing, and several interviews with consultants and contractors, who having good experience in the field of construction, and together with revision and modifications by local experts. The questionnaire was comprised three major parts. Part one of the questionnaire was mainly designed to obtain general information regarding the participants‟ gender, type of organization, years of experience in the construction field, respondents‟ position and company‟s geographic location. Part two of the questionnaire (36 items) obtains information on the factors that contribute to the construction innovation value chain, which consisted of four sections: (1) drivers of innovation, (2) enablers of innovation, (3) barriers of innovation, and (4) impacts of innovation. Respondents were asked to rank the drivers, enablers, barriers and impacts of innovation, according to their own judgment and working experience in Palestinian construction industry. All questions were closed, items measured with a 59 five-point Likert scale ranging from 1 (strongly disagree) to 5 (strongly agree). Part three of the questionnaire (35 items) illustrates the factors influencing innovation. These factors were collected from previous studies, own experience and pilot study. The factors were included in five components: (1) Strategic Management, (2) Stakeholders Management, (3) Internal Innovative Work Environment, (4) External Innovative Work Environment, and (5) Project management. These factors were considered to represent best practice in supporting the innovativeness of construction PM. This part asked the respondents to rate their organization‟s performance. All items in this section were measured with a five-point Likert scale ranging from 1 (not at all) to 5 (very great extent). The final version of the questionnaire was designed in English language (attached in Appendix A), while the distributed version was in Arabic language (attached in Appendix B), since the Arabic language is much more effective and easier to be understood. To distribute questionnaires quickly and to collect data in electronic format, an online questionnaire was developed using a Google Drive form. Questionnaire link was sent by email and respondents' replies were returned directly to a database without noticing sender information. In general, the contact person was the firm owner or a senior manager. Participation in the survey was voluntary. The incentive was the option to receive the results of the research of the survey. The return rates for mail surveys oscillate only 20%. It was surprising that 60 many of the targeted samples do not have email or cannot use the email (especially in the contracting companies). To ensure the results were not biased against firms that did not use email systems, survey forms were distributed through the post to a random sample of practitioners who are part of the Palestinian Contractors Union (PCU) under the first and second classes or member in Engineering Association. 3.6.1.2 Questionnaire Pilot study A pilot study provides a trial run for the questionnaire, which involves testing the wording of questions, identifying unclear questions, testing the technique used to collect the data, etc. (Naoum, 2007). Furthermore, a pilot study is an opportunity for improving the questionnaire, filling in gaps and determining the time required for completing the questionnaire. Prior to disseminating the questionnaire, a pilot study was conducted with five experts to test whether the questions are clear, valid and easy to answer. 3.6.1.3 Questionnaire Validity Validity refers to the degree to which an instrument measures what it is supposed to be measuring (Polit & Hungler, 1985). High validity is the absence of systematic errors in the measuring instrument. When an instrument is valid, it truly reflects the concept it is supposed to measure (Wood & Haber, 1998). The structure validity test was used to evaluate the validity. It measures the correlation coefficient between one field and all 61 the fields of the questionnaire that have the same level of Likert scale (Polit & Hangler, 1985). Table (3.1) clarifies Spearman correlation coefficient for each item of the drivers, enablers, barriers, impacts and the total of the innovation value chain field. The P-values are less than 0.05, so the correlation coefficients of this field are significant at α = 0.05. Therefore, it can be said that the data of innovation value chain field are consistent and valid to be measured. Table (3.1): Correlation Coefficient of Each Field of Innovation Value Chain Item Number of Items Spearman Correlation Coefficient P-Value (Sig.) Drivers of innovation 7 0.664 0.000* Enablers of innovation 7 .0.700 0.000* Barriers of innovation 15 0.697 0.000* Impacts of innovation 7 0.633 0.000* * Correlation is significant at the 0.05 level Table (3.2) clarifies the Spearman correlation coefficient for each item of the practices and the total of the innovation PM practices field. The P- values are less than 0.05, so the correlation coefficients of this field are significant at α = 0.05. Therefore, it can be said that the data of the innovation PM best practices field are consistent and valid to be measured. 62 Table (3.2): Correlation Coefficient of Each Field of Innovation Practices Item Number of Items Spearman Correlation Coefficient P-Value (Sig.) Strategic Management 5 0.828 0.000* Stakeholders 7 0.848 0.000* Internal Environmental 7 0.853 0.000* External Environmental 7 0.729 0.000* Project Management 9 0.852 0.000* *Correlation is significant at the 0.05 level 3.6.1.4 Questionnaire Reliability The reliability of an instrument is the degree of consistency (Polit & Hangler, 1985). In this research, in order to ensure the internal consistency of Likert scale of the questionnaire, Cronbach's Alpha test was used as shown in Table (3.3). The normal range of Cronbach's coefficient alpha (α) value between 0.0 and + 1.0. The closer the Alpha (α) is to 1, the greater the internal consistency of items in the instrument being assumed. For most purposes, the reliability coefficients above 0.7 are considered satisfactory (Burns & Grove, 2003). 63 Table (3.3): Cronbach's Alpha Test Cronbach's Alpha Internal Consistency Excellent Good Acceptable Poor Unacceptable (Cortina, 1993) According to the Cronbach's Alpha test of the questionnaire, as shown in Table (3.4), the total reliability of the questionnaire is 0.939 that is excellent. As well as the values of the Cronbach's Alpha for all the variables are ranging between 0.732 and 0.943, indicating that some scales are more reliable than others, but all well beyond 0.70, which is good. 64 Table (3.4): Cronbach's Alpha Item Number of Items Cronbach's Alpha Internal Consistency Drivers of innovation 7 0.732 Good Enablers of innovation 7 0.765 Good Barriers of innovation 15 0.733 Good Impacts of innovation 7 0.799 Good Strategic Management 5 0.905 Excellent Stakeholders Management 7 0.902 Excellent Internal Innovative Environmental work 7 0.918 Excellent External Innovative Environmental work 7 0.902 Excellent Project Management 9 0.943 Excellent Total 71 0.939 Excellent 3.6.2 Interviews Analysis Interview techniques are more appropriate to collect in-depth information and can cover a wider area of application than questionnaires. The main advantage of interviews is that they provide more opportunity to obtain qualified answers and to clarify or restate questions that the respondent cannot understand. The disadvantages of interviews include being time- consuming, expensive and providing information that can be difficult to analyze. Moreover, interviews may be more subjective than questionnaires (Kumar, 1999; Moore, 1983). 65 3.6.2.1 Focus Group At first, data was collected from a focus group of seven experts working in the construction industry and have an experience in their companies ranging from 20 to 25 years. A focus group is a discussion-based interview involving several participants and a moderator, whose role is to facilitate the discussion (Brewerton & Millward, 2001). A focus group was used in this study for eliciting ideas, thoughts and perceptions from experts and also to understand the problems they are facing during managing their construction works. The collected ideas were then used in formulating the questionnaire. 3.6.2.2 Structured Interviews: Pre-study The structured interview was formulated to answer the main research questions. Seven interviews were conducted with experts representing various institutions in the construction industry, varying from consultants, contractors and project managers. The main reason of using structured interviews in this research was identifying new factors about the drivers, enablers, barriers and impacts of innovation that reflects the real situation of PM in the Palestinian construction sector and that were not mentioned in the literature review. The length of interviews was around 30 minutes. At the end of the interviews, interviewees were asked to comment on the questionnaire and make the required correction before it was distributed. A list of questions used in a structured interview approach is presented in (Appendix C). 66 3.6.2.3 Semi-Structured Interviews: Post-study After receiving the filled questionnaires and analyzing the data, the researcher commenced the qualitative part of this research. Seven semi- structured interviews were conducted with professionals working in construction and engineering firms to explain and verify the results. Interviewees were asked for explanations about the extreme and unexpected results. Notes have been made during each interview and when all interviews were conducted, patterns were matched and main observations were made. 3.7 Normality Test Before data analysis of the survey items began, an assessment of the normality of data is a prerequisite for many statistical tests because not all random variables are normally distributed. Table (3.5) presents the results from two well-known tests of normality: the Kolmogorov-Smirnov Test and the Shapiro-Wilk Test. The null hypothesis is that the data is normally distributed. The null hypothesis is rejected if significance is less than . 67 Table (3.5): Normality Test: Kolmogorov-Smirnova & Shapiro-Wilk Elements Kolmogorov -Smirnova Sig P-value Shapiro -Wilk Sig P-value Drivers 0.120 0.000 0.949 0.000 Enablers 0.125 0.000 0.949 0.000 Barriers 0.113 0.000 0.941 0.000 Impacts 0.120 0.000 0.929 0.000 Strategic Management 0.101 0.000 0.971 0.000 Stakeholders Management 0.098 0.000 0.957 0.000 Internal Innovative Environmental work 0.090 0.000 0.961 0.000 External Innovative Environmental work 0.110 0.000 0.962 0.000 Project Management 0.074 0.000 0.965 0.000 From the results, all the P-values for each group are less than α = 0.05, this gives a basis for the assumption that the data is not normally distributed and non-parametric statistics should be used for data analysis. Basically, there is at least one non-parametric equivalent for each parametric test. Table (3.6) contains several statistical analyses for both parametric and non-parametric test. Table (3.6): Parametric vs Non-Parametric Tests Analysis Type Parametric Non-parametric Compare means between two distinct/independent groups Two-sample t-test Wilcoxon rank- sum test Compare two quantitative measurements taken from the same individual Paired t-test Wilcoxon signed- rank test Compare means between three or more distinct/ independent groups Analysis of variance (ANOVA) Kruskal-Wallis test Estimate the degree of association between two quantitative variables Pearson coefficient of correlation Spearman‟s rank correlation 68 Chapter Four Data Analysis 4.1 Chapter Overview To analyze the empirical data collected through the field exploratory survey, quantitative statistical analysis of the questionnaire was done by using the statistical software SPSS. In this chapter, at first, the analysis of data is done to discuss the characteristics of the study population. After that, descriptive analysis is done to rank the relative importance of the drivers, enablers, barriers and impacts of innovation in Palestinian construction sector. At the end of this chapter, bivariate correlation analysis is done for getting some useful relationships among specific variables. Based on the data obtained from the quantitative survey and its evaluation, it is possible to state that organizations find it important to concentrate on innovation. As shown in Figure (4.1), only 2% of the organizations mentioned that they did not find this aspect important when they asked, “How important is innovation for the future of construction?” Figure (4.1): Importance of innovation 69 4.2 Study Population 4.2.1 Gender As shown in Figure (4.2), analysis of gender distribution confirms that the Palestinian construction industry is traditionally male-dominated sector, (66.6%) survey participants were men and (33.4%) of the participants were women. Figure (4.2): Distribution of Gender 4.2.2 Types of Organizations Figure (4.3) shows that 60% of the respondents have been working in consulting organizations while 40% have been working in contracting organizations. 70 Figure (4.3): Distribution of organization 4.2.3 Research Location Figure (4.4) shows that most of the companies in the sample population (40%) are located in Ramallah city, in the middle of the West Bank. It also shows that 26% of the companies are located in Nablus and 10% of the companies are located in Jenin and Tulkarm, which means 36% of the companies in the sample are located in the north of the West Bank. Also, 18% of the companies in the sample are located in the south of the West Bank, where 14% of the companies are located in Hebron and 4% of the companies are located in Bethlehem. While only 4% of the companies are located in East Jerusalem. 71 Figure (4.4): Company location 4.2.4 Years of Experience Figure (4.6) shows that 62% of the respondents have more than 15 years of experience and only 3% of the respondents has less than 5 years of experience while 14% have between 5 and 10 years of experience and 21% have between 5 and 10 years of experience. Figure (4.5): Respondents experience 72 4.2.5 Position of Respondents One of the main objectives of the study was to obtain a managerial perspective on the study. Respondents were classified based on their positions in their organizations. Figure (4.5) shows that (47) 21% of the consultants respondents are engineers, (39) 18% are project managers, and (134) 61% are firm managers. On the other hand, (19) 13% of the contractors respondents are engineers, (34) 23% are project managers and (92) 63% are firm managers. The results show that the highest level of respondents holds positions of firm managers in both the contractors' organizations and consultants' organizations. Thus, this is an indication that the questionnaire respondents are key persons in their firms. Figure (4.6): Respondent position 73 4.3 Innovation Value Chain Introduction of innovation value chain, taking in consideration drivers, enablers, barriers and impacts of innovation was significant to identify the surrounded environment that affect innovation in construction. Thus, this thesis attempts to reveal the perceptions of the two main groups, consultants and contractors, towards the related factors along the innovation value chain. To give an overall picture of the relative importance of the key drivers, barriers, enablers and impacts along the innovation value chain of the construction industry; the data was analyzed by the Relative Importance Index (RII) method. The respondents were asked to rank the factors, according to the degree of importance (1 – affects with little degree; 2 – affects somehow; 3 –affects with average degree;