Theoretical Framework for Determinants of A/E/C Firm Value, Strategy and Continuity: an Analysis Incorporating Corporeal, Volitional and Knowledge Assets
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Theoretical Framework for Determinants of A/E/C Firm Value, Strategy and Continuity: An Analysis Incorporating Corporeal, Volitional and Knowledge Assets A Thesis Presented to The Academic Faculty By Jeffrey L. Beard In Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the College of Architecture Georgia Institute of Technology May 2011 THEORETICAL FRAMEWORK FOR DETERMINANTS OF A/E/C FIRM VALUE, STRATEGY AND CONTINUITY: AN ANALYSIS INCORPORATING CORPOREAL, VOLITIONAL AND KNOWLEDGE ASSETS Approved by: Prof. Saeid L. Sadri, Advisor College of Architecture Georgia Institute of Technology Dr. Roozbeh Kangari College of Architecture Georgia Institute of Technology Prof. Godfried Augenbroe College of Architecture Georgia Institute of Technology Prof. Chimay Anumba Architectural Engineering Program Penn State University Prof. Kathy Roper College of Architecture Georgia Institute of Technology ACKNOWLEDGEMENTS During our business and academic careers, we are sometimes fortunate to stand on the shoulders of giants. My work at the American Society of Civil Engineers in the early 1990s was propelled by Preston Haskell, Chairman of The Haskell Company, Jacksonville, FL, who significantly expanded the dissemination of my report of the deliberations of ASCE’s Design-Build Task Force, and who later founded the Design- Build Institute of America (DBIA) where I served for a decade as chief executive. At DBIA’s first Professional Design-Build Conference in Atlanta in 1994, I had the distinct pleasure of working with Prof. Saeid Sadri of the Georgia Institute of Technology. Our collaboration and friendship led to a Teaching Assistantship position within the College of Architecture as an instructor for graduate-level project delivery and project management courses. For those marvelous experiences at Georgia Tech from 2000 to 2005 and for his ongoing encouragement of my scholarly work, I am eternally grateful to this internationally capable and beloved mentor. Upon my matriculation within the College of Architecture, I was inspired by engineer and professor Godfried Augenbroe, who challenged me to justify my practical notions about the A/E/C industry with sufficient empirical observation and experiment. Socratic questioning by Prof. Augenbroe provided the window to this thesis topic, with its focus on the business of design and construction. The support and sagacity of Prof. Augenbroe has provided sustenance to a generation of aspiring scholars, and we regard him as the “Oracle of Optimization.” He has helped graduate students across the globe in the myriad small ways -- conversations over a glass of Bordeaux or fine Dutch beer with fellow graduate students would at first lend themselves to fond reminiscences, but we have no doubt these stories will later turn into pedagogical mythology. The completion of this research project would not have been possible without the 21 expert panelists who participated in my Delphi rounds. While I cannot name these nationally-known design and construction professionals due to confidentiality issues, I am indebted to these individuals for their insights and forbearance during six months of questionnaires, feedback and responses. I regard each of them as contemporary giants in the fields of architecture, engineering and construction in the United States. A constant in my life has been the love and companionship of my wife June, who forfeited some of her dreams to help her husband and daughters to follow theirs. The accomplishments of my academic and vocational pursuits, including this thesis, were made possible only through her beneficence and wisdom. “What wisdom can you find that is greater than kindness?” __ Jean-Jacques Rousseau in Emile, 1762 iii TABLE OF CONTENTS ACKNOWLEDGEMENTS………………………………………………….iii LIST OF TABLES……………………………………………………………v LIST OF FIGURES…………………………………………………………viii SUMMARY………………………………………………………………..…x Chapter 1 Introduction and Overview…………………………………... 1 Chapter 2 Literature Review and Definitions……………………………17 Chapter 3 Theoretical Background & Foundations for the Research……51 Chapter 4 Tangible and Intangible/Corporeal and Volitional Assets…….97 Chapter 5 Current and Proposed Asset-Based Indicators……………….144 Chapter 6 Methodology, Data Collection and Modeling………………..169 Chapter 7 Quantitative Assumptions, Delimitations and Testing………..197 Chapter 8 Qualitative Assumptions, Delimitations and Survey Analysis..221 Chapter 9 Results, Emergent Framework and Illustrative Scenario……..263 Chapter 10 Summary, Conclusions and Recommendations………………301 Appendices -- Delphi Background & Approach, Surveys and Results……………….317 Additional Tables Related to Asset Accounting………………………347 References……………………………………………………………………..362 iv LIST OF TABLES Table 1 Chains, Shops and Networks………………………………………………30 Table 2 Gradations of Creativity…………………………………………………....37 Table 3 Evolution of General Asset Classes………………………………………. 68 Table 4 Selected Skandia Intangible Asset Measures……………………………...104 Table 5 Basic Differences Between Tangible and Intangible Assets……………....105 Table 6 Assets and Static/Dynamic Concepts………………………………………111 Table 7 Evolution of Resource-Based Asset Classes by Researcher……………….112 Table 8 Factors Related to an Organization’s Intangible Capital…………………...114 Table 9 “Harder” and “Softer” Intangible Asset Groups……………………………116 Table 10 Machlup’s Flow of Ideas Through the Production Process……………….118 Table 11 NAICS Two-Digit Codes for Major US Industry Sectors………………...123 Table 12 Levels of Inputs, Transformation and Outputs……………………………138 Table 13 The Firm’s Resource Bundle………………………………………………139 Table 14 EU PRISM Range of Assets……………………………………………….141 Table 15 General Classification of Assets and their Nomenclature………………….144 Table 16A Total Asset Accounting – Physical and Financial Assets…………………192 Table 16B Total Asset Accounting – Legal and Registrable Assets…………………..193 Table 16C Total Asset Accounting - Organization, Competence & Motivation Assets193 Table 17 Organizational Assets Stocks and Flows…………………………………….194 Table 18 Competence Assets Stocks and Flows………………………………………195 Table 19 Motivational Assets Stocks and Flows………………………………………196 v Table 20 Hours of Continuing Education Recommended by Firms…………………..205 Table 21 Net Profit Before Taxes……………………………………………………..205 Table 22 Net Profit Before Taxes and Continuing Education Hours…………………206 Table 23 Continuing Education (8 Hours + or --) and Pre-Tax Profit………………...206 Table 24 Continuing Education (2 Days + or --) and Pre-Tax Profit…………………207 Table 25 Hours of Continuing Education for Technical and Professional Staff………207 Table 26 Net Profit Before Taxes by Market Sector…………………………………..207 Table 27 Modified t Test for P Values – Continuing Education………………………208 Table 28 Comparison with Breakdown Intervals -- Continuing Education…………..209 Table 29 Resulting p Values from Test – Continuing Education……………………...209 Table 30 Years of Firm Existence and Hours of Continuing Education………………210 Table 31 Continuing Education Hours (8 Hours + or --) and Years of Existence…….210 Table 32 Summary of Contin. Education Hours (2 Days + or --) and Yrs of Exist..…211 Table 33 Firm Focus on Sustainable Practice and Years of Existence………………..212 Table 34 Firm Yrs of Existence & Percentage of Professionals in Interdiscip Practice.214 Table 35 Average Yrs of Exist. & Percent of Pros Involved in Interdiscip Practice... 214 Table 36 Av. Yrs of Firm Exist. and Ten Categories of Pros in Interdiscip Practice….214 Tables 37A, B & C Adoption/No Adoption of New Technologies and Pre-Tax Profit.215 Table 38 Adoption/No Adoption of New Technologies and Age of Firm...…………..216 Table 39 Summary of Hypotheses and Results Based on Quantitative Data………….219 Table 40 Data Requirements & Variables for Qualitative Portion of the Research…...223 Table 41 Hypotheses & Findings-In-Brief for Qualitative Portion of the Research… 250 vi Table 42 Individual Asset Selection for Firms by Experts & Relation to 7 Categories.256 Table 43 Kendall’s Coefficient of Concordance for Panel Review of 6 Firms………..260 Table 44 Kendall’s W Based on Professions on Panel (Scoring of Asset Emphases)...261 Table 45 Overview of Proposed Steps for “Total Assets” Management Accounting…274 Table 46 Proposed Annual Employee Survey of Capabilities and Deployment………275 Table 47 Proposed Template for Capabilities Deployment Statements…...…………..279 Table 48 Proposed Template: Capabilities & Intangible Resources Balance Sheet..…280 Table 49A, B & C Combinations of Outside In and Inside Out Scenarios……………289 Table 50 Asset Tendencies and Patterns Based on Value Logic of Firms…………….310 Table 51 Kendall’s W Coefficient of Concordance Table…………………………….334 Table 52 Comparison of Sample Firms by Different Business Goals…………………347 Table 53 Characterization of Asset Emphases by Different Professionals……………349 Table 54 Intangible Assets Accounting Sheet – Organizational………………………353 Table 55 Intangible Assets Accounting Sheet – Competence…………………………354 Table 56 Intangible Assets Accounting Sheet – Motivational…………………………355 Table 57 Organizational Total Asset Accounting Spreadsheet………………………..356 Table 58 Compilation of Individual Assets by Expert Panel………………………….358 vii LIST OF FIGURES Figure 1 Expressions of Physical and Intangible Creativity……………..38 Figure 2 Subsystems and Meta-System Surrounding Economic System...89 Figure 3 Blackler’s Window on Organizational Systems……………….108 Figure 4 Furu’s Value Creation Model…………………………………..115 Figure 5 A Firm as a Bundle of Assets…………………………………..168 Figure 6