Contingency-Based Approach to Firm Performance in Construction: Critical Review of Empirical Research

In management literature, a fundamental research question is why some companies succeed while others fail. The contingency-based approach proposes that organizational performance is a consequence of the fit between a set of contingencies, e.g., structure, people, technology, strategy, and culture. This approach has been adopted implicitly and increasingly by construction management (CM) researchers. The purpose of this paper is to examine the development of contingency thinking, theoretical and analytical issues of its application, and the measurement of firm performance in the empirical research in construction. After reviewing the literature of firm performance research approaches in construction, firm performance measurement in the empirical research, and contingency theory, a total of 36 empirical papers addressing firm performance in construction are reviewed in-depth and their content is analyzed. These papers are selected from four leading journals in construction: ASCE Journal of Construction Engineering and Management (JCEM), ASCE Journal of Management in Engineering (JME), Construction Management and Economics (CME), and International Journal of Project Management (IJPM). The review reveals that the contingency-based approach is increasingly visible in the CM literature. However, no research makes it explicit, and some methodological issues of applying contingency theory have not been recorded and discussed explicitly to validate and interpret the research result, such as hypotheses development, multicollinearity, construct validation, and reliability. These issues largely undermine the validity of the body of knowledge accumulated from these empirical studies. The review further shows 36 performance indicators that are used to measure firm performance in these papers, e.g., profitability, the overall performance, growth in contract awards, and the iron triangle of project outcomes, whereas limited attention is paid by CM researchers to understanding what firm performance is and how it can be properly measured in the empirical research. Some suggestions are proposed for applying the contingency-based approach and improving the quality of the empirical research in construction. The main contribution of this paper is that it drastically appeals more theoretical and methodological concerns in organizational studies that apply the contingency-based approach. It also explicitly presents some valuable implications of measuring firm performance for both researchers and practitioners.