How to promote innovation from an organizational control perspective : A case study of a public infrastructure client

Within the infrastructure sector, a public client can have various roles and responsibilities that extend beyond its own organization, such as stimulating and supporting innovation. As an infrastructure project is seldom standardized, the client needs to procure each contract based on the relevant uncertainties and complexities for that specific context. To encourage a contractor’s compliance with the client’so bjectives, the client employs some degree of organizational control. When a public client procures all its infrastructure from contractors, it also needs to find ways of eliciting innovative solutions from the suppliers. Therefore, a public client needs strategies to both promote innovation by the contractors and direct and oversee the contractors’ work to ensure the deliverables meet the project’s objectives. The demands for increased innovation in the construction sector in general needs to be handled concomitant with the client’s need to check that the contractor delivers accordingly to the client’s objectives and demands. The overall purpose of this thesis is to explore the relationship between organizational control and promoting innovation by a public infrastructure client. More specifically, it explores how a public client can promote innovation by its contractors from an organizational control perspective. The theoretical background is provided by an organizational control framework (Ouchi, 1979; Aulakh et al., 1996), i.e. a client can manage and steer an agent via three different control systems: process, output, and social. The empirical data is derived from 47 semi-structured interviews, complemented by observations, from10 different infrastructure projects. The client (The Swedish Transport Administration; STA) is the same for each project, but the contractors differ. Two types of contractor are represented: contractors that have not worked with the STA before (“unfamiliar contractors”), and contractors that have worked with the STA before (“familiar contractors”). A majority of the contract type is design-build. Four appended papers, each presenting a public client perspective, provide the basis of the thesis. Previous findings that the client’s role is important for promoting innovation is explored further in this thesis from an organizational control perspective, emphasizing the role of the public client. It is important that during the procurement phase the client tries to find the right balance between achieving the intended objectives and creating space for innovation. Ex-ante planning is important, because how the client writes the control mechanisms into the procurement documents, and later the contract, has a direct effect on the opportunities for innovation by the contractors.In addition, the client has to manage the project in a way that does not cause irritation of frustration for the contractor, or hinder their work, thus supporting the view that organizational control should be enabling instead of coercive, so that the client’s input encourages innovation rather than creating obstacles. In addition, when adding a relationship history perspective on organizational control, an unfamiliar contractor (i.e. a contractor that has not worked with the client before) can find process control unsuitable and social control confusing, which means output control is probably the most appropriate approach to take when working with unfamiliar contractors. However, just relying on procurement strategies such as a design-build (DB)contract in combination with strict functional demands is not enough to promote innovation. Furthermore, a collaborative setting only seems to lead to innovative solutions if the client regards innovation as a mutual task and utilizes the collaborative setting for innovative co-creation. From the client’s perspective, the practical and managerial implication of this thesisis the importance of finding a balance between giving the contractor space to be innovative in the execution of the contract, and at the same time making sure that the requisite end product is delivered. The results of this thesis suggest that the client does not hand over the “how” to the contractor when it comes to executing the project, as would be expected in a DB contract. From the contractor’s perspective, the responsibility for innovation within a DB contract can be confounded by the client’s use of social control, by which the client may encourage discussions and collaboration regarding innovative solutions but blur the line over responsibilities. This could explain why social control often fails to have a positive impact on innovative output