Internationalisation of New Zealand civil construction firms - opportunities and challenges in Asia
The development experienced by China, India, Indonesia and Vietnam, amongst other emerging markets, has brought a rapid growth in the urban population. However, the speed of urbanisation poses an unprecedented infrastructure challenge for these economies. Considering these developments, the primary aim of governments in these markets is to aid the development of world-class infrastructure facilities. Given the scope of infrastructure development, these markets have increasingly opened the sector to both local and international private investors over the last seven years. This has created enormous opportunities for infrastructure suppliers and it is likely to increase the number of private investments (both local and international) in these markets. The benefits that these emerging markets offer especially in the area of Transport and Energy infrastructure, are likely to be of significance to the New Zealand civil construction sector, given the small size of the domestic market. Indeed, increasing New Zealand’s international business activity is vital to raising New Zealand’s economic growth rate. In light of the above, the first objective of this research is to analyse key resource and capability demands required for infrastructure projects in markets such as India, China, Vietnam and Indonesia. In examining this, it is also imperative to evaluate the competitive advantages that New Zealand civil construction firms could deploy to the target markets. As a resource-based economy, international engagement plays a critical role in the growth and development of New Zealand. The liberalisation and deregulation of the target markets has seen a rise in the number of New Zealand firms keen to tap into opportunities in sectors including agribusiness, biotechnology, food and beverage over recent years. Nevertheless, New Zealand civil construction firms have not participated to anything like the same extent especially in the area of infrastructure development. Reasons for this limited interaction are unclear and not well documented in the literature on the international economic activities of New Zealand civil construction firms. Given the importance of international engagement New Zealand civil construction firms cannot afford to isolate themselves from the opportunities provided by the target markets. However, despite its importance, the internationalisation of the New Zealand civil construction firms remains under-researched. Recognising this gap, the second objective of this study is to examine the constraints faced by New Zealand civil construction firms in internationalising operations. In order to address the two research objectives the study adopts a multiple case-study approach and presents an analysis of the main findings generated from 21 interviews conducted with 15 civil construction firms, one government agency, a ministry and one industry body. The aim is to ensure that the data collected is sufficiently rich and detailed to help understand the workings of the New Zealand civil construction sector. The findings generated by within and cross-case analysis are deductively compared to five theoretical frameworks, namely – OLI Framework, Resource Based View (RBV), Mathews LLL Model, International Entrepreneurship and Uppsala Model. The intention is to uncover aspects that are identified by these and other relevant studies that analyse the internationalisation of small-medium enterprises (SMEs). The findings of this study suggest that factors such as firm size, resources and limited international experience constrain New Zealand civil construction firms when considering international operations. While these findings support the existing literature on internationalisation of SMEs that states that factors such as firm size, resources and experiential knowledge especially affect the ability of SMEs to internationalise (Johanson & Vahlne, 1977; Barney, 1991; Oviatt & McDougall, 1994; Chetty & Hamilton, 1996; Mathews, 2002; Chetty & Campbell-Hunt, 2004), this study specifically contributes to the literature that examines constraints associated with the internationalisation of civil construction firms. Despite the growth in exports of civil construction services, literature on internationalisation of civil construction firms is limited (Moreira et.al, 2013). Previous research in the area suggests that the nature of civil construction projects means that the constraints faced by firms operating especially in an international setting are complex and differ across countries (Moreira et.al, 2013; Seymour, 1987; Quak, 1991). The findings of this study contribute to the existing literature as New Zealand civil construction firms state that given the variation in market and institutional factors, undertaking infrastructure projects in the target markets is particularly challenging and risk prone. Although the study supports existing literature on internationalisation of civil construction firms, the research also adds to the literature by identifying factors specific to New Zealand civil construction firms and the New Zealand domestic market that play a critical role in constraining the internationalisation of New Zealand based civil construction firms. For example, firms in the New Zealand civil construction sector are found to have a strong domestic focus. One of the main reasons for this view is the steady availability of work in the domestic market. The rebuild of Christchurch in the aftermath of earthquakes, for example, has presented an unexpected source of work for New Zealand civil construction firms. A stable domestic market and consequent lack of international experience has made international opportunities less attractive for a number of firms in the civil construction sector. Drawing on insights gained from existing literature and case evidence, the research proposes to design actions and identify key government, industry and firm policy implications that might substantially increase levels of international involvement by New Zealand civil construction firms. Finally, the study seeks to contribute to the general body of knowledge on the internationalisation of SMEs. Given that the study analyses the internationalisation of civil construction firms, the findings seek to deepen the understanding of the distinctive nature of SME service firms internationalisation by putting it in the context of firms in the New Zealand civil construction. The findings of this study can be extended to understand the internationalisation of other firms that provide services associated with infrastructure development such as design, project management, infrastructure management, construction equipment, and ICT firms, as these firms are likely to face similar issues such as networking, lack of market and institutional knowledge, availability of financial and human resources when considering operations in the target markets. Also, considering that market participation from a number of civil construction firms from the Europe and US has been limited in the target markets (Fernandez, 2013), the findings of this study can also be used to inform the internationalisation strategies of these firms. In addition to civil construction firms, the findings of this study can also applied to other traditional service sectors (such as retail) that may face similar issues around resources, competition, institutional and market factors while considering operations in the target markets. Finally, the findings of this study can be extended to evaluate the importance of firm specific capabilities in more dynamic technologically driven service based firms (such as ICT).