FACTORS AFFECTING THE

DEVELOPMENT OF MICRO-
CONSTRUCTION ENTERPRISES

WILLS THOMAS

September 2007
FACTORS AFFECTING THE DEVELOPMENT
OF MICRO-CONSTRUCTION ENTERPRISES

WILLS THOMAS

A thesis submitted in partial fulfilment of the

requirements of Glasgow Caledonian University
for the degree of Doctor of Philosophy

School of the Built and Natural Environment

Glasgow Caledonian University

September 2007
 Abstract

ABSTRACT

Micro-construction enterprises (McE’s) make up 98 percent of all construction

enterprises in UK; they employ about 60 percent of the total industry workforce and
contribute about 40 percent of total turnover of the UK construction industry. These
facts highlight the importance of McE’s to the UK construction industry. However,
analysis of McE centric records revealed that their overall performance has been
rather poor, as they have been plagued by high attrition rates and low survival rates
of young McE’s. The situation is further exacerbated by the decreasing profit levels
of McE’s. This highlights that their might exist certain vitiating factors which inhibit
the McE’s from performing to their optimum capacity thus resulting in the
lamentable scenario which the McE’s find themselves in.

The research methodology adopted for this research was of a hybrid kind with an
eclectic mix of approaches and methods. Appraisal of relevant literature revealed
that previous McE centric research was extremely scant. This instigated a pilot
opinion survey (conducted using two different sets of questionnaires that were sent
out to McE owners, government officials and main-contractors representatives) and a
short-term shadowing exercise (involved active shadowing of McE owners). The
main data collection stage of the research was carried out in two phases. As part of
the first phase 60 interviews were carried out with McE owners to decipher their
skills sets, inclinations, and motivations. The secondary phase involved ethnographic
fieldwork on three different construction projects.

The findings of the research concluded that there exist a set of factors which inhibit
the McE’s from performing to their optimum capacity. These factors were found to
have both endogenous (internal) and exogenous (external) causal sources. In total
eight endogenous factors were identified which were further segregated into owner
and business centric sub-factors. The owner centric factors were McE owners
propensity to take risks; their willingness to innovate; their education level; their
inclination to employ external consultants; their intention to attend training
programmes; and their motivation to start the business. The business centric factors
were business strategy and growth. Altogether six exogenous factors were identified
namely: absence of written contract, collusion, conflict, information asymmetry,
payment delay, and changes in taxation policies. These factors could be further used
by McE’s as a checklist while setting of on the pursuit of achieving growth.

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 Table of content

TABLE OF CONTENT

ABSTRACT....................................................................................................................................ii

TABLE OF CONTENT ...............................................................................................................iv

LIST OF TABLES .....................................................................................................................viii

LIST OF FIGURES.......................................................................................................................ix

LIST OF ABBREVIATIONS.....................................................................................................xiii

Acknowledgements......................................................................................................................xiv

Declaration....................................................................................................................................xv

1. Introduction ..............................................................................................................................1
1.1. Background..........................................................................................................................1
1.2. Aim and Objectives of the research......................................................................................4
1.3. Structure of the thesis ..........................................................................................................6
1.4. Summary...............................................................................................................................7

2. McE’s: an overview ...................................................................................................................8

Chapter 2.........................................................................................................................................8
2.1. Introduction .........................................................................................................................8
2.2. What is a micro-enterprise?.................................................................................................8
2.3. The inadequacy of classifying micro-enterprise’s under the label of SMEs........................9
2.4. Why are micro-enterprises vital to the European Union economy? .................................14
2.5. McE’s in the UK construction industry..............................................................................16
2.6. Analysis of McE statistics ..................................................................................................17
2.7. Role of McE’s in the UK economy.....................................................................................24
2.8. Summary ............................................................................................................................26

3. Business success and failure ....................................................................................................27

Chapter 3.......................................................................................................................................28
3.1. Introduction........................................................................................................................27
3.2. Business success and failure – an overview.......................................................................31
3.3. What is business failure?....................................................................................................33
3.4. How to assess McE failure?...............................................................................................36
3.5. Causes of small business failure........................................................................................40
3.5.1. Endogenous factors.....................................................................................................48
3.5.2. Exogenous factors ......................................................................................................51
3.6. Summary.............................................................................................................................53
4. Endogenous factors...................................................................................................................55
4.1. Introduction .......................................................................................................................55
4.2. Are McE owners entrepreneurs?........................................................................................56
4.3. Owner centric factors.........................................................................................................67
4.4. Behavioural factors ...........................................................................................................68
4.4.1. Entrepreneurial behaviour approach...........................................................................69
4.4.2. Management competency approach............................................................................76
4.4.3. Integrated approach.....................................................................................................79
4.4.4. Key behaviour centric factors ....................................................................................86
4.4.5. External factors and their influence on owner behaviour...........................................92
4.5. Skill centric factors ............................................................................................................95
4.6. Generic/Miscellaneous factors...........................................................................................99
4.7. Business centric factors ...................................................................................................100
4.7.1. Strategy ....................................................................................................................101
4.7.2. Business growth .......................................................................................................105
4.8. Summary...........................................................................................................................116
5. Exogenous factors...............................................................................................................118
5.1. Introduction .....................................................................................................................118
5.2. Absence of written contract .............................................................................................120
5.3. Collusion..........................................................................................................................121
5.4. Conflicts ...........................................................................................................................123
5.5. Information asymmetry and distortion.............................................................................127
5.6. Payment delay..................................................................................................................129
5.7. Changes in tax regulations ..............................................................................................131
5.8. Summary...........................................................................................................................134

6. Research methodology...........................................................................................................136
6.1. Introduction .....................................................................................................................136
6.2. Ethos of the research philosophy ....................................................................................137
6.3 Assumptions.......................................................................................................................139
6.4. Ideological perspective.....................................................................................................144
6.5. Research approach ..........................................................................................................149
6.5.1. Qualitative: strengths and weaknesses.....................................................................149
6.5.2. Quantitative: strengths and weaknesses....................................................................150
6.5.3. Which approach to use – qualitative or quantitative?...............................................151
6.6. Research methods ............................................................................................................153
6.6.1. Methods employed to answer the research questions...............................................154
6.7. Summary...........................................................................................................................172

7. Quantitative findings..............................................................................................................173
7.1. Introduction......................................................................................................................173
7.2. Analysis of generic McE and industry centric information..............................................175
7.3. Summary ..........................................................................................................................192

8. Qualitative findings................................................................................................................193

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 8.1. Introduction .....................................................................................................................193
8.2. Findings of preliminary opinion survey ..........................................................................193
8.2.1. McE owners perceptions ..........................................................................................194
8.2.2. Government representative’s perceptions regarding McE’s.....................................198
8.2.3. Main contractor’s representative perceptions regarding McE’s ..............................202
8.3. Findings of the shadowing exercise.................................................................................206
8.4. Findings of the McE centric investigation ......................................................................210
8.4.1. McE owners background..........................................................................................210
8.4.2. Endogenous factors...................................................................................................214
8.4.3. Exogenous factors.....................................................................................................237
8.5. Summary...........................................................................................................................252

9. Discussion of quantitative and qualitative findings.............................................................253

9.1. Introduction......................................................................................................................253
9.2. Summary of research findings .........................................................................................253
9.3. Key research questions ....................................................................................................271
9.3.1. Research sub-question 1: “Is the inclusion of McE’s in the SME cohort an erroneous
practice?”............................................................................................................................272
9.3.2. Research sub-question 2: “What is the actual role of McE’s in the UK construction
industry?”............................................................................................................................282
9.3.3. Research sub-question 3: “Are McE’s really failing?”.............................................285
9.3.4. Research sub-question 4: “Are all McE’s the same?”..............................................291
9.3.5. Research sub-question 5: “Are all McE owners similar?”........................................299
9.3.6. Research sub-question 6: “Who is the ideal McE owner?”......................................309
9.3.7. Research sub-question 7: “How different are McE owners to owners of micro-
enterprises from other industries?”.....................................................................................312
9.3.8. Research sub-question 8: “Which business owner typology do McE owners belong
to?”......................................................................................................................................314
9.3.9. Research sub-question 9: “Can immigrant labour redress the skill shortage in the
industry?”............................................................................................................................316
9.3.10. Main research question: “What are the factors which inhibit the development of
McE’s?”..............................................................................................................................318
9.4. Measures to redress the current state of McE’s...............................................................320
9.4.1. McE centric measures...............................................................................................321
9.4.2. Project centric measures...........................................................................................322
9.5. Summary...........................................................................................................................325

10. Conclusions and recommendations for future research ..................................................327

10.1. Introduction ...................................................................................................................327
10.2. Aim of research .............................................................................................................328
10.3. Drivers for the industry .................................................................................................330
10.4. Recommendations for future research...........................................................................334
10.5. Personal reflection ........................................................................................................336

REFERENCES...........................................................................................................................338

APPENDIX..................................................................................................................................363
Appendix A: Generic McE centric information pertaining to preliminary statistical analysis
.................................................................................................................................................364
Appendix B: Preliminary survey results..................................................................................365
Appendix C. McE centric investigation...................................................................................380

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 Appendix D. Immigrant workers perceptions..........................................................................386

vii
 List of tables

LIST OF TABLES

Table 2.1: Thresholds for different firm types within the SME
cohort………...……………………………………………..…….9
Table 4.1: Traits and qualities essential for an entrepreneur…………...…..73
Table 4.2: Types of entrepreneurial competencies…..……………………..78
Table 4.3: Business owners intention and ability centric factors which
inhibit business growth…………………...……………………107
Table 4.4: Characteristics and traits required in an owner for enterprise
growth.………...………………………………………...…..…111
Table 5.1: Sources of construction disputes………………………………123
Table 6.1: Types of philosophical assumptions…………………………...138
Table 6.2: Matrix for method selection...…………………………………153
Table 7.1: Percentile change in McE numbers……………………………184
Table 8.1: Key owner centric factors……………………………………...215
Table 8.2: Absence of written contract…………………………………....238
Table 8.3: Instances of collusion observed on site………………………..240
Table 8.4: Instances of conflicts observed on site………………………...243
Table 8.5: Instances of information delay observed on site………………246
Table 8.6: Instances of payment delay observed on site………………….248
Table 8.7: Causal sources for the exogenous factors inhibiting McE
success…………………………………………………………251
Table 9.1: McE’s v. Small construction enterprises: t-test…….………….276
Table 9.2: McE’s share of construction output……………………………283
Table 9.3: Factors inhibiting the development of McE’s……...……….…318
 List of Figures

LIST OF FIGURES

Figure 2.1: McE’s in the UK construction industry.………...…………..….16

Figure 2.2: Comparative analysis of VAT Registrations v.
De-registrations in .....………………...………..............……....18
Figure 2.3: Comparative analysis of VAT Registrations in UK v.
Scotland…...………………………………………………...….19
Figure 2.4: Comparative analysis of VAT De-registrations in UK
v. Scotland …………………………………...…………………20
Figure 2.5: Trends of smaller subgroups within McE’s …………………....21
Figure 2.6: Average survival rate of McE’s which VAT registered
from 1995-2004…………………………………………………22
Figure 2.7: Comparison of Annual Construction Output (All works) vs.
number of McE’s ……………………………………………....23
Figure 2.8: Relationship between performance of McE, industry
and economy ……………………………………………….......25
Figure 3.1: Measure for business failure.…………………………...……....35
Figure 3.2: Environment/response matrix distribution with failure ………..42
Figure 3.3: Input/output model of business failure in the construction
industry …………………………………………………………44
Figure 3.4: Example of matrix for expressing causes of McE failure………45
Figure 3.5: Factors which influence McE business performance….………..47
Figure 3.6: Essentials for a successful entrepreneur………….……………..50
Figure 4.1: Types of small business owners………………………………...63
Figure 4.2: Alternative typologies for small business owners……………....66
Figure 4.3: Global competency space…………………………………….....81
Figure 4.4: Example of a modified version of a global competency
model …………………...............................................................83
Figure 4.5: Environmental factors which might influence entrepreneurial
behaviour …………………………………..…………………...92
Figure 4.6: External factors and their affect on McE owners……….………93
Figure 4.7: Conditions for growth in a McE……………………………….108
 List of figures

Figure 5.1: Collusion in construction projects……………………………..121

Figure 5.2: Ideal information flow……………………………….. ……….126
Figure 5.3: Exogenous factors, which might affect McE’s………………...133
Figure 6.1: Hierarchical model for research methodology………………...137
Figure 6.2: Ontological assumption ……...……………………………..…141
Figure 6.3: Proposed research methodology……………………………….170
Figure 7.1: Stage wise distribution of research methods employed
in the research……...…………………………………………..173
Figure 7.2: VAT registration v. de-registrations (with trend lines)……..…176
Figure 7.3: VAT registration v. de-registration (Forecast)………………...178
Figure 7.4: Trends of groupings within McE’s for the period
1995-2005……….............................................................................
...179
Figure 7.5: Trends of smaller subgroups within McE’s for the period
2001-2005 with trend lines)…...……………………………….182
Figure 7.6: Self-employment rates (1995-2005) construction v. all
other industries……………………………………………...…186
Figure 7.7: Average survival rate of McE’s which VAT Registered from
1995-2004 (with trend line)…………………………………...187
Figure 7.8: Comparison of Annual Construction Output (All works) v.
total no. of McE’s and total no. of McE’s with 0-1 employees..190
Figure 8.1: McE owners perceptions…………………...……………….…194
Figure 8.2: Government representative’s perceptions.…….………………198
Figure 8.3: Main-contractor’s representative’s perceptions……………….202
Figure 8.4: McE age group v. POT percentage……...……………………..213
Figure 8.5: McE owners propensity to take risks v. POT percentage.……..217
Figure 8.6: McE owners willingness to innovate v. POT percentage……...221
Figure 8.7: McE owners educational qualification v. POT percentage…....223
Figure 8.8: McE owners inclination to employ external consultants
v. POT percentage……………………………………………..225
Figure 8.9: McE owners inclination to attend training programmes
v. POT percentage……………………………………………..227
Figure 8.10: McE owners motivation to start business……………………...228
Figure 8.11: McE owners motivation to start business v Profit percentage...229

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 List of figures

Figure 8.12: McE owners perception regarding key competencies………....230

Figure 8.13: McE owners motivation to start business v Profit percentage..232
Figure 8.14: Optimum size for McE’s (McE owners perception)………….234
Figure 8.15: McE owners intention to grow business v. Profit percentage...235
Figure 8.16: Typical structure of contractual relationships on
construction projects……………………..……………………239
Figure 8.17: Collusion on construction projects and it affect on McE’s……241
Figure 8.18: Conflict situations as observed on site ………………..………244
Figure 8.19: Information asymmetry as observed on site…………………..247
Figure 9.1: McE POT percentage v. Small construction enterprise
POT percentage………………………………………………..273
Figure 9.2: Mean POT %: McE v. Small construction enterprises...………275
Figure 9.3: Average McE owners inclination, motivations and skills……..279
Figure 9.4: Average small construction enterprise owners
inclination, motivations and skills……………………………..280
Figure 9.5: Comparison of mean of average POT percentage
(2000-2005): McE’s v. Small construction enterprises v. Top
100 construction firms v. UK construction industry ……….....286
Figure 9.6: Profit trends (2000-2005): McE’s v. Small
construction enterprises v. Top 100 construction firms
v. UK construction industry (2000-2005).…………………….288
Figure 9.7: Comparison of average profits: McE’s from different
regions of origin……………………………………………….291
Figure 9.8: Comparison of average profits: McE’s from different
occupational cohorts…………………………………………..292
Figure 9.9: Comparison of average profits: McE’s with different
number of employees………………………………………….294
Figure 9.10: Comparison of profit trends (2001-2005): McE’s with
different number of employees………………………………..295
Figure 9.11: Comparison of McE number v. profit (based on McE’s
with different number of employees)………….………………297
Figure 9.12: McE owners: Bricklayers…………………….………………..300
Figure 9.13: McE owners: Electricians...…………………………………....301
Figure 9.14: McE owners: Fire protection…………………….…………….302

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 List of figures

Figure 9.15: McE owners: Joiners………………….……………………….303

Figure 9.16: McE owners: Painters………..……………………………..…304
Figure 9.17: McE owners: Plumbers…………………………………….….305
Figure 9.18: Different types of McE owners………………………………..306
Figure 9.19: Ideal McE owners……………………………………………...309
Figure 9.20: Micro-enterprise owners from other industries………………..312
Figure 9.21: McE level measures……………………………………………321
Figure 9.22: From a hierarchical order to a project whole…………………..322
Figure 9.23: Parasitic relationship v. symbiotic relationship…...……….......324

xii
 List of abbreviations

LIST OF ABBREVIATIONS

CIOB: Chartered Institute of Builders

CRISP: Construction Research and Information Strategy Panel
DFEE: Department for Education and Employment
DTI: Department of Trade and Industry
EC: European Commission
EU: European Union
FSB: Federation of Small Businesses
HMRC: Her Majesty's Revenue and Customs
ILO: International Labour Organisation
MBD: Market and Business Development
McE: Micro construction enterprise
NSO: National Statistics Office
OECD: Organisation for Economic Co-operation and Development
OJEU: Official Journal of the European Union
POT: Profit Percentage of Turnover
RICS: Royal Institute of Chartered Surveyors
ROI: Return on investment
SME: Small and Medium sized Enterprise
 Acknowledgements

Acknowledgements

I would like to extend my deepest gratitude to the contribution my supervisor

Professor James Sommerville has made throughout my research. James provided

me with considerable freedom during the process, but was always available with

support and advice when needed. He has helped greatly in both my development

as a researcher and personally, and for this I am eternally grateful. I would also

like to extent my thanks to Professor Cliff Hardcastle for providing me with the

opportunity to study for my PhD, and in creating an environment within which I

have spent three of the happiest years of my life. The School of the Built and

Natural Environment (BNE) has been a big part of my life during this period and

has provided a creative and friendly environment within which to study. The

unquestioning willingness of everyone to help each other, and the feeling of

being part of a team provided an atmosphere that you looked forward to coming

in the morning. In Anthony, Micah, Christos and Sanjeevan I have found

friendship for life and many happy memories. Thank you also to John, Nigel and

Billy for their advice and encouragement throughout the process. I would like to

extend my gratitude to Janet for the helping hand she has extended throughout

the time I have spent at BNE. I would like to thank all the members of the BNE

past and present who have introduced me to many different cultures and have

contributed to an experience that I will never forget. I would also like to thank

individuals from the construction industry who spared time from their busy

schedules to help me in my research. Last but not the least I would like to thank

all the members of my family who have supported me in all my pursuits in life.
 Declaration

Declaration

This thesis is submitted to Glasgow Caledonian University for the Degree of Doctor

of Philosophy. The work presented was carried out under the supervision of Prof.

James Sommerville within the School of the Built and Natural Environment at

Glasgow Caledonian University. Unless otherwise stated in the text, the work

presented in this thesis is my own.

xv
 Chapter1

1. Introduction

1.1. Background

Micro-construction enterprises (McE’s) are defined as enterprises which employ less

than 10 employees and have a turnover under 2 Million Euros (European

Commission, 2003). They make up 98 percent of all construction enterprises in UK

and contribute toward 60 percent of the employment and 40 percent of total turnover

of the UK construction industry (DTI, 2006). According to Sommerville and

McCarney (2003) majority of the projects delivered in today’s construction

environment rely significantly on McE’s for their success. The above figures and

assertions clearly highlight the important position, which the McE’s should have in

the UK construction industry.

However, the ground reality is quite different; McE’s have long been undervalued,

which becomes apparent when one tries to source McE centric literature. Information

pertaining to McE’s is extremely scarce; this situation is rather perplexing given

their vital role in the UK construction industry.

This scarcity of information could be attributed to the classification of McE’s within

the larger cohort of SMEs which include all firms which have 0-250 employees and

a turnover less than or equal to 50 Million Euros (European Commission, 2003).

SMEs can be further broken down into three types of firms namely, micro, small and

medium sized enterprises. These firms greatly vary in their size and characteristics

which defies the logic of grouping these firms under one cohort. This common

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 Chapter1

grouping comes across as an erroneous practice given that the operational dynamics

and the general state of affairs in a micro-enterprise are far removed from that of a

small or a medium sized enterprise, at both the firm level and the project level. It can

also be argued that this act of grouping McE’s within the SME cohort is a

metonymical misconception, which finds it roots in classical economics theory. A

similar situation further manifests itself in most research studies pertaining to McE’s

in the UK construction industry, as researchers tend to group McE’s with small and

medium sized enterprises. This calls for research specifically focused on McE’s as

the current understanding of their characteristics and operational dynamics is

extremely limited.

This research is specific to the McE’s which operate on construction projects and

excludes the McE’s involved in the refurbishment sector as their characteristics and

position in the industry vary. The McE’s fulfil multiple roles on construction projects

depending on their size. A self-employed McE (with no employees) usually works as

a lone entity on an itinerant basis shifting from project to other (Nisbet, 1997). They

are usually considered as fillers for the employees, which main contractors would

have to otherwise directly employ (Sommerville and McCarney, 2003). Whereas the

larger McE’s might even function as a full blown contractor, but their general role is

limited to that of a subcontractor. The McE’s also vary on the basis of their

occupational specialisations as some offer high end technologically biased services

like fire protection whereas others like bricklayers carry out relatively simple

operations. This variance in the McE’s characteristics calls for isolated focus on

different types of McE’s.

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 Chapter1

As mentioned before McE’s though vital to the industry have often been overlooked

given their subordinate status and perceived worth in the industry. It would not be

wrong to assume that this is as much a categorisation based on their actual base end

position in the industrial hierarchy, as it is a inappropriate interpretation of their

actual contribution and influence. This calls for an in-depth analysis of McE’s roles

and function within a project setting. This exercise would clearly decipher if the

common assertion regarding their base end position is valid.

McE’s are usually owned by a single individual who has worked in the industry for

an extended period of time following which he or she sets up a business with the

intention of becoming financially independent. This is an assumed character profile

of a McE owner. As mentioned before, McE’s might vary from each other on the

basis of their size and occupation specialisation, the same could be said for a

variance in McE’s based on their owners character profile. No two individuals are

ever the same; the same could be assumed for the McE owners as they might vary on

the basis of their behavioural traits, skill sets and other determinants. This calls for

an in-depth analysis of McE owners characteristics. This exercise would help

decipher differing owner centric inclinations, perceptions, and skill sets.

Nowadays upto 90 percent of the project value in construction projects can be

subcontracted (Lehtonen, 1998); McE’s might carry out a large proportion of this

subcontracted work. This would suggest that the McE’s might have a greater say in

the proceedings within the construction project however, the ground reality might be

to the contrary. This is corroborated by Dainty et al. (2001) who suggest that smaller

enterprises have to date had little involvement with the development and

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 Chapter1

implementation of supply chain performance improvement and integration measure

within the construction industry. This points towards subjugation of McE’s within

project settings. This calls for an in-depth analysis of McE’s operational dynamics

within project settings to decipher whether the above-mentioned assertion regarding

subjugation of McE’s stands true.

The UK construction industry accounts for about 7 percent of the UK gross domestic

product (GDP) which amounts to about £60 billion of business each year (DTI,

2007). It is also one of the single largest employers in UK employing 7 percent of

the total people in employment. A large proportion of the construction industry

output and employment is contributed by McE’s thus highlighting the patent role of

McE’s in the UK economy however as mentioned before their contribution is not

taken heed of. This research is aimed at providing a panoptical overview of different

factors, which contribute to this undervaluation of McE’s.

1.2. Aim and Objectives of the research

The main aim of this research is to prove or disprove the argument that there are a

set of factors, which inhibit McE growth in the UK construction industry.

To prove of disprove the veracity of the above hypothesis would involve

multilayered assessment of McE’s within different settings. This research aims to

corroborate the above assertions and while doing so identify key factors, which

vitiate McE’s performance thus resulting in their undervaluation.

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 Chapter1

This research builds on the understanding of the simplest firm type operating in the

construction industry, the McE’s. McE’s are an integral part of the construction

industry but are often overlooked. There is a contention that the McE’s are the

lifeblood of the construction industry and yet often undervalue themselves or are

undervalued by those in the higher echelons of the industry.

As mentioned earlier McE’s form the majority of enterprises in the UK construction

industry (DTI, 2006) however, they are cloistered at the bottom end of the UK

construction industry, which could be attributed to the perceptions of the key drivers

of the industry towards them. This research would try to divulge perceptions of key

industry driver’s regarding McE’s to test whether the above assertion is vindicated.

This research intends to delve deeper into the characteristics of a McE owner, which

would help, divulge information regarding their inclinations and traits. This research

would also look at deciphering the motivators driving the McE’s and defining their

strategic intent.

As part of this research, an accurate mapping of McE’s activities within the

composite construction project processes would be conducted to delineate McE’s

roles and responsibilities. This would involve an in-depth assessment of the

operational dynamics of McE’s within a range of supply chains.

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 Chapter1

The main underlying objectives of this research exercise are:

 Developing a robust view of the literature surrounding operation of McE’s;

emphasis would be laid on review of literature in the area of operations of McE’s

within construction supply chains, McE success and failures, and factors

affecting small business success.

 Investigate the field dynamics of a range of McE’s.

 Investigate the personal characteristics and drivers of McE owners.

 Investigate factors emanating within construction projects which influence

McE’s.

 Integrate operation of McE’s within the composite supply chain and industry

frameworks.

 Develop a set of findings which would help divulge key factors which affect

McE performance.

The above mentioned research objectives are aimed at clearly delineating factors

which promote or inhibit McE performance.

1.3. Structure of the thesis

The thesis is divided into 8 chapters:

Chapter 2: Provides a general overview of the role and functions of a McE. This

chapter also highlights key McE centric information, which forms the basis for

further research.

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 Chapter1

Chapter 3, 4, and 5: Demonstrates how literature supports the research questions.

Chapter 3 is aimed at deciphering key factors, which affect small business

performance. These factors have been segregated into endogenous and exogenous

factors, which have been elaborated over in, Chapter 4 and Chapter 5 respectively.

Chapter 6: Covers method adopted including design, rationale, and implications.

Chapter7, 8 and 9: Elaborate on the research findings and answers the key research

questions. Chapter 7 elaborates on the quantitative findings and Chapter 8 on

qualitative finding of this research respectively. Chapter 9 comprises of a summary

of the findings and the answers to the key research questions. Chapter 9 also

elaborates on measures which have been advocated as part of this research to redress

the situation McE’s find themselves in.

Chapter10: Presents the conclusions derived from the overall research findings and

outlines recommendation for future research

1.4. Summary

The preceding sections of this chapter set the scene for what this research is aimed at

and elaborate on the key research objectives. The following chapter provides a

general overview of McE roles and function and comprises of a preliminary

assessment of McE centric information.

7
 Chapter 2

2. McE’s: an overview

2.1. Introduction

This chapter aims to set out what micro-enterprises are and helps delineate their role

in the UK construction industry. This chapter also contains an analysis of McE

centric statistics, which helps reveal their current state of affairs. This analysis is

exclusive to the McE’s in the UK construction industry.

2.2. What is a micro-enterprise?

The term micro-enterprise is made up of two terms micro and enterprise. The Oxford

Dictionary (2002) meaning for micro is something, which is, “extremely small in

scale or scope or capability”, and enterprise is, “venture or project or endeavour”.

Thus if we were to put these two terms together one could define micro-enterprise as

an, “extremely small scaled venture or project or endeavour”. Enterprises are placed

within different cohorts like SMEs or large enterprises based on their quantitative

and qualitative characteristics.

a) Quantitative: based on criteria such as employment, turnover, and asset size.

These vary by industry and country.

b) Qualitative: based on ownership or control of the business.

Micro-enterprises are defined, quantitatively, as enterprises that employ fewer than

10 individuals and whose annual turnover or annual balance sheet total does not

8
 Chapter 2

exceed 2 million Euros (EC, 2003). Glancey and McQuaid (2000) suggest that

micro-enterprises can be qualitatively defined as enterprises that are largely

independent and not mostly owned or controlled by large firms. Bolton (1971)

defines a small enterprise in a qualitative manner as an enterprise that has, “…a

relatively small share of its market…it is managed by its owners or part owners in a

personalised way. In addition, not through the medium of a formalised management

structure…it is also independent in the sense that it does not form part of a larger

enterprise and that the owner should be free from outside control in taking their

personal decisions”. This definition could be also applied to micro-enterprises, as

they tend to have the similar characteristics.

2.3. The inadequacy of classifying micro-enterprise’s under the label of SMEs

Department for Trade and Industry (DTI) classifies micro-enterprises within the

unique cohort of ‘SMEs’ i.e., small and medium sized enterprises. The thresholds for

different firm types within the SME cohort are represented in Table 2.1.

Table 2.1. Thresholds for different firm types within the SME cohort (EC, 2003)

Enterprise Headcount: Annual Work Annual

category Unit (AWU) turnover

Micro < 10 ≤ €2 million
Small < 50 ≤ €10 million
Medium-sized <250 ≤ €50 million

Table 2.1 clearly highlights that the firms included within the SME cohort greatly

vary based on the number of people they employ and their annual turnover which

hints at a paradoxical situation wherein firms at either end of the spectrum are

9
 Chapter 2

grouped together devoid of clear logical reasoning. This is a rather erroneous

situation and has been identified by Sommerville and McCarney (2003) who suggest

that the current trend of including micro-enterprises within the SME does them a

great injustice.

The uptake of a common definition ‘SMEs’ for small and medium sized enterprises

by all countries in the European Economic Community better known as EU

(European Union) countries followed recommendation 96/280/EC of 3 April 1996

(OJEU, 2003). This report suggested that, “…the existence of different definitions at

community level and national level could create inconsistencies. Following the logic

of a single market without internal frontiers, the treatment of enterprises should be

based on a set of common rules. The pursuit of such an approach is all the more

necessary in view of the extensive interactions between national and community

measures assisting micro, small, and medium enterprises” (OJEU, 2003).

This common definition is based on the premise that in a barrier free single market

economy all enterprises should be treated in an equitable manner and common rules

should apply to all of them. Integral to this argument for a common definition is the

postulated single market without internal barriers.

A single market is a free trade area with common policies on product regulation, and

freedom of movement for all the four factors of production namely land, enterprise,

capital and labour (Cecchini, 1992). If one were to assume that enterprises of all

sizes had the same degree of leverage to best utilise the available opportunities in the

single market one could well apply the same rules to them and cluster them under the

10
 Chapter 2

same head. It would not be wrong to suggest that a larger enterprise in most

circumstances has a greater ability to utilise opportunities as compared to a smaller

enterprise. Thus defining micro, small, and medium sized enterprises under the same

heading of SME on the basis of the single market theory is questionable.

The second assertion on the basis of which a common definition has been adopted is

that in a single market scenario common rules should apply to all enterprises. The

operational dynamics and the general state of affairs in a micro-enterprise vary

considerably from those of a small or medium sized enterprise. Under most

circumstances, medium and small sized firms have considerable leverage over

micro-enterprises given their relative position in the industry. Given that this is the

case, clustering micro-enterprises along with small and medium sized enterprises and

suggesting that common rules would apply to all of them would put micro-

enterprises in a relatively weaker position, as they might not have the required

resources to abide by these rules. Thus clustering of micro-enterprises under the

same heading as small and medium sized enterprises based on the position that it

would enable application of common rules is a misleading notion and is

questionable.

The main thrust for this common definition comes from the EC’s (European

Commissions) belief that the extensive interaction between national and community

measures assisting micro, small and medium sized enterprises would be facilitated

by clustering these enterprises under the same heading. As discussed before micro-

enterprises might be at a relatively weaker position as compared to small and

medium sized enterprises and so it would not be wrong to suggest that the national

11
 Chapter 2

and community agencies would need to design these assistance measures specifically

for micro-enterprises. Hence clustering micro-enterprises along with small and

medium sized enterprises would reduce the efficacy of these assistive measures.

This inadequacy has been highlighted in studies conducted by Sommerville and

McCarney (2003) who suggest that those developing policies to support

management and the wider workforce development activities have at best assumed

that the micro-enterprise context is not unique and therefore, can be embraced within

the term ‘Small to Medium’ sized enterprise. Sommerville and McCarney (2003)

made these assertions specifically citing the case of McE’s in the UK construction

industry but this should stand true for all micro-enterprises. This is corroborated by

Greenbank (2001) who advocates that SMEs, which employ up to 249 individuals,

have characteristics, which clearly differentiate them, from micro-enterprises.

The Bolton Committee (1971) whose suggestions were the basis for many of the

initiatives taken by successive British governments in improving the business

environment, for small businesses, perceived size as being relevant to sector.

According to the Bolton Committee (1971), enterprises of a given size could be

small in relation to one sector, whereas an enterprise of similar characterictics in

another sector could be considered large. Having such deep insight in the dynamics

of small firms should have allowed the Bolton Committee to identify the uniqueness

of micro-enterprise and hence they should have defined micro-enterprises separately.

Successive studies and reports produced by government agencies perpetuate the

blunder and continue to look at micro-enterprises within the same category as SMEs.

12
 Chapter 2

This inadequacy of a common definition for micro-enterprises is exacerbated by

standardising it across industries. Holiday (1995) notes that, “…it is surprising that

firms from different industries with nothing in common but their size should be

assumed homogeneous”. Penrose (1995) was of the view that such cross-industry

standardization of firms should be avoided as firms in some industries perform better

than in other industries owing to better working conditions and opportunities. As

mentioned before the Bolton Committee (1971) had noticed this aberration but failed

to act upon it. This inadequacy is further exacerbated as micro-enterprises within the

same industry might vary from each other at great lengths. This premise is supported

by Jaunzens (2001) who suggests that influence due to position within the supply

chain, knowledge, financial circumstances, and willingness or opportunity to

innovate might differentiate micro-enterprises within the same industry.

The tendency to define micro, small, and medium sized enterprises under one unique

head could also produce conceptual shortfalls. This argument is in line with the

suggestions of Goss (1991) even though his argument exclusively focuses on the

small firms. He notes that,

“…there are four areas in which the assumption of small firm’s homogeneity can

lead to profound inadequacies of understanding. These inadequacies will be

referred to as homogenisation effects. The first of these is the encouragement of a

tendency towards essentialism…second, the assumption of homogeneity implies the

existence of common small business interests and a shared outlook amongst their

owners and workers…third, it creates problems of definition and conceptualisation,

particularly in terms of the nature of small business organisational structure [and]

13
 Chapter 2

finally, the assumption of unitary small business sector discourages the examination

of small firms in their wider economic and social context”.

Outwith the ambit of the current argument there exists another problem area in the

definition of enterprises, that of complications caused by the conflicting

classification and definition of the same type of enterprises by different agencies

making comparative analysis extremely difficult (European Foundation, 2001).

Based on the above it would not be wrong to suggest that this erroneous practice of

grouping micro-enterprises within the SME cohort is a rather serious one.

2.4. Why are micro-enterprises vital to the European Union economy?

Micro-enterprises constitute 93 percent of all enterprises in the European Union

(EU); when integrated within the unique grouping of SMEs the composite category

accounts for nearly 97 percent of all EU enterprises (Eurostat, 2006). Micro-

enterprises form the backbone of the EU economy (COM, 2001). The average EU

enterprise provides employment for six people, including those who are perceived as

being the owner (Eurostat, 2006). Micro-enterprises not only have an important role

in the economy, but also in the society, and are at the nucleus of what has been

defined as the ‘European Social Model’ (Lindbeck, 2003).

They contribute about £447,770 Million to the UK economy and employ over

6.5Million people (NSO, 2005). Micro-enterprises are an important connecting link

in the economy and to customers; therefore, they are essential for the functioning of

14
 Chapter 2

the economy and the local supply of the people (Sommerville and McCarney, 2003).

Micro-enterprises also offer new employment opportunities, they account for the

majority of start ups, are a source of and an opportunity for innovation, facilitate

entry and re-entry into the labour market, develop cultural identity, boost

entrepreneurship and foster regional and local development (European Foundation,

2001). The owners of micro-enterprises are, in general more interested in the long-

term development of their local economy, whilst large organisations with

shareholders and management, are primarily concerned with short-term profit and

boosting turnover that facilitates long-term objectives (Greenbank, 2001). Thus it

would not be wrong to suggest that micro-enterprises within the EU are rather

dynamic entities which collectively act as ‘vital cogs’ in the economy and the society

as a whole as contrary to their generally perceived negligible roles (Sommerville and

McCarney, 2003).

Levy (1991, p. 2) argues that SMEs, “…hold the promise of building development

incrementally in existing national capabilities, and provide a seedbed for the

emergence of dynamic and efficient larger national firms…”; as micro-enterprises

are part of the SME cohort and form the majority of these firms, the same might be

attributed to them.

Based on the above it would not be wrong to suggest that micro-enterprises form the

backbone of the EU economy and are absolutely vital for its growth and progress.

The preceding sections of this chapter highlighted the importance of micro-

enterprises to the EU economy and elaborated on the fallacy of categorising micro-

enterprises within the SME cohort. The following section of this chapter is aimed at

15
 Chapter 2

revealing relevant McE centric information and comprises of a retrospective analysis

of McE trends for the period 1995-2005.

2.5. McE’s in the UK construction industry

Figure 2.1. McE’s in the UK construction industry (NSO, 2006)

100.00%

90.00%

80.00%

70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
With no employees 1-4 employees 5-9 employees Total (%)
Enterprises 86.60% 9.40% 2.20% 98.20%
Employment 41.10% 11.70% 6.80% 59.60%
Turnover 23.80% 10.30% 6.30% 40.40%

Figure 2.1 highlights that the McE’s make up 98 percent of all the enterprises in the

UK construction industry; they also contribute 60 percent of the employment and 40

percent of the industry output (NSO, 2006). What is notable from the above figures

is the relatively small output share contributed by the McE’s in spite of being in the

majority in numbers of enterprises and number of people employed. This hints at the

subsidiary role of McE’s within the UK construction industry. Based on the above

facts it can also be construed that the McE’s merely act on behalf of the main and

subcontractors and have relatively meagre independent role although this is yet to be

confirmed. This is not true for the McE’s which ply their trade within the housing

refurbishment sector wherein they undertake the majority of the work (DTI, 2006).

16
 Chapter 2

2.6. Analysis of McE statistics

McE births and deaths

The method of investigation used for assessing McE ‘births’ and ‘deaths’ is by

analysing up to date VAT records produced by the Department of Trade and Industry

(DTI, 2006). The use of VAT data while possessing certain well-documented

limitations (Daly, 1991) represents the most, “…up-to-date, comprehensive,

reasonably long-term and spatially disaggregated date source” (Keeble and Walker,

1993) for such investigation. This is provided credence by Ashcroft et al. (1991) who

suggest that VAT statistics are the most credible and widely used measure of UK

business formation and dissolution. It has however, been noted that VAT

registrations and de-registrations do not correspond to actual firm births and deaths

as many firms may have been in operation before registering for VAT, or might still

be in active operational state after de-registering (Ganguly, 1982; Daly, 1991;

Fotopoulos and Spence, 2001). Nevertheless, it is the most credible source for

analysing the UK small business population (Daly, 1991). It is the consistency of

VAT business registration statistics that makes it the best source for measuring firm

births and deaths in UK (Keeble, 1990).

17
 Chapter 2

25,000

20,000

/De-registrations
Registrations
15,000

10,000

5,000

0
Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
VAT Registration (UK) 15,210 14,860 19,295 18,065 17,850 17,605 18,180 19,435 22,220 21,865 21,870
VAT De-registration (UK) 19,920 17,490 16,625 15,090 15,500 14,395 14,205 14,810 16,445 18,445 19,763

Figure 2.2. Comparative analysis of VAT Registrations v. De-registrations in UK (DTI, 2007)

Figure 2.2 highlights that over a 10-year period, the rate at which the number of

McE’s that joined the VAT system has not significantly changed. In 2006 there were

21,870 registrations vis-à-vis 19,763 de-registrations of McE’s which equates to a

business attrition rate of 90 percent {Business attrition rate in this research

corresponds to the erosion in number of firms and can be calculated using the

formula: Attrition Rate = (VAT De-registrations/VAT Registrations)*100}.

The above statistics paint a rather grim picture; with such a high attrition rate, the

overall growth in number of McE’s is restrained. A limitation of the VAT de-

registration statistics published by DTI is that the reasons for the de-registrations

have not been identified.

18
 Chapter 2

25,000

20,000

VAT registrations
15,000

10,000

5,000

0
Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
VAT Registration (UK) 15,880 15,210 14,860 19,295 18,065 17,850 17,605 18,180 19,435 22,220 21,865
VAT Registration (Scotland) 1,170 1,105 1,055 1,170 1,045 1,185 1,060 1,005 1,130 1,310 1,425

Figure 2.3. Comparative analysis of VAT Registrations in UK v. Scotland (DTI, 2006)

Figure 2.3 highlights that there has been 27.3 percent increase in the number of VAT

registrations in the whole of UK in the period 1995-2005; this is almost 10 percent

more than the VAT registrations in Scotland where the increase has been of about

17.8 percent for the same period. This highlights a regional variation in the number

of McE’s which join the UK construction industry. The number of McE’s that have

VAT registered in the whole of UK has been rising steadily whereas the VAT

registration of McE’s in Scotland has been rather subdued.

19
 Chapter 2

30,000

25,000

20,000

De-registrations
VAT

15,000

10,000

5,000

0
Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
VAT De-registration (UK) 25,540 19,920 17,490 16,625 15,090 15,500 14,395 14,205 14,810 16,445 18,445
VAT De-registration (Scotland) 1,600 1,310 1,225 1,180 1,140 1,075 1,050 1,035 1,010 1,045 1,225

Figure 2.4. Comparative analysis of VAT De-registrations in UK v. Scotland (DTI, 2006)

Figure 2.4 highlights that the number of VAT de-registrations for the whole of UK

have decreased by almost 38 percent for the period 1995-2005; compared to this the

number of VAT de-registrations in Scotland have decreased by 30 percent for the

same period. The above figures highlights a regional variance in the VAT de-

registration rates of McE’s. Whilst the rate of de-registration of McE’s in Scotland

has been steady from 1995-2005, the same cannot be said for the whole of UK. The

number of VAT de-registrations of McE’s fell sharply from 1995 to 1998 and then

started rising again since then.

20
 Chapter 2

Number of McE’s

180000

160000
140000
No. of firms

120000

100000
80000

60000
40000
20000

0
Year 2001 2002 2003 2004 2005
0-1 Employees 77926 71431 70370 70018 60888
2-3 Employees 50653 50306 53022 55027 55726
4-7 Employees 22455 23963 25704 26865 27238
8-9 Employees 8044 9819 10508 10982 11120
All McE's 159078 155519 159604 162892 154972

Figure 2.5. Trends of smaller subgroups within McE’s (NSO, 2006)

Breaking down total number of McE’s into smaller groupings based on the

classifications used by National Statistics office (NSO, 2006) and analysing their

annual trends reveals some very interesting facts as shown in Figure 2.5. It is

observed that that the numbers of firms with 0-1 employees are sharply declining as

compared to other firms within the McE cohort, which are increasing in number.

McE’s with 0-1 employees constitute the single largest grouping of enterprises in the

UK construction industry (NSO, 2006).

21
 Chapter 2

McE survival rate

96.5
100 91.4
85.8 84.2
90
80 74.9
70.4
66.1
70
Percentage

60
50
40
30
20
10
0
6 12 18 24 30 36 42
months months months months months months months
Months (from 1995-2004)

Figure 2.6. Average survival rate of McE’s which VAT Registered from 1995-2004 (DTI, 2006)

Figure 2.6 highlights that the average survival rates of McE’s in the UK construction

after three years of registration decreases to about 70.4 percent as against 91.4

percent after one year (DTI, 2006). This highlights two distinct scenarios:

1) High failure rate of young McE’s. This is in line with well established empirical

fact that young firms tend to be more failure prone than the older ones (see e.g.,

Hall, 1987; Dunne et al. , 1989);

2) McE’s which did survive the first few months after inception tend to falter as

time progresses.

22
 Chapter 2

UK construction output vs. failure of McE’s

Figure 2.7. Comparison of Annual Construction Output (All works) vs. number of McE’s (NSO, 2006;

180000
160000
140000
120000
100000
80000
60000
40000
20000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Year

No. of McE's
Industry output ( £ million) for 2000-2010
Forecast (No. of McE's)

MBD, 2006)

Strong real term growth of 15 percent is anticipated for construction output between

2005 and 2010 in the UK construction industry (MBD, 2006). Taking into

consideration this anticipated high in output growth and comparing it with the

current McE’s statistics, a statistical forecast has been arrived at which shows that on

the whole, number of McE’s in the UK construction industry might not grow at the

same rate as the industry output (Figure 2.7). This scenario could create major

23
 Chapter 2

problems for the industry given that McE’s are the biggest skill source in the

industry (employ 60 percent of the workforce) in the UK construction industry (DTI,

2006).

2.7. Role of McE’s in the UK economy

The following statistics reveal the integral role of McE’s in the UK economy:

• The construction industry accounts for about 7 percent of the UK gross domestic

product (GDP) and is the single biggest industry in the UK, turning over more

than £60 billion of business each year (DTI, 2006). McE’s account for 40

percent of the total construction industry output (DTI, 2006) which amounts to

about £24 billion of business each year and around 2.8 percent of the total UK

gross domestic product.

• The total number of people in employment in UK for the months ending in April

2007 was 29.01 million; 1 in 14 of these people work in the construction industry

which accounts for nearly 7 percent of the total people in employment, which

amounts to about 2 million people (DTI, 2006). McE’s account for nearly 60

percent of those employed in the construction industry (DTI, 2006). This roughly

translates to a situation where McE’s could be attributed with employing about

1.2 million people which accounts for about 4 percent of the total number of

people in employment in UK.

24
 Chapter 2

From the above statistics, it can be construed that failure of McE’s could lead to

severe economic downturn and a drastic drop in the national employment rate. The

above figures seem to suggest that McE albeit vital to the industry have not been

given due government and industry level attention that could help stem their high

attrition rates. Micro-enterprises have a significant role in industries akin to the

construction industry, which have a dynamic medium or large enterprise sector

(Grosh and Somolekae, 1996).

PERFORMANCE PERFORMANCE
OF OF
McE's INDUSTRY

PERFORMANCE
OF
ECONOMY

Figure 2.8. Relationship between performance of McE, industry and economy

Fig 2.8 is a pictorial representation of the cyclic relationship that might exist

between the performance of McE’s, industry and the economy as a whole. The cyclic

relationship corresponds to the effect performance of McE’s might have on the

industry and the economy at large. Strong and buoyant McE’s could help bolster the

25
 Chapter 2

industry and the economy vis-à-vis weak McE’s could lead to industrial and

economic downturn.

2.8. Summary

The preceding section of this chapter highlights the existence of a rather paradoxical

situation wherein McE’s, which play a vital role in the UK construction industry, fail

to thrive in the very same industry. McE were found to have a very high attrition rate

which when coupled with the low survival rate of young McE’s highlights the

deplorable scenario McE’s find themselves in. This entails that an in-depth

assessment of the factors causing McE attrition be carried out.

A thorough deliberation of facts has revealed that micro-enterprises might be

wrongly categorised within the unique cohort of SMEs. This calls for an assessment

of the factors that differentiate McE’s from small construction enterprises. This

difference could also exist at the owner level and hence calls for an assessment of

owner centric characteristics inherent to McE owners which could help set them

apart from small enterprise owners.

The following chapter comprises of an elaborate review of literature aimed at

deciphering factors, which influence small business performance. The literature

reviewed would also aim to decipher factors that might differentiate McE’s from

small construction enterprises.

26
 Chapter 3

3. Business success and failure

3.1. Introduction

Given that the McE’s make up the majority of all UK constructions firms, contribute

to 60 percent of the employment and 40 percent of the industry output (DTI, 2006)

understanding the factors which could influence their success or failure is of some

importance. Assessment of VAT registration and deregistration records (see Chapter

2) revealed that McE’s have a high attrition rate which is compounded by the rather

abysmal survival rate of young McE’s. This finding suggests that McE’s fail to

flourish in spite of their significant role in the UK construction industry.

In the preceding chapter, it was revealed that over the last ten years, the UK

construction industry has grown at a robust rate but the same cannot be said for the

McE’s. Industry fortunes are intrinsically linked to the McE’s fortunes as they are

the major source of labour and employment for the industry. The current McE

scenario could dent the growth of the UK construction industry which could affect

the UK economy as a whole [it contributes almost 7 percent of the UK GDP (DTI,

2006)]. This sets the tone for a closer look at the issue of business success and failure

which is central to unravelling the causes of the high failure rate of McE’s.

Research in the field of McE success and failure is extremely scarce. This is the

same for research within the larger cohort of micro-enterprises in UK. The majority

of the studies conducted pertaining to failure in the UK construction industry have

been aimed at explaining failure at the project level (see e.g., Kharbanda and

27
 Chapter 3

Stallworthy, 1983; Morris and Hough, 1987) rather than at business level. A few

studies on business failure in the construction industry have been carried out in the

United States of America (US) by the likes of Arditi et al. (2000) and on a larger

industrial scale by Dun and Bradstreet (1989-1993). The utility of the findings of

these research exercises in assessing McE failures in the UK construction industry is

severely curtailed because of the following reasons:

• These research exercises were predominantly carried out to look at business

failures in the US construction industry; the factors that influence business

success or failure in US construction industry might be different to those in the

UK owing to difference in macro environment, industry structure, government

policies, rules and guidelines, culture and other determinants.

• One of the major contentions of this research is that the McE’s in UK are unique

and hence need to be looked at in isolation which contrasts with the approach of

looking at failure across an array of different sized businesses, which these

studies employed.

There have been a few studies, which have looked at developing business

performance prediction models specifically for business within the UK construction

industry (see e.g., Langford et al., 1993; Hillerbrandt et al., 1994; Hughes et al.,

1998). Arditi et al. (2000) best explains the shortfalls of these studies; suggesting

there is considerable scope for “…development of a theoretical framework that

incorporates data based on both organisational and managerial foundations rather

than on financial ratios…in the construction industry”. These studies tend to

primarily focus on the financial aspects of businesses but avoid looking at other core

28
 Chapter 3

areas relevant for business survival like owners personality traits (Sadler-Smith et

al., 2003) and economic conditions (Penrose, 1995).

Small business success or failure has a vital role in defining economic performance.

In spite of this, research aimed at discovering factors or practices which lead to small

business success or failure are as yet an, “…unfulfilled purpose of business

research” (Rogoff et al., 2004). Everett and Watson (1998) note that the blame for

this paucity in this area of research can be laid down to information scarcity. They

further go on to identify the reasons for this scarcity:

• Lack of reliable data source;

• Once business operations cease, information concerning business becomes

difficult to obtain;

• Since the information in small businesses resides with the owners in absence of a

formal systematic reporting requirement, which is the norm in larger businesses

information tends to get lost.

This supports Bannock and Doran’s (1980) work which noted that, “…the most

important gap in British Statistics, and indeed in virtually all other countries, is in

statistics on…small business failure”. These assertions have been made in the

context of small businesses but would be applicable to micro-enterprises as they are

considered to be part of the small business cohort and in fact constitute nearly 98

percent of all small businesses in the UK (DTI, 2006).

29
 Chapter 3

Even though perplexing as it might sound, the above-mentioned practice of

groupbing micro-enterprises within the unique SME cohort could be one of the main

reasons for this scarcity in micro-enterprise specific research. Holmes et al. (1994)

gives credence to this premise, they suggest that the majority of the studies

conducted, “….fail to recognise that there may be considerable differences between

the factors affecting the survival of micro-enterprises and those affecting small to

medium enterprises”.

There are a few scattered studies (see Holmes et al., 1994; Reid, 1995; Reid, 1996)

which look at micro-enterprise success and failure in UK but a major weakness of

these studies is that they have adopted extremely convoluted tools of investigation.

McE centric research is nascent in nature and thus needs to be investigated with a

simplistic approach as against the convoluted approach espoused in these studies.

The scarcity of micro-enterprise research compounded by the over complicated

nature of existing micro-enterprise research highlights the need to look elsewhere for

the required information. Small enterprises even though different in scale have

similar characteristics to micro-enterprises, thus information sourced from small

enterprise research could be adopted for micro-enterprise research. Research on

small business success and failure is widespread which would help develop a

thorough yet simplistic approach required to investigate McE success and failure.

It has been suggested previously that defining McE’s within the SME cohort is an

erroneous practice and could be one of the main reasons for scarcity in micro-

enterprise specific research, but given that there is no other comprehensive and

30
 Chapter 3

credible source of information, using small business literature is the only viable

option. It is also to be noted that owing to the extreme scarcity of small business

literature specific to the construction sector, literature reviewed is not industry

specific. The information sourced from small business literature needs to be adapted

specifically for McE research.

3.2. Business success and failure – an overview

The first issue on hand is to develop an understanding of what in essence is

“business success” and “business failure”. Rogoff et al. (2004) suggest that there is,

“…no single agreed-upon definition for small business success or failure”.

Researchers have defined small business success and failure contingent on there

viability and their inherent position in the business life cycle i.e., if they have ceased

to operate they are deemed as a failure and if they continue to operate they are

deemed to be a success (see e.g. DiPietro and Sawhney, 1977; Everett and Watson,

1998).

Rogoff et al. (2004) criticise this commonly adopted model for defining business

success and failure; according to them, this definition is “crude” and has severe

weaknesses. In support of this argument they cite a relevant scenario, they note that,

“…one business might continue to exist and therefore be categorised as a success

but might continue to disappoint its owners by achieving only minimal profits, while

another business might cease to exist, but because of the sale of its assets” has, “…

left its owner wealthy”. This highlights a significant weakness in the current

definition for business success and failure as it is severely restrictive in nature and

31
 Chapter 3

fails to address issues outwith the ambit of what can be deciphered from business

records (e.g. VAT statistics). Given that there is no universally accepted

homogeneous definition for business success and failure, the definition to be adopted

for a research has been open to individual interpretations. This highlights the need

for a coherent and unique definition for McE success and failure owing to their

unique characteristics which are far removed from micro-enterprises in other

industries (Sommerville and McCarney. 2003) which is a driver of this research.

Emphasis has been laid on business failure based on the reasoning that business

success is contingent on averting business failure and hence if one were to decipher

all the factors associated with small business failure one could devise ways to revert

this trend. Fredland and Morris (1976) have a contrary view; they argue that the

causes of small business failure cannot be isolated and that, “…any attempt to do so

is...a futile exercise”. Abdelsamad and Kindling (1978) look at this in a different

light, they note that, “…although failures cannot be completely avoided in a free

enterprise system, the failure rate could be reduced if some of its causes are

recognised and preventive action is taken”. Gaskill and Van Auken (1993)

supported this assertion; they suggest that understanding the factors that affect small

business performance, “…would enable public policymakers and small business

advisors to better serve the small business sector”.

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 Chapter 3

3.3. What is business failure?

Failure in the context of a small business could refer to a varied set of scenarios.

Everett and Watson (1998) identified four basic measures of failures that have been

used previously. These measures are:

1. Discontinuance of ownership of the business (see e.g., Ganguly, 1985;

Williams, 1993). This set could also include firms which that were disposed

(sold or liquidated) with losses to prevent further losses as identified by

Riquelme and Watson (2002). Churchill (1952) suggests that sale or liquidation

of business does no imply failure because many businesses are given up due to

illness or retirement or because of alternative opportunities.

2. Discontinuance of the business (see e.g., Bates and Nucci, 1989; Dekimpe and

Morrison, 1991). This definition for business failure has been used by

researchers looking at entry and exit rates, particularly in manufacturing (Everett

and Watson, 1998). Fredland and Morris (1976) suggest that business

discontinuance is a proxy measure to define failure, as discontinuance could

suggest that resources have been shifted to opportunities that are more profitable.

This has been reiterated by Everett and Watson (1998) who suggest that this

mode of defining failure has two significant limitations: firstly that it excludes as

failed any business that was sold to new owners irrespective of the reason for the

sale and secondly that the many service industries business cease to exist when

they key operator (owner manager) retires or moves on.

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 Chapter 3

3. Bankruptcy (see e.g., Massel, 1978; Hall and Young, 1991). Everett and Watson

(1998) argue that this is not a proper mode to define failure as it is a, “…very

narrow definition” and may exclude many businesses that would commonly be

regarded as having failed. They further go on to suggest that given the limitation

that businesses which are barely breaking even which have been identified as

“failing businesses” by Land (1975) would not be included in this definition as

they have not been placed into bankruptcy.

4. Businesses that were disposed (sold or liquidated) of with losses to prevent

further losses (see e.g., Riquelme and Watson, 2002). Everett and Watson (1998)

suggest that that, “…losses in this context include the owners capital and,

therefore, a business could be regarded as having failed even though there may

have been no loss to creditor”. They further note that this definition of failure

has not been used by researchers.

5. Businesses fail to perform or simply put businesses that failed to achieve

appropriate profit (see e.g., Sommerville and McCarney, 2003). Cochran

(1981) calls these businesses, “…firms, which fail to make a go of it”. Altman

(1993) elaborates on this measure; he notes that a business is considered to have

failed if the realized return on invested capital, with allowances for risk

considerations, is significantly and continually lower than prevailing rates on

similar investments.

34
 Chapter 3

DIS-
CONTINUANCE
OF
OWNERSHIP

BUSINESS
WHICH
BANKRUPTCY FAILED TO
POST
PROFITS

DIS- BUSINESS
CONTINUANCE DISPOSED OF
OF WITH
BUSINESS LOSSES

Figure 3.1. Measures for business failure

Figure 3.1 helps delineate the major scenarios in which a business could be deemed a

failure. Additionally, a business is also considered to be a failure when it is unable to

pay its obligations when they are due (Frederikslust, 1978) and when its value falls

below the opportunity cost of staying in business (Cressy, 1996). Baden-Fuller

(1989) defines failure as a function of future events:

π = rC – C1,

35
 Chapter 3

Where “π” is present value of anticipated profit in the coming period, “C” is residual

value of the plant if scrapped now, “r” is rate of interest, and “C1” is present value of

anticipated gain in scrap value from deferring the closure.

The above assortment of scenarios and measures for business failure is not

exhaustive in nature. The definitions for business success have been open to

individual interpretation by researchers and the same has been the case for the

measures employed to assess business failure. It would not be wrong to suggest that

this heterogeneity in the measures espoused by researchers to assess business failure

inadvertently causes a lot of confusion. Given this scenario, some would call for a

homogenous measure to assess business failure, but as businesses are not

homogenous in kind, the need for heterogeneous measures becomes explicit. Based

on the above premise a suitable measure to assess McE failures needs to be chosen

from the aforementioned list.

3.4. How to assess McE failure?

The measures discussed previously have their inherent merits and demerits which

need to be deliberated upon before deciding the appropriate measure for assessing

McE failure. The measures represented in figure 3.1 with the exception of two

“discontinuance of ownership” and “failure of the business to perform” are related to

business closure. The majority of the previous studies on business failure used

business closure as the measure to ascertain business failure (see e.g., Ganguly,

1985; Williams, 1993). The same has also been used in the previous chapter to

36
 Chapter 3

obtain the failure rate for McE’s. A major disadvantage of this measure is that it fails

to take into account businesses that continue to operate even though they fail to post

reasonable profits. These measures can be utilised to get a fair idea of the general

trend but do not divulge the reasons for business failure. It is a mere numerical

calculation that involves comparing number of business start-up to shutdowns. It is

disconnected from the business and hence does not allow for close scrutiny of the

individual businesses which is integral to deciphering factors which cause business

failure.

Of the other two highlighted measures that are outwith the ambit of business closure,

‘discontinuance of business ownership’ is seriously flawed as it fails to take into

account businesses which might have been sold on even though they are profitable,

which would infer that these business were successful.

This leaves the measure of assessing business failure based on its profitability. The

advantage of this measure is that by measuring long term profit trends of a business

one can clearly ascertain whether it is a success or a failure. Cochran (1981)

advocates the use of profitability as a measure of a firm’s success. Everett and

Watson (1998) suggest that, “…this definition of failure appears to be most

relevant”.

Everett and Watson (1998) cite a weakness in this measure, according to them, “…

while most definitions of failure have been associated with business closure or sale

this definition would also include businesses, which continue to operate even when

generating adequate returns”. This argument is based on the view that this measure

37
 Chapter 3

could be flawed as it incorporates within the failed cohort even those businesses

which generate adequate returns. The issue of essence here is clearly defining what

represents adequate returns. Sommerville and McCarney (2003) suggest that profit

maximisation is the key objective of any business. Hence, it would not be wrong to

infer that adequate returns could be equated to achieving appropriate profit level.

Akintoye and Skitmore (1991) suggest that achieving appropriate profit level is vital

for a firm’s survival and growth. Pindyck and Rubinfeld (2000) note that, “…all

firms that, follow rational-decision making intend to produce at the profit-

maximizing output”. Based on the above premise, it would not be wrong to suggest

that if a business fails to achieve appropriate profit levels it fails to fulfil its key

objective.

As mentioned before, information on closed small business is hard to acquire and in

the case of McE’s is further exacerbated by extreme scarcity of previous research.

Assessing long term profitability trends of existing McE’s would negate this

information scarcity and also help draw up a clearer picture of what factors

contribute to business success and failure as the sample set used for investigation

would mostly constitute active business (businesses which are still in operation).

Profitability analysis is often included with the cohort of financial performance

models. These models use financial ratios derived by a statistical search through a

number of plausible financial indicators (Kangari et al., 1992). Argenti (1976)

suggests that these financial ratios can highlight some of the associated symptoms

but are unable to identify the causes of failure. In the context of this research

profitability analysis would be conducted concurrently with ethnographic and

38
 Chapter 3

qualitative research (mixed research methodology adopted – see the later research

methodology chapter) which would help divulge relationships between business

profitability and factors which are internal and external to the business which affect

business profitability. This would negate the criticism directed against the use of

financial ratios. The use of financial ratios in this research is restricted given the

simplistic nature of McE’s. McE’s tend to have very limited business records hence

the profitability measure used would be simplistic in nature.

Profitability is said to be a function of three factors (Wright, 1979):

1. Sales volume (or work done), sometime called turnover;

2. The capital investment; and

3. The margin of profit earned.

Profitability can be expressed as profit percentage of turnover (POT) or return on

capital investment (ROI) (Akintoye and Skitmore, 1991). Both ROI and POT have

been previously used in studies of profitability in the construction industry (see e.g.,

Lea and Lansley, 1975; Fellows and Langford, 1975; Akintoye and Skitmore, 1991,

Hillerbrandt, 1995; Ball et al., 2000) but no previous research utilised profitability as

a measure for assessing business success and failure. Each of these studies has their

own inherent merits and demerits. Using ROI requires knowledge of capital

investment but given that the start up capital investment required for McE’s is

minimal (as most of them function as labour only subcontractors) this measure

would not be ideal. Conversely, the argument against the use of POT is that firms

might achieve high profits because of high net assets involved (Akintoye and

39
 Chapter 3

Skitmore, 1991) but given that, McE’s have relatively low net assets this argument

would not have any credence if POT were to be used to measure McE profitability.

POT would be used in this research to assess McE success and failure owing to its

relative simplicity and suitability. As part of this research long-term profitability

assessment for a sample, population of McE’s would be carried out. The average

profitability of McE’s would be compared to that of the top 100 construction

companies in UK for the period 1995-2005. This would divulge whether the

profitability trends across the industry are homogenous or not. If the results of this

examination were to reveal that average profitability of McE’s is lower than those of

the larger construction company’s one could construe that profits were not trickling

down from the larger construction companies to the McE’s as they are meant to, in

an ideal situation. The average profitability trends of participating McE’s would also

be compared to their geographic location, competencies and skill sets, strategies,

motivations etc to ascertain how these factors influence business profitability. The

period 1995-2005 has been chosen given that the company information for the

period after 2005 is scarce owing to its relative immediacy (data collection methods

employed by statutory bodies is questionable).

3.5. Causes of small business failure

A substantial number of studies have been carried out which have examined the

causes of small business failure (see Fredland and Morris, 1976; Peterson et al.,

1983; Hall and Young, 1991; Hall, 1992; Gaskill and Van Auken, 1993; Everett and

40
 Chapter 3

Watson, 1998). Everett and Watson (1998) identified that the majority of these

studies have been based on the opinions of three main groups namely failed owners

(Fredland and Morris, 1976; Hall and Young, 1991; Gaskill and Van Auken, 1993),

non failed owners (Peterson et al., 1983) and third parties for instance liquidators or

official receivers (Hall, 1992).

Business success or failures have been attributed to a variety of reasons. Arditi et al.

(2000) note that business failure is a result of a, “…complex process and is rarely

dependant on a single factor”. Everett and Watson (1998) suggest that business

success or failure depends on risks, which owners accept when starting a business.

Fredland and Morris (1976) have segregated these risks into two cohorts namely

‘endogenous’ i.e., risk internal to the business and ‘exogenous’ i.e., risks external to

the business. DiPietro and Sawhney (1977) have defined risks as factors, they state

that, ‘…there are two different factors which jointly determine the failure rate of

businesses in the economy. The first in internal – the effectiveness of management,

and the second is external – the general economic environment’. Everett and

Watson (1998) suggested a broader set of classification for these risks namely

Economy, Industry, and Firm based risks. This broader classification tries to

segregate exogenous risks into economy and industry based risks.

41
 Chapter 3

Boyle and Desai (1991) as part of the research they conducted on turnaround

strategies for small firms developed an ‘environment/response matrix distribution’ to

express the causes of business failure. This matrix was adopted and modified by

Arditi et al. (2000) to research business failures in the US construction industry as

shown in Figure 3.2.

CELL 1 CELL 2
Management
Internal:
ENVIRONMENT

control
Events
under

•BUDGETARY ISSUES • ISSUES OF

•HUMAN AND ADAPTATION TO
ORGANISATIONAL MARKET
CAPITAL ISSUES CONDITIONS
Management
Events not

CELL 4
External:

CELL 3
control
under

•MACROECONOMIC
•BUSINESS ISSUES
ISSUES

Administrative systems and Strategic long term

procedures planning

Response

Figure 3.2. Environment/response matrix distribution with failure (Arditi et al., 2000)

Figure 3.2 highlights the environment/response matrix developed by Arditi et al.

(2000). In the above matrix, Cells 1, 2, 3, and 4 comprise of factors that were

identified by Arditi et al. (2000) as the very causes of business failure. This model

was developed by analysing the percentage occurrence of these factors over a period

of time in businesses and coupling this to symptoms of business failure. It is to be

noted that Arditi et al. (2000) developed this matrix by adapting factors of business

failure which were identified by Dun and Bradstreet (1989-1993).

42
 Chapter 3

The matrix segregates causes of failure into four types that are collectively

categorised under two events namely: internal and external. These internal and

external events are endogenous and exogenous risks that were identified by Fredland

and Morris (1976). This matrix highlights that endogenous factors can be influenced

by the McE owners whilst the exogenous factors might be outwith their sphere of

influence. The assumption that exogenous factors cannot be influenced by the owner

comes across as a weakness of this model along with its severely restricted list of

causes for business failure.

Figure 3.3 highlights the alternative approach adopted by Dun and Bradstreet

Corporation (1989-1993). They used an alternative approach to explain the reasons

of business failure in the US construction industry. This was in the form of an input/

output model where organisational and environmental factors influence a company’s

success or failure individually, jointly or indirectly through company performance

factors (Arditi et al., 2000). Dun and Bradstreet’s model is more exhaustive when

compared to the one adopted by Arditi et al. (2000) as it enlists a larger number of

causes for business failure.

43
 Chapter 3

ORGANISATIONAL ENVIRONMENTAL
FACTORS FACTORS
Human, organisational and financial
capital Macroeconomic and natural
DETERMINANTS
•Lack of business knowledge Factors
•Lack of managerial experience
•Lack of line experience
•Lack of commitment Industry weakness
•Poor working habits •Poor growth prospects
•Overexpansion •High interest rate
•Family problems •Disaster
•Fraud
•Insufficient capital

PERFORMANCE

Insufficient growth
SYMPTOMS

•Heavy operating expenses

•Burdensome institutional debt
•Receivable difficulties
•Inadequate sales
•Not competitive
•Business conflicts
OUTCOME

BUSINESS
FAILURE

Figure 3.3. Input/output model of business failure in the construction industry (Dun and Bradstreet,

1989-1993)

A major weakness of both the aforementioned models is that they fail to divulge

information about owner intentions and resultant manifestation, which in effect is

one of the causes of business failure. However, these models could be used a

template for developing a unique model/matrix for expressing identified causes of

McE failures.

44
 Chapter 3

ENDOGENOUS EXOGENOUS

FACTORS/RISKS FACTORS/RISKS
Owner centric Project centric
Not able to Not able to
Able to influence Able to influence
influence influence

McE centric Industry centric

Not able to Not able to
Able to influence Able to influence
influence influence

Figure 3.4. Example of matrix for expressing causes of McE failure

Figure 3.4 is an example of the matrix, which could be used to express causes of

McE failure. This model/matrix would be a mix of the models espoused by Arditi et

al. (2000) and Dun and Bradstreet (1989-1993). The severe restrictiveness of the

Arditi et al. (2000) model would be avoided by enlisting all possible inhibiting

factors which prevent McE’s from succeeding. These factors were identified and

ranked by owners who were interviewed and shadowed. These factors would also

comprise of owner-manager’s intentions and motivations so as to make it a more

robust model. These inhibiting factors would be categorised under two heads namely

endogenous and exogenous which would be further segregated into two i.e., those,

which McE owners can influence, and those they cannot.

This model would also take into consideration the ontological assumptions adopted

in this research which address the nature of reality of this research (see research

methodology chapter). Based on this premise the endogenous factors can be further

45
 Chapter 3

divided into owner and business centric sub-factors and the exogenous factors would

be divided into those, which are project and industry centric sub-factors.

As part of this research, several of these factors would be compared to the

profitability percentage of the McE’s to understand the underlying trends. For

example, if the average profitability of McE’s whose owners have a higher level of

educational qualification than those owners with a lower qualification, it could be

inferred that business success and failure is contingent on the educational level of the

owner-manager. Only factors for which information can be sourced by qualitative

and ethnographic data collection methods would be included in this comparative

analysis.

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 Chapter 3

PROJECT INDUSTRY
CENTRIC CENTRIC
FACTORS FACTORS

FACTORS
OWNER- WHICH
EFFECT BUSINESS
MANAGER
McE CENTRIC
CENTRIC
FACTORS
FACTORS BUSINESS
PERFORMANCE

Figure 3.5. Factors which influence McE business performance

Figure 3.5 is a pictorial representation of how the different factors within the

endogenous and exogenous cohort affect McE’s business performance. This model

clearly highlights that factors inherent to the business and within the control of the

McE owners i.e., endogenous factors are enveloped and influenced by exogenous

factors.

47
 Chapter 3

The following section of this chapter comprises of a general overview of endogenous

and exogenous risk factors identified in previous studies in the area of small business

failure.

3.5.1. Endogenous factors

Endogenous factors are inherent to the business. These factors are primarily

associated with theories from the strategic management school of thought (Sadler-

Smith et al., 2003). Based on the ontological assumptions adopted, the endogenous

factors would comprise ‘Owner centric factors’ and ‘Business centric factors’.

The majority of the studies conducted in the area of small business performance

reiterated that the two primary endogenous causes of small business failure appear to

be lack of appropriate management skills and inadequate capital (Fredland and

Morris, 1976; Peterson et al., 1983; Hall and Young, 1991; Gaskill and Van Auken,

1993; Everett and Watson, 1998). Inadequate capital is a prime example of a

pervasive factor which could be identified within both endogenous and exogenous

cohorts.

The importance of owner centric factors is best put forward by Praag (2003) who

notes that, “…it is the man who makes the difference; he sets the conditions, the

boundaries, the characteristics and, ultimately the value creating ability of the…

firm”. Child (1972) suggested that the fate of a business is dependant on the strategic

choice model, which emphasises on importance of managerial decisions and actions.

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 Chapter 3

Many researchers have suggested that the firm can be considered an extension of the

founder (see e.g., Chandler and Hanks, 1994; Peteraf and Shanley, 1997; Reuber and

Fischer, 1999). Kaldor (1972) reiterates this precept when he defines the business

owner as, “…the coordinating ability of the firm”. He further goes on to note that,

“…firms whose coordinating ability changes, while preserving their legal identity,

would not remain the same firm…all the theoretically relevant characteristics of a

firm change with changes in coordinating ability”. Based on the above it would not

be wrong to suggest that the intentions, motivations, and actions of the owner might

affect the performance of a business.

The owner of a small business is often considered an entrepreneur and hence owner-

centric factors might comprise of factors, which are considered essential for an

entrepreneur to be successful. Wright and Westhead (1998) suggest that

entrepreneurship is a requisite for business survival. Say (1964) notes that success in

entrepreneurship requires qualities such as, “…judgement, perseverance and, a

knowledge of the world as well as of the business”. Knight (1965) suggests that an

entrepreneur requires, “…the power of effective control and intellectual capacity”.

Praag (2003) notes that for business success the owner/entrepreneur requires ‘…

knowledge of the industry and the occupation gathered through experience’.

Schumpeter (1950) suggests that the function of an entrepreneur is to innovate and

firms, which cease to innovate, will not survive. Marshall (1930) suggests that a

successful entrepreneur requires to have command over general abilities, capital, and

good fortune.

49
 Chapter 3

EXPERIENCE

TRAITS AND GOOD

CHARACTER- FORTUNE
ISTICS
SUCCESSFUL
ENTREPRENEUR

SKILLS ABILITIES

Figure 3.6. Essentials for a successful entrepreneur

Figure 3.6 is a pictorial representation of all the aforementioned factors which are

considered essential for an entrepreneur to be successful. Most of these factors are

within the owner’s sphere of influence but others like good fortune are outwith. The

factors mentioned above are a few of the owner centric factors, which might

influence the success, or failure of the business. As mentioned in the previous

section of this chapter, one of the many objectives of this research is to identify

50
 Chapter 3

owner centric factors specific to McE’s. Most of the studies tend to consider all

owners to be entrepreneurs; this research sets out to find whether this contention is

valid for McE owners or is it an antithesis. This can be assessed by comparing traits,

intentions, and motivations of McE owners to what is considered by writers as the

pre-requisite to qualify as an entrepreneur.

Most of the studies group owner and business centric factors together which might

be due to the perception that businesses are an extension of the founder (see e.g.,

Chandler and Hanks, 1994; Peteraf and Shanley, 1997; Reuber and Fischer, 1999).

This assertion is partly true in the case of McE’s given that most McE’s are one-

person enterprises (also referred to as sole traders) and hence they are directly

connected to the business.

Arditi et al. (2000) in their singular study on business failures in the US construction

industry identified budgetary issues and organisational learning as two key business

centric factors which cause business failure. They identified that insufficient profits,

heavy operating expenses, insufficient capital, burdensome institutional debt and

receivable difficulties, constitute the budgetary issues. The factors which were

identified as constituents of organisational learning are akin to the factors identified

previously as essentials for a successful entrepreneur.

3.5.2. Exogenous factors

Exogenous factors are those factors which are ‘external to’ and ‘envelop’ the

business. These factors are primarily associated with theories postulated by

51
 Chapter 3

organisational ecologists like Hannan and Freeman (1984) who favour the concept of

“environmental determinism” and claim that, “…fate of a firm is determined by

environmental selection forces”.

Studies conducted by Everett and Watson (1998) suggest that economic factors

appear to be associated with between 30 and 50 percent of small business failures in

Australia. Fredland and Morris (1979) noted that during, “…cyclical downturns the

marginal firm is more likely to fail”. Berryman (1983) notes that even though

external causes have been identified as the key causes of small business failure, it is

surprising that they have been, “…given scant attention in literature”.

Based on the ontological assumptions adopted in this research exogenous factors

would comprise Project centric factors and Industry centric factors. The exogenous

factors could also constitute the economy and other macro-environmental factors

which even though vital are outwith the scope of this research. As has been

identified before most of the failure studies in the construction industry have looked

at project failure (see e.g., Kharbanda and Stallworthy, 1983; Morris and Hough,

1987) which cannot be related to McE failure. Conflicts in projects have been

identified by both Latham (1994) and Egan (1998) as major causes of project failure.

It needs to be seen whether project level conflicts have an effect on McE’s business

performance and if it does, whether it results in failure. Arditi et al. (2000) identified

that conflict within the organisation as a major cause of business failure in the US

construction industry but given that McE’s are a very small unit such intra-

organisational conflicts might not be an occurrence within McE’s.

52
 Chapter 3

Arditi et al. (2000) identifies industry weakness as a prominent industry centric

factor which cause business failure. They note that, “…business failures are caused

by industry weakness but tend to decrease with the rise in economic conditions”.

They also identify competition as a cause of failure within the strategic factors

cohort which in the context of this research would be within the ambit of business

centric factors but given that McE’s don’t usually have the prowess to negate this

competition, its positioning within this cohort is questionable. Competition level

increase with decreasing entry barriers; entry barriers are set by the industry and

government at large and hence competition could be regarded as an industry centric

factor. These factors are outwith the sphere of McE owners influence but given that

they are actively involved with the industry there is a possibility that McE owners

can collectively bring about a change by approaching industry bodies, which they are

usually, part of.

There are many other exogenous factors like high interest rates, stringent rules, and

regulations etc., which are set by the government which have been identified as

prominent causes of business failure (Hall and Young, 1991). These factors are not

under industry control and hence completely outwith the sphere of McE’s influence.

3.6. Summary

This chapter provided a general overview of the literature pertaining to small

business failure. Five different measures for small business failure were identified

i.e., discontinuance of ownership of the business, discontinuance of the business,

53
 Chapter 3

bankruptcy, liquidated businesses and inadequate profit levels, of which inadequate

profit levels was chosen as the measure to define McE’s failure. Furthermore causes

of business failure were segregated into those caused by factors within the business

i.e., endogenous and those outwith i.e., exogenous. Endogenous factors were

separated into owner and business centric factors and exogenous factors were

separated into project and industry centric factors.

The following chapter comprises a review of literature pertaining to endogenous

factors which are presumed to influence the McE’s.

54
 Chapter 4

4. Endogenous factors

4.1. Introduction

The previous chapter delineated the diverse assortment of factors, which influence

business success or failure. As mentioned before these factors can be broadly

grouped within two cohorts i.e., endogenous and exogenous. This chapter comprises

a review of literature aimed at deciphering and deliberating upon relevant

endogenous factors. Endogenous factors have been fragmented into two namely:

• Owner centric factors

• Business centric factors

In a McE, the difference between the owner and business centric factors is

negligible. The McE owners tend to be intrinsically linked to their businesses as it is

the only recourse to their livelihood and they are solely responsible for all business

operations (Based on the findings of this research). Thus, it would not be wrong to

suggest that owner and business centric factors could be interspersed but this has

been avoided as the ontological assumptions (see research methodology chapter)

adopted entail that the owner and the business be considered as two distinct realities.

Based on the above premise owner and business centric factors have been looked at

in different sections within this chapter.

55
 Chapter 4

The first part of this chapter comprises of a thorough review of current literature on

owner centric factors with the primary focus on ascertaining factors that are

associated with successful small business owners. These factors can be used as a

comparator with owner centric factors prevalent in the McE’s to delineate what

personal (owner derived) factors prevent the McE owners from achieving

appropriate levels of profit and thus preventing business failure.

Small business literature on owner centric factors has often been interspersed with

entrepreneurship literature. This is based on the assertion that small business owners

and entrepreneurs are the same (see e.g., Kanter, 1982; Bridge et al., 2003).

4.2. Are McE owners entrepreneurs?

In the preceding chapter, it was identified that small businesses success or failure is

often associated with the individual characteristics of the owner (Everett and

Watson, 1998). Bridge et al. (2003) suggest that small business success is contingent

on the prevalence of entrepreneurial traits in individuals. As identified in the

preceding chapters, McE’s in the UK construction industry have a rather high failure

rate; based on the above premise, it could be construed that the McE’s failure is in

part due to the absence of entrepreneurial traits in McE owners. If this were the case

then McE owners could work towards developing these entrepreneurial traits and

hence avert McE’s failure occurring due to owner centric factors.

However, the question is whether these entrepreneurial traits are in essence

applicable to all sorts of small businesses. The contention of this research is that

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McE’s are unique and hence what is applicable in conventional small businesses

might not be applicable in McE’s. This assertion takes root in the findings of a

number of small business research exercises, which concluded that small business

owners form an exclusive cohort distinct in all respects to entrepreneurs (see e.g.,

Hornaday, 1990; Chell et al., 1991; Stewart et al., 1998; Becherer and Maurer, 1999;

Hyrsky, 2000; Sadler-Smith et al., 2003). The central contention of this research is

that McE’s are unique and hence it might not be wrong to suggest that McE owners

might in fact be different to both small business owners and entrepreneurs.

On simplistic analysis, all McE owners could qualify as entrepreneurs given that

they fulfil the criterion set out by the generic definition for the term entrepreneur.

The Dictionary of International Management (1999) defines the term entrepreneur

as, “…a person who sets up a business or businesses”. Almost all McE owners with

the exception of those who have been handed down or have bought the business

from someone else would qualify as entrepreneurs using this definition. As has been

mentioned before the majority of the research exercises which are aimed at

deciphering owner centric issues in small businesses tend to look at small business

owners and entrepreneurs in the same light which might be based on the premise

identified above i.e., any individual who sets up a business can be defined as an

entrepreneur.

This assertion could be the main reason why small business researchers use the term

entrepreneur and entrepreneurship in a generic manner without giving due

consideration to whether all small business owners can be regarded as entrepreneurs

or not. This has led to a great deal of impediment in the area of small business

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research as highlighted by Hornaday (1990) who notes that, “…the words

entrepreneur and entrepreneurship continue to bedevil business scholars”. He

further notes that, “…too much time and effort is expended in the search for

entrepreneurs among small business owners’. He further notes that, ‘…those

attempting to understand and assist small businesses are hindered by their efforts to

use the concept of entrepreneurship”.

Researchers tend to adopt entrepreneurs, as the benchmarks while defining what

small business owners should be like (Filley et al., 1976). This vitiates the unique

identity of small business owners. Small business owners are considered to be lower

in stature to entrepreneurs based on the generic argument that entrepreneurs have

specific traits and abilities, which promotes business growth (Sadler-Smith et al.,

2003). This argument is based on the belief that all entrepreneurs are successful but

statistics reveal that in fact, over 50 percent of entrepreneur backed businesses fail in

the first year and 95 percent fail within the first five years (Global Entrepreneurship

Monitor, 2005).

Collins et al. (1964) and Smith (1967) were the first few to differentiate small

business owners from entrepreneurs. Smith (1967) suggested that small business

owners could be separated into two groupings namely craftsman entrepreneurs and

opportunistic entrepreneurs. It is interesting to note that Smith (1967) used the term

entrepreneurs while making this differentiation which corroborates Hornaday’s

(1990) assertion that, “…the term entrepreneur and entrepreneurship (Hornaday

refers to the terms entrepreneur and entrepreneurship as “E words”) has saturated

the field of small business research”.

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Filley et al. (1976) proposed an alternative typology consisting of craft, promotion,

and administrative managerial types. They further elaborated on the characteristics

on these owners; they note that, “…craft types limit organizational growth and rely

upon a benevolent environment for the success of their rigid firms. Promotion types

are associated with changing S-curve rates of growth and are prepared to exploit

opportunities with radical organizational change. Firms managed by administrative

types will exhibit linear growth and a rational, well-developed organizational

structure designed for planned environmental adaptation”. The craft and promotion

types identified by Filley et al. (1976) are similar to the craftsman entrepreneurs and

opportunistic entrepreneurs identified by Smith (1967). Filley and Aldag (1978)

further developed on Filley et al’s. (1976) work and suggested that for firms to grow

successfully craft and promotion type owners must develop into administrative type.

Hornaday (1990) cast doubt on these assertions but failed to give reasons for the

same.

Stanworth and Curran (1976) as part of their work on small business growth

identified three roles played by the small business owners namely the artisan,

classical and manager roles. They further elaborated on the characteristics of these

roles; in the artisan role the owner pursues personal satisfaction; in the classical role,

the owner desires personal financial return; and in the manager role the owner

supervises the continued growth of the firm using rational management techniques.

They put these roles on a growth continuum that assumes owners change roles as the

firm grows. The artisan and classical roles identified by Stanworth and Curran

(1976) are similar to the craftsman and opportunistic/promotional role identified by

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both Smith (1967) and Filley et al. (1976). The classical role is akin to the

administrative managerial type identified by Filley et al. (1976).

On the face of it the typologies devised by Filley et al. (1976) and Stanworth and

Curran (1976) look similar but on closer examination it is revealed that while Filley

et al. (1976) segregate the owners into three different sets based on the specific

characteristics of the owners, Stanworth and Curran’s (1976) typology is based on

segregating owner types by the specific characteristics they display during the

different stages of the firms life cycle. Stanworth and Curran’s (1976) typology is

flawed given that they consider all the three subsets to be “entrepreneurial roles”

thus sticking to the assertion that all small business owners are in essence

entrepreneurs.

Dunkelberg and Cooper (1982) identified three categories of small business owners

whom they referred to as "entrepreneurial types" namely growth oriented,

independence oriented and craft oriented. Craft and growth-oriented owners

identified by Dunkelberg and Cooper (1982) were akin to the craftsmen and

promotion type identified by Filley et al. (1976). The growth-oriented owners are

also similar to the opportunistic owners identified by Smith (1967). However,

Dunkelberg and Cooper (1982) failed to identify the managerial type identified by

Filley et al. (1976) instead; they identified a group of independence-oriented owners

who aimed, "…to avoid having to work for others”. Dunkelberg and Cooper (1982)

reiterated the mistake committed by Stanworth and Curran (1976) as they used the

term entrepreneur in their studies. In essence the typologies identified by Smith

(1964), Stanworth and Curran (1976) and Dunkelberg and Cooper (1982) with the

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exception of Filley et al. (1976) could be considered as typologies for different types

of entrepreneurs. Another weakness of these typologies is that they failed to link

owner intentions and motivations to their role and function in the business.

Based on the findings of the above-mentioned researchers (Smith, 1967; Filley et al.,

1976; Stanworth and Curran, 1976; and Dunkelberg and Cooper; 1982, Sadler-Smith

et al., 2003) a flawed yet exhaustive set of small business owner typologies can be

identified which are as follows:

1. Craftsman (Smith, 1967; Filley et al, 1976; Stanworth and Curran, 1976;

Dunkelberg and Cooper, 1982)

2. Opportunistic/Promotion/Classical/Growth (Smith, 1967; Filley et al, 1976;

Stanworth and Curran, 1976; Dunkelberg and Cooper, 1982)

3. Manager/Administrative managerial (Filley et al., 1976; Stanworth and Curran,

1976)

4. Independence oriented (Dunkelberg and Cooper, 1982)

Most of the typological studies mentioned above tried to segregate small business

owners into different typologies instead of focusing their attention on differentiating

small business owners from entrepreneurs. Carland et al. (1984) were the first to

suggest clear-cut differences between small business owners and entrepreneurs

devoid of the entrepreneurial idiom which preceding typologies were stuck with.

According to them an entrepreneur, “…is an individual who establishes and

manages a business for the principal purposes of profit and growth. The

entrepreneur is characterized principally by innovative behaviour and will employ

strategic management practices in the business”; and the small business owner, “…

is an individual who establishes and manages a business for the principal purpose of

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furthering personal goals. The business must be the primary source of income and

will consume the majority of one's time and resources. The owner perceives the

business as an extension of his or her personality, intricately bound with family

needs and desires”. This premise was further refined by Hodgetts and Kurtako

(2001) who note that small business owners independently own and operate

businesses that are, “…not dominant in their field, and usually do not engage in

many new or innovative practices” whereas the, “…entrepreneurs principal

objectives are profitability and growth…the business is characterized by innovative

strategic practices and continued growth”. They further note that the

entrepreneur, “…may be seen as having a different perspective from small business

owners in the actual development of their firm”.

Recent typological studies have identified that small business owners might be more

akin to craftsmen (Gerber, 1995) and managers (Stewart et al., 1998). These

typological studies are significantly different from the earlier studies as they are

based on the assertion that small business owners are part of exclusive cohorts far

removed from the earlier assumption that small business owners could be segregated

into different typologies.

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 Chapter 4

CRAFTSMAN

Practising a trade, craft or

occupation

Loyalty to the Desire for

Firm/career Independence/
Personal control
Business
ownership
PROFESSIONAL ENTREPRENEUR
MANAGER
Exploitation of
Innovation and
Building an Pursuing personal
organisation growth wealth

Figure 4.1. Types of small business owners (Hornaday, 1990)

The decisive work on typologies was conducted by Hornaday (1990) who developed

a typology model (Figure 4.1) where he categorised small business owners based on

their individual intentions and motivations and their role and function in the

business, thus negating the weakness of the earlier typologies. He identified three

types of small business owners namely craftsman, manager, and entrepreneur.

Hornaday’s (1990) model highlights a very interesting phenomenon; he notes that all

the owner types might share common attributes. The only factors, which are unique

to the individual sub sets, have been enlisted below:

• Craftsman: Practising a trade, craft or occupation

• Manager: Building an organisation

• Entrepreneur: Pursuing personal wealth

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On the face of it, McE’s owners come across as craftsmen as they fulfil the exclusive

criterion set out above i.e., they practise a trade, craft, or occupation. This is not to

say that McE owners cannot be considered as managers or entrepreneurs.

Hornaday’s (1990) assertion that pursing wealth is an exclusive characteristic linked

with entrepreneurs is questionable as most people start business to earn a livelihood;

livelihood in essence is an act aimed at pursuing personal wealth. This is the same

for the exclusive characteristic identified for managers as there might be some McE

owners who would want to build an organisation. The construct used by Hornaday

(1990) is partially flawed as some small business owners might in fact fulfil two or

three of the above mentioned exclusivist criteria. This is reiterated by Cohen and

Musson (2000) who suggest that small firms are populated by people who perform

entrepreneurial, managerial, and operational functions in unison.

Based on this line of thought four other types of small business owner typologies can

be identified (Assumed profiles for small business owners), which are:

• Craftpreneur: Small business owner who practises a trade, craft or occupation

and pursues personal wealth while doing so;

• Managerial-entrepreneur: Small business owner who intends to build an

organisation while pursuing personal wealth;

• Craftmanager: Small business owner who practises a trade, craft, or occupation

and intends to build an organisation centred around his speciality (trade, craft, or

occupation).

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• Managing-craftpreneurs: Small business owner who practices a trade, craft, or

occupation and build an organisation centred around his speciality with the

intention of accruing personal wealth.

The distinctions between these subsets are faint yet patent which highlights the wide

array of typologies, which could be further identified, based on the inherent and

individualistic characteristics of the small business owner. Small businesses are

deeply influenced by the personal characteristics of their owners and given that all

individuals have different characteristics, cloistering them within any particular

subset is a tumultuous task.

As has been mentioned earlier one of the central contentions of this research is that

McE’s are unique hence it would not be wrong to construe that McE owners might in

fact be totally distinct from all the above mentioned owner types. This assertion

could be further extended to segregate McE owners pursuing different specialities

into different subsets given that it is common knowledge that their inherent

characteristics are different. For example, a McE owner who is a bricklayer by

background is far removed from someone who is an electrician because the functions

they perform and the skill sets required of them are totally different.

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 Chapter 4

Craftmanagers Craftsmen Craftpreneurs

+ +
+
+ Managerial +
craftpreneurs
+ +
Professional managers Entrepreneurs

+ +

Managerial-
entrepreneurs

Figure 4.2. Alternative typologies for small business owners

Figure 4.2 is a pictorial representation of a model that have been devised as part of

this research to decipher which cohort McE owners belong to, based on their roles,

functions, intentions and motivations. This model incorporates all the small all

typologies identified in the earlier sections of this chapter. This exercise also

involves independently assessing McE owners pursuing different specialities to

decipher whether the aforementioned assertion that they might belong to different

subsets is valid.

The following section of this chapter is aimed at delineating the specific owner

centric factors, which influence McE success and failure.

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4.3. Owner centric factors

Research on owner centric factors in McE’s is an unexplored area of small business

research. It is to be noted that most owner centric studies aim to divulge behavioural

traits and abilities, which are unique to entrepreneurs and managers but fail to

address the effect their intentions, and motivation could have on business

performance. Man et al. (2002) suggest that the entrepreneur's demographic,

psychological, and behavioural characteristics, as well as his or her managerial skills

and technical know-how are the most influential factors related to the performance of

a small business. From the above, three broad categories of owner centric factors can

be identified namely behavioural factors, skill centric factors and generic factors.

The following sections of this chapter comprise of an exhaustive review of literature

aimed at deciphering the vital components of the aforementioned factors.

A preliminary appraisal of associated literature revealed that research on owner

centric factors is somewhat ambiguous. A prime example of this is the inclusion of

skill related issues in behaviour centric studies (see e.g., Hisrich and Peters, 1992;

Utsch, 1999; Sadler-Smith, 2003). This approach has been negated in this research

by elaborating on the specific categories within different sections of this chapter.

It is also revealed that, within owner centric literature, the overarching trend of

overemphasising on the terms entrepreneur and entrepreneurial has been reiterated.

Researchers have also oversubscribed to the terms manager and managerial without

any sort of logical intellection as to whether all small business owners fulfil the role

of a manager or not.

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Another limitation of owner centric literature is that most researchers have directly

adopted themes and theories from the area of corporate entrepreneurship and

corporate management without giving due consideration to the fact that small

businesses and corporate entities are diametrically opposite. This exemplifies the sad

state of small business research where researcher feels that it is mandatory to apply

theories, which have emerged in the other areas to small business research. This

highlights the lack of originality in the current crop of small business literature. The

following section of this chapter aims to decipher the relevant behavioural factors.

4.4. Behavioural factors

The importance of behavioural factors is best exemplified by Sadler-Smith et al.

(2003) who note that the analysis of behaviour of owners in small businesses and

how this relates to business performance in term of business growth is a pertinent

question for entrepreneurship and small business management theory. Bridge et al.

(2003) note that it is, “…it is the possession by individuals of a trait, or traits that

predisposes them to [be] enterprising”. Researchers have subscribed to either

“entrepreneurial behaviour” approach (see e.g., Cohen and Musson, 2000; Sadler-

Smith et al., 2003 etc.) or “management competency” approach (see e.g., Gherardi,

1999; Holton and Naquin, 2000; Man et al., 2002) to assess these behavioural

factors. The weakness of these two approaches is that they look at entrepreneurs and

managers as exclusive typologies thereby negating the existence of individuals who

might perform both entrepreneurial and managerial functions, hence exclusively

subscribing to either of these approaches to assess behavioural factors might be a

fallacy. However, this does not vitiate the importance of these two approaches in this

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research given that McE owners might benefit by embedding entrepreneurial and

managerial traits.

The subsequent section of this chapter comprises of review of the aforementioned

approaches used to assess behavioural factors, which would feed into segregated

sections specifically aimed at explaining different behavioural factors.

4.4.1. Entrepreneurial behaviour approach

Entrepreneurial behaviour approach is a trait-based perspective that involves

examining the innate characteristics of entrepreneurs (Sadler-Smith et al., 2003).

There have been a number of studies which employed this approach to describe the

attributes of entrepreneurship in terms of personality traits, attitudes and

management behaviour (see e.g. Carland, 1984; Hisrich and Peters, 1992; Utsch et

al., 1999). It is to be noted that within entrepreneurship literature there is an

etymological conundrum with respect to the usage of the terms behaviour,

characteristics, mannerism, qualities, style, and traits. Most researchers use these

terms interchangeably while others like Bridge et al. (2003) consider them as distinct

constructs. Oxford Dictionary (2002) defines these terms as follows:

• Behaviour: the way in which someone or something behaves

• Characteristic: a feature or quality typical of a person

• Mannerism: a habitual gesture or way of speaking or behaving

• Qualities: an essential and distinguishing attribute of something or someone

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• Style: a manner of doing something

• Traits: a distinguishing quality or characteristic

All these terms have analogous definitions and hence in the context of this research

will be used interchangeably. It can be argued that the interchangeable usage of the

above-mentioned terms would compound the problem but has been adopted to

maintain the integrity of the literature reviewed.

To further, deliberate on this approach one needs to understand the essence of the

term entrepreneurial. Utsch (1999) defines the term entrepreneurial as the, “…

willingness to take risks in order to make a profit”. The term entrepreneurial finds its

etymological roots in the terms entrepreneur and entrepreneurship.

It was the famous Irish economist Cantillon (1755) who coined the term

entrepreneur. He suggested that an entrepreneur is a person who undertakes and

operates a new enterprise or venture and assumes some accountability for the

inherent risks. Schumpeter (1950) proposed a revised definition for entrepreneurs; he

noted that an entrepreneur is a person who is willing and able to convert a new idea

or invention into a successful innovation. Knight (1965) referred to an entrepreneur

as the economic functionary who undertakes such responsibility of uncertainty,

which by its very nature cannot be insured, or capitalized or salaried to. Casson

(2005) characterises entrepreneurs as decision makers who improvise solutions to

problems, which cannot be solved by routine alone. Accretion of the above

definitions suggests that an entrepreneur could be any individual who sets up a new,

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innovative, and risky business. Gibb (1988) identified that the propensity of an

individual to set up a new business is contingent upon the following:

The time of life of the individual (the older person with little prospect of further

promotion);

1. The social and political context (the ‘enterprise culture’);

2. The types of market (if the preferred market open to the entrepreneur is

associated with ease of access);

3. The entrepreneur versus the corporatist (the person who is fed up with structure

and task orientation in larger firms).

This entrepreneurial act of setting up a new business is called entrepreneurship.

Carland et al. (1984) define entrepreneurship in terms of innovative behaviour allied

to a strategic orientation in pursuit of profitability and growth. Hisrich and Peters

(1992) define entrepreneurship as the process of, “…creating something different

with value by devoting the necessary time and effort, assuming the accompanying

financial, psychological and social risks and receiving the resulting rewards of

monetary and personal satisfaction”. Sommerville and McCarney (2003) viewed

entrepreneurship as a specific function involving the exploitation of opportunities,

which exist within a market.

Studies on entrepreneurial behaviour stem from the belief that most entrepreneurs

would have common characteristics and behavioural traits given that they aspire to

achieve the same goal i.e., profits. Researchers have identified a wide array of

different behavioural traits ranging from personal owner centric traits, which are

akin to generic behavioural patterns of the owner to specific traits, which are

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considered exclusive to entrepreneurial individuals.

As has been mentioned before the majority of the studies on entrepreneurial

behaviour employed a trait-based perspective (Sadler-Smith et al., 2003). The

importance of behavioural or trait based factors is best identified by Bridge et al.

(2003) who note that it is, “…the possession by individuals of a trait, or traits, that

predisposes them to enterprising behaviour”. Chamley (1983) suggests that the main

quality of the entrepreneur is to deal with unforeseen events. Timmons (1989)

suggests that people with persevering, problem-solving, and reliable temperaments

will have entrepreneurial tendencies. Covin and Slevin (1988) defined an

entrepreneurial style as being one inclined to take business-related risks, favour

change and innovation, and compete aggressively with other firms and a non

entrepreneurial style as one characterized as being risk-averse, non innovative,

passive, and reactive. Hyrsky (2000) in a factor analysis research of small business

managers identified work commitment and energy, innovativeness and risk taking,

ambition and achievement, and egotistic features as dimensions of entrepreneurship.

Georgelli et al. (2000) described “being entrepreneurial” as being willing to take

risks, and being innovative, articulated with an ambition to grow. Sadler-Smith et al.

(2003) suggest that intention to grow and an innovation/change orientation are

characteristics of entrepreneurial behaviour; they also note that entrepreneurial

behaviour promotes a culture of creativity and risk taking, create flat informal

structures, and formulate strategy in order to take advantage of identified

opportunities. Bridge et al. (2003) identified a set of personality traits and qualities,

which are exclusive to entrepreneurs namely achievement motivation, risk-taking

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propensity, locus of control, need for autonomy, determination, creativity, self-

confidence and trust.

Based on the above it would not be wrong to construe that an individual who intends

to pursue an entrepreneurial activity would need to possess multivariate traits and

qualities. Many of these qualities and traits mentioned above have been worded

differently but have been used to denote similar factors and hence can be used

interchangeably; for example, being ambitious, achievement-oriented and

competitive are traits synonymous with having an intention to grow and hence can

be grouped together. This has been taken into consideration while drawing up a list

of traits and qualities essential for an entrepreneur, which have been listed below in

Table 4.1.

Table 4.1. Traits and qualities essential for an entrepreneur

Traits and qualities Literature source

Covin and Slevin (1988); Georgelli et al.
• Intention to grow/ Achievement-oriented/
(2000); Hyrsky (2000); Bridge et al. (2003);
Ambitious/ Competitive
Sadler-Smith et al. (2003).
Covin and Slevin (1988); Georgelli et al.

• Innovative/Change oriented/ Creativity (2000); Hyrsky (2000); Bridge et al. (2003);

Sadler-Smith et al. (2003).

• Intuition Chamley (1983).
• Determination/Energetic/ Self-confident Hyrsky (2000); Bridge et al. (2003).
• Egotistic/Need for autonomy Hyrsky (2000); Bridge et al. (2003).
• Formulate strategy Sadler-Smith et al. (2003)
• High work commitment Bridge et al. (2003).
Covin and Slevin (1988); Georgelli et al.

• Propensity to take risks (2000); Hyrsky (2000); Bridge et al. (2003);

Sadler-Smith et al. (2003).

• Trusting Bridge et al. (2003).
The traits that have the highest frequency of citation are intention to grow,

innovativeness and a propensity to take risks (Five of the six literature sources

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 Chapter 4

analysed espoused these traits). These traits can be used to differentiate an

entrepreneur from a small business owner. As mentioned in the preceding sections of

this chapter one of the key objectives of this research is to ascertain which owner

typologies McE owners belong to: to achieve this, McE owners would be tested for

the prevalence of these traits. If the majority of the McE owners show a high

prevalence of these traits, it could be construed that McE owners are entrepreneurs.

The weakness of this approach is that it is based on the assumption that all

entrepreneurs will have similar characteristics, but in a real world situation, this

might not stand true, as the probability of finding two individuals with homogenous

characteristics is quite low even though they may aspire for similar things. Shapiro

(1975) conducted a set of psychological tests on entrepreneurs, which revealed that

individuals are endowed with different levels of business acumen, which highlights

that difference between entrepreneurs at a behavioural level. This was corroborated

by Cooper (1986) found a radical difference in types of entrepreneurs involved in

new firm formation within two different sectors.

This variance in entrepreneurs can also be found in their ambitions and motivations.

Jarillo (1989) suggests that entrepreneurs have varying ambitions for their business,

some desire to achieve outstanding growth and financial rewards while others have a

desire to be their own boss.

Binks and Coyne (1983) differentiated entrepreneurs based on their motivation to

start business. They note that their motives are contingent on the situation they find

themselves in; they call these situational factors as ‘push’ and ‘pull’ effects. Holiday

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(1995) further elaborates on this push and pull effect and suggests that entrepreneurs

are either ‘pushed’ into independence through worries about security or ‘pulled’ by a

strong belief that they can do better on their own. She goes on to suggest that

individuals who are ‘pulled’ into starting a business fare better than those who are

‘pushed’ into it. Gray (1990) notes that the lure of personal independence is an

important pull factor in the decision to seek a career as a small business owner. He

also notes that the main push factors are redundancy, recession and blocked

promotion and further claims that the aforementioned push factors have a greater

role in motivating people to start their own businesses.

The frailty of the push and pull argument proposed by Binks and Coyne (1983)

stems from their disposition to group all small business owners within the

entrepreneurial cohort. Their assertion is in line with the typological paradigms

discussed earlier in this chapter (see e.g. Dunkelberg and Cooper; 1982; Hornaday,

1990; Sadler-Smith et al., 2003) as they merely identified different entrepreneur

typologies based on their motives.

However, this does not completely vitiate their argument, as it could be adapted to

segregate McE owners into different groupings based on their motivation to start the

business. As part of this research McE owner’s motivation to start their business

needs to be compared to the average profitability of their business. If the results of

this exercise were to generate a specific pattern in line with Holidays (1985)

assertion it could be inferred that owner motivation has a vital role to play in

business success and failure. This exercise would set the tone for further research on

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small business owners motivation which is as of now an under researched area in

small business management.

4.4.2. Management competency approach

The management competence approach is based on the works of Boyatzis (1982).

Sadler-Smith et al. (2003) suggest that this approach involves articulating desirable

managerial behaviours in the language of management competence. They further

suggest that competencies reflect, “…desirable management behaviours whose

relative efficacy may be context dependent”.

The use of this approach has been steadily increasing within small firm research over

the last decade (Loan-Clarke et al., 2000). Successive UK governments through the

Management Charter Initiative (MCI) (1995) adopted this model to shape and

promote competency based management development (Martin and Staines, 1994;

Sadler-Smith et al., 2003). According to Boam and Sparrow (1992), this rising

importance results from two fundamental issues:

1. Large-scale change programs have failed to change organizations, as they fail to

deliver the necessary changes in individual behaviour.

2. The growing link between business performance and employee skills has driven

the need to improve management capability in order to sustain business

performance.

According to Man et al. (2002) this approach is a response to the need for long-

lasting individual characteristics leading to success, rather than simply skills and

abilities, in facing increasing competition.

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There is considerable confusion with regard to what the term competency actually

means and in what context it should be used (Bridge et al., 2003). According to Bird

(1995), competencies are seen as behavioural and observable but only partly

intrapsychic characteristics of an entrepreneur. Woodruffe (1991) has made a

distinction between the term “competency” and “competence”. He defines

competency as the dimensions of behaviour, which underlie competent job

performance. He further argues that this term should be reserved for the person-

oriented variables that people bring with them to the job, i.e. their inputs. Bridge et

al. (2003) suggests that competency is often used as modern terminology for ability.

The contextual conundrum surrounding the management competency approach

stems from the different sets of objectives it has been adopted for. Researchers like

Boyatzis (1982) suggest that management competency is related to the personal

characteristics that make people competent while government bodies like MCI

(1995) have used it as a work-functions approach to detail those job functions that

competent people can perform better (Bridge et al., 2003).

This contextual irregularity has further extended to how researchers used this

approach within small business research. Researchers like Martin and Staines (1994)

tried adopting managerial competencies to identify competency patterns within small

business owners but while doing so failed to give due consideration to the fact that

managerial competencies might be different from competencies of small business

owners. Caird (1992) was the first to identify a set of entrepreneurial competencies

as different from managerial competencies. She concluded that there are four

different aspects of entrepreneurial competency namely knowledge, performance,

skill and psychological variables. Lau et al. (1999) suggest that entrepreneurial

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competencies can be considered as higher-level characteristics encompassing

personality traits, skills, and knowledge, representing the ability of the entrepreneur

to perform a job role successfully. Man et al. (2002) identified a set of six

entrepreneurial competency areas, which have been enlisted below in Table 4.2.

Table 4.2. Types of entrepreneurial competencies (Man et al., 2002)

Competency area Behavioural focus

Competencies related to recognising and

Opportunity competencies developing market opportunities through

various means
Competencies related to person-to-person
Relationship competencies
or individual-to-group based interactions
Competencies related to different

Conceptual competencies conceptual abilities which are reflected in

the behaviour of the entrepreneur

Competencies related to the organisation

of different human, physical, financial and

Organising competencies technological resources, including team

building, leading employees, training and

controlling
Competencies related to setting, evaluating
Strategic competencies
and implementing the strategies of the firm
Competencies that drive the entrepreneur
Commitment competencies
to move ahead with the business

The Small Business Service (SBS), a key UK government organisation responsible

for the welfare of small businesses in UK, identified six key managerial

competencies vital for the small business success namely: leadership, technical

ability, general management, finance, language, and marketing. As part of this

research, McE owners would be asked to identify their level of competency in these

areas.

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The criticism levelled against a management competency approach is best identified

by Bridge et al. (2003) who note that, “…there are a number of lists of possible

enterprise competencies that overlap but do not coincide, and the lists of enterprise

competencies also overlap with lists of enterprise traits and attributes”. This

highlights the lack of a definitive set of competencies, which can be ascribed as

quintessential for business success. The numbers of competencies identified by

researchers are far too exhaustive and varied and as recognised by Bridge et al.

(2003) are more general than domain specific.

It is also of interest to note that these managerial/entrepreneurial competencies are

similar to the entrepreneurial behavioural factors described in the preceding section

of this chapter. This highlights the conundrum that researchers face whilst selecting

which approach to use, as both these approaches highlight the same issues but in

different contexts. This argument formed the cornerstone for the integrated

approach, which is described in length in the following section of this chapter.

4.4.3. Integrated approach

A heterogeneous array of factors were identified by researchers who subscribed to

either of the two approaches described in the preceding sections of this chapter but

they failed to realise that small business owners might simultaneously perform both

entrepreneurial and managerial functions. Hodgetts and Kuratko (2001) had a similar

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view on this issue, according to them entrepreneurial style and management style

even though distinct were not mutually exclusive. They further noted that the, “…

ability to remain entrepreneurial while adopting administrative traits is vital to the

ventures successful growth”. This further highlights that entrepreneurship and

management are not exclusive functions instead they are required by firms on a

concurrent and transferable basis, for success.

This line was touted by Mukhtar (1998) who proposed an integrated global

competency approach who suggested that all firms operate inside a global

competency space within which business competencies may be identified. Sadler-

Smith et al. (2003) further elaborated on this and note that, “…the global

competence space comprises entrepreneurial management behaviour, administrative

(non-entrepreneurial)management behaviour and generic management behaviours;

…management behaviours within small behaviours may be mapped within the

global competence space, and particular firms may be hypothesised as possessing a

portfolio of behaviours comprising entrepreneurial, administrative, and generic

elements as related to the organisations entrepreneurial style”. They further

developed a model (Figure 4.3) based on this assertion to ascertain which firms were

high growth and low growth respectively.

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ENTREPRENEURIAL
BEHAVIOURS

+
NON-
ENTREPRENEURIAL
BEHAVIOURS
- ENTREPRENEURIAL
STYLE
+ FIRM TYPE
(HIGH GROWTH OR
LOW GROWTH)
(MANAGEMENT)

GENERIC
BEHAVIOURS

GLOBAL COMPETENCY
SPACE

Figure 4.3. Global competency space (Sadler-Smith et al., 2003)

Figure 4.3 highlights the global competency model that was used by Sadler-Smith et

al. (2003) to link the two separate streams of management theory namely

entrepreneurship and managerial competence.

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The main propositions of this model are:

“Proposition 1a: There will be relationship between entrepreneurial style and those

managerial behaviours that (1) promote a culture of creativity and risk taking; (2)

create flat informal structures; and (3) formulate strategy in order to take advantage

of identified opportunities…Proposition 1b: There will be a negative relationship

between entrepreneurial style and those managerial behaviours that emphasise

planning, control, monitoring, evaluation, and formalised organisational

structures…Proposition 2: There will be a positive relationship between

entrepreneurial style and firm type (high growth)…Proposition 3: There will be a

positive relationship between entrepreneurial management behaviour and firm type

(high growth).”

This model utilises an additive/deductive approach to represent which factors have a

positive or negative influence on firm growth. The weakness of this model is that

administrative issues like planning, control, monitoring, evaluation, and formalised

organisational structures have been represented as non-entrepreneurial negative

components though recognised by researchers like Hodgetts and Kuratko (2001) as

vital for business success. Sadler-Smith et al. (2003) also consider all entrepreneurial

factors are universally positive but this might not be true in all instances. A prime

example of this is risk, willingness to take risks is considered quintessential for

entrepreneurship (Georgelli et al., 2000). Business success is contingent on the level

and type of risk taken. If the type of risk taken is of an uncalculated nature he could

harm the fortunes of the company whereas in a highly competitive business

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environment if he failed to take the necessary risks his or her business might stagnate

and fail. This premise could be used to infer that all three issues under consideration

namely entrepreneurial, managerial, and generic behavioural issues could have a

positive or negative effect on the business. Based on the above assertion a modified

version (Figure 4.4) of Sadler-Smith et al. (2003) model has been proposed as part of

this research, which can be used by researchers who intend to conduct further

research on owner centric factors.

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ENTREPRENEURIAL BEHAVIOUR
E
NEGATIVE M POSITIVE
P
M
A
H
A
POSITIVE
S
K
S
I OWNER
S
E MANAGER
MANAGERIAL COMPETENCE CENTRIC
E
NEGATIVE M
P
POSITIVE FACTORS
M
H
A
A
S
S
K
I
S
E
GENERIC BEHAVIOUR HIGH
E
NEGATIVE M
P
POSITIVE McE
M
A
H
A
GROWTH
S
S
K
I
S
E

GLOBAL COMPETENCY SPACE

Figure 4.4. Example of a modified version of a global competency model

Figure 4.4 is a pictorial representation of the modified global competency model

proposed as part of this research. Akin to Sadler-Smith et al.’s model (2003) the

global competency space in this model would encapsulate within itself three cohorts’

namely entrepreneurial behaviour, managerial competence and generic behaviour.

The three aforementioned cohorts would be individually divided into to two sub-

cohorts namely negative and positive. This would negate the weakness of Sadler-

Smith et al’s. (2003) model as each of the individual factors could be exclusively

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classified within the positive or negative sub-cohorts depending on their effect on the

business. For business success, the owner should emphasise on the positive factors

and mask the negative factors.

As mentioned before the models espoused above consider entrepreneurial and

managerial issues as exclusive and isolated function albeit in a real world situation

most McE owners fulfil the roles of both an entrepreneur and a manager. This

contradiction paves way for further research aimed at developing a collective and

coherent understanding of entrepreneurial and managerial issues, which can be

viewed under a singular construct.

Contrary to the lines of thought elaborated above Bridge et al. (2003) segregated

owner centric research into a set of theories. These theories relate to the make up of

individuals and how some individuals are more enterprising than others; enterprising

individual are construed to be more successful at businesses. These theories were

segregated into personality theories, behavioural theories, economic approaches,

sociological approaches, cognitive theories, and a number of integrated approaches.

These theories even though exhaustive in content are focused at deciphering factors

which are integral for the success of an entrepreneur hence reiterating the fallacy of

equating all small business owners to entrepreneurs. Another flaw with this approach

is that many issues elaborated within these theories tend to have an overlapping

nature and hence cannot be grouped under any specific theoretical cohort. For e.g.,

Bridge et al. (2003) consider personality theories to be distinct from cognitive and

behavioural theories but within personality theories they talk about issues like

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creativity, determination and self confidence which can be considered as both

cognitive and behavioural issues.

In addition to these behavioural factors a number of owner centric attributes have

also been identified as important for small business success namely attitude,

enthusiasm, diligence and perseverance, persuasiveness and a positive outlook

(Bridge at al., 2003).

The following section of this chapter aims at decipher the key behaviour centric

factors identified in the preceding sections of this chapter.

4.4.4. Key behaviour centric factors

Within the preceding sections of this chapter a number of behaviour centric factors

required for small business success were highlighted of which three factors namely

innovativeness, intention to grow and propensity to take risks were identified as

imperative for small business success. A preliminary appraisal of literature revealed

that information on innovation at an owner centric level is extremely scarce.

Information that is available is focused at business level innovations and hence

deliberation on this factor has been kept brief. Intention to grow manifests at both at

owner centric level and business level and hence has been deliberated in length in the

business centric section of this chapter. The following section of this chapter

comprises of a brief deliberation on innovation and propensity to take risks.

Innovation

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Studies on innovation at an owner centric level for McE’s are extremely scarce,

even though innovation is considered vital for business success (see e.g., Covin and

Slevin, 1988; Georgelli et al., 2000). Cosh et al. (1996) were of the view that

innovation significantly reduces the probability of firm failure. This scarcity is

further compounded by the dearth of research investigating innovation from the

perspective of the small construction firm (Egbu et al., 1998; Gann and Salter, 2000).

The term innovation finds its root in the term innovate which means “to introduce

new methods, ideas, or products” (Oxford Dictionary, 2002). One of the key studies

on innovation in small firms in the UK construction industry was carried out by

Sexton and Barrett (2003) who defined innovation as the effective generation and

implementation of a new idea, which enhances overall organizational performance.

They suggest that successful innovation outcomes are achieved through an

appropriate innovation focus that is responsive to contextual factors, realized by

organizational capabilities and channelled through effective and efficient innovation

processes. As part of their research they found that small firms in the UK

construction industry are not always motivated to innovate, they tend to limit their

exposure to costs and risks of innovation as much as possible. They identified that

the common innovation outcomes in small construction firm are client relationship

development innovation, organization and management innovation at firm and

project levels and technological innovation. They further go on to suggest that

outcomes of innovation can be grouped into two areas:

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1) Improving the effectiveness of the firm, i.e. making sure that the firm is doing

the right activities.

2) Improving the efficiency of the firm, i.e. making sure that the firm’s activities are

done well.

Based on the above it can be construed that innovation has both an endogenous and

exogenous focus, i.e., internal and external focus. As mentioned above one of the

key outcomes of innovation is improving the efficiency of the firm; in McE’s this

responsibility lies on the shoulder of the McE owner. Herein lies the frailty of Sexton

and Barrett (2003) work which stems from their negation of the human element; they

fail to identify that it is the owner who runs the firm and hence is responsible for

developing the practices within the firm.

Sexton and Barrett (2003) adopted an approach postulated by Egan’s (1998)

Rethinking Construction report which looked at innovation as the responsibility of

the bigger firms and was largely focused at innovation within the project

environment. Egan’s report assumed that innovations, which would happen at the

bigger firms, would trickle down to the smaller firms but failed to identify the role of

the small business owner in promulgating innovative practices. Egan’s findings were

in line with the findings of the OECD (1982) report, which found that large firms are

more able to afford the investment for innovation and more able to tolerate the risk

of adoption, whereas smaller firms are more likely to use simple decision making

processes. Alternatively studies carried out by Utterback (1974) revealed that, “…in

mature industries, such as textiles, machine tools and construction, innovation is

more likely to come from smaller, newer firms than from older, larger firms”.

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However, some may argue that in the context of a McE this would not apply, as they

do not usually have the required monetary backup or the technical knowledge to

develop innovative practices. This argument is credible but it could also be argued

that if McE’s were to be funded and given adequate training they could also develop

innovative practices, which were in line with the best practices in the rest of the

industry. This further highlights the weakness of most studies on innovation in

construction industry as they failed to comprehend that innovations will only be

effective if they were applied across the industry. This highlights the need for

studies, which would focus at innovation across the industry right from project level

to the individual level. Only if individuals innovate can the industry innovate.

There have been no studies, which looked at innovation and its effect on business

performance for small firms in the construction industry. This scarcity could be due

to the fact that outcomes of innovation are hard to quantify in monetary terms. As

part of this research, McE owners propensity to innovate would be compared to

profit level of their business to decipher whether innovation has an effect on business

performance. If the findings of this exercise reveal that, there is in affect a positive

relationship between the aforementioned factors and business performance it could

be consequentially inferred that innovation is integral to McE success. This would

also highlight the human element attached to innovation, as innovation at the McE

level is contingent on the owners decision and his /her innovative capability.

Propensity to take risks

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The majority of the studies on risk within the construction industry have been limited

to project levels risks. (see e.g., Flanagan and Norman, 1993; Smith et al., 2006).

There have been no studies which looked at risks within small firms in the UK

construction industry even though propensity to take risks is considered vital for

small business success (see e.g., Covin and Slevin, 1988; Georgelli et al., 2000;

Hyrsky, 2000). This extreme scarcity could be due to the fact that construction

industry by its very nature is considered very risky (Edwards, 1995; Flanagan and

Norman, 1993).

The term risk means a situation involving exposure to danger (Oxford Dictionary,

2002) thus, propensity to take risks can be simply defined as an inclination to

involve oneself in a dangerous situation. Brockhaus (1980) defines the propensity for

risk taking as, “…the perceived probability of receiving the rewards associated with

success of a proposed situation, which is required by an individual before he will

subject himself to the consequences associated with failure, the alternative situation

providing less reward as well as less severe consequences than the proposed

situation”. Mancuso (1975) identified that individuals who start businesses have

three levels of risk preferences namely low, moderate, and high. Liles (1974)

suggested that in becoming an entrepreneur an individual risks financial well-being,

career opportunities, family relations, and psychic well-being.

A number of studies differentiate entrepreneurs from managers (Sadler-Smith et al.,

2003) and employees (Knight, 1965; Chamley; 1983) based on their propensity to

take risks; most of these studies revealed that employees and managers are more risk

averse than entrepreneurs. Mancuso (1975) suggested that most entrepreneurs are

moderate risk takers but failed to provide any empirical proof for the same. This

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assertion was substantiated by Brockhaus (1980) who found that 64 percent of the

entrepreneurs whom he interviewed as part of the research he conducted on

entrepreneurs had propensity for moderate level of risk.

These finding were refuted by Busenitz (1995) who was of the view that, “…

empirical evidence showing entrepreneurs to have a higher risk propensity has

yielded little support”. However, the frailty of Busenitz’s (1995) argument centres

around the over complicated psychological techniques he employed to delineate

propensity of taking risks from the actual action of taking risks. According to him

that entrepreneurs take more risk but do not have a higher risk propensity. This

assertion albeit right from a psychosomatic perspective fails to qualify when looked

at from a simplistic point of view. To take more risks one needs to have an

inclination to take risks, an action without thought is not a possibility. Hence when

looked at from a simplistic point of view Brockhaus’s (1980) findings do seem valid.

As part of this research, McE owners were to identify the level of risk they were

willing to take which would be compared to Brockhaus’s (1980) findings to identify

whether McE owners qualify as entrepreneurs. This exercise would be further

extended to delineate different types of McE owners based on their propensity to

take risks.

McE owners propensity to take risks would also be compared to their business

profits to decipher whether McE owners propensity to take risks affect their business

performance. If the findings of this exercise reveal that, there is in affect a positive

relationship between the aforementioned factor and business performance it could be

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consequentially construed that owners propensity to take risks is integral to McE

success.

4.4.5. External factors and their influence on owner behaviour

Another issue, which came to light from the review of literature was that previous

studies had failed to shed light on the influence external factors like the economy,

bank interest rate etc. might exert upon McE owners behaviour, competencies,

intentions, and motivations. This is in spite of the fact that there have been numerous

studies which espoused that external factors have a significant impact on

entrepreneurial behaviour (see e.g., Morrison, 2000; Bridge et al. 2003.).

National and societal

culture

Economic conditions Political conditions

‘Demand’ factors Individuals with their ‘Supply’ factors such

such as attributes, resources, as participation rates,
economic, technical beliefs, traits income levels and
and industry issues and intentions population growth

Government Equilibrium rates of

intervention enterprise

Figure 4.5. Environmental factors which might influence entrepreneurial behaviour (Bridge et al.,

2003)

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Bridge et al. (2003) developed a model (see Figure 4.5) to define the environmental

factors, which might influence entrepreneurial behaviour. A multitude of different

factors both internal and external akin to those described by Bridge et al. (2003)

might affect McE owners. In the context of this research only factors in relative

immediacy to McE’s would be considered as influential. As mentioned in the

preceding chapter, these factors can be broadly categorised into project, and industry

centric factors.

It has been assumed in this research that owner centric factors even though

independent are enveloped and influenced by business, project, and industry centric

factors. These factors might have an independent or collective affect on McE

owners. As part of this research, a limited scope investigation would be carried out

to decipher whether this assumed link between external factors and owner behaviour,

competencies, intentions, and motivations exists.

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McE OWNER’S
BEHAVIOUR,
COMPETENCIES,
INTENTIONS
AND MOTIVATION

Figure 4.6. External factors and their affect on McE owners

Figure 4.6 is a pictorial representation of the presumed influence factors emanating

from settings external to and enveloping the McE would have on McE owners

behaviours, competencies, intentions, and motivations.

The following section of this chapter comprises of thorough review of literature

aimed at deciphering the key skill centric factors that are essential for McE success.

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4.5. Skill centric factors

Primary appraisal of associated literature revealed that a number of issues

highlighted within independent streams of literature, as vital skill centric factors

were not relevant to McE’s. To avoid superfluous deliberation, only issues identified

as vital to McE success have been deliberated upon in this section of the chapter.

It is to be noted that within the small business literature there is a general

disagreement as to whether the terms ability, competency, and skill are analogous.

The Oxford Dictionary (2002) definition for these terms is analogous and hence in

the context of this research these terms have been used interchangeably. It is to be

also noted that studies on skill centric factors specific to small business owner in the

UK construction are extremely scarce hence; general literature from the area of small

business management has been reviewed for this section.

Most of the studies in this field subscribe to the term entrepreneur (see e.g., Amit et

al., 1990; Georgelli et al., 2000) or manager (see e.g., Holton and Naquin, 2000;

Man et al., 2002) to define skill centric factors thus reiterating the fallacy of

identifying all small business owners as either entrepreneurs or managers.

Multitudes of different factors have been identified as skill centric factors namely

management skill, technical ability, management competencies etc. This highlights

the problem one comes across while undertaking research on skill centric issues as

there are no definitive factors, which can be, ascribed as vital skill centric factors and

those factors, which have been identified, are exclusively aligned to entrepreneurs or

managers. The literature for this section has been exclusively sourced from studies

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on skill centric factors aligned to the entrepreneurial cohort given that majority of the

studies aligned to the managerial cohort are specific to individuals who perform the

role of a manager or administrator as a job function (Cohen and Cohen, 1984).

Nonetheless, a few of the prominent management skill as identified by Cohen and

Cohen (1984) have been enumerated below:

• Communication

• Leadership

• Marketing oneself to the boss

• Planning

• Problem solving and decision making

• Productivity management

• Stimulating innovation and creativity

• Stress management

• Time management and goal achievement

These management skills are similar to the management competencies identified

earlier in this chapter. Lucas (1978) suggests that persons having relatively more

entrepreneurial ability became entrepreneurs while those possessing relatively less

became workers. This assertion can be questioned given that many individuals with

relatively less abilities might still start business, the issue here is to assess whether

they can be in essence be considered to be entrepreneurs or merely small business

owners.

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Jovanovic (1982) looked at abilities as an acquirable and revisable commodity. He

notes that, “…those who enter self-employment gradually learn about their

managerial abilities by engaging in actual running of the business…those who

revise their ability estimates upward tend to expand output while those embracing

downward estimates tend to contract or dissolve their businesses”. This highlights

that entrepreneurs needs to constantly update their abilities to survive in a highly

competitive business environment.

The importance of ability/skill in a business is best exemplified by Amit et al.

(1990), who suggest that entrepreneurial activity centres on the entrepreneur’s ability

to combine tangible and intangible assets in new ways and to deploy them to meet

customer needs in a manner that could easily be imitated.

Bates (1990) links entrepreneurial ability to experience, he suggest that with

experience entrepreneurs at the helm of a matured businesses acquires a precise

estimate of their abilities whereas in younger firms entrepreneurs have less precise

estimates of their true abilities. This assertion with respect to entrepreneurs in

younger firm might not stand true for serial entrepreneurs. Serial entrepreneurs are

those entrepreneurs who exit one venture before entering into a subsequent one

(Wright et al., 1997). These entrepreneurs tend to have long-term business

experience and have a good idea of their abilities.

Georgelli et al. (2000) suggest that the core abilities for entrepreneurship are a

capacity for, “…changing business processes…launching of new products [and] a

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planning capacity” but noted that not all small businesses are equipped with these

capabilities, nor are all managers predisposed towards them.

In the context of this research, the skill centric factor that is imperative to McE’s

success is education. As is common knowledge, McE owners tend to be lowly

educated given that the entry barriers into the industry are limited (SBS, 2006).

Conversely, entrepreneurs are usually relatively well educated (Douglas, 1976).

Morrisson et al. (1994) found that owners of large enterprises were more educated

and experienced before starting their business than owners of small businesses. They

further go on to report that those with the lowest level of education are found

predominantly in the smallest businesses and that the number of employees increases

with the level of education of the owner.

Holiday (1995) identified that there exist within the overall entrepreneur cohort, a

unique set of traditional entrepreneurs who are likely to form firms as single owners

and be poorly educated. McE owners seem to fulfil this criterion for traditional

entrepreneurs (Based on the findings of this research). As part of this research McE

owner’s educational level would be compared to their business profits to decipher

whether increased educational levels affects their overall business performance. If

the findings of this exercise reveal that, there is in affect a positive relationship

between education levels and business performance it could be consequentially

inferred that owners education levels is integral to McE success.

Other skill centric factors albeit vital are outwith the scope of this research and hence

have not been examined. However, this does not vitiate the importance of the skill

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centric issues outlined above. There is considerable scope for further research on

McE specific skill centric issues.

The following section of this chapter comprises of a brief description of generic

owner centric factors vital for McE success.

4.6. Generic/Miscellaneous factors

Studies on generic factors in the small business literature are extremely scarce. As

part of this research two vital generic factors were identified namely training and use

of external consultants. Training is related to skill centric issues whereas the use of

external consultants is often regarded as a business centric issue. Both these factors

directly influence McE owner’s decision-making ability and his behavioural traits.

A report published by the European Foundation (2001) revealed that owners and

managers of micro firms need access to more and better information about training,

contracting, health and safety aspects, and social protection schemes. This highlights

the importance of the aforementioned generic issues as McE owners require requisite

training and external help to improve on their current knowledge on issues like

contracting, health and safety aspects, social protection schemes etc. As part of this

research, McE owner’s inclination to training and employing external consultants

would be compared to their business profit levels to decipher whether these factors

affect overall business performance. If the findings of this exercise reveal that, there

is in affect a positive relationship between the above-mentioned factors and business

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performance it could be consequentially inferred that training, and employing

external consultants is integral to McE success.

There are numerous other generic factors, which albeit vital are outwith the scope of

this research and hence have not been examined.

The following section of this chapter comprises of thorough review of literature

aimed at deciphering the key business centric factors that are essential for McE

success

4.7. Business centric factors

A preliminary appraisal of the literature revealed a number of vital business centric

factors prominent among which were issues related to internal finance (Reid, 1996;

Tucker and Lean, 2003), bank interest rates (Reid, 1995; Storey and Wynarczyk,

1996) and acquisition of new technology/information technology (Hoffman et al.,

1998; Smith, 1999). Above-mentioned factors even though vital were found lower in

the order of primacy in the list of business centric factors identified as part of this

research. The two prominent factors, which were found to have a direct relationship

with McE business performance, were “intention to grow” and “strategy”. Intention

to grow has been identified earlier in the chapter as a behaviour centric issue but has

been considered as a business centric factor as it manifests itself as a business centric

decision vis-à-vis say pure behaviour centric issues like the propensity to take risk.

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In the context of this research, importance was given to those business centric

factors, which could be directly influenced by the business owner. Issues like

finance, bank interest rate, and information technology albeit vital for McE’s were

found to be outwith the sphere of direct owner control. It could be argued that the

owner has complete control over his business finances but finding of this research

revealed that financial situation within McE’s were contingent on exogenous factors

like payment delay, competition, availability of work etc and were thus outwith the

control of the McE owner. This research is aimed at deciphering McE related factors,

which could be altered, by the direct action of the owner and hence factors outwith

the control of the owner have been negated from further deliberations.

The prominent business centric factors identified above i.e., strategy and growth are

interrelated, as business growth is usually a direct result of the strategic decision

taken by the business owner. The following section of this chapter comprises of a

thorough review of literature related to business strategy. It is to be further noted that

literature reviewed has been sourced from the area of small business research given

the extreme paucity of previous research on strategy in McE’s.

4.7.1. Strategy

The term strategy finds its etymological roots in the Greek term strategos which

comes from the ancient Greek translation of ‘commander in chief’ or ‘chief

magistrate’ which is a compound of stratos (an army spreading on the ground) and

agein (to lead) (Cummings, 2002). Based on the above definition it can be implied

that strategy has to do with leadership skill and organisational behaviour. Houlden

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(1993) notes that strategy, “…is about choosing - where and how to compete, how to

organise, who to appoint and how to allocate resources for the greatest overall

success”. Whittington (1993) attempts to capture and explain the definitions of

strategy by his four generic approaches to strategy, that is plotted on a scale of

outcomes verses processes. He notes that, “…the Classical approach is the oldest

and most influential and relies on traditional and rational planning methods. The

Evolutionary approach in contrast is less rational even fallible, and substitutes the

discipline of the market for the law of the jungle. A Processualists approach is a

pragmatic approach to imperfect markets and the fallible nature of organisations.

Systemic approach is relativistic, regarding the ends and means of strategy as

permanently linked to the cultures and powers of the local social systems in which it

takes place”. He further suggests that the four approaches differ fundamentally

along two dimensions; the outcome verses the process by which it was made. The

definition of strategy is therefore dependent on whether it is deliberate or emergent

or intended to maximise profit or maximise other benefits such as risk reduction.

Strategy is often confused with tactic as they have very similar definitions but what

sets the two apart is that strategy is long term whereas tactics are short term. The

application of a tactic also differs from the application of a strategy in an

organisation as tactic is generally locally employed. What is perceived to be a

strategy by a manager may also be perceived as a tactic by the owner of the business

(Rumelt, 1979 p197). Ansoff (1968), attempts tries to resolve this confusion by, “…

the integration and interrelation of the three decision areas i.e., operational,

tactical, and strategic”.

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Strategy is often also equated to operational effectiveness but Porter (1996) suggest

that operational effectiveness is no longer a strategy instead strategy has to do with

‘unique activeness’ and doing things ‘differently’ to others.

Ansoff (1968) equates strategy to strategic planning. He notes that, “…strategic

planning involves preparation of objectives formulated to move a firm from its

current position to a future desired position in the market thus reducing the

performance gap in terms of market share in relation to competition”. Contrary to

this Mintzberg (1995) was of the view that, “…there is a common misconception

that strategy is a plan and a pattern of behaviour that is aligned to that plan; he

further goes on to suggest that this definition is a fallacy as a company’s pattern of

behaviour rarely follows their plan”.

Research in the area of strategic planning in small firms is severely restricted

(Schwenk and Shrader, 1993). Strategic planning as an exercise is often overlooked

by owners of small businesses as it is know to be an expensive process involving

external consultants (Robinson and Pearce, 1984; Schwenk and Shrader, 1993). This

assertion is supported by Gray (1997) findings; he observed in his research on

managing entrepreneurial growth that small firms which tend to be independent

single owner owned firms tend to be averse to strategy formation exercise, as they

tend to see any external advice as a question posed to their authority and knowledge.

This aversion could also be due to what Gupta (1998) identifies as an aversion of

small business owners towards investments, which show no direct results. He notes

that, “…small firms are usually quite concerned with monthly cash flow and cannot

afford to invest in systems that do not quickly contribute to the profitability of the

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organisation. Not only is money unavailable, the people needed to develop or

operate the new control techniques either do not exist or are too busy with their

daily tasks”. This aversion towards strategic planning even though justifiable does

rob small business of an important tool which they could use to survive in the highly

competitive business environment which most small firms find themselves in.

Drobny (1983) corroborates the above assertion and suggests that in order to

improve the internal dynamics of the firm, the alignment of the organization

according to the strategy devised to generate opportunities and meet the challenges,

which might exist in the external environment, is quintessential. He further goes on

to advocate that the behaviour of the management team, which in case of McE’s

might be limited to a single person, namely the owner of the McE, should be aligned

behind the strategy and is not is not independent of the organization. This is also

supported by Hayes (1985) who suggests that strategic planning is not a panacea for

all problems that businesses encounter however, it does provide small business

owners and managers with an enabling tool that they could use to steer businesses

out of trouble and for achieving growth.

Research on importance of strategy within small businesses in the UK construction

industry is extremely scarce. There have been few prominent studies carried out by

the likes of Edum-Fotwe (1995) and Ssegawa (2003) aimed at deciphering the role

strategy formulation in the larger construction firms. Edum-Fotwe (1995)

demonstrated that, although the construction industry operated in a very complex

environment with high levels of turbulence and competition whereby very few

construction contractors adopt formal processes in the formulation of long-term

strategies, strategy formulation is a way by which barriers/hurdles could be cleared.

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Ssegawa (2003) was of the view that formulating appropriate strategies increases the

chances of winning contracts.

As part of this research, McE owner’s inclination to strategic planning would be

compared to their business profits to decipher whether strategic planning affects their

business performance. If the findings of this exercise reveal that, there is in affect a

positive relationship between strategic planning and business performance it could

be consequentially inferred that strategic planning is integral to McE success. The

following section reviews literature related to business growth.

4.7.2. Business growth

As identified earlier in this chapter business growth can be simultaneously

categorised within both behaviour and business centric cohorts. This is due to that

fact that business growth is multidimensional in scope and character (Scase and

Gofee, 1989; Morrison et al., 2003). Growth generally occurs on the convergence of

owner intentions, and competencies, internal organizational factors, region specific

resources and infrastructure, and external relationships and network configurations

(;Storey, 1994; Glancey, 1998; Mitra and Matlay, 2000; Morrison et al., 2003).

Numerous theories have been propounded to explain the phenomenon of growth

(Evans, 1975; O’Farrell & Hitchens, 1988). O’Farrell & Hitchens (1988) in their

review of alternative conceptual frameworks for explaining small business growth,

classify available business growth theories into three main groups:

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1. Static Equilibrium Theories: Based on theories derived from the field of

industrial economics that tend to be preoccupied with attainment of economies of

scale and minimisation of long-run unit costs and is insufficiently concerned with

the dynamics of growth.

2. Stochastic models of firm growth: Based on theories developed mainly in the

field of economics. There are many stochastic models of firm growth, but

Gibrat’s law of proportionate effect (1931) stands out, which proposes that

business growth rates are independent of enterprise size.

3. Theories of economics: According to which McE growth is viewed as a series of

phases or stages of development through which the business may pass in an

enterprise life cycle.

These theories fail to provide a simplistic view of business growth. This has also

been identified by McMahon and Stranger (1995) who note that, “…simplicity and

parsimony are qualities which seem to be overlooked in the zeal to provide as

comprehensive and nuance-replete an explanation as possible of growth

phenomena”.

Business growth albeit considered vital by researchers (Marsden, 1990) has been

often overlooked by micro-enterprises and small firms (Kazumi, 1995). This has also

been identified by Grosh and Somolekae (1996) who claim that most enterprises that

begin on a micro scale remain that way indefinitely and only a few of the medium-

scale enterprises begin as micro-enterprises. They further suggest that there is little

mobility from the category of smallest firms to that of only slightly larger firms;

there is a paucity of graduation even among relatively successful micro businesses

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(Grosh and Somolekae, 1996). Similar findings were also revealed in studies

conducted by Dunne and Hughes (1994), and Hart and McGuinness (2003).

A number of reasons have been linked to this reluctance of small businesses to grow.

Gray (1997) was of the view that reluctance to growth in small businesses has to do

with the perception of the owners whose main reason to start-up a business has to do

with independence, they enjoy working for themselves and are often scared that any

sort of growth would be akin to giving up their independence (Gray, 1997). He

further also claimed that growth averseness is more a problem in a micro-enterprise

as against in a medium sized enterprise. Grosh and Somolekae (1996) suggest that

the reason some enterprises might be unable to graduate to larger scale might relate

to market and technology; diseconomies of scale might exist in certain market

niches. Morrison et al. (2003) suggest that business growth is contingent on small

business owners intentions and abilities; he further identifies the intention and ability

related issues that inhibit small business growth which have been listed below in

Table 4.3.

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Table 4.3. Business owners intention and ability centric factors which inhibit business growth

(Morrison et al., 2003)

Inhibiting Factors

Intention Ability
• Lack of ambition and • Constrained

vision managerial

• Anti-business competencies

“hobbyist” approach • Narrow skill base

• Quality of life • Physical

protectionism expansion/production

limitations
• Mature position in

life-cycle • Organisational

structures results in

lack of time and

resources

From the above it can be inferred that the ability to grow is linked to the owner’s

volition, abilities and intentions, and conducive circumstances. Penrose (1995)

propounded conditions for business growth (Figure 4.7), which are in line with the

above assertion; he suggested that growth is contingent on:

1) Prevailing Environment

2) Skill Base of the Enterprise

3) Perceptions of the Entrepreneur

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CORE CONDITIONS
PERCEPTION
COMPETENCY FOR OF THE
AND SKILL
BUSINESS OWNER
BASE
GROWTH

Figure 4.7. Conditions for business growth (Penrose, 1995)

The influence that the prevailing environment has on business growth is pre-

eminent. Penrose (1995) suggests that growth is controlled by the external

environment rather than by quality of resources and ingenuity of entrepreneur. Wang

and Yang (2000) were of the view that having an awareness of both the general and

task environment is a pre-requisite for an enterprise to have a competitive advantage.

They further claimed that the external environment, which constitutes the macro-

economic developments, market conditions, access to resources etc, affects the

growth outcomes of the enterprise.

This reveals the prevalence of two distinct ‘realities’ namely general environment

and task environment; this line of thought is akin to the ontological assumptions

espoused in this research wherein McE’s are proposed to exist within four different

states of reality (see Chapter 6). The task environment is akin to the reality of the

McE and the general environment is akin to the realities of the project and the

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industry within which the reality of the McE exists. There also exits outwith the

reality of the industry, the reality of the external macro-environment within which

the industry operates. Based on the above premise it can be inferred that McE

owners need to be aware of the happenings within the realities of the McE, project,

industry, and to an extent the external macro-environment to have the required

competitive advantage to survive and grow. There is a scope for further research in

this field as previous research in this subject area is all but absent. Penrose (1995)

was of the view that environment is not a constant and cannot be predicted. It would

not be wrong to construe that McE’s are not adept enough to influence or control the

external environment but they can constantly observe the external environment for

threats and opportunities, and then take the requires measures to counter these threats

and make the best of the available opportunities.

As identified earlier business growth is contingent on the core competencies and

skill base of the business. Penrose (1995) suggests that the ability of the entrepreneur

to take advantage of what he sees in the environment is dependant on the types and

amounts of productive services existing in the firm and what it is accustomed to

operate (Penrose, 1995). Based on the above premise it can be construed that core

competencies of an business has to do with what services it specialises in and how

adept it is at doing it. These competencies should not be confused with managerial

competencies identified in the earlier sections of this chapter. There is a general lack

of information on the influence the core competency of a McE might exert on its

ability to achieve growth. Core competencies are internal factors under the control of

the owner and hence can be refined and enhanced to achieve growth.

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Skill base of an enterprise has to do with the people who are part of it (Penrose,

1995) i.e., people employed by the McE. Construction industry as a whole is plagued

by severe skills shortages (CIOB, 2007) which further permeates down to McE’s (as

identified by McE owners who participated in this research). Business growth

depends on its skill base; in situations were there is skill shortage the ability of a

business to achieve growth is greatly curtailed. The external environment defines

skill base and thus it would not be wrong to construe that this condition for growth is

outwith the control of a McE. McE’s are not adept at defining the state of their skill

base. Enhancing the skill base requires external intervention, which usually come in

the form of government, and industry led initiatives. This subject area has been

discussed in length in the following chapter, which deals with exogenous factors.

Growth is also contingent on the perceptions of the owner. Small business growth as

has been proposed does not represent a self-evident phenomenon nor is it a matter of

chance, but is a result of clear, positively motivated business intentions and actions

on part of the owner, driven by the belief that the owner manger can produce the

desired outcomes (Gray, 1997; Maki and Pukkinen, 2000; Morrison et al., 2003).

Based on the above premise it can be construed that owners perception are behaviour

centric factors aligned to their ambitions and intentions.

As has been identified earlier majority of the small business owners are generally

reluctant to pursue business growth (Kazumi, 1995). This reluctance is a volitional

issue and is derived from their fear of loosing control of their businesses (Gray,

1997). This highlights that small business owners are not usually ambitious and

motivated enough to pursue growth. Orser et al. (2000) suggests that business

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owners motives for growth are not homogeneous and reflect experiential and

situational differences. This further highlights that the owners perception on growth

centric issues might vary with time and experience. International Labour

Organisation (ILO) has devised a list of characteristics and traits required by small

business owners to pursue growth (1LO, 1998) which has been listed below in Table

4.4.

Table 4.4. Characteristics and traits required in an owner for enterprise growth (ILO, 1998)

Characteristics Traits
Self confidence Belief in ability, independence, optimism
Strong will
Persistence and perseverance, determination
power
Task/result
Achievement-oriented, hard work, initiative
oriented
Risk taker Risk assessment and judicious risk taking ability
Good communicator, responsive to suggestions, develops other
Leadership
people
Innovative, creative, flexible, resourceful, versatile,
Originality
knowledgeable
Future-
Foresight, vision, perceptiveness
orientated

As part of this research, McE owner’s inclination towards business growth will be

compared to their business profits to decipher whether it affects their overall

business performance. If the findings of this exercise reveal that, there is in effect a

positive relationship between the aforementioned factors, it could be consequentially

inferred that inclination towards business growth is integral to McE’s success.

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As part of this research set of small construction enterprise owners were asked to

identify the routes they adopted to achieve growth. Care was taken to include only

those small business owners who had started off as McE owners (started their own

McE and were not handed down the business). These growth routes range from short

term decisions (tactics) to long drawn out strategic decisions (strategies) which they

implemented over the course of time. Most small construction enterprises identified

a host of different growth routes and further professed that they had employed a

mixture of growth routes as against a single route. This does not vitiate the adoption

of a single route to achieve growth however, a mixture of growth routes could be the

ideal way forward. Aforementioned a number of growth route were identified

however, a few growth routes were reiterated by most respondents; these key growth

routes have been described below:

1) Innovation

2) Geographic Relocation

3) Geographic Expansion

4) Partnership

1. Innovation: (explained in the section on behavioural factors)

2. Geographic Relocation: Geographic relocation involves an enterprise shifting

location from its initial business base (see e.g., Peet, 1983; Denoble et al., 1990;

Brower et al., 2002). This is a common step, which enterprises take when they

see that the opportunities in their initial base have dried up; they shut shop and

move on to a different location where opportunities might exist. This is a popular

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route among small businesses in a variety of different industries like electronics

(Denoble et al.,1990), manufacturing (Peet, 1983) etc., but has not been widely

promulgated in the construction industry which might be due to the fact that

construction firms in any case do carry out activities over a wide geographical

area on a itinerant basis.

3. Geographic Expansion: Geographic expansion is a strategy that is utilized by

many small firms to achieve their growth objectives (Greening and Barringe,

1998). This approach involves expanding a firm's business from its original

location to one or more additional geographic sites, and is particularly well suited

for firms that cannot expand in their present location but believe that their

products or services may be appealing to consumers in other markets.

4. Partnering: It is a method of improving communication mechanisms and

technologies, responding to innovative construction projects and reducing

transaction costs resulting from uncertainty, competition, and information

asymmetry (European Construction Institute, 1997). Partnering has also been

advocated by Egan (1998) to improve the performance of the UK construction

industry. Mazzarol (2000) states that lack of resources experienced by most

small firms suggests that substantial benefits might be obtained through the

development of partnerships or alliances with other organisations likely to make

up any shortfalls. Dent (1990) suggested that strategic partnerships would be

essential for success in the future. Strategic partnerships enable small firms to

achieve greater levels of product innovation and can assist with expansion into

new market segments when faced with rapidly changing external environments

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(Maynard, 1996). Davey et al (2001) suggest that there are basically two types of

partnering which are adopted in the construction sector namely:

a) Project Partnering: Here parties come together for the duration of the project.

b) Strategic Partnering: Here parties develop a long-term relationship over a

series of projects for which contracts are usually negotiated.

These types of partnering are usually limited to the duration of construction

projects and are not related to partnering at the enterprise level, which involves

developing relationships over a sustained period of time to develop competitive

advantages for the participating enterprises. Some commonly adopted methods

of enterprise level partnering are:

• Value-adding Partnership (VAP): VAP's are cooperative relationships

between independent firms that operate at different points along the

production chain. Johnston and Lawrence (1991) states that VAP's have

proven to be, in many cases, as successful as vertically integrated firms, and

in some cases have been able to compete with vertically integrated firms.

Gulati (2000) has suggested the following advantages of adopting VAP:

- Creativity

- Focus/specialization allows building expertise

- High quality

- Low overhead and lean staff

- Increased market intelligence

- Short response time

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• Networking: Dent (1990) states that small enterprises need to develop

“networks” capable of delivering economies of scale and greater market

penetration were seen as important. Flexible, informal networks can be just

as beneficial as more formal ones (Malecki and Tootle, 1996). In recent

years, small manufacturing enterprises have joined or formed cooperative

inter-organizational relationships, such as networks, to access resources for

organizational growths without the constraints of vertical integration

(Human, 1996). Recent publications describe how, “…networks help small

companies think and act big” (Selz, 1992).

• Virtual integration: These are supply chains made up of loose affiliations of

companies organized as a supply network, where physical assets are replaced

by information (Hammant, 2000). This kind of integration works flawlessly

only when information flows seamlessly but there remain barriers to this.

Above-mentioned growth routes might be used in an isolated fashion or as a

combination. However, mere adoption of these routes does not guarantee growth;

prevalence of the relevant conditions for growth is vital for achieving optimum

levels of business growth.

4.8. Summary

This chapter highlighted the fallacy of considering all small business owners as

entrepreneurs which led to the identification of new owner typologies i.e.,

craftmanagers, craftpreneurs, managerial entrepreneurs and managerial

craftpreneurs. As part of this research, McE owners were assessed for specific

characteristics in attempt to clearly decipher which owner typology they belong to.

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The preceding sections of this chapter also provided a review of literature pertaining

to endogenous factors that are presumed to influence McE’s performance. The

endogenous factors were segregated into owner and business centric factors. Owner

centric factors were further segregated into behaviour, skill, and generic sub-factors.

Two key behaviour centric sub-factors (related to owners motivations and traits

which are presumed to influence business performance) were identified namely:

owners inclination to innovate and their propensity to take risks. It was also

identified that business success is also contingent on owners motivation to start the

business. The skill centric factor presumed to have a significant on McE

performance was McE owners education level. Two key generic factors were

identified namely: McE owners inclination to employ external consultants and attend

training. McE’s success is contingent on the prevalence of the correct assortment of

both endogenous and exogenous factors. However, this does not vitiate the benefit

McE’s might garner by imbibing and practising even few of the factors identified in

this chapter. The business centric factors that were presumed to influence McE

performance were business strategy and growth. Growth was also identified as a

behaviour centric factors as it is assumed that growth is contingent on McE owners

intention to grow. As part of this research, McE owners were asked to identify their

education level, inclinations towards the above-mentioned factors and motivations to

decipher whether McE success is contingent on the presumed endogenous factors.

The following chapter comprises of review of literature related to exogenous factors

vital to McE success.

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5. Exogenous factors

5.1. Introduction

The preceding chapters outlined the various endogenous factors, which might affect

McE performance. As highlighted in the preceding chapters, these endogenous

factors might be influenced by the exogenous factors, which envelop them. Studies

aimed at deciphering the influence of exogenous factors on small businesses identify

a number of factors; a prominent few have been enumerated below (see e.g.,

Peterson, 1983; Everett and Watson, 1998; Bridge et al., 2003):

• Cultural, political and economic conditions

• Demand and supply factors and equilibrium rates

• Government policies

These exogenous factors albeit, outwith the control of the McE owners (Penrose,

1995) could be monitored to adapt to the changes in the external environment. The

McE owner needs to change, refine, and enhance the person and business centric

competencies to survive in an external environment, which is in a constant state of

flux.

As identified in the preceding chapters the exogenous factors which have been

considered in this research, are limited to those in relative immediacy to the McE.

These factors are broadly grouped into factors that are spawned in either the project

or the industry settings. These two setting form the two exogenous ‘realities’

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(ontological assumptions adopted in the research- see Chapter 6) which surround the

McE and form the McE’s immediate task environment. Task environment as defined

by Dill (1958) are parts of the environment relevant for goal setting. McE’s find

themselves enveloped and directly influenced by the happenings in these task

environments. This is not to say that other exogenous settings will not affect McE’s.

The following exogenous factors were presumed to influence McE’s:

1. Absence of written contract

2. Collusion between main and subcontractors against McE’s

3. Conflicts

4. Information asymmetry and distortion

5. Payment delay

Apart from these factors within the project and industry settings, factors outwith in

the external macro environment might also influence McE’s prominent among which

might be changes in tax regulations specific to self-employed workers in the

construction industry.

The following section of this chapter comprises a review of literature related to the

aforementioned exogenous factors. It is to be noted that literature on the

aforementioned factors are extremely scarce which curtails the profundity of the

deliberations.

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5.2. Absence of written contract

Section 107, of the Housing Grants, Construction and Regeneration Act (1996) does

not recognise unwritten verbal contracts; it stipulates that a construction, “…

contract has to be in writing” and of a minimum duration of 45 days. Based on the

above statute the contractual relationship between the main contractor or

subcontractor v. McE would not be categorised as a construction contract as

majority of the work carried out by McE’s on construction projects is usually

undertaken on the basis of a verbal notice or order and the work they generally

undertake is a of a temporal nature less than 45 days in duration. This would put

them at a disadvantage on construction projects with respect to their right to refer a

dispute for adjudication as Section 108, of the Housing Grants, Construction and

Regeneration Act (1996) stipulates that only parties under construction contracts

have the right to do so. This might also restrict McE’s from claiming for damages in

case of injury on site and impinge on their implied rights. This would call for a

proper written contractual agreement between McE’s and their employers clearly

setting out the rights and duties of both the parties. Clegg (1992) had a contrary

view on contracts and claimed that contracts cause conflicts.

It could be conversely argued that absence of written contracts would stipulate that

McE’s are mere employs and hence Employment Act (2002) would be applied to

them. Employment Act (2002) has set guidelines for who is an employ; McE’s of

self-employed status working on site as a labourer might qualify as employees but

those who use their own plant and machinery would not. This contractual situation

can be identified as a legal grey area and calls for further legal centric research on

this area.

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As part of this research, McE’s owner would be asked to identify whether the

absence of a written contract has impinged on their implied rights and further

hindered their performance on projects.

5.3. Collusion

Collusion is defined as a secret agreement or co-operation between two or more

people who are trying to deceive (Oxford Dictionary, 2002). In economic studies, the

term collusion is used to define situation when rival companies cooperate for their

mutual benefit (Tirole, 1992). Collusion usually manifests itself in two forms namely

cartels and tacit collusion (Vives, 1999). Cartels are explicit forms of collusions

whereas tacit collusion refers to cases of unspoken co-operation between firms to

achieve a common goal (Tirole, 1988). Collusion is illegal in UK as per the statutes

of The Competition Act 1998 (Furse, 1999).

In the construction industry collusion usually manifests itself in form of collusive

tendering (Fraser and Skitmore, 2000; Doree, 2004) and price fixing (Lowe, 1987).

Preliminary project level analysis revealed that in certain instances the main

contractor and the subcontractor seemed to conspire against the McE to exclude

them from the decision making process on construction projects.

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Figure 5.1. Collusion in construction projects

CLOSED LOOP
SYSTEM

COLLUSION
MAIN CONTRACTOR SUB
McE's
CONTRACTOR
IMPREGNABLE NEXUS BETWEEN
MAIN AND SUB CONTRACTORS

McE's ARE LEFT

OUT OF THE
LOOP

Figure 5.1 is a pictographic representation of the collusive arrangement that might

exist on construction projects. In construction projects main contractors and

subcontractors work together in a closed loop system (closed system preventing

external intervention) forming an impregnable nexus while the McE’s work on the

fringes. This nexus between main contractors and subcontractors might take the form

of a tacit collusive agreement, which they could use to exploit the McE’s. This type

of collusion could lead to restriction of McE rights and payment delay. It may also

influence owner centric factors like McE owners perceptions, intention, motivations,

and behaviour. Previous research on main contractor and subcontractor collusion

against McE’s is all but absent. There is considerable scope for further research in

this area as this phenomenon might adversely affects McE’s both at a personal level

as well as at the business level

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As part of this research ethnographic study would be carried out to decipher whether

collusion of the sort mentioned above takes place on construction projects. In-depth

analysis of the research findings associated with collusion derived from the

aforementioned exercise have been elaborated over in the findings chapter.

5.4. Conflicts

Conflict is defined as a serious disagreement or argument or an incompatibility

between opinions and principles (Oxford Dictionary, 2002). There is a general

disagreement within construction literature over the analogous use of the terms

conflict and dispute. Moore (1989) suggests that these terms are analogous whereas

Fenn et al. (1997) suggest that these are two distinct notions. They further note that

conflict, “…exist whenever there is an incompatibility of interest, and therefore is

pandemic. Conflict can be managed, possibly to the extent of preventing a dispute

resulting from the conflict”. There assertion is that dispute is a result of a conflict. In

the context of this research, the terms conflict and dispute are used in an analogous

manner given that the simplistic definition for both these terms is identical.

The UK construction industry is known for its adversarial nature (Latham, 1994;

Egan, 1998). According to ACTIVE (1996, p.7), “…the confrontational culture

which is endemic in the [construction] sector has resulted in the development of

inefficient business processes, which feed through, as overheads, to total project

costs”. Both Latham (1994) and Egan (1998) report reiterated that the fragmented

structure of the UK construction industry was partially due to the excessively high

number of disputes between parties. Conflicts in the construction industry happen at

various levels; some of these have been enumerated below:

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Client v. Main contractor;

Client v. Supplier;

Client v. Consultant;

Main contractor v. Subcontractor;

Main contractor v. Supplier;

Main contractor v. Consultant;

Subcontractor v. Supplier;

Subcontractor v. Consultant etc.

A rather high proportion of these conflicts happen between client and main

contractor (Egan, 1998) and main contractor and subcontractor (Latham, 1994;

Hinze and Tracey, 1994). A number of reasons have been cited for this high

propensity for conflicts in the construction industry. Fenn et al. (2003) as part of a

literature review exercise they carried out summarised the following sources of

construction disputes (Table 5.1):

Table 5.1. Sources of Construction Disputes (Fenn et al., 2003)

Research Sources of disputes

Bristow and Vasilopoulos (1995) Six areas: unrealistic expectations;

contract documents; communications;

lack of team spirit; and

changes
Conlin et al. (1996) Six areas: payment; performance;

delay; negligence; quality; and

administration
Diekmann et al. (1994 Three areas: people; process; and

product
Heath et al. (1994) Seven areas: contract terms;

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payment; variations; time; nomination;

renomination; and information

Hewit (1991) Six areas: change of scope; change

conditions; delay; disruption;

acceleration; and termination

Kumaraswamy (1996) Two areas: root causes; and

proximate causes
Rhys Jones (1994) 10 areas: management; culture;

communications; design; economics;

tendering pressures; law;

unrealistic expectations; contracts;

and workmanship
Semple et al. (1994) Four areas: acceleration; access;

weather; and changes

Sykes (1996) Two areas: misunderstandings; and

unpredictability

Preliminary project level analysis revealed that McE’s are plagued by conflicts at the

McE v. Subcontractor level. Previous research on this sort of conflict is lacking.

Given that, interactions between McE’s and subcontractors are similar to those

between main contractors and subcontractors what is construed for them could be

applied to deliberate on the interactions between McE and subcontractors.

Dainty et al. (2001) suggest that the subordinate position of the subcontractor, within

the hierarchy of construction process, makes inter-organisational conflict inevitable.

This was also corroborated by Lehtonen (1998) and Miller et al. (2001) who were of

the view that small subcontracting firms are perceived as subordinates in the decision

making process. Greed (1997) was of the view that the main source of conflicts at

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this level is the pressure continually applied to those at the next level down in the

process hierarchy.

Based on the above assertion it can be argued McE’s v. subcontractor conflicts might

be caused due to the pressure exerted by subcontractors on McE’s who usually work

as subordinates to them. These conflicts might manifest at both an interpersonal level

and at an organisational level. Given that McE’s are intrinsically connected to their

owners, these conflicts might indirectly affect McE owners psyche. Many

psychologists have propounded that conflicts might in fact have a regressive effect

on human psyche (Altschule, 1977; Gilbert, 1989). Based on the above assertion it

could be construed that conflicts might influence McE owners perceptions,

intentions, motivations, and behaviour. There is considerable scope for further

research in this area as the regressive developments in McE owners psyche could be

linked to their relative underperformance and high failure rate.

Conflicts might also affect McE’s at a business level. It is well known that conflicts

cause huge financial and business level losses to those in the higher echelons of the

construction supply chains (Egan, 1998); the same sort of losses might also affect

McE’s. As part of the ethnographic research carried out for this research, time was

spent on construction sites to decipher the nature and source of conflicts that McE’s

are usually involved in. In-depth analysis of the research findings associated with

conflict derived from the aforementioned exercise have been elaborated over in the

findings chapter.

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5.5. Information asymmetry and distortion

MAIN
CONTRACTOR INFORMATION
INFORMATION
SENT: A RETREIVED: B

INFORMATION INFORMATION
RETREIVED: A SENT: B
SUB-
CONTRACTOR
INFORMATION INFORMATION
SENT: A RETREIVED: B

INFORMATION McE INFORMATION

RETREIVED: A SENT: B

NO NOISE ON SIGNAL
NO DISTORTION

Figure 5.2. Ideal information flow

Construction industry is renowned for the fragmented structure (Egan, 1998); this

fragmented structure is known to adversely affect the process of information

exchange and distribution across the project supply chain (Higgin and Jessop, 1963;

Ndekugri and McCaffer, 1988). This process of information exchange and

distribution is collectively called information flow (Higgin and Jessop, 1963).

Problems in information flow manifest itself in the form of information overload

(Farhoomand and Drury, 2002) and information asymmetry (Otjacques et al., 2007).

Information overload occurs when the user is given more information than they can

absorb (Farhoomand and Drury, 2002) and information asymmetry arises when all

the people dealing with a given problem have different levels of information about

the same object (Pindyck and Rubinfeld, 2000; Otjacques et al., 2007).

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Preliminary analysis of construction projects revealed that McE’s on construction

projects might be plagued by information distortion. Information distortion is a form

of information asymmetry caused due to a loss of information integrity during the

communication (Otjacques et al., 2007). This information distortion could lead to

delay and poor quality of work and further led to conflicts. This is corroborated by

Black et al. (2000) who suggested that decisions based on incomplete information is

a key source of conflicts on construction projects.

In an ideal scenario (Figure 5.2) the information emanating from the main contractor

should reach the McE without any sort of distortion. In cases of information

asymmetry, information that emanates from the main contractor might reach the

McE in a severely distorted form. On first impression, this distortion might not come

across an unscrupulous act instead can be attributed to the multiple points of

interactions involved. Information flow from the main contractor to the McE

happens in a disjointed manner as it first travels from main contractor to

subcontractor and then from subcontractor to the McE. Conversely, it could be

viewed as a covert act on part of the main contractor or subcontractor as they might

be withholding information from McE’s to maintain leverage over them. This

distortion could also be due to the tacit collusion between main contractor and

subcontractor identified earlier in this chapter as they might be jointly withholding

information from McE’s to maintain a degree of primacy on the project.

Aforementioned this information distortion might impede McE performance on site,

which might also McE performance.

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Delay and bad quality of work done by McE’s due to information distortion could

lead to McE’s incurring significant penalisation, which could further affect their

personal reputation and affect their overall business profitability. The veracity of this

assertion was not proved in this research owing to the limited scope of this research.

This research was limited to identifying the underlying project scenarios that might

affect McE performance, which underlines the scope for further research in this area.

Previous research on information asymmetry of the type identified above is all but

absent albeit many studies have been carried out to analyse information flows within

construction project (Higgin and Jessop, 1963; Ndekugri and McCaffer, 1988).

In-depth analysis of the research findings associated with information distortion has

been elaborated over in the findings chapter. In an ideal scenario, information

distortion should be avoided as project success depends on collaboration between

participating parties where they would integrate at all levels and freely share

information both formally and informally (Gattorna and Walters, 1996).

5.6. Payment delay

Small business success is contingent on maintaining a sustained level of cash flow

(Deakin, 1972; Welsch and White, 1981; Cressy, 1996; Watson et al., 1998). Cash

flow is directly linked with income generated from the business (Welsch and White,

1981). In the case of a McE, income is equivalent to the payment received for the

work they do. Higher income levels are a key motivation factor for people who start

business (Gray, 1990). Based on the above premise it can be construed that changes

in income levels caused due to payment delays could have a detrimental affect on

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McE owner’s business performance and their personal motivation to stay in

business.

The UK consruction industry is known for disputes, which arise from delayed

payments and payment retention (Heath et al., 1994; Conlin et al., 1996; Fenn et al.,

1997). Majority of these payment related disputes, which come to public attentions

involve large construction companies but a number of payment related disputes

involving McE’s might remain unknown given their relatively small size and

position in the construction industry.

The Housing Grants Act (1996) prohibits retention of payments by a contractor to a

subcontractor on the grounds that they had not been paid by the client. However, this

might not apply to McE’s as their relationship with their employees might not

constitute a construction contract. Hence, in case of payment delays McE’s might

have to resort to the protection offered under the aegis of the Employment Act

(2002). As identified in the preceding section McE contractual rights is a legal grey

area and hence it would not be possible to clearly define the recourse which McE’s

might have to expedite delayed and retained payments.

As identified earlier McE cash flow can be severely affected by payment delays,

which could in effect lead to McE failure. Previous research on this assumed links

between payment delay and business survival is all but absent. As part of this

research McE, owners would be asked to identify prevalence of payment delays and

also whether payment delays affect their overall business performance.

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5.7. Changes in tax regulations

Recent changes in tax regulations have adversely affected McE’s in the UK

construction industry especially those with a self-employed status (Winch, 1997;

Bridge, 1998; Briscoe et al., 2000). It is to be noted that there exists a conundrum

surrounding the inclusion of self-employed individuals within the McE cohort. This

might be due to the different tax regulations in place for those individuals in self-

employment and those who own small partnership or limited companies. It can also

be attributed to the fact that most self-employed individuals are not VAT registered

(DTI, 2006). Self-employed individuals satisfy all the requirements for McE’s set

out by European Commission (OJEU, 2003); hence, in the context of this research

self-employed individuals would be considered as McE’s.

Until 1999, most self-employed individuals either received a “714 certificate” or

came under the “SC60 scheme”. Those with a 714 certificate were exempted them

from tax deductions at point of wage or sum payment; instead their annual

assessment tax was paid on profits agreed after the deduction of a generous level of

expenses (Briscoe et al., 2000). For those who came under the SC60 scheme income

tax at the base rate was deducted from any payment for labour and a final appraisal

of tax owing or refundable was made at the end of the tax year (Briscoe et al.,

2000). 714-certification scheme led to a great spurt in self-employment (Harvey,

1995) until 1999 when a new Construction Industry Scheme (CIS) was initiated.

This new legislation was brought in to curb the large amounts of revenue loss,

which the government was suffering due to individuals who had bogus self-

employed status (Winch, 1998). Under the CIS 1999, regulations 714 certificates

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became invalid and the conditions for obtaining new tax certificates to enable

subcontractors to receive gross payments became much more stringent (Briscoe et

al., 2000). To qualify for CIS an individual had to demonstrate an annual net

turnover of over £30,000, operate a business, which maintains proper accounts from

recognised premises and must have an up-to-date tax record for the preceding three

years (HMRC, 2006). Those who did not qualify for CIS certification were forced

into SC60 where basic rate taxes were deducted at source of payment (Briscoe et al.,

2000). It was anticipated that workers who were in possession of 714 certificates

and some partnerships and smaller limited companies might not meet the threshold

for the CIS certificate given the stringent requirement for CIS certifications (see

Bridge, 1998).

Briscoe et al. (2000) were of the view that these regulations would prompt some

self-employed to shift to direct employment and others to move to the black

economy and work for cash in hand. They further suggested that option of forming a

small construction company would not be viable under the new CIS regime. The

aforementioned assertions made by Briscoe et al. (2000) concerning the affect that

the new tax changes would have on self-employed were merely speculative in

nature and were not supported by any statistical evidence. They carried out there

research in 2000 a year after the initiation of the CIS scheme and hence were in no

position to chart the self-employment rates for the period following 1999. An

assessment of latest self-employment statistics was carried out as part of this

research to verify Briscoe et al. (2000) speculation suggesting a drop in self-

employment rates following CIS 1999.

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Following the 1999, Construction Industry Scheme the government initiated a New

Construction Industry Scheme (New CIS) in April 2007 (HMRC, 2007). This

scheme aims:

1. To reduce to reduce the regulatory burden of the Scheme on construction

businesses

2. To improve the level of compliance by construction businesses with their tax

obligations

3. To help construction businesses to get the employment status of their workers

right

This scheme has come into effect recently and hence related studies are all but

absent. As part of this research, McE owners need to be asked about their views on

the effect that regulatory (tax related) changes have had on their business interests.

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CONFLICT

INFORMATION
COLLUSION ASYMMETRY/
DISTORTION

EXOGENOUS
factors
which might
affect McE’s
ABSENCE
OF PAYMENT
WRITTEN DELAY
CONTRACT

CHANGES
IN TAX
REGULATIONS

Figure 5.3. Exogenous factors, which might affect McE’s

Figure 5.3 highlights a few of the exogenous factors that have been described in the

preceding sections of this chapter. As mentioned before these factors were chosen

based on their relative immediacy to McE’s. This is to not to say that other factors

would not affect McE’s. McE’s are assumed to be at the bottom end of the

construction industry hierarchy and hence it would not be wrong to construe that

McE’s might be most affected by exogenous factor as against a small or medium

sized construction firm.

5.8. Summary

The preceding sections of this chapter provided a review of literature pertaining to

exogenous factors which have been presumed to affect McE’s. Five of the

exogenous factors that were identified i.e., absence of written contract, collusion,

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conflict, information asymmetry and payment delay were scenarios which had direct

McE involvement and though outwith the control of the McE owner could be

influenced by those in the higher echelons on a construction project or industry.

However the sixth factors i.e., changes in tax regulations though presumed to

significantly impact McE fortunes was completely outwith the sphere of McE

involvement and would require active government intervention for its restitution. As

part of this research, time was spent on construction projects to decipher whether the

above-mentioned factors had as significant an impact on McE performance as was

presumed.

The following chapter comprises of extensive review of research methodologies

employed in this research.

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6. Research methodology

6.1. Introduction

The research methodology incorporated within any research project is of vital

importance in guiding the direction and determining the quality of the research

conducted. Methodology is concerned with the logic of scientific inquiry, in particular

with investigating the potentialities and limitations of particular techniques or

procedures (Grix, 2002). Methodology is often confused with methods; the latter is the

techniques of procedures used to collate and analyse data (Blaikie, 2000).

Owing to the complex nature of the environment in question, an appropriate research

methodology is essential for ensuring the validity and representative nature of the

environment in question. The preceding chapters highlighted the status quo of McE’s in

the industry and shed light on various issues, which affect McE and are influenced by

them. As mentioned before the paucity of McE research resulted in an unavoidable

aberration of adopting generalised knowledge related to micro and small enterprises

from various sources and related to different industries. This use of generalised

knowledge even though contrary to the central ethos of the research does provide one

with a useful platform to further develop on the central premise of this research. The

core research exercise, which follows on from the review of literature, avoids this

generalisation where possible. This chapter sets out the research methodology, which

was implemented for this core research exercise.

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6.2. Ethos of the research philosophy

This research aims to decipher factors which preclude the development of McE’s. In

order to achieve this objective a method of understanding the interactions between the

McE’s and the external macro-environment must be developed. There is a general

conundrum with respect to how one delineates the research methodology one employs.

The philosophical and theoretical lenses, which encapsulate research, are varied and

range from broad perspectives, such as epistemological and ontological assumptions, to

ideological stances, such as post modernism and critical perspectives, to more narrowly

defined theories (Flinders and Mills, 1993). There is a hierarchy in the delineation of

research methodologies, which is best, described in a figurative manner as shown in

Figure 6.1.

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Figure 6.1. Hierarchical model for research methodology

Figure 6.1 highlights the hierarchical research methodology which has been adopted for

this research. The presumed model is akin to an onion ring with overlapping concentric

rings with the assumptions adopted at the periphery and the actual method employed at

the core. The assumptions that are adopted form the basis for the ideologies, approaches

and methods employed in any research (Burns, 2000). The following section of this

chapter elaborates on the assumptions adopted for this research

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6.3 Assumptions

The cornerstone of every research is a ‘paradigm’. This paradigm is based on a set of

assumptions, which guide the researcher in his research exercise. Creswell (1997)

suggests that these, “…assumptions are related to the nature of reality, the relationship

of the researcher to that being researched, the roles of values in a research and the

process of research”. Guba and Lincoln (1988) further enumerate and elaborate on

these philosophical assumptions, which are depicted in Table 6.1.

Table 6.1. Types of philosophical assumptions (Guba and Lincoln, 1988)

Implication for practice

Assumption Question Characteristics
(examples)
Reality is
Researcher uses quotes and themes
subjective and
What is the nature in words of participants and
Ontological multiple, as seen
of reality? provides evidence of different
by participants in
perspectives
the research
What is the Researcher

relationship attempts to lessen Researcher collaborates, spends time

between the distance between in field with participants and

Epistemological
researcher and himself or herself becomes an “insider”

that being and that being

researched? researched
Researcher
Researcher openly discusses values
acknowledges that
What is the role that shape the narrative and includes
Axiological research is value
of values? own interpretation in conjunction
laden and that
with interpretation of participants
biases are present

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Researcher writes

in a literary,

informal style Researches uses an engaging style of

What is the
using the personal narrative, may use first-person
Rhetorical language of
voice and uses pronoun, and employs the language
research
qualitative words of qualitative research

and limited

definitions
Researcher uses Researcher works with particulars

inductive logic, (details) before generalisations,

What is the
studies the topic describes in detail the context of the
Methodological process of
within its context research, and continually revises
research
and uses an questions from experiences in the

emerging design field

Most research exercises tend to focus on all the above-mentioned assumptions but given

the nature and objectives of this research, the focus on the axiological and rhetorical

assumptions has been avoided. The axiological assumption requires that the research be

value laden but given that this research is of a nascent embryonic nature value

generation is not expected. Basing research on the rhetorical assumption would imply

that the investigator uses specific terms and personal and literary narrative in the

research (Neuman, 2001). As the use of first-person “I” and metaphors is avoided, this

research diverges from addressing rhetorical assumptions. Based on astute deliberation

of what is required from the research it has been found that the philosophical

assumptions adopted would be an eclectic mix of the ontological, epistemological, and

methodological assumptions.

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Ontological assumptions address the nature of reality. Creswell (1997) suggest that

reality is constructed by individuals involved in the research situation. He further notes

that, “…multiple realities exist, such as the realities of the researcher, those of

individuals being investigated, and those of the reader or audience interpreting a

research”. With reference to this research, to add to the above-mentioned mix of

realities one needs to add the reality of the setting (e.g. project, office etc.) within which

research is conducted. The individuals are merely immersed within the setting and

cannot transmute reality of the setting. It is akin to a snowman in a snow glob. One

could transmute reality within the snow globe by shaking the snow globe but the

snowman within has no volitional influence on the setting within the snow globe. The

setting of the research would influence the behaviour of the individuals involved and

hence would transmute reality of the individuals involved. This stance is in direct

contradiction to Creswell’s (1997) argument that reality is constructed by individuals

involved in a research situation alternatively it would not be wrong to construe that the

individuals involved are mere pawns and it is the setting which defines reality. This

ontological assumption is central to this research. This research tries to assume reality as

flexible and out with individual control and hence involves coherently investigating

individual’s perceptions and behaviours within variable “realities” (research settings).

This would inherently transpire in looking at the same research objectives from different

perspectives.

As mentioned before the main crux of this research is deciphering the role and position

of McE’s within the confines of the construction project supply chain and the larger

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construction industry as a whole which would involve investigating McE’s within

variable “realities” i.e., settings (Figure 6.2).

REALITY REALITY REALITY REALITY

OF THE OF THE OF THE OF THE
OWNER McE PROJECT INDUSTRY

Figure 6.2. Ontological assumption

Figure 6.2 highlights the realities within which McE’s operate. The smallest domain of

analysis would be the reality of the owner i.e., the McE owner and the largest would be

the construction industry within which McE’s exist. All these realities are independent

yet interconnected and need to be looked at both in isolation and in an interactive mode.

This can be best explained by looking at the reality of the owner. The owner who runs

the McE is a single individual and in essence is an independent state of reality yet he his

directly connected to variable other states of reality like his family, his social

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connections and so on and so forth. This state of reality is different from the reality of

the McE, which he owns but given that, he is dependant on the McE for his livelihood

and to a certain extent for his identity, it would not be wrong to infer that these realities

are interconnected and have a strong influence on each other. The same stands true for

the other states of realities mentioned above. The reality of one owner can influence the

reality of the industry overall. All these realities are in a state of constant flux and hence

there interactions change constantly.

Epistemological assumptions address the relationships of the researcher to that being

researched. The general ethos of this assumption is that with active participation of the

researchers with those they research the, “…distance and or objective separateness”

(Guba and Lincoln, 1988) of the researcher with the research subject would be

minimised. This would enable the researcher to arrive at an “insider’s” perspective. This

“insider’s” perspective is essential in unearthing complex interactions, which exist

within dynamic setting such as those existent within a construction project, and in the

larger confines of the construction industry. One of the key objectives of this research

exercise is defining interactions between specific individuals within varied settings and

how it affects their perceptions and behaviour. This also feeds into and from the

previously mentioned ontological assumption that variable realities exist and thus with

active participation within varied realities a clearer and objective inference can be

arrived at. This assumption involves adopting ethnographic research methods. The

interactions and relationships, which would be investigated by direct participation, are

those within the McE and the project settings.

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Methodological assumptions address the issue of how the researcher gestates the entire

research process. The research process is usually a multi-layered one (Burns, 2000).

This research exercise would involve encapsulation of different research methods,

which would be used both in isolation and in unison. Inductive logic would prevail and

the process would be one of emerging design.

The assumptions on which this research is based crossover at various junctures and

hence it would not be wrong to say that a hybrid set of assumptions forms the basis of

this research.

6.4. Ideological perspective

Ideological perspectives help draw attention to the needs of people and social action

(Neuman, 2001). These perspectives help the researcher to collate and develop a

philosophical framework that guides the main “purpose” of a research. All ideologies

have their inherent strengths and weaknesses. The research ideology adopted squarely

depends on what the research sets out to achieve. Given the nascent nature of the area of

this research, the research ideology adopted would be one, which allows a degree of

fluidity and stays clear of generalisations. A key objective of this research is to change

perceptions; the UK construction industry has for long, been stuck in a rut of following

archaic definitions and practices based on the above-mentioned fallacy of generalisation.

It is to be noted that this research does derive from the past but looks at mitigating the

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errors of the past rather than following what is preconceived. There are many

ideological perspectives in research but the two prominent ones, which researchers in

the construction field follow are:

1. Modernism

2. Post modernism

Modernistic research framework is useful for research that involves assessing

environments with predefined boundaries and an established high level of understanding

(Taylor, 1999). Leading social researchers such as Massey (1994) and Laurie et al.

(1999) suggest that using modernist approach to research, results in assessing situations

by imposing a structural approach to analysis and interpretation and thus preventing

fluidity and the emergence of a context within research. The use of modernistic

approach in subject areas, which do not have the requisite boundaries and

understanding, could lead to faulty conclusions and aberrant representation of reality.

Post modernist theory evolved in the last few decades or so in response to the deficiency

of modernist approach of research in handling complex issues. It is a stance critiquing

the 19th century “Enlightenment” and early 20th century emphasis on technology,

rationality, reasons, universals, science, and the positivist, scientific method (Stringer,

1993; Bloland, 1995). The basic concept of post modernistic approach according to

Creswell (1997) is that knowledge claims must be set within the conditions of the world

today and in the multiple perspectives of class, race, gender and other group affiliations.

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He further goes on to suggest that, “…these are negative conditions, and they show

themselves in the presence of hierarchies, power, and control by individuals in these

hierarchies, and the multiple meaning of language”. Post modernism cannot be viewed,

as a single theory instead is a family of theories and perspectives that have something in

common (Bloland, 1995). Thomas (1993) further goes on to suggest that post

modernism is characterised by a number of interrelated characteristics rather than by a

single definition. Bloland (1995) argues that post modernism is a “post-theory

perspective” and challenges “meta-narratives”. Lyotard (1984) defines post modernism

as, “…incredulity towards meta-narratives”. A meta-narrative, “…is a global or

totalising cultural narrative schema which orders and explains knowledge and

experience” (Stephens and McCallum, 1998).

Modernistic ideologies, which are based on meta-narratives, attempt to construct grand

theories thereby dismissing the naturally existing chaos in this world and reinforce

power structures thereby ignoring the heterogeneity or variety of human existence

(Lyotard, 1984). Thus it would not be wrong to say that post modernism is against

totalitarianism and grand definitions which try to encapsulate varied knowledge and

experiences.

Post modernist approach aims to avoid dangers of stereotyping and the categorisation of

complex issues and situations (Laurie et al., 1999). In contradiction to the modernist

approach, which imposes structure, the post modernist approach allows structure to

emerge from the environmental context. The stringent structure, which forms the basis

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of modernist approach, neglects the potential for fluidity of meaning and understanding

to emerge within complex environments (Massey, 1994; Laurie et al., 1999).

Researchers of culture like Massey et al. (1999) were the first to identify the value of

post modernist approach in sociology when they recognised that individuals within

society exist with multiple identities and that it is misrepresentative to identify them as

solely belonging to one identity category. Even though post modernism finds it roots in

sociology its use in other fields has been propagated by Gummensson (2000) who

argues that the, “…nature of the industrial environment and its management benefit just

as much from” the use of post modernistic approach.

This aberration of classifying and stereotyping has been also been common practice in

construction research as can be seen in the previously mentioned classification of McE’s

within the unique cohort of SMEs. Most of the policy centric research that has been

previously carried out pertaining to the UK construction industry (see e.g., Latham,

1994; Egan, 1998 etc.) have adopted the modernistic approach. These research exercises

were meant to change the way the UK construction industry functions. The fragility of

these studies was largely that they were based on generalisations, which are the basis for

any research exercise carried out within the modernist approach. This generalisation

further manifested in the way these studies tried to incorporate finding and practices

from other industries into the construction industry. It has been identified by many

previous studies that construction industry has a unique character (Winch, 1987;

Gidado, 1996) which would imply that what might be right and acceptable practice in

one industry might not work in the construction industry. This aberration could have

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been avoided if these works (Latham, 1994; Egan, 1998) were carried out with the post

modernistic approach thereby looking at the issue at hand with a fresh perspective.

Carrying over preconceived notions nullifies the possibility of developing novel

methods of solving a problem.

There are many criticisms of the post modernist approach. It is often accused of being

directionless and lacking focus due to the absence of structure (Massey et al., 1999).

Thomas (1993) calls postmodernists “armchair radicals”. According to him, post

modernists tend to focus their critiques in changing ways of thinking rather than on

calling for actions based on these changes. However, within the context of this research

such an approach is appropriate, as the main objective of this research is to change

perceptions. Another criticism of post-modernism is that even though it is anti-theory,

theoretical tools are used to make its case (Habermas, 1981). This is a valid criticism of

post modernism but given that there is a severe paucity of previous research related to

McE’s, this criticism is avoided.

Using post modernist research ideology would help to arrive at a teleological doctrine,

which would propagate reconstitution and restructuring of the current esoteric order

prevalent in the construction industry. The pedagogic implications of using this

approach are that the research would be carried out with an open mind liberating the

researcher from the binding restrictions of preconceived knowledge. It would not be

wrong to suggest that further studies carried out in the research area might subscribe to

the modernist ideology.

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6.5. Research approach

Following the decision to adopt a post modernist philosophy, there is a requirement to

identify the nature of methods and techniques deployed in order to satisfy the research

objectives. This section discusses which type of approach should be used for research.

There are many methods, which are incorporated in research; each method has its own

merits and demerits. These methods are generally categorised under the subhead of two

different approaches namely qualitative and quantitative. To converge on a suitable

approach for this research, it is beneficial to explore the differences and take into

account the relative advantages and disadvantages of these approaches.

6.5.1. Qualitative: strengths and weaknesses

The use of qualitative methods is widely acknowledged as the tools or techniques used

when modelling complex situations to overcome the difficulties during assessment. The

strengths of qualitative methods are that it generates rich, detailed data that leaves the

participants' perspectives intact and provides a context in which to measure behaviour.

This method uses open questioning techniques and focuses upon ‘processes’ and

‘reasons why’, which differs from that of quantitative research, because quantitative is

concerned with addressing correlations between variables (Weinreich, 2003). Yin

(2003) adds that the method can examine contemporary events and (Schramm, 1971)

describes it as a method of ‘illuminating a decision or set of decisions’. Qualitative

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analysis allows the researcher to gain access to the mindset of an individual’s perception

of life and reasoning for their subsequent behaviour (Gummensson, 2000). It only by

understanding the reasons why an individual or group behave in a manner they do is it

possible to define their behaviour and interactions.

The criticisms of this method are that it can be ‘less precise’ and that ‘results may vary

greatly depending upon who conducts the research’ (Weinreich, 2003). Another

difficulty is this becomes a slightly abstract measurement and has no actual data to

measure. Yin (2003) continues to say that ‘informal manipulation’ can take place to

focus the research on a particular outcome. A common statement for choosing this route

is that the data collection and analysis is labour-intensive and time-consuming.

However, this is largely a reason based on the researcher’s resources than an actual

criticism of the method. Probably the most common comment is that the results cannot

be generalised to a population, although it can generalise to a theory. Again, this is not

so much a weakness of the method, but a statement of the usefulness of the outcome of

the research.

6.5.2. Quantitative: strengths and weaknesses

This method examines the incidence or prevalence of phenomena and there are claims

that it can be used to predict future events (Punch, 1998). Quantitative approach is

predominantly used to assess patterns during analysis of largely numerical data.

Statistical analysis is the main tool adopted within this approach (Neuman, 2001).

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The main strength of quantitative approach compared to other approaches is that results

can relate either to a known population or, discover exactly ‘who’ is the population are

and therefore can be used for commercial targeting (Burns, 2000). Quantitative methods

have the benefit of being highly objective, where the researcher is considered external to

the actual research, and results are expected to be replicable no matter who conducts the

research. The outcome of well-designed quantitative research is that it has the reliability,

substance, and significance to provide a robust generalization about a theory.

The weakness of these methods is that it assumes that the researcher knows exactly what

he or she is looking for, and if the phenomenon under research is difficult to measure or

quantify the results can be misleading. A major drawback of quantitative approach is

that when attempting to explain the behaviour of humans, quantitative analysis, fails

overall to understand why they behave the way they do (Gummensson, 2000). Human

behaviour is measured in a way that removes the event from its real world setting, and

ignores the effects of variables that have not been included in the model. Quantitative

research can be biased both in its design and in interpretation.

6.5.3. Which approach to use – qualitative or quantitative?

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Clearly both methods can be used with success and are subject firstly to careful design,

and secondly to awareness of the potential weaknesses. The research methodology

chosen depends on three factors; the type of research question, the control the

investigator has over behavioural events and the focus on contemporary events (as

opposed to historical phenomena). Yin (2003) points out that often there is considerable

overlap between these two approaches, but the skill in choosing the correct method is

getting the ‘best fit’ with the research question parameters. Weinreich (2003) argues that

using mixed approach is the ultimate method. He notes that a researcher should use, “…

both quantitative and qualitative data to provide a more complete picture of the issue

being addressed, the target audience and the effectiveness of the program itself".

Johnson (2004) notes that, “a key feature of mixed methods research is its

methodological pluralism or eclecticism, which frequently results in superior research

compared to mono-method research”.

A disadvantage of this mixed approach is that it might combines the weaknesses, (for

example bias is prevalent in both cases), and significantly increases the research

resources required.

The complex nature of this research entails that a mixed approach be adopted. A prime

example of this mixed approach is the use of statistical descriptive analysis for assessing

observation made by using ethnography, interviews, and case studies methods.

Statistical analysis, which is a quantitative tool, can add credence to qualitative

observations.

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6.6. Research methods

A common misconception is that the choice of method should be arranged hierarchically

(Yin, 2003). Every method, tool, or technique used for gathering data has its own

relative strengths and weaknesses (Smith, 1975). The results will be affected by the

method used and it is impossible to ascertain the nature of that effect (Saunders et al.,

2003). The nature of this research certainly highlights the need for the re-application of

exploratory phases, but Yin (2003) maintains that all types can be used at each phase

and knowing when to use each type is the key to a robust research. He further suggests

that it is not the strengths and weaknesses of a method that determines which is better; it

is the right application for the right question that is the issue when choosing a method.

Yin (2003) further developed a matrix (Table 6.2) as a selection guide for selecting

appropriate methods.

Table 6.2. Matrix for method selection (Yin, 2003)

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Requires control Focuses on

Type Form of research question over behavioural contemporary

events? events?
Experiment How, why Yes Yes
Who, what, where, how many,

Survey how much No Yes

Who, what, where, how many,

Archival Analysis No Yes/No
how much
History How, why No No
Case Research How, why No Yes

The above matrix can be used for assessing which qualitative research tool be used but

has left out anthropological methods such as ethnography and quantitative methods. The

methods used depend on the requirement of the research questions. Many of the research

questions would require use of multiple methods.

6.6.1. Methods employed to answer the research questions

The research methods employed in this research are driven by the needs of the particular

research questions. The following section will help provide an overview of methods that

were employed in this research and how they were applied to different research

questions. To delineate the methods one needs to assess the requirement of the

individual research sub-questions.

The main research question is:

“Are there a set of factors which inhibit the development of McE’s?”

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It would be very easy to sight an answer for this question. It could well be a simple

‘Yes’ or ‘No’. However, if one digs deeper it is revealed that there are many

overlapping layers, which need to be assessed and analysed to divulge the appropriate

answer. This appropriate answer could still be a ‘Yes’ or ‘No’, but what one achieves by

this analysis and assessment, is a broader understanding of the key drivers which shape

the eventual answer. To decipher these drivers one needs to assess and analyse in great

lengths the four aforementioned ontological realities namely the realities of the owner,

the McE, the project and the industry. The research sub-questions have been thus

modelled to clearly define these realities and to further look at the interaction of these

realities. These sub-questions can be further divided into sub-sub-questions given that

even within these realities exist intricate complexities, which need to be defined. The

sub-questions are as follows:

• Research sub-question 1: “Is the inclusion of McE’s in the SME cohort – a

fallacy?”

• Research sub-question 2: “What is the actual role of McE’s in the UK construction

industry?”

• Research sub-question 3: “Are McE’s really failing?”

• Research sub-question 4: “Are all McE’s the same?”

• Research sub-question 5: “Are all McE owners similar?”

• Research sub-question 6: “Who is the ideal McE owner?”

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• Research sub-question 7: “How different are McE owners to owners of micro-

enterprises from other industries?”

• Research sub-question 8: “Which business owner typology do McE owners belong

to?”

• Research sub-question 9: “Can immigrant labour redress the skill shortage in the

industry?”

The methods employed to answer these research questions have been discussed in the

following sections of this chapter.

1. Extensive Literature Review

A comprehensive literature review would help in assessing prevalent ideologies on

various issues, which are part of the research. There is an extreme neglect of micro firms

in the small firms literature itself, is no more or less than an interest in the typical or

modal firm (Hughes, 1993). This neglect is owing to lack of readily available data, as

the larger a firm the more likely are its operations to be covered by legislation on public

disclosure of operations and the more likely are its activities to fall within one or more

of various tax regimes (Reid, 1995). Owing to the paucity of McE research literature

from diverse sources were used. These included literature on SMEs within the

construction as well as other industries. Web resources would also used for this purpose.

2. Based on Grounded Theory:

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A few of the research methods employed within this research fall within the gamut of

grounded theory. Grounded theory is a technique created by Glaser and Strauss in the

late 1960’s. Grounded theory was defined by the authors of Glaser and Strauss (1967) as

a method of analysis that, “…begins with the area of the research and what is relevant

to the area is allowed to emerge”. Grounded theory is a method traditionally applied to

transcripts obtained from interviews, open-ended questionnaires, and archive

documentation. Grounded theory inductively derives from the research of the

phenomenon it represents. Strauss and Corbin (1998) argue that grounded theory is an

emergent theory and as a procedure cannot be learnt from prescription. They further

suggest that grounded theory is derived from the data, systematically gathered and

analysed through the research process. Researcher using this method does not begin

with an area of research and allows the theory to emerge from the data. Grounded theory

is a tool used by post modernist owing to the lack of generalisation in this tool.

Grounded theory as a process significantly removes the influence of the researcher and

their perceptions from the analysis, guarding against the dangers of bringing

preconceived ideas and concepts into the research gathering and analysis process

(Strauss and Corbin, 1998) which further fits perfectly with the post modernist school of

thought.

Glaser and Strauss (1967) suggest that this approach requires a considerable proportion

of fluidity and flexibility as a process in order to provide the reflective capabilities,

which it is, know for. Contrary to this, Strauss and Corbin (1998) suggest that it is

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important not to separate the phases while conducting research using grounded theory

thus negating the fluidity, which Glaser and Strauss postulated.

Grounded theory entails the use of codification and categorisation to order thinking.

Strauss and Corbin (1998) suggest that this theory relies on the process of coding

patterns within the data, forming categories, identifying their relationships and trying to

understand the overall meaning through the generation of theory. Glaser (1992) one of

the key proponents of grounded theory who along with Strauss is regarded one as

founding fathers of grounded research raised concerns on the manner in which Strauss

and Corbin (1992) described the coding process, and argued that their interpretation was

too prescriptive. Given the impending disagreement over the mode of coding and that

the research methods employed to answer individual research questions are of a hybrid

nature coding has been avoided as it would make things overcomplicated. Coding has

been restricted to the parties involved and loose codification has been adopted for the

responses.

There is a grand conundrum with regard to what grounded theory is and how it needs to

be applied. The founding fathers of grounded theory Glaser and Strauss disagree with

each other on this issue. Glaser (1992) criticised Strauss and Corbin (1990) for being too

prescriptive in their interpretation of the process to the user and argued that this

threatened the ability of the researcher to allow the theory to emerge from the data

sample. This disagreement further provides conclusive evidence that strictly following

grounded theory could lead to aberrant conclusions hence this research exercise loosely

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picks and chooses from what grounded theory has to offer as per the requirements of the

research. The research methods employed for this research exercise, which fall within

the gamut of grounded theory, are:

a) Pilot opinion survey: Given the shortage of previous McE research a preliminary

survey of McE’s and parties directly or indirectly associated with McE’s (Main

contractors agents and government representatives) was conducted to divulge

general perceptions regarding McE’s. This survey would help decipher general

perceptions regarding McE position in the construction industry hierarchy. This

exercise would also help reveal perceptions of government and main contractor

representatives regarding McE’s ability to redress the skill shortage which plagues

the industry.

This preliminary opinion survey was conducted using two different set of

questionnaires. The questionnaires were different in design and were sent to

different groups of individuals one solely directed towards McE owners and the

other towards government officials and industry representatives. The questionnaires

were of a simplistic nature with a few generic questions followed by a set of core

questions.

In total 100 questionnaires were sent out to individuals in each of the groups of

which 75, 63 and 69 responses were received from McE owners, government

officials, and main contractors representatives respectively. Of these responses, 60

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were chosen from each group so that a consistent set of questionnaires can be used

for analysis. Another reason for adopting a consistent set was that some of the

questionnaires contained erroneous content. The 60 McE owners who replied to the

questionnaires were approached at a later stage in the research for detailed interview

and firm level financial analysis. The information gathered from this survey helped

set the tone for the following research.

b) Case studies: The case research approach was used in this research in conjunction

with ethnography. It was used to define McE roles in different project types and

further helped decipher problems they faced on these projects.

Case research as a method is employed with the aim of, “…of researching in an

open and flexible manner social action in its natural setting as it takes place in the

form of interactions or communication” (Sarantakos, 1998). Yin (2003) argues that

such an approach has been viewed as weak sibling of social science methods and

that it enjoys a stereotype of being insufficient precision, objectivity, or rigor. Case

research approach forms the base of post modernist framework. Even though this

approach is well know for it lack of structure (Yin, 2003) the potential provided for

allowing an understanding to develop of complex situations through its emergence

from the empirical context of the case research, provides relevance for this research.

Sarantakos (1998) argues that case research is a valid form of inquiry in the, “…

context of descriptive as well as evaluative and casual studies, particularly when the

research is too complex for survey studies or empirical strategies, and when the

researcher is interested in the structure, process and outcomes of a single unit”. The

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level of complexity in this research and the need to research McE’s within varied

project settings requires that case research approach be considered.

Sarantakos (1998) identified five characteristics specific to a case research approach

which can be identified as its strengths: 1) it studies units in their entirety; 2)

employs several methods primarily to avoid or prevent errors and distortions; 3)

often studies as single units; 4) perceives the respondent as an expert not just as a

source of data; and 5) it studies a typical case. Each and very project varies from

each other and so does McE role on these projects. This variance makes it the ideal

setting to use case research approach.

The case research approach allows complexity to be assessed and understood in

close quarters thereby preventing misrepresentation of ‘reality’ and abiding by the

ontological assumptions of this research. The lack of existing McE research

produces a need for an approach that allows for an assessment of real life examples

so that theory can emerge from the realities of the context. Aforementioned there are

many overlapping layers of reality one needs to look at in this research exercise. The

zones of reality of vary with every project, hence case research comes across as an

ideal approach to better understand and assess McE within these varied settings. The

use of case research approach compliments the conceptual framework of this

research exercise.

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The case research approach according to Yin (2003) can appear as either a singular

or a multiple assessment. Within the context of this research, due to the uniqueness

of every construction project, a multiple case research approach is selected. A

multiple case research approach provides the opportunity to assess for general

patterns and observations across the range of case studies in the sample, whilst

retaining the individual context of each case research. Multiple case research

approach would further helps balance the importance of the specifics existing within

singular projects, with the general observation across the set of projects in

consideration.

The selection of a case research approach as one of the research methods used within

the research requires consideration to be placed on the nature of the sample and the

requirements of its selection. The selection of the number of case studies to be

considered depends is usually determined by the principles of theoretical saturation.

Saturation is a point within the analysis process where the inclusion of additional

data (i.e. case studies) would not add to or alter the findings of this research (Strauss

and Corbin, 1998). In the context of this research the selections of the case studies

aims to provide a representative sample by covering all of the variations in the form

of the attributes for both McE’s and the project environment.

The projects were selected with the aid of local contacts. The projects analysed were

of different types and had different procurement routes. Three case studies were

selected keeping in mind that these projects had a great degree of McE participation.

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Ethnography formed the primary source of data for this part of the research exercise

(explained in later section of this chapter). Ethnography is in essence is an

anthropological exercise that has been described later on in this chapter. The

methods used to collect data at this stage greatly vary from what is the common

practice in the case research approach. Using a hybrid method for data collection

was in keeping with the philosophical and contextual nature of this research.

c) Interviews: In total six rounds of interviews were conducted. The first three rounds

of interviews were conducted following the preliminary survey. The remaining

rounds of interviews were carried out on construction sites simultaneously with the

ethnographic stage of the research.

The first round of interviews was conducted with 60 McE owners who had

previously participated in the preliminary opinion survey. This exercise was used to

source information required for comparing owner and business centric factors to the

performance of their businesses. The total number of interviews that were to be

conducted was selected using the principle of theoretical saturation (Strauss and

Corbin, 1998). The interviews had an underlying semi-structured form but were

conducted using an open-ended discussion format given that the shadowing exercise

had revealed that McE owners were uncomfortable with formal interaction. McE

owners were asked to identify their inclinations regarding key owner centric factors

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and about the general performance of their business. They were also asked to

identify the factors, which inhibit them from performing to their optimum capacity.

The second round of interviews was conducted with 38 small construction

enterprise owners (10-49 employees). They question asked and the format of the

interviews was akin to that of the interviews conducted with McE owners. This

exercise would help divulge whether McE owners are different from small

construction enterprise owners. This exercise involved assessing small construction

enterprise owners perceptions regarding key owner centric factors and about the

general performance of their business.

The third round of interviews was carried out with 40 individuals who owned

micro-enterprises in other industrial sectors. These owners ran businesses, which

had similar characteristics to McE’s. They were asked questions related to skill

centric factors and their overall business performance. This exercise would help

divulge whether McE owners had similar characteristics as owners of micro

enterprises from other industries.

Following this stage, interviews were carried out as part of the ethnographic stage

of the research. These interviews were aimed at deciphering perceptions of

individuals involved in different strata’s of the project hierarchy.

The first round of these interviews was a preliminary exercise and was carried out

with the main contractors and subcontractor’s site agents so as divulge their

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perceptions on McE’s. These interviews were of an open-ended discussion type. A

total of 16 contractor’s site agents were interviewed on the five projects which were

part of the ethnographic research. The number of individuals interviewed was

selected by the means of theoretical saturation (Strauss and Corbin, 1998). The

individuals interviewed were from different section of the industry and helped

derive a preliminary exogenous perspective regarding McE role and functions in

construction projects.

The second round of the interviews was carried out with young trainee operatives

on site. 80 of these individuals were interviewed at random stages during the

ethnographic exercise. These interviews were in the form open-ended discussion

keeping in mind the nature of the respondent. The openness and flexibility of the

interview process is important to allow an understanding to be gained of the context

to which it is set (Glaser and Strauss, 1967). This exercise was carried out to

decipher their perception regarding self-employment vis-à-vis direct employment.

The third round of the interviews was carried out with immigrant (non-UK citizens)

operatives on site. These interviews were of an open-ended discussion type and

helped divulge their motivations to stay and work in UK and their long term plans.

In total 30 interviews were carried out and the number of participants chosen for the

interviews was selected using the principle of theoretical saturation (Strauss and

Corbin, 1998). This exercise would helped divulge the motivations and long term

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plans of immigrants workers who have been identified as the panacea for the skill

shortage in the UK construction industry (Egan, 1998).

Methods discusses in this section of the chapter i.e., preliminary opinion survey, case

studies and interviews were also in conjunction with other methods, which are out with

the gamut of grounded theory.

3. Ethnography (Fieldwork)

The ethnographic exercise in this research was carried out in two stages. The first stage

was a preliminary endogenous exercise involved shadowing 12 McE owners (as

mentioned before in the case research section) for a period of 4 months. This exercise

helped develop on the understanding of McE owners self-perceived notions concerning

their business, the external environment, their skill base, and personal core competencies

and further shed light on the problems they face. The second stage involved being

stationed on ongoing construction projects to gain a first hand insight into McE roles,

functions, and practices within a construction project environment. This exercise also

helped decipher problems which McE’s face on construction projects. This exercise

helped conclude the research by looking at McE’s in their exogenous environments.

Ethnography is a description and interpretation of a cultural or social group or system

(Denscombe, 2007). Ethnography as a process involves prolonged observation of the

group, typically through participant observation in which the participant is immersed in

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the day-to-day lives of the people (Creswell, 1997). When involved in ethnographic

research the researcher, “…begins the research by looking at people in interaction in

ordinary settings”, and then attempts to, “…discern pervasive patterns such as life

cycles, events and…themes” (Wolcott, 1996). Spradley (1980) suggest that ethnography

consists of looking for what people do (behaviours), what they say (language), and some

tension between what they really do and what they ought to do as well as what they

make and use.

One of the main advantages of ethnography is that it allows the researcher to be totally

immersed in a system and yet be disconnected from it. Participant observation provides

an idea of interaction and the interrelationships of social relations in a group, and a sense

of process, which cannot be obtained in any other way (Frankenberg, 1963). This allows

the researcher to develop a, “…holistic cultural portrait of the social group that

incorporates the views of the actors in the group and the researcher’s interpretation of

views about human social life” (Creswell, 1997). Given that this ethnographic exercise

in conducted within two different continuums the social groups and the actors vary.

With respect to the shadowing exercise conducted within McE’s the social group is the

McE and the actors are the McE owner and its employees. In context of the research

exercise carried out on the site the social group is the construction project, the actors are

the various parties involved on site.

The use of ethnography to research mechanisms within McE’s is apt as the size of the

enterprise and its workforce liberate the researcher from interdepartmental wrangling

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and facilitates the nurturing of close relationships with the research group (Holiday,

1995). Although it is widely acknowledged that in the research of enterprises there is a

need for data collected by using ethnography, little research using this methodology has

in fact been undertaken; this has meant that small firm’s research has remained

positivist, repetitive, quick and risk averse (Stockport and Kakabadse, 1991). The

ethnographic studies of small firms are still an exception is surprising given that the

small firm may be the ideal arena for ethnographic organisational research (Curran and

Burrows, 1987). The McE’s owners who were shadowed for this part of the research

were selected keeping in mind that all types of McE’s are included in the research set.

Theory of theoretical saturation (Strauss and Corbin, 1998) was used to select the

number of individual shadowed. 12 McE owners from across Scotland who had

different specialisations were selected. These sets of owners provide a representative

sample by covering all the variations.

The ethnographic research conducted within the confines of the construction project

helped unravel issues related to McE’s on site. A construction project is usually out

with the purview of external observers, ethnography allows the researcher to get into

this closed system and decipher the mechanisms from within. The numbers of projects

ethnographically studied were selected using the principle of theoretical saturation

(Strauss and Corbin, 1998). Aforementioned 5 projects were chosen as case studies and

thorough research was conducted using ethnographic research methods.

4. Financial analysis

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This was a threefold exercise. The first stage involved assessing balance sheets of 60

participating McE’s for their profit-maximising capacity. Following this, the same

process was repeated for 40 micro-enterprises from other industries. The third stage

involved assessing accounts of projects, which were analysed ethnographically to

divulge the actual amount of work main contractors and sub-contractors sub-contracted

to McE’s on construction projects. This would help define the actual position of the

McE’s in construction projects.

A few studies have looked at profitability of firms in construction industry, key among

them are works of Lea and Lansley (1975) and Asenso and Fellows (1987). Profitability

may be expressed as a profit percentage of turnover (POT) or return on capital (ROI)

(Akintoye and Skitmore, 1990). POT was used as a measure of profitability to assess the

profit maximisation capacity of the McE’s and micro enterprises in other industries.

POT was given preference over ROI owing to the relative simplicity of POT. Another

reason for adopting POT was that turnover was the only reasonable data most McE’s

had. Most McE’s did not have a system in place to keep tab of their investments. These

enterprises were further categorised based on the owners perception of profit

maximisation conditions under the following heads:

1. Economic profit

2. Break even

3. Loss making

4. Shutdown

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The statistics revealed from this exercise was compared to the background, inclinations

motivations and skill sets of the owner of these enterprises (revealed from interviews).

Analysis of project output was carried out as part of this research to divulge McE share

of the total project output. This exercise would help decipher the actual role of McE’s on

construction projects. DTI (2006) estimates show that McE’s cater to about 40% of total

construction industry output. This research sets out examine the credence of these

figures and further develop on the central premise of this research that McE’s are the

lifeblood of the industry.

The following section of this chapter highlights the research methodology adopted in

this research (Figure 6.3).

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FINANCIAL
ANALYSIS
SURVEY
McE
CASE STUDIES ETHNOGRAPHY OUTPUT PROFIT

INTERVIEWS FORECASTING

Figure 6.3. Proposed research methodology

Figure 6.3 is a pictorial representation of the research methodology employed in this

research. As mentioned before the research methodology is of a “Hybrid” type and is

unique to this research. Multiple research methods are used to answer individual

research sub-questions, which feed into a composite answer for the main research

question. The assumptions adopted for this study is an eclectic mix of ontological,

epistemological, and methodological assumptions which feeds into the ideology which

is postmodernist in nature. The research approach is plural and involves the usage of

both qualitative and quantitative techniques. The methods employed in this research are

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varied with instances when multiple methods have been employed to achieve a singular

research objective. This research strongly espouses the uptake of mixed research

methodology as it allows for, “…methodological pluralism or eclecticism, which

frequently results in superior research compared to mono-method research” (Johnson,

2004).

6.7. Summary

The preceding sections of this chapter highlighted the research assumptions, ideology,

approaches, and methods which were employed in this research. The research

methodology adopted in this research is of a hybrid kind with an eclectic mix of

research methods which range from simple questionnaire surveys to in-depth

ethnographic fieldwork (Figure 7.1). The first stage of the data collection process in this

research would involve questionnaire surveys which would be followed up with a short

term shadowing exercise (time would spend with McE’s within their functional

settings). This would be followed up with in-depth McE centric investigation, which

would involve semi-structured interviews with McE owners. Ethnographic fieldwork

carried out on construction projects would constitute the final stage of the data

collection process (data collection in this phase of the research would be carried out by

means of semi-structured interviews, project output analysis, observations etc.). The

following chapter highlights the findings of the data collected by the aforementioned

research methods.

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7. Quantitative findings

7.1. Introduction

The preceding chapters comprised a thorough review of relevant literature and research

methodology adopted for this research. Review of the literature revealed the existence of

a number of factors both endogenous and exogenous to the McE, which could influence

McE performance. These factors were tested for their veracity by means of different

research methods ranging from semi-structured interviews to active ethnographic

exercises. The research methods were employed in a stage wise manner (see Figure 7.1.)

to decipher these factors based on their relative position and primacy in the hierarchy.

Literature review

Preliminary investigation Main investigation

McE centric investigation
Analysis of relevant
facts and figures Interviews
Financial analysis with McE owners and
employees
Preliminary survey

Project centric research

Shadowing exercise
involving McE owners Ethnographic study Interviews

Financial analysis

Figure 7.1. Stage wise distribution of research methods employed in the research

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The first stage of the research involved statistical analysis of McE and industry centric

information. This was followed by an opinion survey based on questionnaires sent out to

McE owners and industry and government representatives to decipher the general

perception regarding McE’s. This was followed up with a shadowing exercise involving

McE owners, which helped, divulge whether the results of the preliminary survey were

in line with the ground reality. Above-mentioned stages constituted the preliminary

investigation stage of the research. This investigation helped develop the general

understanding of McE facts and associated perceptions of those involved within and

outwith the McE.

The preliminary investigation was followed up by the main investigation stage of the

research, which was carried out in two stages. The first stage involved McE centric

investigation, which was a two-part exercise comprising of interviews with McE owners

and employees and analysis of McE financial records to decipher their profit levels. The

second stage involved project centric investigation; this was a three-part exercise which

included ethnographic analysis, spot interviews with McE owners and other operatives

on site, and analysis of project outputs to decipher the contribution of McE’s in

construction projects.

The findings of this research have been can be broadly classified on the basis of the type

of analysis that was conducted i.e., quantitative and qualitative. The quantitative

component of this research comprises of the analysis of generic McE and industry

centric information. The qualitative component comprises of the findings of the of the

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preliminary opinion survey, shadowing exercise, McE and project centric investigation.

However, it needs to be noted that certain parts of the qualitative research have been

substantiated by quantitative research keeping with the hybrid research methodology

that has been adopted in this study. The findings of the quantitative and qualitative

research have been discussed in separate chapters to allow for isolated focus on the

individual components. The findings from the analysis of McE and industry centric

information, which largely constitutes the quantitative component of this research, have

been discussed in the following sections of this chapter.

7.2. Analysis of generic McE and industry centric information

This section of the chapter comprises of the findings of the statistical analysis carried

out on McE related figures derived from latest DTI (2006) and NSO (2006) reports. A

preliminary analysis included in Chapter 2 revealed that McE have a rather high

attrition rate. This was based on analysis of VAT registration and de-registration

statistics for the period 1996-2006. The veracity and robustness of this assertion can be

questioned owing to the overextended nature of the period adopted in the analysis on

which the assertion is based. VAT registrations and de-registration rates can fluctuate

significantly with changes in the external macro environment (Daly, 1990; Ashcroft et

al., 1991) hence to accurately reveal the underlying trends one needs to assess VAT

statistics for a period in relative immediacy. Considering this the period 2002-2006 was

chosen for statistical analysis of McE attrition rates. The relative immediacy of the

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chosen period would help reveal the latest trends as against the muddled trends that

might be revealed by choosing an overextended period.

y = 981x - 2E+06

VAT registrations/de-
25,000
R2 = 0.7411
20,000
registrations y = 1475.1x - 3E+06
15,000
R2 = 0.9765
10,000
5,000
0
2001 2002 2003 2004 2005 2006 2007
Year

VAT Registration (UK) VAT De-registration (UK)

Linear ( VAT Registration (UK)) Linear ( VAT De-registration (UK))

Figure 7.2. VAT registration v. de-registrations (with trend lines)

Figure 7.2 shows the McE VAT registration and de-registration trends for the period

2002-2006. A linear regression test was applied to the VAT registration and de-

registrations data sourced from latest DTI records to reveal the underlying trends. The

trend lines in the above graph are of a linear nature. The equation for a linear line graph

(Clegg, 1982) is:

y = mx + c

Where “x” and “y” are the coordinates of the points that satisfy the function, “m” is the

gradient, and “c” is the “y intercept” of the linear line graph. The gradient is a number

that represents the steepness of a straight line. A positive gradient is synonymous with a

line that is sloping uphill whereas a negative gradient represents a line that slopes

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downhill going left to right. The equations for linear trend lines for VAT registrations

and de-registrations are shown below:

y = ( 981)x - 2E+06 (VAT registration)

y = (1475.1)x - 3E+06 (VAT de-registration)

In the above equations the gradient for both the trend lines are positive thus highlighting

that both VAT registrations and de-registrations have been uniformly escalating for the

period 2002-2005. However, the gradient for de-registrations is higher than that for

registrations; this implies that de-registrations have been increasing at a faster rate than

registrations.

“R2” i.e., squared of correlation coefficient, which is also called the coefficient of

determination (Clegg, 1982) for both the trend lines were calculated, values for which

are as shown below:

R2 = 0.7411 (VAT registration)

R2 = 0.9765 (VAT de-registration)

The coefficient of determination for both the trend lines is close to 1. This implies that a

strong correlation exists between the x and y. In the above graph x is years and y is

number of registrations/de-registrations. Based on the above it can be construed that

there is a year on end increase in the number of registrations and de-registration.

However, given that R2 value for de-registrations i.e., 0.9765 is very near to 1 vis-à-vis

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registration, which is 0.7411 it can also be construed that a stronger co-relation exists

between de-registrations v. years as compared to registrations v. years.

Thus far, McE VAT registrations have been higher than de-registrations but in a few

years time the situation might be quite different. To speculate what the situation would

be, a forecast based on the current trends have been arrived at as shown in Figure 7.3.

35,000
VAT registrations/de-registrations

30,000
y = 981x - 2E+06
25,000
2
R = 0.7411 If the current
trend continues
20,000 VAT
y = 1475.1x - 3E+06
2 de-registrations
15,000 R = 0.9765
might supersede
10,000
registrations by
the year 2012
5,000

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Year
VAT Registration (UK) VAT De-registration (UK)
Linear ( VAT Registration (UK)) Linear ( VAT De-registration (UK))

Figure 7.3. VAT registration v. de-registration (Forecast)

Figure 7.3 highlights that if all the determining conditions were to remain same, McE

de-registrations will supersede registrations by 2012. It can be argued that this a

speculative assertion but this does not vitiate its robustness. On synthesis of the above

facts, it can be claimed that if the current trend were to continue, it would not be long

before the exit rate of McE’s would be greater than the entry rate. McE’s provide the

bulk of the skill fodder required for sustenance of the industry and any drop in the

number of McE could impact the very survival of the industry.

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 Chapter 7

Figure 7.4. Trends of groupings within McE’s for the period 1995-2005

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Figure 7.4 is a graphical representation of the long-run analysis carried out to divulge

annual trends for McE numbers across different groupings (based on classification used

by National Statistics Office) for the period 1995-2005. A linear regression test was

applied to the dataset to reveal the underlying trends. In the above graph, trend lines

representing McE’s with 0-1 and 8-9, employees are linear in nature whereas as the

trend lines representing McE’s with 2-3 and 4-7 employees respectively, are of a

polynomial nature. Linear trend lines are generally in the form a straight line and

represent a situation where the dispersion of the scattergraph points is small and a strong

correlation exists between the variables (Clegg, 1982). Polynomial trend lines are

generally in the form of a parabola and represent a situation where a large dispersion

between the scattergraph points might exist but the correlation between the variables

might still be strong (Clegg, 1982). The equations and coefficients of determination for

the above trend lines are as shown below:

y = -2973.1x + 6E+06; R2 = 0.7928 (0-1 employees)

y = 463.26x2 - 2E+06x + 2E+09; R2 = 0.739 (2-3 employees)

y = 188.53x2 - 752935x + 8E+08; R2 = 0.8425 (4-7 employees)

y = 888x - 2E+06; R2 = 0.8085 (8-9 employees)

The linear trend line for McE’s with 0-1 employees has a negative gradient, which

highlights a steep downward movement and a coefficient of determination value of

0.739 that is close to 1, which highlights a strong correlation between number of firms

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and years. Based on the above it can be construed that from 1995 to 2005, there has

been a year on end decrease in the number of McE with 0-1 employees.

The polynomial trend line for McE’s with 2-3 employees’ highlights a parabolic

correlation between number of firms and years. From the assessment of the trend line, it

can be construed that number of McE within this grouping dropped until 2000 following

which they have been steadily increasing in number. Similar trends were observed for

McE’s with 4-7 employees.

The linear trend line for McE’s with 8-9 employees has a positive gradient, which

highlights an upward movement and a coefficient of determination value of 0.80, that is

close to 1, which highlights a strong correlation between number of firms and years.

Based on the above it can be construed that from 1995 to 2005, there has been a year on

end increase in the number of McE with 8-9 employees.

The coefficient of determination for the trend line representing total number of McE was

close to 0 for all types of correlations thus divulging no clear pattern. Based on the

above it can be construed that from 1995 to 2005 the number of McE’s has been

constantly varying from year to year.

On analysing the gradients of the linear trend lines it is revealed that number of McE’s

with 0-1 employees has been decreasing at a very high rate whereas the number of

McE’s in the other groupings have shown no veritable change. This drop in the number

of McE’s with 0-1 employees can be attributed to a number of reasons prominent among

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which are the recent changes in tax regulations (see Chapter 5). The total number of

McE’s has remained more or less stable from 1995 to 2005.

This analysis was of a long-run type, which could raise contentions concerning the

adoption of this extended period. To avoid such contentions a short-run analysis for this

subject area has been carried out (Figure 7.5).

180000
2
y = -3001.2x + 1E+07x - 1E+10
2
R = 0.8697
160000

140000

120000
Number of firms

100000

80000
y = -3198.1x + 6E+06
2
R = 0.7111
60000
y = 1486.7x - 3E+06
2
R = 0.9099
40000
y = 1098.6x - 2E+06
2
R = 0.9277
20000
y = 731.5x - 1E+06
2
R = 0.8506
0
2000 2001 2002 2003 Year 2004 2005 2006

0-1 Employees 2-3 Employees 4-7 Employees

8-9 Employees All McE's Linear (0-1 Employees )
Linear (8-9 Employees ) Linear (2-3 Employees) Linear (4-7 Employees )
Poly. (All McE's)

Figure 7.5. Trends of smaller subgroups within McE’s for the period 2001-2005 (with trend lines)

Figure 7.5 is a graphical representation of the short-run analysis carried out to divulge

annual trends for McE numbers across different groupings for the period 1995-2005.

The equations and coefficients of determination for the above trend lines are as shown

below:

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y = -3198.1x + 6E+06; R2 = 0.7111 (0-1 employees)

y = 1486.7x - 3E+06; R2 = 0.9099 (2-3 employees)

y = 1098.6x - 2E+06; R2 = 0.9277 (4-7 employees)

y = 731.5x - 1E+06; R2 = 0.8506 (8-9 employees)

y = -3001.2x2 + 1E+07x - 1E+10; R2 = 0.8697 (All McE’s)

The coefficient of determination (r2) for all trend lines is close to 1 thus implying that

there is a strong co-relation between number of firms and years. This highlights that

there has been either a steady year on end increase or decrease in the number of firms

within the different groupings of McE’s. Most of the trend lines in the above graph are

of a linear nature except the one representing total number of McE’s which has a

polynomial nature.

In the above graph, most linear trend lines have a positive gradient except the one

representing McE’s with 0-1 employees, which have a negative gradient. The trend line

for McE’s with 0-1 employees has a steep negative gradient as compared to other

groupings, which have a moderate positive gradient thus implying that McE with 0-1

employees are decreasing at a rather fast rate vis-à-vis McE’s in other groupings, which

have been steadily increasing in number. Among those groupings with a positive

gradient, McE with 2-3 employees have the steepest gradient thus highlighting that the

number of firms within this grouping have been increasing at a faster rate than those in

the other groupings.

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The polynomial trend line representing McE number across all groupings highlights that

that total number of McE’s have been more or less stable from 2001-2005.

The results from the long-run and short-run analysis carried out for the period

1995-2005 and 2001-2005 respectively reveal common trends. Overall, the total number

of McE’s has remained more or less stable. While the number of McE’s in most

groupings has steadily increased in number those, which employ 0-1 employees have

seen a sharp fall. It can be argued that this fall is due to the fact that these firms might

have grown in size and hence moved out from this grouping. To test the above argument

a further investigation was carried out which involved charting out the total percentile

change in the number of McE’s across each grouping. The results of this analysis are as

follows:

Table 7.1 Percentile change in McE numbers

Percentile change for the period

McE grouping
1995-2005
0-1 employees -38.50%
2-3 employees -14.00%
4-7 employees +34.25%
8-9 employees +176.54%

Table 7.1 reveals that from 1995 to 2005, the number of McE’s with 2-3 employees has

in fact dropped by 14 percent contrary to the steady growth in numbers, which the trend

lines for the period 2001-2005 highlighted whereas McE’s with 4-7 and 8-9 employees

grew at a very high rate. It could be argued that McE’s with 0-1 employees had in fact

grown into McE’s with 4-7 or 8-9 employees however this does not offset the huge gulf

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left by the sharp and steady drop in number of McE’s with 0-1 employees as they

constitute the single largest section of companies in the UK construction industry and

contribute towards 41 percent of the employment and 23 percent of the total industry

output (DTI, 2006). Any further drop in number of McE’s with 0-1 employees could

bring about an unprecedented labour shortfall that could further exacerbate the critical

labour shortage that plagues the UK construction industry (Agapiou et al., 1995;

MacKenzie et al., 2000).

Many of these McE with 0-1 employees are generally self-employed. Given that self-

employed are often categorised separately (Winch, 1998, Briscoe et al., 2000), analysis

of self-employment rates were carried out to decipher whether this decline in number is

unique to the construction industry. To assess this, self-employment rate (for the period

1995-2005) for the UK construction industry was compared with that of all the other UK

industries put together. A linear regression test was applied to the related dataset to

reveal the underlying trends. This graph is based on data sourced from DTI (2006). The

results of this analysis have been represented in a graphical manner as shown in Figure

7.6.

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50.00% y = 0.0086x - 17.018

40.00% R2 = 0.9529

30.00%
Percent

20.00%
y = -0.0246x + 49.476
10.00% R2 = 0.9753
0.00%
1994 1996 1998 2000 2002 2004 2006
Year
Construction industry All other industries
Linear (Construction industry ) Linear (All other industries )

Figure 7.6. Self-employment rates (1995-2005) construction v. all other industries

The equations and coefficients of determination for the trend lines in Figure 7.6 are as

shown below:

y = -0.0246x + 49.476; R2 = 0.9753 (Construction industry)

y = 0.0086x – 17.018; R2 = 0.9529 (Other industries)

In the above graph, both the trend lines are of a linear nature and have a coefficient of

determination that is close to 1 thus entailing that there is a strong correlation between

the variables that in this case is self-employment rates and years. The trend line for self-

employment rates in the construction industry has a negative gradient whereas that for

all the other industries has a positive gradient. Based on the above it can be construed

that self-employment rates in the constriction industry have been gradually decreasing

whilst steadily increasing in other industries (see Appendix Table A 1.1. for source

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data). This is a rather grim scenario as self-employed in the UK construction industry

account for nearly 26 percent of all companies in the UK (across all industries) (NSO,

2006). Such a drop in self-employment rates can have catastrophic consequences for the

whole UK economy.

As explained in Chapter 2 the high attrition rate of McE’s is further compounded by the

low survival rate of young McE’s. The following graph (Figure 7.7) highlights this

scenario:

96.5 y = -5.1464x + 101.91

100 91.4
85.8 84.2 R2 = 0.9855
90
80 74.9
70.4
66.1
70
Percentage

60
50
40
30
20
10
0
6 12 18 24 30 36 42
months months months months months months months
Months (from 1995-2004)

Figure 7.7. Average survival rate of McE’s which VAT Registered from 1995-2004 (with trend line)

A linear regression test was applied to the related dataset to reveal the underlying trends.

The above graph (Figure 7.7) compares the average survival rate of McE’s with their

time in existence after having VAT registered for McE’s which VAT registered in

between 1995 and 2004. This graph is based on data sourced from DTI (2006) business

survival records.

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The trend line in the above graph is of a linear nature with a coefficient of determination

close to 1, which implies that there is a strong correlation between survival rates and

period of existence. The trend line has a negative gradient of 5 which equates to a 5

percent drop in McE numbers across each time distribution grouping i.e., after every 6

months 5 percent of the McE’s which had registered fail or de-register. The above

assertion can come across as a fallacy given that DTI (2006) consider de-registration

and failure as analogous. Not all businesses that de-register are failures as some

businesses might de-register as they have been sold on or because the person who owns

the business might retire even though the business was posting reasonable profits. The

fallibility of this analysis stems from the above premise however, this does not vitiate

the utility of this finding. The result of this analysis provides credence to the assertions

made in Chapter 2 i.e., young McE’s have a high failure rate and those McE’s which did

survive the first few months after inception tend to falter as time progresses. The

findings of this assessment are in line with the well established empirical premise that

young firms tend to be more failure prone than the older ones (see e.g., Hall, 1987;

Dunne et al., 1989).

The shortcomings of this finding stem from the limited inclusion of self-employed

individuals in the VAT registration index. Majority of the smallest McE’s i.e., those

which have no employees (nearly 86.60 percent of all construction firms) and operate as

self-employed might show an aversion to getting VAT registered. To test the above

assertion individuals working on construction sites with a CIS 4 card (self-employed)

were asked about their perception regarding VAT registration. Majority (78 percent) of

the respondents believed that getting VAT registered was not important and had no

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intention to do so (see Appendix Table A 1.4. for all the related statistical information).

When asked about their reasoning behind this abeyance from VAT registration, majority

of the respondents cited additional costs (39%) , increased level of paperwork (30%),

and excessive taxes (14%) resulting from VAT registration as the main factors putting

them off VAT registration. As mentioned before self-employed individuals constitute a

large section of the McE’s, their aversion from getting VAT registered entails that the

survival rates based on VAT de-registration might not include survival rates of self-

employed individuals. Thus, the aforementioned assessment of survival rates for VAT

registered firms could be regarded as a limited scope exercise. This highlights the scope

for further research in this area as there are no credible sources that can used to analyse

McE survival rates.

Low survival rate of young McE’s when coupled with the steep decline of McE’s with

0-1 employees and the increasing level of de-registration across all the groupings of

McE’s (high attrition rate) points towards a rather grim future for McE’s in the UK

construction industry. As identified earlier in Chapter 2, the UK construction industry is

set for 15 percent growth by the year 2010 (MBD, 2006) which could see a further surge

because of the advent of London Olympics in 2012 (RICS, 2007). Aforementioned

factors i.e., low survival rate of young McE’s, steep decline in McE’s with 0-1

employees and high overall McE attrition rate could adversely affect this stipulated

industry growth. As part of this analysis, industry-output trends for the period

2001-2005 was compared to, the trends for the aforementioned factors to highlight the

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adverse scenario, which the industry could find itself in (Figure 7.8). A linear regression

test was applied to the related dataset to reveal the underlying trends.

180000 2
y = -679.93x + 3E+06x - 3E+09
2
160000 R = 0.1553

140000

120000
y = 8340.5x - 2E+07
2
100000 R = 0.9876

80000 y = -3548.9x + 7E+06

2
60000 R = 0.8513

40000

20000

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Year

No. of McE's with 0-1 employees Total number of McE's

Industry output (£ million) Linear (No. of McE's with 0-1 employees )
Linear (Industry output (£ million)) Poly. (Total number of McE's )

Figure 7.8. Comparison of Annual Construction Output (All works) v. total no. of McE’s and total no. of

McE’s with 0-1 employees

The equations and coefficients of determination for the trend lines in Figure 7.8 are as

shown below:

y = 8340.5x - 2E+07; R2 = 0.9876 (Industry output)

y = -3548.9x + 7E+06; R2 = 0.8513 (Number of McE’s with of 0-1 employees)

y = -679.93x2 + 3E+06x - 3E+09; R2 = 0.1553 (Total number of McE’s)

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In the above graph (Figure 7.8), the trend line for industry output is of a linear nature

and has a steep positive gradient, which implies that the industry has been growing at an

accelerated rate. Whereas the trend line representing the number of McE’s with 0-1

employees which albeit linear has a steep negative gradient implying that number of

McE’s with 0-1 employees has been falling at a steady rate. The trend line representing

the total number of McE’s is of a parabolic nature and has a descending gradient, which

would imply that the total number of McE’s has been slowly falling. This paints a rather

sorry state for McE’s. The situation becomes clearer when the percentage change in the

aforementioned variable from 2001-2005 is revealed. Whilst the overall industry output

has grown by around 43 percent from 2001-2005 (DTI, 2006) which amounts to an

annual growth rate of around 8 percent, the total number of McE’s in the same period

have fallen by around 2.5 percent and McE’s with 0-1 employees have fallen by around

21 percent (see Appendix A).

In an ideal scenario, growth of an industry would result in growth of businesses

operating within that industry (Penrose, 1995). However, in the case of McE’s the

situation is contrary to that espoused above. McE’s though in majority and contributing

heavily towards employment and output, fail to thrive in this epoch of rapid industrial

growth. This highlights the prevalence of certain underlying factors, which prevent them

from achieving a position in the highest echelon of the industry that is due to them.

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7.3. Summary

The preceding sections of this chapter further substantiated that McE’s have a rather

high attrition rate and is particularly high for McE’s with 0-1 employees. Based on the

current VAT registration v. deregistration trends a forecast was arrived at which

revealed that deregistrations might supersede registrations by the year 2012. The

findings in this chapter conclusively proved that McE’s with 0-1 employees were worse

off than other McE with respect to decline in numbers. It can be argued that McE’s with

0-1 employees might be maturing and thus increasing in size and taking on more

employees however, the increasing de-registration rates prove otherwise. This chapter

highlights that McE’s might be gradually failing; this could have a detrimental affect on

the construction industry especially given that it is speculated that the industry would

see an accelerated growth rate in the coming years.

The following chapter comprises of the findings of the qualitative component of this

research.

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 Chapter 8

8. Qualitative findings

8.1. Introduction

This chapter comprises of the findings of the qualitative component of this research. The

findings have been discussed under different heads based on the different stages of

qualitative data collection i.e., preliminary opinion survey, shadowing exercise, McE

and project centric investigation. The following section of this chapter elaborates on the

findings of the preliminary opinion survey.

8.2. Findings of preliminary opinion survey

This section of the chapter comprises of an extensive elaboration of findings from the

preliminary opinion survey that was carried out to divulge government, industry, and

McE level perceptions regarding McE’s. This survey was conducted using two different

questionnaires one solely directed towards McE owners and the other towards

government officials and industry representatives. The findings of this survey have been

interpreted within different sections to allow for exclusive focus on the views of the

individuals from different groupings.

The following section comprises of detailed analysis of McE owners perceptions

regarding their business operation and the general position of McE’s within the industry.

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8.2.1. McE owners perceptions

McE’s are
at the BASE END
of the
Construction
industry
hierarchy

High attrition
McE’s are not
rate of McE’s
important for the
would not affect
UK construction
the construction
industry
industry
McE owners
perceptions

McE’s cannot
train and develop Not satisfied with
staff to offset skill current profit levels
shortage of their business
in industry

Figure 8.1. McE owner’s perceptions

Figure 8.1 highlights the perceptions of McE owners regarding different issues related to

profile of McE’s within the industry, business performance, and ability to preclude skill

shortage in the industry (see Appendix section B1 for all the related statistics).

The majority (78 percent) of the McE owners who took part in the preliminary survey

believed that McE’s are not important for the growth and survival of the UK

construction industry. A large section (79 percent) also believed that McE’s are at the

base end of industrial hierarchy. This hints at the rather low-level of self worth in the

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McE owners. Their perception concerning the worth of their firm is wrongly placed as

in actual fact McE’s as a cumulative cohort are in majority in the industry in terms of

number of firms and also contribute towards a bulk of the employment and industry

output. This hints at a paradoxical situation wherein McE owners assessment of their

worth is diametrically opposite to their actual worth. This disproportion between self

worth and actual worth seems to have stemmed from a host of different factors both

inherent owner centric and exogenous factors which envelop and influence McE owners

perceptions. These factors have been discussed in length in later sections of this chapter.

The UK construction industry is excessively fragmented with a strong top-down

structure (Egan, 1998). This effectively leaves McE’s at the bottom of pecking order

with main-contractors and subcontractors calling the shots. This manifests itself in the

clouded self-image, which McE owners painted for themselves. They see themselves at

the base end of the industrial hierarchy with no influence on the proceedings of the

industry. As part of this research, the above-espoused link between industry/project

level structure and McE owner’s perceptions was investigated. The results of this

exercise have been discussed in length in the later sections of this chapter.

This low self worth when seen in the light of the current McE trends could be linked to

the high attrition rate of McE’s, as an unmotivated McE owner might not perform to his

optimum level, which could affect the performance of the firm and thus lead to its

failure. This link between owner self worth and business performance has also been

identified by a number of small business researchers who claim that superior business

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performance is directly linked to positive self worth of the owner (Boyd and Vozikis,

1994; Gray, 2002).

This lack of self worth further manifests itself in McE owners perceptions regarding the

affect a high McE attrition rate would have on the construction industry. The majority

(84 percent) of the McE owners believed that a high McE attrition rate would have no

adverse affect on the UK construction industry. This also highlights a lack of optimism

in McE owners regarding their future in the industry, which might stem from the

consistent downward trend in McE fortunes while the rest of the industry enjoys an

extended growth spurt (see Figure 7.8). Self worth and optimism are inextricably linked

psychological paradigms; a person with low self worth tends to be pessimistic and

performs way below his or her optimum capacity (Fontaine and Jones, 1997; Brissette et

al., 2002). This seems to be the case with McE owners, as they seemed to have left all

hopes of reversing the current abject trends in the hands of fate instead of systematically

working towards raising their profile and stemming the high attrition rate.

The majority (61.67 percent) of the McE owners who participated in this survey were

dissatisfied with the profit levels of their business. Low profit levels could be attributed

as one of the main reasons for McE owners low self worth (Research conducted as part

of this research revealed that average McE profits are significantly lower than profit

levels across the UK construction industry). The aforementioned link between profit

levels and self worth has also been identified by McKay (2001) who notes that higher

profits can boost owner self-worth.

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Low profit levels can also be linked to the high attrition rate of McE’s. Similar

phenomenon has also been identified in small business literature by Gallo and Vilaseca

(1996), and Covin and Slevin (1989) who suggest that low profit levels could lead small

business owners to shutdown or sell their business. Based on the above premise it can be

hypothecated that low profit levels might prompt McE owners to either shutdown or sell

their businesses which could be the reason for the high attrition rate of McE’s. Low

profit levels could also drive young McE’s to shutdown in an expedited manner, which

could be linked to their rather low survival rate.

McE’s employ nearly 60 percent of the workforce in the UK construction industry (DTI,

2006); given this picture, it could be assumed McE’s could play a vital role in offsetting

the skill shortage plaguing the industry. Contrary to the above presumption the majority

(89%), of the McE’s owners believed that McE’s were in no position to train and

develop staff. This highlights that, though McE’s have minimum entry requirement and

thus employ maximum number of people, they were in no way or form interested in

promulgating training to the people they employ. This non-engagement on their part

nullifies the leverage they would have otherwise enjoyed in the industry had they taken

the initiative to train people. Functioning as a centre for training can alter the profile of

McE’s from that of mere participants to active members capable of influencing the

proceedings within the industry.

On synthesis of the above facts and figures, it can construed that McE owners are

unmotivated and dissatisfied individuals with low self worth who see their firms at the

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bottom of the industrial hierarchy as against the vital cogs that they really are. This

further adds to the sorry state of McE’s as not only are their numbers eroding at a rather

high rate, but also their owners are in no way acting towards bucking this downward

trend.

8.2.2. Government representative’s perceptions regarding McE’s

M cE’s are
at the BAS E END
of the
Cons truction
indus try High attrition
M cE’s are not hie rarchy rate of M cE’s
im portant for the
w ould not affe ct
UK cons truction
the construction
indus try
indus try

Government
M cE’s cannot representative s
train and de ve lop perceptions Don’t dire ctly
s taff to offse t s k ill
em ploy M cE’s
s hortage
in indus try

Imm igrant
w orkers
are the rem e dy for Don’t inte ract
s k ill s hortage w ith M cE’s
plaguing the
indus try

Figure 8.2. Government representative’s perceptions

Figure 8.2 highlights the perceptions of government representatives regarding issues

related to profile of McE’s within the industry; their relationship and interaction with

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 Chapter 8

McE’s; and the issue of skill shortage plaguing the industry and McE’s ability to

preclude this skill shortage (see Appendix section B 2a for all the related statistics).

Government representative’s perceptions were included in this research given that they

are responsible for drafting all socio-economic policies, which directly or indirectly

affect McE’s. Many government led construction industry reviews and studies have

been undertaken in the recent past (Banwell, 1964; Latham; 1994; Egan, 1998;

Fairclough, 2002) with the premise of informing the development of management

education and learning. Sommerville and McCarney (2003) suggest that these reviews

have largely ignored the McE context. They further go on to suggest that the approach

adopted by these reviews to drive down from the larger enterprises through to medium,

small and ultimately to the micro’s has met with a dismal degree of success. This

highlights a grave inadequacy in government policies as they have given scant attention

to McE’s though they constitute the majority of the businesses in the industry and

contribute towards the bulk of the employment and industry turnover. This negation of

McE’s further highlights that McE’s hold no sway in the industry. As part of this

research, government representatives mainly drawn from local councils were included in

the survey given that it is at their level that policies are implemented.

The majority (53 percent) of those who took part in this preliminary survey believed that

McE’s are not important for the growth and survival of the UK construction industry. A

large section (66 percent) also believed that McE’s are at the base end of the industrial

hierarchy. This highlights that the negation of McE’s is not restricted to higher echelons

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(as highlighted by omission of McE’s from reports by Latham and Egan) instead it is

widespread across all strata’s of government institutions. Government policies are

driven by those at the lower levels of the government hierarchy though drafted by those

at the top (legislative body). This highlights a rather deplorable scenario as ignorance

regarding McE’s at the lower levels might pervades through to the higher levels in the

hierarchy thus resulting in the exclusion of McE’s from studies which form the basis of

industry centric policies. Government agencies seem to be detached from the ground

reality and seem to have no understanding of the internal dynamics of the industry. This

becomes further evident as the majority (87 percent) of the respondents believe that high

attrition rate of McE’s would not adversely affect the construction industry.

The detachment between government representatives and McE’s could stem from the

fact that the majority (80 percent) of the government bodies do not directly employ

McE’s and those which did employ McE’s had meagre levels of interaction with them

(only 27 percent of the respondents interacted with McE’s on a regular basis). Lack of

direct link blurs the government representative’s perceptions regarding McE’s. They

seem ambiguous to the fact that though not directly employed by them, McE’s do

strongly contribute to the industry as a whole.

The UK construction industry is plagued by severe skills shortage (MacKenzie et al.,

2000). When asked to cite a remedy for the skills shortage the majority (53 percent) of

the respondents identified that immigrant labour would satisfy this demand. This comes

across as a quick fix and a negation of the large talent pool which could be sourced if

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McE’s were to be pursued to train and develop the large number of itinerant people

working with them on a temporary basis (see Appendix B1). This becomes further

evident as the majority (53 percent) of the respondents believe that McE’s cannot be

funded to recruit, train, and develop staff to offset the skill shortage in the industry. This

aversion of government representatives to transfer training responsibilities to McE’s is

in line with findings of the government led construction industry centric studies like

Egan (1998) which suggested that it is the duty of main contractors to train individuals.

However, in the current scenario the majority of the main contractors have shifted from

actual contracting to management contracting thereby employing fewer and fewer

people in the direct workforce (Miller et al., 2001) and hence relinquishing any

responsibility of training. This further highlights that government representatives and

bodies have limited knowledge of the internal dynamics of the industry.

On synthesis of the above facts and figures, it can construed that government agencies

develop industry centric policies based on a distant perspective detached from the reality

that McE’s are a vital cog of the industry. Given the above scenario, it can also be

argued that government bodies might in fact be drawing up policies contradictory to the

needs of the industry. Erroneous perceptions of government representatives could

significantly impact McE’s though the link between them is implicit in nature. As

revealed before in Chapter 5 a number of exogenous factors outwith the control of the

McE owner could influence McE fortunes. A few of these factors are government driven

policies prominent among which is the taxation policy specifically formatted for self-

employed individuals in the UK construction industry. This policy has undergone

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regular changes, which has been linked to the gradual demise of self-employment in the

UK construction industry (Briscoe et al., 2000). As part of this research, McE owners

and main contractor’s representatives were asked to identify whether changes in tax

policies driven by the government bodies influence their business proceedings and

performance. The findings of this exercise are discussed in length in a later section of

this chapter.

8.2.3. Main contractor’s representative perceptions regarding McE’s

McE’s are
at the BASE END
of the
Construction
McE’s are industry High attrition
very important hierarchy rate of McE’s
for the would affect
UK construction the construction
industry industry

Main-
contractors
McE’s can representatives
train and develop perceptions Directly
staff to offset skill
employ McE’s
shortage
in industry

Immigrant
workers
are the remedy for Interact
skill shortage with McE’s
plaguing the
industry

Figure 8.3. Main contractor’s representative’s perceptions

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Figure 8.3 highlights the perceptions of main contractors representatives regarding

issues related to the profile of McE’s within the industry; their relationship and

interaction with McE’s; and the issue of skills shortages plaguing the industry and

McE’s ability to negate this skills shortage (see Appendix section B 2b for all the related

statistics).

Main contractors have a vital role in the construction industry and find themselves at the

top of the industrial hierarchy (Miller et al., 2001). Most of the industry centric studies

initiated by government agencies identify main contractors as the primary vehicle to

disseminate and implement new directives and policies (Latham, 1994; Egan, 1998). As

has been identified in the preceding section the main contractors role has gradually

changed from actual contracting to management contracting, thus limiting their active

participation in the work on site (Miller at al., 2001). In many instances, main

contractors subcontract nearly 90 percent of the total project value (Lehtonen, 1998). A

large section of the work subcontracted by main contractors to subcontractors might be

further subcontracted by McE’s.

Sommerville and McCarney (2003) suggest that McE’s are used as the mechanism by

means of which large enterprises attain their objectives while sacrificing some or all of

the McE’s objectives. They further suggest that McE’s are used as buffers and controls

for attainment of the large enterprises objectives, at the cost of McE development. This

highlights the rather sorry state which McE’s might find themselves in; ignored by the

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government agencies McE work at the bottom of the industrial hierarchy subject to the

whims of the main contractor.

As part of this research main contractors representatives especially those actively

working on construction sites and in direct engagement with McE’s were asked to

identify their perceptions regarding McE’s. There views could be used to ascertain

whether Sommerville and McCarney’s (2003) assertion regarding main contractors

subjugation of McE’s is apt.

The majority (53 percent) of those who took part in this survey believed that McE are

vital for the growth and survival of this industry. This highlights that main contractor’s

representatives have a better idea about McE roles vis-à-vis government representatives,

which could be attributed to their relative immediacy to the McE’s. It was surprising to

note that though the main contractor’s representatives rightly identified that McE’s are

vital to the industry, a large section (67 percent) of them still considered McE’s at the

base end of the industry. This highlights the double standards, which main contractors

representatives employ with regards to the positioning of McE’s in the industrial

hierarchy. Based on the above it could be construed that though main contractors are

aware of the importance of McE’s they are not ready to consider them as an equal which

further sheds light on the top down structure of the UK construction industry.

A very large section (93 percent) of the respondents believed that the high attrition rate

of McE’s would adversely affect the industry. This highlights that main contractors have

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a better idea regarding internal dynamics and emerging scenarios within the industry

vis-à-vis the government representatives. Based on the above it can also be suggested

that main contractors are extremely reliant on McE for their own survival and growth.

The main contractor’s representatives better understanding of McE’s role in the industry

can be attributed to the fact that the majority (60 percent) of them directly employ

McE’s and a large section (53 percent) also interact with the McE’s on a regular basis.

Main contractors directly engage and work with McE’s vis-à-vis government bodies

which are detached from McE’s. The implication of this link between main contractors

and McE’s manifests itself in the veritable difference between the perceptions of

government and main contractor’s regarding McE’s role in the industry.

When asked to cite a remedy for the skill shortage that plagues the UK construction

industry (MacKenzie et al., 2000), the majority (60 percent) of the respondents

identified that immigrant labour would satisfy this demand. Main contractor’s

perceptions regarding skills shortages are akin to the perceptions of the government

representatives. This highlights a rather deplorable scenario wherein those in a position

to influence the proceedings of the industry believe in short-term arrangements as

against long-term strategies, which might irrevocably resolve the problem of skills

shortages. However, contrary to the perception of the government representative most of

the main contractor’s representatives (73 percent) believed that McE’s could be funded

to recruit, train, and develop staff to offset the skills shortages in the industry. This

highlights that main contractors have a clearer and better understanding of the role

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McE’s could play to offset skill shortage plaguing the industry. This could also be

construed as a response based on the main contractor’s aversion to taking up employee

training, which as suggested by Egan (1998), is their responsibility.

On synthesis of the all the above facts and figures it can be construed that the main

contractors representatives are in a better position vis-à-vis government representatives

to understand the vital role McE’s play in the growth and survival of the UK

construction industry. However, this does not transform their perceptions regarding the

position of McE’s within the industrial hierarchy. Respondents across all the groups

who took part in the preliminary survey believed that McE’s are at the base end of the

industrial hierarchy.

Based on the findings of the preliminary survey it can be construed that McE’s position

in the industrial hierarchy could be equated to that of a vassal in the feudal system. Akin

to vassals, McE owners have been found to have very low self worth. They work for the

growth and survival of those higher up in the hierarchy with limited or no sway over the

proceeding. McE owners self-image is morphed by the perceptions of those higher in the

hierarchy.

8.3. Findings of the shadowing exercise

Following the preliminary survey a short period was spent shadowing a few McE’s

(Sample size: 12) to divulge the internal dynamics of their businesses. This exercise also

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helped ascertain whether the perceptions of the McE owners who took part in the

preliminary survey are in line with the ground reality (see Appendix Section B 3 for all

the related statistics).

The shadowing exercise was carried out over 4 months with a maximum of 6 hours a

day spend over 3 days a week with each individual McE. This exercise involved

observing McE owners within different settings, which was interspersed with open-

ended discussions with McE owners and employees. McE’s involved in the

refurbishment sector were excluded from the research given that they generally work in

isolation and operate outwith the industrial hierarchy spoken of in the preceding sections

of this chapter. To maintain the veracity of this exercise, McE owners who took part in

the survey were excluded from the list of McE owners short-listed for shadowing. Given

the restricted sample size and duration of this exercise no statistically conclusive

observations were made nonetheless this exercise did allow to get a first hand and

intimate view of the proceedings within McE’s.

Most of the McE owners who were shadowed were first time businessmen and had

started the business having worked in the industry for an extended period. They were all

relatively lowly educated and most of them had undergone some sort of vocational

training having left school at a rather young age. The majority of the McE owners who

were shadowed fit a certain standardised profile with similar characteristics, aims, and

aspirations.

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Their main motive behind starting the business was a strong desire for independence.

When asked to identify their relative position in the industrial hierarchy most of them

saw themselves as habiting the base end thus reiterating the perception of the McE

owners who took part in the survey. A large section of the McE owners also thought that

McE’s were not important for the growth and survival of the industry. When asked to

comment on the high attrition rate of McE’s and the effects it could have on the

industry, most of them identified that this phenomenon would not have any adverse

effects.

The majority of the McE owners who were shadowed were of the view that McE’s were

in the deplorable position they found themselves in because of the inaction of those in

the higher echelons of the industrial hierarchy. They believed that government agencies

and main contractors were actively working towards creating circumstances that would

dissuade people from going into self-employment. Many of them were of the view that

government agencies were only interested in collecting taxes and had no interest in their

long-term welfare and upkeep.

When asked to comment on their relationship with the main contractors, many of them

noted that main contractors were merely using them to fulfil their own objectives with

out giving them due respect. They also felt that they had been deprived by the main

contractor of any say in the running of the project. They felt detached from the

industrial, project hierarchy, and complained that no one took what they had to say into

consideration.

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On the issue of skills shortages, most of the McE owners identified that they had no role

to play in offsetting the skill crunch instead felt that their own businesses were dying

given the shortage of labour.

Most of the McE owners whose business had been in existence for a long time hark back

to the “good old days of the 1970’s” when self-employment was at its pinnacle. They

felt that during the 1970’s there was a great thrust for self-employment, which laid the

foundation stone of some of the biggest construction firms of the present. On the whole,

McE owners were dissatisfied with their businesses and their relative position in the

industry. It was sad to note that none of the McE owners were optimistic about their

future and instead felt that McE’s as a cumulative cohort were approaching a slow and

painful death.

Findings of the shadowing exercise were in line with the findings of the preliminary

survey highlighting the rather sorry state which McE’s find themselves in. This exercise

further proved that if the main industry players were to maintain their current level of

inaction towards remedying the high attrition rate of McE’s, it would not be long before

McE’s as a cohort vanish from the face of the UK construction industry thus critically

affecting the industry and the economy as a whole.

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8.4. Findings of the McE centric investigation

The preceding section of this chapter elaborated on the findings of the preliminary stage

investigation carried out to decipher general perceptions and trends. Following the

preliminary stage investigation the main McE centric investigation was carried out.

During this stage of the research, 60 McE owners who had previously taken part in the

preliminary survey were interviewed to gather their perceptions regarding key owner

and business centric factors previously identified by means of the extensive literature

review (see Chapter 4). These interviews had an underlying semi-structured form; but

were carried out as an open-ended discussion given that the shadowing exercise had

revealed that McE owners were uncomfortable with formal forms of interactions. These

interviews were followed up with an extensive review of the financial records of the

participating McE’s to ascertain their profit percentage of turnover (POT). Their POT’s

were then compared with their perceptions regarding key owner and business centric

factors to determine whether POT levels varied with changes in the McE owners

perceptions. Findings linked to owner and business centric factors have been discussed

in separate sections of this chapter. The following section elaborates on the general

background of the McE owners who were interviewed as part of this research.

8.4.1. McE owners background

The majority of McE owners who were interviewed were married (77 percent);

Caucasian (100 percent); males (100 percent), with an average age of around 47 years

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(see Appendix C for all the related statistics). This data regarding McE owners profiles

are similar to those accrued from the shadowing exercise. The above findings highlight

that, the majority of the McE’s were owned by individuals with similar characteristics.

It is interesting to note that the majority of the owners were males from a single ethnic

background thereby highlighting that females and individuals from other ethnic

backgrounds appear to be reluctant to start businesses within the construction industry.

This has also been identified by Dainty et al. (2004) who note that the UK construction

industry, “…has an unenviable status as being the industry with the lowest

representation of women and ethnic minority employees”. This further highlights the

fallibility of current government policies in counteracting the exclusivist policies of the

UK construction industry. Byrne et al. (2005) found that this problem is widespread

across Europe and noted that, “…European and national authorities and social partners

need to address equality of access, and of employment conditions to ensure that”

exclusion can be overcome.

It is to be also noted that the majority of the McE owners (61.67 percent) were middle

aged i.e., between 45 and 65 years of age. This is in line with the findings of a research

conducted by McNair and Flynn (2007) which revealed that the UK construction

industry employs a higher proportion of workers over the age of 45 than any other

industry. Based on the above it could be construed that there is a dearth of young

enterprising individuals interested in starting businesses within the construction

industry. This is not to say that middle-aged individuals are in any way or form less

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productive than individuals from the lower age groups. However, individuals from this

age group are known to be averse to the uptake of new technologies (McNair and Flynn,

2007) which could vitiate their ability to perform in a fast changing industry. This

highlights the need for a younger and more dynamic set of McE owners who could

adapt to the rapidly changing needs and practices of the UK construction industry. It can

be argued that the above assertion hints of ageism but given the rapidly eroding

industrial base of McE’s and the middle-aged McE owners aversion to change, only a

thorough ownership overhaul could save McE’s from complete annihilation.

This is a divisive assertion and needs to be thoroughly analysed for it to be vindicated.

To test the veracity of the above assertion McE’s profit percentage of turnover (POT

percentages), were compared to McE owners age which would help decipher whether

middle-aged McE owners perform better or worse than those belonging to a lower age

group.

This exercise involved segregating McE owners into two groups one containing those

below the age of 45 and the other for those above, following which average POT

percentages for the period 1995-2005 were calculated for both the groups. The results of

this exercise are represented in a graphical manner as shown in Figure 7.12.

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Figure 8.4. McE age group v. POT percentage

2.50% 2.29%

2.00%
1.38%
1.50%
POT %

1.00%
0.50%
0.00%
45 and below Over 45
McE owner age group
Average POT % (1995-2005)

Figure 8.4 highlights that the profit percentage McE’s with middle-age owners is

significantly lower than that for McE’s with younger owners. Based on the above it

could be construed that McE’s owned by younger owners perform better those owned

by older owners thus validating the need for younger and more dynamic set of McE

owners who could actively work towards offsetting the high attrition rate plaguing the

industry. This is not to say that experienced middle-aged McE owners cannot play a

vital role in the industry however, for this to happen they would need to be open up to

new technologies and undo their inherent averseness to change.

The younger set of McE owners could help in offsetting the high attrition rate of McE’s

however, they seem reluctant to start business within the construction industry. To test

the above assertion young individuals (Sample size: 80) who had recently joined

construction industry apprenticeship programmes were asked to identify whether they

would like to be self-employed or directly employed in the future. The majority (75

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percent), of the trainees chose direct employment over self–employment. Those who

had chosen direct employment were further asked to define the reasons for negating

self-employment as a career choice. The majority of the respondents were of the view

that self-employment would not give them the security and leisure time that they

yearned for.

The findings revealed that younger individuals are reluctant to go into self-employment.

This could further exacerbate the high attrition rate of McE’s given that the number of

new businesses joining the industry will be further reduced. The following section

highlights McE owners perceptions regarding key endogenous factors identified as vital

for McE success.

8.4.2. Endogenous factors

This section comprises extensive elaboration of McE owners perceptions regarding key

endogenous factors identified as vital for McE success. Endogenous factors have been

segregated into owner and business centric factors. As previously identified (in Chapter

4), owner centric factors can be segregated into three groups namely behaviour centric

factors, skill centric factors and generic factors. The owner centric factors included in

this research can be classified within the aforementioned groups as shown in Table 8.1.

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Table 8.1 Key owner centric factors

Behaviour centric factors Skill centric factors Generic factors

• Propensity to take risks • Education level • Inclination to employ

• Willingness to innovate external consultants

• Intention to attend

training programmes

• McE owners motivation

to start the business

The key business centric factors assessed as part of this exercise are business strategy

and growth. The McE’s average profit percentage of turnover (POT) for the period,

1995-2005 were compared to each of the owner and business centric factors to decipher

whether McE profits vary with changes in the McE owners perceptions and inclinations

regarding each of these factors (See Appendix C for all the related statistics). The

findings of this exercise are described below. The finding have been supported by

literature based evidence were necessary.

Propensity to take risks

In the construction industry, the term risk is used to define project level risks (Flanagan

and Norman, 1993; Edwards, 1995) however; in the context of this research, it would

denote business level risks. Business risks are threats, which a business owner

voluntarily takes on in his/her quest for business success (Hyrsky, 2000).

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Willingness to take risks is a trait associated with people who are adventurous and

determined (Lupton and Tulloch, 2002). Binswanger (1980) was of the view that

younger individuals have a higher propensity to take risks vis-à-vis older individuals.

Willingness to take risks is also regarded as a central characteristic of an entrepreneurial

individual (Bridge et al., 2003).

The McE owners were asked to identify whether they were willing to take business level

risks in response to which the majority (88.33 percent) of the McE owners answered in

the negative. This highlights that most McE owners are risk averse, which could be

attributed to the fact that most of the interviewees were middle-aged individuals.

Aversion to risks could also be linked to the low self worth of McE owners. This link

between self-worth and risk has also been identified by Krueger and Dickson

(1994) who suggest that having higher self worth increases an individual’s ability to

take risks.

The McE owner’s aversion to risk can also be linked to their high attrition rate. The UK

construction industry has been changing at a rapid pace (Pries and Janszen, 1995) which

requires that business operating within it also change. The McE owner’s aversion to risk

would restrict their ability to keep abreast of the pace of the change in the industry,

which could consequently result in McE failures.

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The McE owner’s aversion to risks might also affect the profitability of their business.

To test the veracity of the above assertion the average profit percentage of turnover

(POT percentage) for the period 1995-2005 for McE’s whose owners were willing to

take risks was compared with those which had risk averse owners. The results of this

exercise are represented in a graphical manner as shown in Figure 8.5.

3.78%
4.00%
3.50%
3.00%
2.50%
POT %

2.00% 1.46%
1.50%
1.00%
0.50%
0.00%
Yes No
Propensity to take risks

Average POT % (1995-2005)

Figure 8.5. McE owner’s propensity to take risks v. POT percentage

Figure 8.5 reveals that profitability of McE’s whose owners were willing to take risks is

almost two and half times more than those who were not. This highlights that McE

success could be contingent on the owners propensity to take risks. Based on the above

findings it can be construed that risk aversion leads to reduced McE profits, which could

result in McE failure.

The McE owners need to change their perceptions regarding risks if they are to reverse

the high attrition rate they are currently plagued with. Results of this exercise show that

the McE owners who were willing to take risks made more profits, which suggests that

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if the McE owners were to open up to the idea of taking on calculated risks, they could

increase their profit margins. Increased profit margins could motivate more individuals

to join the ranks of the self-employed and could further limit the exodus of the current

crop of McE’s, thus reducing the high attrition rate of McE’s.

One of the main assertions of this research is that inclusion of McE’s with the

entrepreneur cohort might be erroneous. Central to this argument is the premise that the

McE owners characteristics are far removed from that of an entrepreneur. Willingness to

take risks is considered an inherent and integral characteristic of an entrepreneur

(Hyrsky, 2000; Bridge et al., 2003). Based on the above premise McE owners could be

excluded from the entrepreneur cohort given that most (88.33 percent) of them were

reluctant to take any sort of business risk.

However, it could be argued that this is not the case given that McE operate in an

industry which is known to be risky (Flanagan and Norman, 1993; Edwards, 1995), thus

implying that they are undertaking a risky operation. The weakness of the above

argument is that McE actions in construction projects are generally non-volitional in

nature i.e., they merely do what they have been told to do thus negating any signs of

intentional risk adoption. Based on the above it can be construed that inclusion of McE

owners within the entrepreneur cohort is a erroneous act.

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Willingness to innovate

The term innovation is generally used in the construction industry to denote

technological and process based changes (Love and Irani, 2004). Sexton and Barrett

(2003) define innovation in the context of a small firm, “…as the effective generation

and implementation of a new idea, which enhances overall organizational

performance”. In the context of this research innovation at its most primal level is

examined i.e., an individuals “willingness” to innovate.

Previous research at this level involving McE owners is all but absent. The first to

identify the role of the individual in innovation was Katz (1961) who noted that that

innovation must be characterized with respect to the patterns of thought and actions of

the people to whom it is directed. The decisive work on individual “willingness to

innovate” was carried out by Rogers and Shoemaker (1971) who suggest that

innovativeness is a normally distributed uni-dimensional characteristic of individuals in

any given population. Feaster (1968) considers innovativeness to be an individual’s

awareness of the need to innovate, or a positive attitude toward change. Similar studies

were also carried out by Kirton and Mulligan (1969), Bruner and Tajfel (1961) and

Jacoby (1971), which demonstrated a strong relationships between innovativeness and

personality characteristics. Looking at innovation at the human level permits a measure

of innovativeness, which is not innovation specific (Hurt et al., 1977) instead allows the

focus to be centred on the person who implements the innovation.

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As part of this research McE, owners were asked to identify if they were willing to

innovate. A very high majority (90 percent) of the respondents were not willing to

innovate which could be linked to the fact that most of the them were middle-aged and

as previously mentioned, most people in this age group are averse to change (McNair

and Flynn, 2007).

The McE owners aversion to innovation can also be linked to their aversion to risks. The

link between innovativeness and risk was identified by Cancion (1967) who defined

innovativeness as the proportional amount of risk taking involved in the deployment of

resources in an uncertain situation. Statistical analysis revealed a strong co-relation

between risk and innovativeness as 66.67 percent of the McE owners who were willing

to take risks were also willing to innovate. This highlights that within the larger McE

cohort there might exist a group of individuals who have different aims and aspiration

vis-à-vis the conventional McE owner. This finding helps validate one of the key

assumptions of this research that McE’s are not a heterogonous grouping.

Aversion to innovation could affect McE profitability. To test the above assumption

profit percentage of turnover (POT percentage) for McE’s whose owners were willing to

innovate was compared to those owners who were not. The results of this exercise are

represented in a graphical manner as shown in Figure 8.6.

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4.00%
3.44%
3.50%
3.00%
2.50%
POT %

2.00% 1.54%
1.50%
1.00%
0.50%
0.00%
Yes No
Innovation oriented
Average POT % (1995-2005)

Figure 8.6. McE owners willingness to innovate v. POT percentage

Figure 8.6 reveals that average profit percentage of McE’s whose owners who were

willing to innovate is nearly twice that of those who were not. This highlights that McE

success is contingent on the owners willingness to innovate. Based on the above finding

it can be construed that aversion to innovation leads to reduced McE profits, which

could result in McE failure (Test for correlation was not undertaken given the limited

sample size).

The McE owner’s aversion to innovation could also be linked to the high attrition rate of

McE’s. Aversion to change could negate the ability of McE owners to adapt and keep

abreast of the rapid pace of change in the UK construction industry. This would result in

the slow death of McE’s, as they would no longer be able to meet the changing

requirement of the industry. As mentioned before McE owners were willing to innovate

were more profitable than those who were not thus implying that if McE owners were to

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be more innovation oriented they could earn higher profits margins. Higher profits

margins could attract new people to join the ranks of the self-employed and also

decrease the exodus of current McE’s thus reducing the high attrition rate of McE’s.

Akin to propensity to take risk, willingness to innovate is also considered an integral

characteristic associated with entrepreneurs (Georgelli et al., 2000; Bridge et al., 2003).

Given that most (90 percent) of the McE owners who were interviewed were reluctant to

innovate, the assertion that McE owners are not entrepreneurs is further supported

Education

Previous published research linking the McE owners education level and McE

performance are all but absent. Most researchers tend to overlook the impact an

individual’s educational qualification might have on their business performance. Given

that McE’s function at the base end of the industrial hierarchy the skill sets required of

them are limited. This could be attributed to the minimal entry barriers in the

construction industry (SBS, 2006).

To shed light on the McE owner’s education background, McE owners were segregated

based on their educational qualifications (see Appendix C1). This revealed that the

majority of the McE owners had vocational (32 percent) qualifications. Vocational

qualifications are trade-based programmes, which train individuals in a specialised area

(Ceresconsult, 2007). Vocational course even though ideal for their function role on

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construction projects might not give them the skill sets required for managing a

business.

To assess whether the McE owners education level influenced the performance of their

business, McE owners qualification levels were compared to the average profit

percentage (POT percentage) of their businesses. The results of this exercise are

represented in Figure 8.7.

3.50%

3.00%

2.50%

2.00%
POT %

1.50%

1.00%

0.50%

0.00%
Owners educational level Undergraduate O level A level Vocational
Average McE POT %(1995-2005) 3.28% 1.94% 1.40% 1.39%
Figure 8.7. McE owners educational qualification v. POT percentage

Figure 8.7 reveals that the McE’s whose owners who had the highest educational

qualification i.e., the undergraduates had nearly twice the profit levels of those who had

lower educational qualifications. However, it is interesting to note that McE’s with

owners who were educated to ‘O’ level, which is considered at the bottom end of the

educational spectrum had higher profit levels than those who were vocationally

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educated and those with ‘A’ level certificates. There is no clear decipherable reasoning

for why McE’s with ‘O’ level certificates had higher profit levels than those with an ‘A’

level certification or a vocational degree.

It is interesting to note that the McE’s owners with undergraduate degrees had bigger

businesses and employed more people. This is corroborated by Morrisson et al. (1994)

who as part of their research of small business owners found that small business owners

with the lowest level of education were predominantly found in the smallest businesses

and that the number of employees increases with the level of education of the owner.

This research revealed that overall McE owners had lower educations qualification vis-

à-vis owners of micro-enterprises from other industries (See Appendix C2). The

majority (70 percent) of micro-enterprise owners who took part in this research were

undergraduate degree holders and this is further reflected in their higher profit levels and

proclivity to employ external consultants, innovate, grow, take risks, and develop long-

term strategies for their business. This highlights that low educational qualifications are

not endemic to all the micro-enterprise owners in UK. If the McE owners are to redress

their current rate of attrition, they need to better their educational skills by undertaking

training programmes. It would not be even wrong to suggest that there is an urgent need

to overhaul the current educational system in place, as it does not prepare people who

intend to start businesses in construction industry.

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Inclination to employ external consultants

The role that external consultants could play in helping McE’s improve their business

performance has not been examined previously. As part of this research, McE owners

were asked to identify if they had employed the services of an external consultant to

which the majority (85 percent) of the McE owners answered in the negative. To

decipher whether employing external consultants helped the McE’s improve their

business performance average profit percentages for McE’s which employed the

services of external consultants were compared to those which had not. The results of

this exercise are represented in Figure 8.8.

3.66%
4.00%
3.00%
POT %

2.00% 1.39%
1.00%
0.00%
Yes No
Employed external consultants
Average POT % (1995-2005)

Figure 8.8. McE owner’s inclination to employ external consultants v. POT percentage

Figure 8.8 reveals that average profit percentages for McE’s which employed the

services of an external consultant were nearly three times more than those who had not.

This clearly highlights the benefits McE’s could accrue by employing external

consultants.

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Training programmes

The UK construction industry has in the recent past been plagued by diminishing skill

levels of workers (MacKenzie et al., 2000). The same was found to deter McE owners

from performing to their optimum capacity (shadowing the McE owners revealed that

McE’s were adversely affected by diminishing skill levels of workers). The UK

construction industry has changed at a very rapid pace but the same cannot be said for

those working in the industry. Many studies have cited the need for training

programmes, which would help people working in the industry to better their skill sets

(Agipou et al., 1995; MacKenzie et al., 2000). The McE owners who were shadowed as

part of this research were found to be lacking in requisite skills sets thus highlighting the

need for training programmes. The majority (75 percent) of the McE owners who took

part in this had not attended any training programmes. On being asked as to why they

had not attended a training programme, the majority (55 percent) of the McE owners

cited lack of time and the rest felt that such courses were irrelevant

To decipher whether attending training programmes helped the McE owners improve

their business profitability, average profit percentages (POT percentage) for McE’s

whose owners had attended training programmes were compared to those who had not.

The results of this exercise are represented in Figure 8.9.

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 Chapter 8

3.00%
2.52%
2.50%
2.00%
1.47%
POT % 1.50%
1.00%
0.50%
0.00%
No Yes
Attended training programme

Average POT % (1995-2005)

Figure 8.9. McE owners inclination to attend training programme v. POT percentage

Figure 8.9 reveals that average profit percentages for McE’s whose owners attended

training programmes were nearly twice those who had not. This clearly highlights the

benefits the McE owners could accrue by attending training programmes.

Motivation to start business

Previous research linking the McE owner’s motivation to start business and McE

performance are all but absent. As part of this research, McE owners who took part in

this research were asked to identify their motivation to start the business. The results of

this exercise are represented in Figure 8.10.

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 Chapter 8

100.00%

90.00%

80.00%

70.00%

60.00%

50.00%
38.00%
40.00%

30.00% 27.00%

20.00% 13.00% 12.00% 10.00%

10.00%

0.00%
Freedom Social status Self fulfillment Interest in trade Employment
insecurity
Motivation to start business

Figure 8.10. McE owner’s motivation to start business

Figure 8.10 reveals that the largest section of the McE owners had started the business

with the intention of maintaining their freedom (38 percent) and for attaining a higher

social status (27 percent). A very small section of the McE owners started their business

with a genuine interest in trade. As part of this research, average profit percentage for

McE’s where compared to their owners motivation to start the business to decipher

whether differing owners motivations affected the McE’s performance. The results of

this exercise are represented in Figure 8.11.

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 Chapter 8

4.50%

4.00% 3.85%

3.50%
3.00%

2.50% 2.30%

POT %
2.00% 1.76%
1.50% 1.21%
1.00%
0.43%
0.50%
0.00%
Interest in Self Employment
Motivation to start business Social status Freedom
trade fulfillment insecurity
Average McE POT % (1995- 3.85% 2.30% 1.76% 1.21% 0.43%
2005)

Figure 8.11. McE owner’s motivation to start business v Profit percentage

Figure 8.11 reveals that the McE owners who started the business because of a genuine

interest in trade had significantly higher profits than those who started their businesses

because of other motivation factors. This highlights that individuals should start

businesses of if they are genuinely interested in what they are doing.

As part of this research, McE owners were also asked to identify their level of expertise

and ability in the area of basis business and managerial competencies. The results of this

exercise are represented in Figure 8.12.

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 Chapter 8

80.00%

70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
Good Average Poor
Finance 13.00% 33.00% 54.00%
General management 64.00% 36.00%
Languages 7.00% 25.00% 68.00%
Leadership 63.00% 37.00%
Marketing 17.00% 35.00% 48.00%
Technical ability 61.00% 37.00% 2.00%

Figure 8.12. McE owner’s perception regarding key competencies

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Figure 8.12 reveals that the majority of the McE owners felt that they had a good level

of expertise in the areas of technical ability, general management, and leadership; and

poor level of expertise in the areas of marketing, language, and finance. The areas in

which they considered, they had a good level of expertise were areas in which they had

accrued a better understanding owing to their industrial experience. Most of the McE

owners had worked in the construction industry for years and hence had a good level of

understanding as to how work is carried out and delegated thus highlighting their high

level of expertise in general management and leadership. Most of them also perceived

that they had a good level of technical ability, which could be attributed to the

specialised training they had received in their trade area while working in the industry.

Majority of the McE owners felt that their lower levels of expertise in the areas of

marketing, language, and finance was precluding them from performing to their

optimum capacity and thus rendering them incapable of marketing their services and

managing their finances in a proper manner. The above finding further highlights the

need for higher educational qualifications and regular training.

The following section of this chapter comprises elaboration of findings related to the

key business centric factors i.e., strategy and growth.

Strategy

Strategy (as revealed in Chapter 4) is vital for long-term business success and survival.

Previous studies on the role of strategy in McE’s are all but absent. The majority (63

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percent) of the McE owners who took part in this research had no strategy for their

business. A few of the McE owners employed short-term strategies (25 percent)

concerning cash flow management, resource allocation etc while a still fewer number of

the McE owners employed long-term strategies (12 percent). The McE owner’s

abeyance from developing and implementing strategy could be attributed to the nature

of their business activity and lack of awareness. To decipher whether employing

business strategy positively influenced the McE’s profit levels, average profit

percentages (POT percentage) for McE’s which had a business strategy were compared

to those which did not. The results of this exercise are represented in Figure 8.13.

5.00%

4.00%

3.00%
POT %

2.00%

1.00%

0.00%
Long term Short term
Use of strategic plans No strategy
strategy strategy
Average McE POT % 3.85% 2.10% 1.19%
(1995-2005)
Figure 8.13. McE owner’s motivation to start business v Profit percentage

Figure 8.13 reveals that the average profit percentage of the McE’s whose owners

employed long-term business strategies were nearly three times more than those who

employed no strategies. This clearly highlights the benefits McE’s could accrue by

developing and implementing long-term business strategies.

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Growth

As highlighted before business growth can be considered as both an owner and business

centric factor as business growth is contingent on the business owners intention to grow.

The majority (73 percent) of the McE owners who took part in this research were averse

to the idea of growth as they felt that they would loose control of their business. As part

of this research an attempt was made to decipher as to what the McE owners thought

was the optimum size for their business. To achieve this McE owners were asked to

identify their satisfaction level regarding key personal and business factors namely

personal independence, financial independence, cash flow, social status, pressure and

self worth during each stage of their business life cycle. Only mature McE’s with 8-9

employees were included in this research given that they had gone through different

stages in their life cycle. The results of this exercise are represented in Figure 8.14.

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 Chapter 8

100%

90%

80%

Satisfaction level
70%
Optimum size for a McE
60% (based on McE owners
perceptions).
50%

40%

30%

20%

10%

0%
0-3 4-6 7-9
Size of firm
Level of personal independence 81% 11% 8%
Level of financial independence 13% 38% 49%
Satisfaction with cash flow problems 58% 29% 13%
Satisfaction with pressure 58% 32% 10%
Increment in social status 11% 28% 61%
Level of self worth 9% 21% 70%

Figure 8.14. Optimum size for McE’s (McE owners perception)

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Figure 8.14 reveals that the McE owners were most comfortable with cash flow,

independence, and pressure levels exerted on them when they were extremely small

(when employing 0-3 people) in size whereas they felt most comfortable with their

financial independence, social status, and self-worth when they were bigger in size

(when employing 6-9 people). On accretion of the above facts, it can be construed that

most McE owners find themselves to be of an optimum size when employing around

three people. The McE owners felt that at this stage in the business they were in

complete control of their business and were satisfied with the level of cash flow,

financial independence, pressure, self-worth, and social status. Given that the McE

owners were most satisfied with their businesses were of a small size, brings up the

questions as to why should the McE owners look for growth. To decipher this average

profit percentage for McE’s which intended to grow were compared to those, which did

not. The results of this exercise are represented in Figure 8.15.

3.50%

3.00% 2.90%

2.50%

2.00%
POT %

1.50% 1.31%

1.00%

0.50%

0.00%
Yes No
Intention to grow business
Average McE POT % (1995-2005)

Figure 8.15. McE owners intention to grow business v. Profit percentage

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 Chapter 8

Figure 8.15 reveals that the average profit percentage for the McE’s whose owners

intended to look for business growth was twice that of, those who were satisfied with the

current size of their business. This clearly highlights that the McE owners who look for

growth are more successful than those who don’t. McE’s growth would inspire more

people to join the ranks of the self-employed and would thus help redress the high

attrition rate of McE’s.

The findings in the preceding section of this chapter highlight that the endogenous

factors assessed as part of this exercise strongly influence McE profits and hence can be

construed to be vital for McE success. This exercise was a limited scope investigation

and makes no claims about the exclusivity of the endogenous factors identified as part of

this research i.e., there could be a number of endogenous factors which have not been

assessed in this research which could affect McE fortunes. This highlights the

tremendous scope for further research in this area as this research was only a nascent

attempt at what could be regarded as one of the key research areas that both industry and

research establishments need to focus on.

The following section of this chapter comprises, elaboration of findings related to the

key exogenous factors. The deliberation in the following sections would be lacking in

profundity given the short time that was spend analysing these factors. Exogenous

factors require long-term assessment, which was outwith the scope of this research.

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8.4.3. Exogenous factors

In Chapter 5 six key exogenous factors were identified which were presumed to affect

McE’s. As part of this research, a short time was spent on three different construction

projects procured by three different routes to decipher the prevalence of the presumed

project centric factors. Information during this stage of the research was collected by

means of interviews, open-ended discussions, and general observation. The following

sections of this chapter comprise a brief deliberation of findings related to exogenous

factors.

Absence of written contract

As identified in Chapter 5, absence of written contract could in effect restrict the rights

of a McE arising from the work they do on construction projects. It has been established

that this is a legal grey area as work done by the McE’s on construction projects might

not come under the ambit of a construction contract nor an employment contract. This

situation would give rise to a number of legal complications, which need in-depth legal

scrutiny.

McE’s are often employed on construction projects on the basis of a verbal order. This

verbal order is considered a promise and under Scottish contract law, a verbal promise

implies that a contract exits between the parties however, the Housing Grants,

Construction and Regeneration Act (1996) does not consider such a contract as a

building contract. The Housing Grants, Construction and Regeneration Act (1996) forms

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the basis of most dispute resolution exercises in the UK construction industry and given

that work done by the McE’s does not fulfil the criteria of a constriction contract McE’s

options regarding dispute resolution are further limited. As part of this research,

contracts between the McE’s and their employers were scrutinized following which time

was spend on construction projects on the lookout for problematic situations that might

arise due to the absence of a written contract between. The results of this exercise are

represented in Table 8.2.

Table 8.2. Absence of written contract

Problems for McE’s

Contractual agreement of arising owing to

standard written form absence of written

Procurement
between main-contractors/ contractual
route
subcontractors and McE’s agreements as

observed on site
YES NO YES NO
Construction
17.65% 82.35% 46.43% 53.57%
management
Management
100% 60% 40%
contracting
Traditional 11.11% 88.89% 37.50% 62.50%
Average 9.59% 90.41% 47.98% 52.02%

Table 8.2 reveals that more than 90 percent of the contractual relations between the

McE’s and their employers, which were scrutinized, were based on verbal orders i.e.,

promise. It was also noted that 52 percent of the contractual relationships which were

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scrutinized had some or the other problem which had arisen due to the absence of a

written contract. The contractual relationships between the parties as observed on

construction projects are represented in Figure 8.16.

BASED
ON STANDARD
FORMS OF
CONTRACT-
MC GREATER
D
RIGHTS
I

C ON TR AC T
COHESIVE
RELATIONSHIP R
E EMPLOYER-
C EMPLOYEE
T
SC RELATIONSHIP-
GREATER
C ON TR AC T

H RIGHTS
I
R
CONFRONTATIONAL E BASED ON A
RELATIONSHIP VERBAL
McE’s
PROMISE

MC: Main-contractor
SC: Subcontractor

Figure 8.16. Typical structure of contractual relationships on construction projects

Figure 8.16 highlights the confrontational relationship that might exist between the

subcontractors and the McE’s. The majority of the McE’s are employed by

subcontractors on construction projects on the basis of a verbal order, which gives rise

to many of the conflicts between them. It was interesting to find that the McE’s

employed by the main-contractors though limited in number found themselves in a

better situation as the contractual relationship between them was that of a employer-

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employee. Based on the above it can be construed that the McE’s should opt for a

written contractual agreement were possible as against a mere verbal promise.

Collusion

As identified in Chapter 5 collusion usually manifests itself in the UK construction

industry in form of collusive tendering (Fraser and Skitmore, 2000; Doree, 2004) and

price fixing (Lowe, 1987). The preliminary shadowing exercise revealed that there

exists a tacit form of collusion on construction projects were the main-contractors and

subcontractors collude against the McE’s to deprive them of their rights, influence etc.

To test whether this was a usual phenomenon time was spent on construction projects on

the lookout for it recurring prevalence. The results of this exercise are represented in

Table 8.3.

Table 8.3. Instances of collusion observed on site

Main-contractor-Subcontractor collusion against McE as observed on site

Procurement Route YES NO
CM 64.61% 35.39%
MC 80% 20%
Traditional 74.07% 25.93%
Average 72.89% 27.11%

Table 8.3 reveals that the instances when the main-contractors and subcontractors

colluded against the McE’s were rather high. This highlights that the McE’s position at

the base end of the industrial hierarchy could well be attributed to the main-contractors

and subcontractors volitional subjugation and manipulation of the McE’s. On extended

observation, it was revealed that the tacit collusive arrangement that exists between

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main-contractors and subcontractors was effecting McE’s at a number of levels. The

collusive arrangement as observed on the construction projects are represented in Figure

8.17.

McE’s
PAYMENTS

A INVOLVEMENT
IN PROJECT
F
COLLUSION
F RIGHTS

MAIN CONTRACTOR SUB

CONTRACTOR
E
C
MOTIVATIONS

COLLUSION T INTENTIONS

S
BEHAVIOUR

Figure 8.17. Collusion on construction projects and it affect on McE’s

Figure 8.17 highlights the effect tacit collusion in construction projects might have on

the McE’s. It was found to affect the McE’s at both an owner and business centric level.

Collusion affects the McE owner’s behaviours, intentions, and motivation at the owner

centric level and their payments, rights and involvement in projects at a business centric

level. The McE owners who were interviewed felt that this unholy nexus between main

contractors and subcontractors was restricting their ability to stand for themselves and

further negating any chance of restitution of the current McE attrition rate. When the

Office of Fair Trade were approached with this issue, no responses were received from

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them which further highlights that the government institution which have been set up to

counter such malpractices within industries give a blind eye to the situation the McE’s

find themselves in.

Conflicts

As identified earlier in Chapter 5 the UK construction industry is known for its

adversarial nature (Latham, 1994, Egan, 1998). Conflicts are a daily event on

construction projects, which could be attributed to its overly fragmented structure. As

identified in the preceding sections of this chapter, McE’s are at the bottom of the

industrial hierarchy thus negating any sway that they might have on construction

projects. The shadowing exercise revealed that the McE’s were often at the receiving

end in most conflict situations with both the main-contractors and the subcontractors

ganging up against them. To test whether this was a usual phenomenon time was spent

on construction projects on the lookout for it recurring prevalence. The results of this

exercise are represented in Table 8.4.

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Table 8.4. Instances of conflicts observed on site

Initiative Average delay

Instance of Average delay
taken by caused due to Initiative taken
main-contractor Instance of caused due to
main- main- by
-McE conflict subcontractor-McE subcontractor-
contractor contractor- subcontractor
observed on conflict on site/day McE conflict
to resolve McE conflict to resolve issue
site/day per day
issue per day
YES NO YES NO YES NO YES NO

70
86.36% 13.64% 26.19% 73.81% 63.64% 36.36% 26.83% 73.17%
64 minutes
minutes

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Table 8.4 reveals that a number of conflicts involving the main-contractor and the

subcontractor v. the McE’s were observed on construction projects. It was interesting to

note that though in most instances the main contractors and the subcontractors had

instigated the conflict, they took no initiative to resolve the issue. The blame was

squarely levied on the McE’s with the McE’s in no position to retaliate. A lot of time

was wasted in construction projects due to the ensuing conflicts. On an average around

60-70 minutes of daily work time was lost due to conflicts. This ensuing conflicts pitted

the McE’s against the combined forces of the main-contractors and the subcontractors.

This situation was regularly observed on projects and is represented in a pictorial

manner in Figure 8.18.

McE

McE McE McE

McE's McE's McE LOGGER- MAIN AND SUB-

McE’s WORK ON CONTRACTORS
THE FRONTLINE HEADS WORK IN
BUT ARE
McE's NOT
McE's McE WITH UNISION LEAVING
McE’s AT THE
GIVEN DUE
RESPECT EACH EXTREME
FRINGES
McE's McE's McE OTHER

McE McE McE

McE

Figure 8.18. Conflict situations as observed on site

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Figure 8.18 highlights the rather deplorable scenario that the McE’s find themselves in;

subjugated by those in the higher echelons of the industrial hierarchy the McE owners

are left with low self-worth and a deep-set aversion to work in the construction industry.

The McE owners felt that they were merely required to fulfil functional roles in

construction projects with no actual influence on the proceedings of the project. This

they felt affected their self-worth and further motivated them get out of the construction

industry, which could be attributed to their high attrition rate.

Information asymmetry and distortion

The main-contractors and subcontractors representatives who were interviewed as part

of this research held the McE’s responsible for a large proportion of the defective work

on construction projects. They were of the view that the McE’s were not adept enough

to handle the pressure of work and also suggested that they were lacking in skill levels.

Research carried out as part of this research does support their claims however their lies

an underlying twist to this tale. The preliminary shadowing exercise revealed that

information asymmetry which travels down from the main contractor to the McE was

one of the main causes of defective work. To test whether this was a usual phenomenon

time was spent on construction projects on the lookout for it recurring prevalence. The

results of this exercise are represented in Table 8.5.

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 Chapter 8

Table 8.5. Instances of information delay observed on site

Procurement Instance of Information delay % of Defective

route information source instances of work by

Main- Sub-
delay information McE due to
contractor contractor
observed delay which information

on site/day led to distortion

information

distortion
CM 67.65% 78.26% 21.74% 69.57% 75%
MC 60% 66.67% 33.33% 66.67% 100%
Traditional 70.37% 73.68% 26.32% 63.16% 83.33%
Average 66.01% 72.87% 27.13% 66.46% 86%

Table 8.5 reveals that a large proportion (86 percent) of the defective work, which the

McE’s were blamed for, was due to information distortion brought about by

communication gaps in the project. The main-contractors were found to be the main

source of the information asymmetry. Information travelled from the main-contractor to

the subcontractor through a number of points of information transactions and at every

stage information which emanated from the main-contractor was found to be distorted.

By the time information reached the McE’s the state of the information had been

completely distorted. This scenario as observed on construction projects is represented

in a pictorial manner in Figure 8.19.

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MAIN CONTRACTOR

DISJOINTED BACKWARD INFORMATION FLOW

has absolute information (100%)
about the project and passes
down info to sub-contractors
specific to the work
they do Information flows from Sub-
Contractors to Main

FORWARD INFORMATION FLOW

Information flows from Main
Contractor to Sub- MULTIPLE POINTS Contractor
contractors OF INTERACTION

SUB-CONTRACTOR SUB-CONTRACTOR SUB-CONTRACTOR

(Small to Medium passes info to McE’s (Small to Medium
Enterprise) specific to work they Enterprise)
do

Information flows
Distorted Information flows from McE’s to
from Sub- Sub-contractors but they
Contractors to McE’s McE McE McE have no contact
McE McE McE McE with main contractor
McE’s receive very limited
McE ME MEandME ME ME ME McE
distorted
McE info concerning the project McE
ME ME ME ME ME ME ME
thereby giving the main contractorME
ME ME ME ME
undueME ME over
leverage ME them

Figure 8.19. Information asymmetry as observed on site

Figure 8.19 highlights the information flow as observed on site. As highlighted before

information reaches the McE’s in distorted state. The scenario is further complicated by

the fact that the McE’s don’t have a direct link with the main contractors hence any

work related queries they have to be first reported to the subcontractor who further

transmits the information to the main-contractor. The multiple points of information

transaction further distorts the information. Based on the above findings it can be

construed that a large proportion of the defective work which the McE’s are blamed for

is in fact a result of the information asymmetry and distortion which occurs during the

multiple stages of information flow.

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Payment delay

The McE owners who took part in this research, revealed that their businesses were

plagued by a severe cash flow problem, which they believed were one of the main

reasons for the high attrition rate of McE’s. On being asked to identify the factors which

they felt caused this cash flow problem, the majority (88 percent) cited payment delays

on construction projects as the main causal factor. To test whether this was really the

case a thorough analysis of onsite payment schedules was carried out. The results of this

exercise are represented in Table 8.6.

Table 8.6. Instances of payment delay observed on site

Payment delay Who is to blame for payment

observed on site delay

Interview response Procurement
Main- Sub-
YES NO McE
contractor contractor
Cash flow problem CM 75.75% 24.25% 26.92% 65.38% 7.69%
YES 66.67% MC 60% 40% 100%
NO 33.33% Traditional 62.96% 37.04% 29.41% 70.59%
Main causes of

cash flow problem

Payment Average 66.24% 33.76% 18.71% 78.66% 2.56%
83.33%
delay
Debt 16.67%

Table 8.6 reveals that payment delay is a common occurrence on construction projects.

The payment delays suffered by the McE’s were found to stem from the subcontractors

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volitionally delaying payments to improve their own cash flow cycle. This was also

corroborated by a few subcontractor’s representatives who noted that the McE’s were

paid sometimes as late as 45 days after they have submitted the bill. This further adds to

the misery of the McE’s as they have to survive in a highly volatile and competitive

industry which requires that they maintain a sufficient level of internal cash flow but

regular payment delays impede them from doing so, thus resulting in high rate of

business attritions.

Recent changes in taxation policies

Every new government that comes to office changes the taxation norms to better suit

their economic policies. The constant change in tax polices worse affect the smallest

businesses as they find themselves in a quandary while dealing with the legal modalities

involved in this process. Briscoe et al. (2000) in their research on the affect of taxation

policies on the self-employed in UK revealed that there is a direct link between the

changes in tax policies and the high attrition rate of self-employed in the UK

construction industry. As identified in an earlier section of this chapter, the number of

self-employed in the UK construction industry has been diminishing from the mid

1990’s at a rather high rate. This could be attributed to the two new taxation policies,

which were incorporated in 1996 and 1999, which increased the threshold for

individuals, who wanted to join the ranks of the self-employed (Briscoe at al., 2000). As

part of this research, McE owners (only those employing 0-1 people) and the

contractor’s representatives were asked to identify their perceptions regarding this issue.

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There was a growing antagonism within the construction industry workforce regarding

the new taxation scheme. A large section (88 percent) of the McE owners felt that

regular changes in taxation schemes preclude individuals from setting up their own

business. They felt that the minimum requirement that was set for individuals and

companies who wanted CIS 5 and CIS 6 certification was rather stringent and required

huge capital investments. The common belief was that in the name of taxation reforms

the policy makers i.e., the government was in fact firing the death salvo for

entrepreneurship culture in the industry.

The majority (67 percent) of the contractor’s representatives who were interviewed felt

that the regular changes in taxation policies have exacerbated the skill shortage in the

industry. A very large section (91 percent) of the contractor’s representatives also felt

that policy makers should continue providing tax rebates of the type provided before the

1999 policy changes as it acted as a catalyst to attract individuals to work in the

construction industry.

Based on the above findings, it can be construed that regular changes in taxation policies

are detrimental for the future of self-employment in the UK construction industry.

Who is to blame for the abject exogenous factors which adversely affect McE’s?

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The preceding sections of this chapter elaborated on a few of the exogenous factors,

which inhibit McE success. These vitiating factors were found to have been caused by

groups both within and outwith the project setting. The factors have been linked to their

causal sources and represented in Table 8.7.

Table 8.7. Causal sources for the exogenous factors inhibiting McE success

Problems Source of problem (Responsible parties)

faced by Main-
Government Subcontractor McE
McE’s contractors
Absence of

written √ √ √ √

contract
Conflicts √ √
Collusion √ √
Information
√ √
asymmetry
Payment delay √
Taxation
√
policies

Table 8.7 reveals that the main source of the inhibiting factors is the subcontractor who

directly employs the McE’s. Based on the above it can be construed that the

subcontractors might in fact be subjugating the McE’s for their own selfish interest. This

calls for urgent steps which would redress the aforementioned scenario and create a

more egalitarian project hierarchy where McE’s work with the main contractors and

subcontractors as partners as against their current vassal roles.

The findings in the preceding sections of this chapter highlight that the exogenous

factors assessed as part of this exercise strongly influence McE’s and hence can be

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construed to be vital for McE’s success. This exercise was a limited scope investigation

and makes no claims about the exclusivity of the exogenous factors identified as part of

this research i.e., there could be a number of exogenous factors which have not been

assessed in this research which could affect McE’s fortunes. This highlights the

tremendous scope for further research in this area as this research was only a nascent

exercise and needs to be further researched to decipher all the exogenous factors, which

might inhibit McE’s growth.

8.5. Summary

The preceding sections of this chapter highlighted that the general perception regarding

McE’s is that they are at the base end of the industrial hierarchy. The results of the

shadowing exercise revealed that McE owners had low self-worth and saw themselves at

the bottom end of the industrial hierarchy. The findings of this chapter conclusively

proved that McE’s success is contingent on the endogenous and exogenous factors

identified in this research. The following chapter comprises of an elaborate discussion of

the findings of the preceding two chapter, answers to key research question also

elaborate on a few measures advocated to preclude McE failure.

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9. Discussion of quantitative and qualitative findings

9.1. Introduction

This chapter comprises of a summary of findings highlighted in the preceding chapters.

These findings form the basis of the answers to the key research questions that

collectively help address the central aim of this research i.e., to identify factors which

inhibit the development of McE’s. In addition to this McE and project centric measures

aimed at redressing the current status quo of McE’s have been elaborated in this chapter.

9.2. Summary of research findings

This section of the chapter summarises the findings of this research discussed in the

preceding sections of this chapter.

Analysis of generic McE and industry centric information

The first stage of this research involved in-depth analysis of relevant McE and industry

centric data, findings from which are enumerated below:

• Analysis of McE VAT registration and de-registration statistics for the period

2002-2006 revealed that thus far, McE VAT registrations have been higher than de-

registrations however the number of de-registrations per year have been increasing

at a faster rate than registrations which would entail that McE de-registrations might

soon supersede registrations. Based on speculative forecast it was revealed that if all

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the determining conditions were to remain same, McE de-registrations would

supersede registrations by 2012.

• Analysis of annual trends for McE numbers across different groupings (based on

classification used by National Statistics Office) for the period 1995-2005 revealed

that there has been a year on end decrease in the number of McE with 0-1

employees. McE’s with 2-3 and 4-7 employees saw a drop in their numbers till 2000

following which their numbers have been steadily increasing. McE’s with 8-9

employees saw a year on end increase in their numbers for the period 1995-2005.

McE’s with 0-1 employees constitute the large section of McE’s firms (86 percent)

and employ the maximum number of people (42 percent), drastic drop in their

numbers could be attributed as the main reason for the high attrition rate of McE’s.

• Comparison of self-employment rate in the UK construction industry v. other

industries revealed that self-employment rates in the constriction industry have been

gradually decreasing whilst steadily increasing in other industries.

• Analysis of survival rates of McE post VAT registration revealed that young McE’s

have a very high failure rate and those McE’s which did survive the first few months

after inception tend to falter as time progresses.

• Comparison of industry output v. McE numbers revealed that whilst the overall

industry output has grown by around 43 percent from 2001-2005 (DTI, 2006) which

amounts to an annual growth rate of around 8 percent, the total number of McE’s in

the same period has dropped by around 2.5 percent. The sharpest drop in numbers

was in McE’s with 0-1 employees which saw a drop of around 21 percent

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The above findings paint a grim picture for the future of the McE’s. In this time of

burgeoning industrial growth the McE’s have seen a drop in their stock which is further

exacerbated by the low survival rate of the young McE’s and increasing level of de-

registration across all the groupings of McE’s. This scenario was perplexing given that

under general circumstances industrial growth bring with it a drastic increase in number

of firms operating within that industry. These set of findings conclusively proved that

though McE’s can be called lifeblood of the UK construction industry on the basis of

their contribution to the industry, in actual fact their situation was to the contrary as they

were merely jostling for survival.

Preliminary opinion survey

Shortcomings of the literature review instigated a preliminary opinion survey. This

survey was carried out using semi-structured questionnaires which were directed

towards the McE owners, government, and construction industry representatives. The

questionnaires sent to the aforementioned participants were different in content and

hence the findings of this exercise have been enumerated in three different sections as

shown below:

McE owners perceptions

• Majority (78 percent) of the McE owners who took part in the survey believed that

McE’s are not important for the growth and survival of the UK construction

industry.

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• A large section (79 percent) believed that McE’s are at the base end of industrial

hierarchy.

• Majority (84 percent) of the McE owners believed that high McE attrition rate would

have no adverse affect on the UK construction industry.

• Majority (61.67 percent) of the McE owners who participated in this survey were

dissatisfied with the profit levels of their business.

• Majority (89%) of the McE’s owners believed that, McE’s were in no position to

train and develop staff

On accretion of the above facts and figures, it can construed that the McE owners are

unmotivated and dissatisfied individuals with low self worth who see their firms at the

bottom of the industrial hierarchy as against the vital cogs that they really are. This low

self worth could be linked to the high attrition rate of McE’s as the McE owners would

no longer have the motivation required to compete and survive.

Government representative’s perceptions regarding McE’s

• Majority (53 percent) of those who took part in this survey believed that McE’s are

not important for the growth and survival of the UK construction industry.

• A large section (66 percent) believed that McE’s are at the base end of industrial

hierarchy.

• Majority (87 percent) of the respondents believe that high attrition rate of McE’s

would not adversely affect the construction industry.

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• Majority (80 percent) of the government bodies do not directly employ McE’s and

those which did employ McE’s had meagre levels of interaction with them (only 27

percent of the respondents interacted with McE’s on a regular basis).

• When asked to cite a remedy for the skill shortage that plagues the UK construction

industry, majority (53 percent) of the respondents identified that immigrant labour

would satisfy this demand.

• Majority (53 percent) of the respondents believe that McE’s cannot be funded to

recruit, train, and develop staff to offset the skill shortage in the industry.

On accretion of the above facts and figures, it can construed that the government

agencies develop industry centric policies based on a distant perspective detached from

the reality that the McE’s are a vital cog of the industry. Based on the above information

it can also be argued that government bodies might in fact be drawing up policies

contradictory to the needs of the industry.

Main contractor’s representative perceptions regarding McE’s

• Majority (53 percent) of those who took part in this survey believed that McE are

vital for the growth and survival of this industry.

• A large section (67 percent) of them considered McE’s at the base end of the

industry.

• A very large section (93 percent) of the respondents believed that the high attrition

rate of McE’s would adversely affect the industry.

• Majority (60 percent) of the main contractors directly employ McE and a large

section (53 percent) interact with McE’s on a regular basis.

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• Majority (60 percent) of the respondents identified that immigrant labour would

satisfy this demand

• Most of the main contractor’s representatives (73 percent) believed that McE’s could

be funded to recruit, train, and develop staff to offset the skill shortage in the

industry.

On accretion of the all the above facts it can be construed that the main-contractors

representatives are in a better position vis-à-vis government representatives to

understand the vital role the McE’s play in the growth and survival of the UK

construction industry.

The above findings highlight that that universal perceptions regarding the McE position

in the industrial hierarchy are similar; everyone considers the McE’s at the base end of

the industrial hierarchy. The McE owners perception regarding their low level of

importance in the industry were in line with the government representatives perceptions

whereas the main contractor was of the view that the McE’s are important which

highlights their intimate knowledge of the internal dynamics of the industry. The McE

owners and government representatives believed that the high attrition rate of the McE’s

would not affect the construction industry whereas main contractors once again

highlighted their greater knowledge of the industry by rightly suggesting that high

attrition rate of McE’s is detrimental for the industry.

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On the whole the preliminary opinion survey highlighted that the perceptions of the

participants regarding the McE’s defied the actual role and position of the McE’s in the

UK construction industry.

Shadowing exercise

The preliminary opinion survey was followed up with a short McE centric shadowing

exercise to decipher the McE centric ground realities. This exercise was further used to

decipher problems that the McE owners faced and other owner centric factors results for

which have been enumerated below:

• Most of the McE owners who were shadowed fit a certain standardised profile with

similar characteristics, aims, and aspirations.

• Their main motive behind starting the business was a strong desire for

independence.

• When asked to identify their relative position in the industrial hierarchy most of

them saw themselves as habiting the base end.

• Most of them also thought that McE’s were not important for the growth and

survival of the industry.

• When asked to comment on the high attrition rate of McE’s and the affect it could

have on the industry, most of them identified that this phenomenon would not have

any veritable adverse affects.

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• Majority of the McE owners who were shadowed were of the view that McE’s were

in the deplorable position they found themselves in because of the inaction of those

in the higher echelons of the industrial hierarchy.

• When asked to comment on their relationship with the main contractors, many of

noted that main contractors were merely using them to fulfil their own objectives

with out giving them due respect.

• On the issue of skill shortage, most of the McE owners identified that they had no

role to play in offsetting the skill crunch instead felt that their own businesses were

dying given the shortage of labour.

The findings of the shadowing exercise were in line with the findings of the preliminary

opinion survey. This exercise further highlighted that the McE’s usually work as stand-

alone companies and are generally not affiliated to any professional or business body.

McE centric investigation

McE centric investigation was carried out to assess the affect McE owners background

and endogenous factors have on the McE’s performance. This exercise involved

comparison of McE owners inclinations, motivations and skill sets to their firms profit

percentages to decipher whether variance in the McE owners inclinations, motivations

and skill sets affect McE profit levels. The findings of this exercise have been

enumerated in two different sections as shown below:

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McE owners background

This section comprises of the findings pertaining to the McE owners background. As

part of this research, McE owners background information i.e., age, marriage status etc.

were compared to the overall profit percentages of their firms to decipher whether

variance in these general factors affect the McE’s profit levels, results for which have

been enumerated below:

• Majority of the McE owners were married (77 percent) Caucasian (100 percent)

males (100 percent) with an average age of around 47 years. This finding highlights

that the majority of the McE owners were males from a single ethnic background

thereby suggesting that females and individuals from other ethnic backgrounds

might be reluctant to start businesses within the construction industry.

• Majority of the McE owners (61.67 percent) were middle aged i.e., between 45 and

65 years of age. Comparison of McE owners age to their business profit percentages

revealed that the profit percentage McE’s with middle-aged owners is significantly

lower than that for McE’s with younger owners. Based on the above it could be

construed that McE’s owned by younger owners perform better those owned by

older owners.

• The above finding revealed the need for a dynamic and young set of McE owners

however, on analysis of McE’s owners age statistics it was revealed that young

(below 45) McE owners were a rarity which highlights an aversion among

youngsters to start their own businesses in the industry. To test the above assertion

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young individuals (Sample size: 80) who had recently joined construction industry

apprenticeship programmes were asked to identify whether they would like to be

self-employed or directly employed in the future. In response majority (75 percent)

of the trainees chose direct employment over self–employment. Those who had

chosen direct employment were further asked to define the reasons for negating self-

employment as a career choice. Majority of the respondents were of the view that

self-employment would not give them the security and leisure time that they yearned

for.

The above findings reveal that the McE owners background does have a veritable affect

on their business performance. This link between factors like owners age and business

performance has not been identified in previous research exercises pertaining to small

business performance. The above facts call for a review of current government policies

as they seem to have regulations and policies in place which preclude certain groups of

individuals from joining the industry.

The following section identifies the key findings related to the endogenous factors

which were assessed as part of this research.

Endogenous factors

Six owner and two business centric endogenous factors were assessed as part of this

research. The assessment involved identification of McE owners skills set and

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inclinations and perceptions regarding key owner and business centric factors following

which these findings were compared to the average profit percentage of their firms to

decipher whether variance of these factors affect the McE’s profit levels. The findings of

this exercise have been enumerated below:

• Propensity to take risks: Majority (88.33 percent) of the McE owners were found

to be risk averse. Comparison of average profit percentage of turnover (for the

period 1995-2005) of McE’s whose owners were willing to take risks v. risk averse

owners revealed that profitability of McE’s whose owners were willing to take risks

is almost two and half times more than those who were not.

• Willingness to innovate: Majority (90 percent) of the McE owners were averse to

any sort of change/innovation. Comparison of average profit percentage of turnover

(for the period 1995-2005) of McE’s whose owners were willing to innovate v. those

who were innovate revealed that average profit percentage of McE’s whose owners

who were willing to innovate is nearly two times more than those who were not.

• Education: Majority of the McE owners had vocational (32 percent) qualifications.

Comparison of average profit percentage of turnover (for the period 1995-2005) of

McE’s v. McE owners education level revealed that McE’s whose owners who had

the highest educational qualification i.e., the undergraduates had the nearly two

times the profit levels of those who had lower educational qualifications i.e.,

vocational. This exercise also revealed that This research revealed that on the whole

McE owners had lower educations qualification vis-à-vis owners of micro-

enterprises from other industries

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• Inclination to employ external consultants: Majority (85 percent) of the McE

owners were not inclined to employing external consultants. Comparison of average

profit percentage of turnover (for the period 1995-2005) of McE’s whose owners

had employed external consultant to those who had not revealed that average profit

percentages for McE’s which employed the services of an external consultant were

nearly three times more than those who had not

• Training programmes: Majority (75 percent) of the McE owners who took part in

this had not attended any training programmes. Comparison of average profit

percentage of turnover (for the period 1995-2005) of McE’s whose owners had

attended training programmes to those who had not revealed that average profit

percentages for McE’s whose owners attended training programmes were nearly two

times more than those who had not

• Motivation to start business: McE owners identified a number of motivations for

starting the business, majority however had started their business with the intention

of maintaining their freedom and for attaining a higher social status. Comparison of

average profit percentage of turnover (for the period 1995-2005) of McE’s on the

basis of their owners motivation revealed that McE owners who started the business

because of a genuine interest in trade had significantly higher profit percentages than

those who started their businesses because of other motivational factors.

• Strategy: Majority (63 percent) of the McE owners who took part in this research

had no strategy for their business. Comparison of average profit percentage of

turnover (for the period 1995-2005) of McE’s whose owners employed a business

strategy to those who did not revealed that the average profit percentage of McE’s

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whose owners employed long-term business strategies was nearly three times more

than those who had no strategies

• Growth: Majority (73 percent) of the McE owners who took part in this research

were averse to the idea of growth as they felt that they would loose control of their

business. On being asked to identify an optimum size for a McE, most McE owners

identified that the optimum size of a McE when it employs around three people.

Comparison of average profit percentage of turnover (for the period 1995-2005) of

McE’s v. McE owners intention to grow revealed that average profit percentage for

McE’s whose owners intended to grow were nearly two times more than those who

were satisfied with the current size of their business.

The above finding highlight that the above factors influence the McE’s profit levels and

hence can be construed to be vital for McE success. The McE owners who had higher

educational qualifications and a strong inclination to take risks, innovate, employ

external consultants and a had a genuine interest in trade were the most successful of the

lot. It was also found that McE owners with a genuine interest in trade and an urge to

constantly upgrade their skill sets (undertake training courses) had the most successful

businesses.

The above findings highlight that the average McE owners are not adept enough to

operate a profitable business. They were also found lacking in all the basic factors

required for entrepreneurial success. In essence, the average McE owners were

staunchly opposed to change, which is forced upon by them a rapidly changing

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construction industry thus resulting in their high attrition rate. This calls for a new set of

McE owners who would be more entrepreneurial in their approach. The current state of

McE owners is rather deplorable as they find themselves as a group resisting change

whilst others in the industry have moved on and embraced change with open arms. The

situation is further exacerbated by the aversion of youngsters to self-employment

(highlighted in section on generic statistical analysis) thus negating the infusion of fresh

blood which the McE’s urgently need for survival.

Among the larger population of the McE owners there exist a few McE owners who

were open to change and had the right motivation and inclination to survive in the

industry. These owners had profitable businesses, were growing at a rapid pace, and

could be regarded as ideal McE owners and their businesses the ideal McE’s.

Project centric investigation

Project centric investigation involved fours months of field research that was carried out

to decipher the prevalence of six key exogenous factors which were presumed to affect

McE’s, results for which have been enumerated below:

• Absence of written contract: This research revealed that most contractual

relationships between the McE’s and their employers were based on verbal orders,

which might not be recognised as construction contracts by the Housing Grants,

Construction, and Regeneration Act (1996). The absence of written contracts

between the McE’s and their employees restricts McE rights and further breeds

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tensions between the McE’s and their employers. Some might argue that

relationships between the McE’s and their employers could constitute a employment

contract however the basic structure of their agreement which is legally recognised

as a “Promise” in Scotland is not accepted by the employment tribunal as a legally

acceptable employment contract.

A standard written contract could be the solution however the temporal nature of

McE’s work on site further restricts the robustness of even a legally sound written

contract as it would not be accepted as a construction contract under the Housing

Grants, Construction, and Regeneration Act (1996). This calls for a review of the

Housing Grants, Construction, and Regeneration Act (1996), which should consider

the plight of the McE’s and reconstitute section 108 of the Act, which should

accommodate temporal agreements as construction contracts. Under the current

regulations McE’s have no clear rights to go to a dispute resolution tribunal with a

claim against their employee as the very basic requirement for a claim to be made is

that the contract in place should be as per the stipulations of the Housing Grants,

Construction and Regeneration Act which most McE-employer agreements don’t

qualify for. There is a general lack of clarity in this area and can be regarded as a

legal grey area which needs to be thoroughly analysed by the legal researchers.

• Collusion: This research revealed a strong tacit arrangement between main

contractors and subcontractors, which they use to subjugate the McE’s. The McE’s

find themselves at the receiving end in most project with no sway or influence to

stand for themselves. This collusive arrangement between the main-contractors and

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subcontractors reduces the McE owners inclination to stay and work in the industry

thus resulting in the high attrition rate of McE’s. Collusion manifests itself in many

ways prominent among which is main contractor and subcontractor level collusion

in delaying McE payments. The McE’s find themselves cornered within a project as

main contractors and subcontractors link up to restrict the McE’s rights and

influence in a project. Collusion could also be regarded as a major causal factor for

the low self worth of McE owners as they find themselves constantly rebuked by

main contractor and subcontractor on site.

When the Office of Fair trade was approached with this situation, they failed to

respond which highlights government disinterest in the plight of the McE’s. The

situation is further exacerbated, as most McE owners did not have any sort of

affiliation with a professional or industry body with whom they could raise their

concerns. This calls for a platform where the McE’s could come together and jointly

works towards raising their profile in the industry.

• Conflict: Many government led construction industry reports like Latham (1994)

and Egan (1998) reiterated their concerns regarding the adversarial culture in the

industry. The findings of this research revealed that the McE’s often find themselves

in an adversarial situation with their employees on construction projects. These

adversarial situations were generally instigated by the employee be it the main

contractor or the subcontractor but what was perplexing to note was they did not try

to resolve the issue. The McE owners who were interviewed as part of this research

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felt that no one really cares about their plight in the industry; as one of the McE

owners who were interviewed put it; “McE’s are all but cannon fodder” for those in

the higher positions in the industrial hierarchy. Conflicts affect owner at both

personal and business levels as constant rebuke results affect their self-worth and

further inculcates a deep-set aversion to work in the construction industry. Based on

the above it can be construed that conflicts might indirectly cause McE shutdown,

which would have an overarching impact on the industry and the larger economy as

a whole. This calls for a reawakening among those in the higher echelons of the

industrial hierarchy as they need to start giving the McE’s the respect which they

rightly deserve if the current rate of McE attrition is to be reversed or stemmed.

• Information asymmetry: Defects are a common incidence on most construction

projects. The main-contractors and subcontractors often cite mistakes caused due to

McE owners ineptitude as one of the main reasons for defects; findings of this

research prove otherwise. The findings of this research revealed that distorted

information flow emanating at the main contractor level is a cause of most defects.

By the time, information reaches the McE’s it distorts which results in defective

work. The problem is exacerbated by the absence of a feedback loop though which

the McE’s could interact with main contractors. This calls for a standardised system

wherein all parties working on the project are connected to each other thus allowing

for smooth flow of information. This requires that the main-contractors implement

new systems, which would bring the McE’s closer to them as against the current

system, which pushes the McE’s further away. Information asymmetry if precluded

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could prevent defects, which are as of now a common occurrence in most projects

and further redress the bad publicity the McE’s get for defective work and

ineptitude.

• Payment delay: Disputes occurring due to payment delays are a common

occurrence on construction projects. Findings of this research revealed that the

McE’s were paid sometimes as late as 45 days after they submitted their bills. This

causes internal cash flow problems for the McE’s and thus in the long run results in

their failure. It is interesting to note that in most instances, the main-contractors

released the payments due to McE’s on time but the subcontractors withheld it to

improve their own cash flow situation. The above scenario causes a lot of problems

for the McE’s and further breeds tensions between the parties on site. This calls for

stricter systems, which would regulate payment flow on construction projects and

make it mandatory for all parties to release payments on time. The Housing Grants

Act (1996) has provision to preclude payment delays however; these provisions

don’t generally apply to the McE’s, as their relationship with their employers might

not constitute construction contracts.

• Taxation policies: Findings of this research revealed that constant changes in

taxation policies adversely affect the McE’s, as they are generally not adroit enough

to meet the thresholds, which these policy changes require. This has led to a

decrease in self-employment numbers (Briscoe et al., 2000). The McE owners who

were interviewed as part of this research, believed that these tax policy changes

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don’t take into account the plight of the McE’s and are instead just means of

collecting more tax. This calls for a review of the process in place to make these

policy changes.

The exogenous factors enumerated above are generally outwith the McE owners sphere

on control and cannot be influenced by them. Restitution of these factors requires

external intervention, which should emanate from the main contractor as they are in the

position of power. As identified before main contractors are aware of the importance of

the McE’s however fail to identify scenarios that originate in project which are under

their control, which negatively affect the McE’s. This highlights either volitional

inaction or genuine ignorance on part of the main contractors. However if McE’s failure

is to be precluded main-contractors need to redress the way projects are carried out. This

calls for a rational reconstitution of the project hierarchy, which would result in a more

egalitarian system where all parties involved in the project, would have an equal say.

9.3. Key research questions

The preceding sections of this chapter comprised of a thorough analysis of the findings

of this research. These finding form the basis of the dataset which was used to answer

key research questions, answers to which would be accrued to answer the main research

question i.e., what are the factors that affect the development of the ideal McE. The

following sections comprise of the answers to the key research questions have been

deliberated over in different sections.

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9.3.1. Research sub-question 1: “Is the inclusion of McE’s in the SME cohort an

erroneous practice?”

One of the central assertions of this research is that inclusion of the McE’s within the

larger cohort of SMEs is an erroneous practice. To validate this assertion average profit

percentage of turnover (POT percentage) for McE’s was compared to that of small

construction enterprises (enterprises which employ 10-49 employees) for the period

2000-2005. In total 60 McE’s and 38 small construction enterprises were chosen for this

research. The McE’s that were chosen were same as the ones whose owners were

interviewed to ascertain the endogenous factors described in the earlier section of this

chapter. The variance in sample size is due to the fact that most small construction

enterprises who were approached for this research abstained from revealing their

business profits. It could be argued that a sample size of 38 McE’s should have been

chosen to maintain the robustness of this exercise. However, the choice of utilising the

POT percentage for 60 McE’s was persisted with, to maintain a level of consistency (in

terms of the information used). The first stage of this assessment exercise involved

comparing average POT percentage of McE’s and small construction enterprises for the

period 2000-2005. A linear regression test was applied to the dataset to reveal the

underlying trends. The results of this exercise are represented in Figure 9.1.

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y = 0.0018x - 3.5825
5.00% 2
4.50% R = 0.9587
4.21% 4.30%
4.00% 4.09%
3.71% 3.76%
3.50% 3.40%
3.00%
y = -0.002x + 4.0432
POT %

2.50% 2
2.00% R = 0.9409
1.90% 1.91%
1.71%
1.50% 1.52%
1.21%
1.00% 0.95%
0.50%
0.00%
1999 2000 2001 2002 2003 2004 2005 2006
Year
Average McE POT % for 2000-2005 (Sample size: 60)
Average Small enterprises POT % for 2000-2005 (Sample size: 38)
Linear (Average Small enterprises POT % for 2000-2005 (Sample size: 38))
Linear (Average McE POT % for 2000-2005 (Sample size: 60))

Figure 9.1. McE POT percentage v. Small construction enterprise POT percentage

The equations and the coefficients of determination for the trend lines in Figure 7.27 are

as follows:

y = -0.002x + 4.0432; R2 = 0.9409 (McE’s)

y = 0.0018x – 3.5825; R2 = 0.9587 (Small construction enterprises)

The coefficients of determination for both the trend lines in the above graph is almost 1

thus implying that there has been a strong year on end increase or decrease in the

average profit percentages of turnover (POT percentage) from 2000 to 2005. The trend

line representing the average POT percentage of McE’s has a steep negative gradient

thus implying that the average POT percentage of the McE’s have been steadily

decreasing from 2000-2005. Whereas the trend line representing average POT

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percentage of the small construction enterprises has a steep positive gradient thus

implying that average POT percentage of the small construction enterprises has been

steadily increasing from 2000-2005. On accretion of the above facts, it can be construed

that whilst average profit levels for McE’s has been consistently decreasing those for

small construction enterprises have been increasing. The above findings reveal that the

McE’s and the small construction enterprises have different profit levels however this

finding does not irrefutably validate the assertion that the McE’s are different from the

small construction enterprises as it can be argued that this difference in profit levels can

be attributed to the difference in their size and scope of work done. To prove that that

the McE’s are different from the small construction enterprises on the basis of their

average profit levels one needs to prove that the difference between their profit levels is

statistically significant. To achieve this, the means of their average POT percentages

were compared, following which t-test was conducted out to test for statistical

significance.

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4.50%

4.00%

3.50%

3.00%
POT %

2.50% 3.91%
2.00%

1.50%

1.00%

0.50% 1.53%

0.00%

Mean POT % (2000-2005)

McE Small enterprises

Figure 9.2. Mean POT %: McE v. Small construction enterprises

Figure 9.2 reveals that the mean of average POT percentage for the McE’s is

significantly lower than that for small construction enterprises. Based on the above, it

can be construed that on an average the McE’s profit levels are significantly lower than

that of the small construction enterprises however, this does not prove that the difference

between their means is statistically significant. To prove that the difference between the

mean of their profit levels is statistically significant one needs analyse the difference

between their variability (Clegg, 1982) for which the t-test was used the results for

which are represented in Table 9.1.

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Table 9.1. McE’s v. Small construction enterprises: t-test

t-Test: Paired Two Sample for

Means
Variabl
Variable 1
e2
Mean 1.533333333 3.925
Variance 0.150506667 0.13291
Observations 6 6
-0.93668512
Pearson Correlation
1
Hypothesized Mean Difference 0
df 5
-7.91109850
t Stat
6
P(T<=t) one-tail 0.000259701
t Critical one-tail 2.015049176
P(T<=t) two-tail 0.000519402
t Critical two-tail 2.570577635

The t-test (Table 9.1) revealed that the difference between the profit levels of the McE’s

and the small construction enterprises is statistically significant, since the two-tailed

probability is 0.000519402, which is much lower than alpha (i.e., 0.05). It also implies

that means of the samples differ. Applying the one-tailed test reveals that, that the one-

tailed probability 0.000259701 is much lower than alpha (i.e., 0.05). Based on the above

it can also be construed that mean for average POT percentage for small construction

enterprises for the period 2000-2005 is higher than the mean for McE’s for the same

period.

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Based on the above statistical analysis it can be inferred that average POT percentage

for the small construction enterprises is always higher than that of the McE’s. Given that

the above exercise proved that difference between the mean for average POT percentage

for the small construction enterprises and the McE’s is statistically significant, it can be

construed that McE’s are different from small construction enterprises.

This assertion is further validated by comparing the McE owners and small construction

enterprises owners skill sets and their inclinations and perception regarding key

endogenous factors. The findings of this exercise are represented in the form of spider

diagrams (Figure 9.3 and 9.4).

The spider diagrams are in the form of a nonagon, which has been divided into 9

segments. Each side of the segment or “arm” denotes a different variable, which

comprise of eight endogenous factors and one representing average POT percentage. All

these factors have been scored specific to their unit of assessment. The magnitude of the

scores increases as one goes further away from the centre except for the arms

representing education level and motivation.

The arm representing education level comprises of four different educational

qualifications i.e., ‘O’ level, ‘A’ level, vocational and undergraduate which were placed

on the arm in an increasing order of the McE’s profit levels (the McE’s whose owners

had higher educational qualifications were found to have higher profit levels, the

exception was the McE’s whose owners who had ‘O’ level qualifications). The arm

representing motivation comprises of five different motivations, which were placed on

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the arm in an increasing order representing increasing profit levels associated with each

specific motivation.

The shaded area within the spider diagram represents the inclination and perceptions of

McE and small construction enterprise owners towards each of the aforementioned

factors. The larger the shaded the greater would be the proclivity towards the specific

factors. The spider diagrams help clearly delineate the relationship that might exist

between profit levels and endogenous factors examined in this research.

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Figure 9.3. Average McE owners inclination, motivations, and skills

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Figure 9.4. Average small construction enterprise owners inclination, motivations, and skills

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Comparative analysis of the above spider diagrams (Figure 9.3 and 9.4) reveal that the

shaded area in the diagram representing the McE’s is much smaller than that of the

small construction enterprises which implies that:

• McE’s (1.53 POT percentage) have lower average profit percentage than small

construction enterprises (3.91 POT percentage);

• The McE owners (most had vocational degrees) have lower education qualifications

vis-à-vis the owners of small construction enterprise owners (most were

undergraduates);

• The majority (85 percent) of the McE owners were against the idea of employing an

external consultant whereas majority (65.79 percent) of small construction enterprise

owners were for it;

• Most (90.00 percent) of the McE owners were averse to innovation whereas the

majority (76.32 percent) of the small construction enterprise owners were innovation

oriented;

• The majority (73.33 percent) of the McE owners had no plans for business growth

whereas the majority (76.32 percent) of the small construction enterprise owners

were constantly looking for opportunities to grow their business;

• Freedom (36.00 percent) was the main motivation for the McE owners to start their

business whereas the small construction enterprise owners started their businesses

because they were genuinely interested in trade (50.00 percent).

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• Most (88.00 percent) the McE owners were unwilling to take business related risks

whereas the majority (65.79 percent) of all small construction enterprise owners

were willing;

• The majority (63.00 percent) of the McE owners had no strategic plans for their

business whereas the majority (52.63 percent) of the small construction enterprise

owners had clearly laid out long term strategic plans for their business;

• The majority (75 percent) of the McE owners had not attended any sort of training

programmes whereas a large section (68.42 percent) of the small construction

enterprise owners had.

The above facts reveal that inclinations, perceptions, and skill sets of the McE owners

are diametrically opposite to that of the small construction enterprises owners. On

accretion of the above facts and figures it can be construed that the inclusion of McE’s

within the SME cohort is an erroneous practice and in fact cane be regarded as a gross

metonymic misappropriation.

9.3.2. Research sub-question 2: “What is the actual role of McE’s in the UK

construction industry?”

DTI (2006) statistics reveal that the McE’s make up nearly 98 percent of all businesses

in the UK construction industry and employ 60 percent of the workforce and contribute

towards nearly 40 percent of the industry output. Closer appraisal of the above figures

reveals a rather perplexing scenario as the McE’s contribute only 40 percent of the

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industry output, which a rather measly figure given their strength in numbers. This

scenario is further stupefying given that it is a well-known fact that the majority of the

work on construction projects is subcontracted from the main-contractors to the

subcontractors and further from the subcontractors to the McE’s (Dainty et al., 2001).

This could be attributed to the fact that a large part of the work, which the McE’s do, is

not accounted for. To test the veracity of the above assertion construction output for

three projects procured by three different routes namely construction management,

management contraction and traditional were analysed. The main-contractors and

subcontractors representatives were interviewed to decipher their perceptions regarding

the share of actual work done by parties’ in the project. The results of this exercise are

represented in Table 9.2.

Table 9.2. McE’s share of construction output

Site Procurement Value of % of total % of total Main-

Route work work work contractors

subcontracted subcontracted estimate of

by main- to McE's work done

contractor to by McE’s

sub-contractor
BB CM £12,000,000 100% 70% 30%

C MC £6,500,000 80% 60% 35%

M T £7,000,000 70% 80% 25%
Average 83% 70% 30%

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Table 9.2 reveals that the actual share of work done by the McE’s (about 70 percent) is

contrary to the main contractors estimate (about 30 percent) regarding the McE’s share

of work. The main-contractors representatives who were interviewed on the construction

projects were of the view that the McE’s carry out about 25-35 percent of the total work

on construction projects which is similar to the DTI statistics which suggest that the

McE’s do about 40 percent of the work. However, the ground reality seems to be quite

different; the findings of this exercise reveal that the main-contractors subcontract about

70-100 percent of the total work to the subcontractors depending on the procurement

route. The subcontractors further subcontracted about 60-80 percent of the total work to

the McE’s, thus entailing that the McE’s on an average carried out about 70 percent of

the total work on site which is far removed from main contractors representatives

estimate of about 30 percent. The above figures highlight that the actual share of McE

output might be twice what they are actually accounted for.

This assertion is open to contention however, it does point towards the excessive

fragmentation prevalent in the industry, as those at the upper echelons of the

construction industry seem to be disconnected from the actual proceedings on projects.

The main-contractors allocate the project risks to the subcontractors (Miller et al, 2001;

Holt et al, 2000) who further transfer it down to the McE’s however, while doing so the

main-contractors seem to completely absolve themselves from the plight of the McE’s.

Based on the above findings it can be construed that the McE’s can be regarded as the

lifeblood of the UK construction industry.

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9.3.3. Research sub-question 3: “Are McE’s really failing?”

Preceding sections of this chapter highlighted that McE’s have rather high attrition rate

which has been regarded as evidence of their incessant failure. However, it can be

argued that mere attrition cannot be considered as proof enough to make the above

assertion given that the attrition rates could vary with changes in the external macro

environment.

Earlier sections of this chapter also highlighted that average profits earned by the

McE’s are significantly lower than that of the small construction enterprises. This

highlights an underlying discrepancy as the difference in profit levels between firms in

relative immediacy in terms of size is of a rather high magnitude. Profit levels across all

types of firms in most industrial sector in free market economies like UK, US etc., are

generally proportional though differing in scale (Cubbin and Geroski, 1987) however,

McE’s seem to be defying this trend. Based on the above it can be construed that the

McE’s might be underperforming vis-à-vis other firms in the construction sector which

could be identified as a clear sign of their impending failure. To test the above assertion

average profit percentage of turnover (POT percentage) for McE’s were compared with

the average profit percentage for all firms operating in the UK construction industry for

the period 2000-2005. To decipher whether profit levels across the industry vary with

the size of the firm, McE profit levels for the period 2000-2005 were further compared

with average profit levels for the top 100 UK construction firms (in terms of annual

turnover) and small construction firms who participated in this research. Information

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regarding profit levels for top 100 construction firms and overall were sourced from

Building (2005) magazine, which published construction industry results at the end of

every financial year.

The first stage in the analysis involved comparing means of the average profit

percentage for all the above groupings. The results of this exercise are represented in

Figure 9.5.

7.00%
6.00%
5.00%
POT %

4.00%
3.00%
2.00%
1.00%
0.00%
Small construction Top 100 Gross industry
McE
McE’s
enterprises construction profit levels
Mean of the average profit 1.53% 3.91% 5.92% 3.12%
percentage (2000-2005)

Mean of the average profit percentage (2000-2005)

Poly. (Mean of the average profit percentage (2000-2005) )

Figure 9.5.Comparison of mean of average POT percentage (2000-2005): McE’s v. Small construction

enterprises v. Top 100 construction firms v. UK construction industry

Figure 9.5 reveals that average profits percentage of turnover in the UK construction

industry increases with increasing size of the firm. The mean of the average profit

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percentage for McE’s is almost half of what is industry standard. It is further revealed

that profits earned by the top 100 firms in the UK constructions industry are nearly four

times more than that of McE’s. This difference in profit levels across firms of differing

sizes in the UK construction industry highlights a rather deplorable scenario wherein the

McE’s are left at the base end of the industry to survive of scraps while those at the top

of the industry continue to feast. Profits in the construction industry are concentrated at

the top of the industrial hierarchy, which further highlights the top down fragmented

structure of the UK construction industry deplored by Egan (1998). In a utopian scenario

profits levels all firms in the industry would be more or less proportional but this is

usually not achievable however, there should be at least a certain level of parity, which

is not the case in the UK construction industry.

The McE’s profits levels are at the base end in the construction industry, which is

similar to their perceived base end position in the industrial hierarchy (see preliminary

opinion survey). However, their base end position does not prove that they are failing. It

could be proved that the McE’s are failing if it is revealed that their profit levels are

diminishing while increasing for other firms in the industry. To test for the prevalence of

the above-assumed scenario McE’s profit trends for the period 2000-2005 were

compared with that of all the previously assessed groupings. A linear regression test was

applied to the dataset to reveal the underlying trends. The results of this exercise are

represented in Figure 9.6.

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7.00%
y = 0.003x - 5.9483
2
R = 0.9793
6.00%

5.00%
y = 0.0018x - 3.5825
2
R = 0.9587
4.00%
POT %

y = 0.0006x - 1.1703
2
R = 0.3345
3.00%

2.00%
y = -0.002x + 4.0432
2
R = 0.9409
1.00%

0.00%
1999 2000 2001 2002 2003 2004 2005 2006
Year

McE Small construction enterprises Top 100 construction companies

Gross industry profit levels Linear (Top 100 construction companies) Linear (Small construction enterprises)
Linear (Gross industry profit levels) Linear (McE)

Figure 9.6. Profit trends (2000-2005): McE’s v. Small construction enterprises v. Top 100 construction firms v. UK construction industry

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(2000-2005)

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The equations and coefficients of determination for the trend lines in Figure 9.6 are as

follows:

y = -0.002x + 4.0432; R2 = 0.9409 (McE’s)

y = 0.0018x - 3.5825; R2 = 0.9587 (Small construction enterprises)

y = 0.003x - 5.9483; R2 = 0.9793 (Top 100 firms)

y = 0.0006x - 1.1703; R2 = 0.3345 (All industry)

All the trends lines in the above graph are linear in nature. The coefficient of

determination (R2) for all the trend lines are very close to 1 thus implying that there is an

year in end increase or decrease in the profit percentage for all the groupings excluding

the one representing average profit levels for the overall industry which have been at a

fixed level from 2000-2005. The trend line representing average McE profits has a steep

negative gradient thus implying that average profit earned by the McE’s have been

decreasing at a steady rate whereas the trend lines representing top 100 UK construction

firms and smaller firms have positive gradient implying that profit levels for these two

groups of firms have been steadily rising. Based on the above facts it can be construed

that average profit percentage for the McE’s has been diminishing while increasing for

other firms.

Reducing profits levels of McE’s couple with their high attrition rate and low survival

rate of young McE’s, conclusively proves that McE’s are failing whilst other firms in

the industry continue to grow.

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Appraisal of the above trend lines also revealed that gross profit level for the industry

have more or less remained constant while profit levels for all other firms excluding the

McE’s have been steadily increasing. This highlights the possible prevalence of a

deplorable scenario wherein other firms in the UK construction industry might be

profiting at the expense of the McE’s.

9.3.4. Research sub-question 4: “Are all McE’s the same?”

One of the central assertions of this research is that McE’s are not a homogenous

grouping. To test the above assertion McE’s profit levels were compared with their

region of origin, occupational specialisation and the number of people they employ.

Region of origin

The McE owners who were interviewed were drawn from different parts of Scotland

namely Aberdeen, Dundee, Edinburgh, Fife, Glasgow, and Stirlingshire. The regions

they were drawn from have their own unique macro environmental characteristics,

which could influence owner and business centric characteristics of the McE’s. A prime

example of this would be regional variance in workload. The McE’s based in city

regions like Glasgow, which are huge conurbations, would have a higher workload than

McE’s in Scottish highlands where infrastructural growth is limited. To test the above

assertion means of average profit percentage (POT percentage) of the McE’s for the

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period 1995-2005 was compared to their region of origin. The result of this exercise are

represented in Figure 9.7.

2.50%

2.00%

1.50%
POT %

1.00%

0.50%

0.00%
Region of origin Edinburgh Fife Aberdeen Glasgow Dundee Stirlingshire

Average POT % (1995-2005) 1.97% 1.94% 1.79% 1.69% 1.54% 0.61%

Figure 9.7. Comparison of average profits: McE’s from different regions of origin

Figure 9.7 reveals that the McE’s from urban sprawls like Edinburgh, Aberdeen, and

Glasgow were more profitable than the McE’s from smaller centres like Dundee and

Stirlingshire; the only region bucking this trend was Fife. This could be attributed to

increased workload and other owner and business centric factors. Based on the above it

can be construed that the mean of average profit percentage for the McE’s vary with

their region of origin thus implying that the McE’s might vary from region to region.

Occupational specialisation

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The McE owners who were interviewed as part of this research belonged to different

occupational cohorts i.e., they offered different specialised services. The McE owners

from different occupational cohort would require different skill sets unique to their area

of specialisation. For example, the skill sets required by a bricklayer are far removed

from that required by an electrician and so on and so forth. This variance in skill sets

and functional specialisation could be linked to the huge variance in profit levels

identified for the McE’s who took part in this research (Average McE profits ranged

from 0.09 % to 4.65 %). This variance highlights that the McE’s from different

occupational cohorts, might in fact be different to each other. To test the above assertion

means of average profit percentage for the McE’s for the period 1995-2005 was

compared to their occupational specialisation. The result of this exercise are represented

in Figure 9.8.

4.50%

4.00%

3.50%

3.00%

2.50%
POT %

2.00%

1.50%

1.00%

0.50%

0.00%
Fire
McE type Electricians Joiners Bricklayers Painters Plumbers
protection
Average POT % (1995-2005) 3.90% 2.05% 1.85% 1.58% 1.37% 0.95%

Figure 9.8. Comparison of average profits: McE’s from different occupational cohorts

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Figure 9.8 reveals that the McE’s from different occupational cohorts have different

profit percentages. Profit percentage for the McE’s offering electrical services were

nearly four times more than that of the McE’s offering plumbing services. This

highlights that the McE’s from different occupation cohort not only offer different

services but also have different profit levels. This could be attributed to the relative

variance in price of service offered. Based on the above it can be construed that the

mean of average profit percentage for the McE’s varies with the type of service its offers

thus implying that the McE’s from one occupational cohort might be far removed from

those in another.

Number of people employed

The number of people employed by McE’s might from vary from zero (i.e., the McE is a

self-employed individual) to nine. This variance in terms of number of people employed

by the McE’s would influence the scale of work they do and also manifest itself in the

structure (those with more number of employees might have larger capital investments,

overheads etc. vis-à-vis those McE which are self-employed) and proceedings of the

business. As part of this research the McE’s who participated in this research were

segregated into groups based on the number of people they employ (these groupings are

akin to those used by National Statistics Office) following which the cumulative mean

of average profit percentage of McE’s in each group were calculated and compared. The

results of this exercise are represented in Figure 9.9.

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4.50%
4.00%
3.50%
3.00%
POT %

2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
0-1 2-3 4-7 8-9
No. of people employed
Employees Employees Employees Employees
Average POT % 1.07% 1.98% 3.12% 3.89%
(1995-2005)

Figure 9.9. Comparison of average profits: McE’s with different number of employees

Figure 9.9 reveals that the McE’s with different number of employees have different

profit percentages. Profit percentage for McE’s with 8-9 employees were nearly four

times more than that of McE’s with 0-1 employees, which could be attributed to the

variance in their workload and business centric infrastructure. Based on the above it can

be construed that McE’s vary on the basis of the number of people they employ.

Findings of this research revealed that profit percentages in the UK construction are

proportional to the size of firm i.e., smaller the firm lower the profit percentage and vice

versa. The findings in this section corroborate the above finding.

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In an earlier section of this chapter it was revealed that during the period 2001-2005 the

smallest McE’s i.e., those employing 0-1 people had a very high attrition rate while

those with more employees were growing in number. As part of this research profit

percentages for the McE’s grouped on the basis of the number of people they employed

were compared for the period 2001-2005 to decipher whether the trend for profit

percentage mirrored those for numbers. A linear regression test was applied to the

dataset to divulge the underlying trends. The results of this exercise are represented in

Figure 9.10.

5.00%
y = 0.0025x + 0.0302
R2 = 0.6699
4.00%

y = -0.0003x + 0.0333
3.00% R2 = 0.0446
POT %

2.00% y = 8E-05x + 0.0183

R2 = 0.0821

1.00%
y = -0.0047x + 0.0202
0.00% R2 = 0.9941

-1.00%
2001 2002 2003 2004 2005
0-1 employees 1.50% 1.11% 0.61% 0.21% -0.40%
2-3 employees 1.80% 1.85% 1.92% 1.83% 1.85%
4-7 employees 3.25% 3.22% 3.54% 2.97% 3.24%
8-9 employees 3.60% 3.20% 3.63% 3.88% 4.50%

Figure 9.10. Comparison of profit trends (2001-2005): McE’s with different number of employees

The equations and coefficients of determination for the trend lines in Figure 9.10 are as

follows:

y = -0.0047x + 0.0202; R2 = 0.9941 (0-1 employees)

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y = 8E-05x + 0.0183; R2 = 0.0821 (2-3 employees)

y = -0.0003x + 0.0333; R2 = 0.0446 (4-7 employees)

y = 0.0025x + 0.0302; R2 = 0.6699 (8-9 employees)

The trend lines in Figure 9.10 reveal that the mean of profit percentages for the period

2001-2005 for the McE’s with 2-3 and 4-7 employees have remained more or less

constant while increasing for the McE’s with 8-9 employees and decreasing for McE’s

with 0-1 employees. The trend line representing the McE’s with 0-1 employees has a

very high negative gradient thus implying that their average profit percentages have

been diminishing at a very high rate whereas the trend line representing the McE’s with

8-9 employees has a positive gradient thus implying that there average profit

percentages have been constantly increasing. To decipher whether the profits trends for

the McE groupings mirror that of their number the graphs representing both these

factors have been placed along side as shown in Figure 9.11.

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5.00%
POT % y = 0.0025x + 0.0302
R2 = 0.6699
4.00%

3.00%

POT%%
2.00%
POT
1.00%

0.00%
y = -0.0047x + 0.0202
R2 = 0.9941
-1.00%
Year 2001 2002 2003 2004 2005
0-1 employees 1.50% 1.11% 0.61% 0.21% -0.40%
2-3 employees 1.80% 1.85% 1.92% 1.83% 1.85%
4-7 employees 3.25% 3.22% 3.54% 2.97% 3.24%
8-9 employees 3.60% 3.20% 3.63% 3.88% 4.50%

90000
Number
80000 y = -3548.9x + 80773
of firms
70000 R2 = 0.8513

60000
of firms

50000
firms

40000
No.
No. of

30000

20000

10000

0
Year 2001 2002 2003 2004 2005

0-1 Employees 77926 71431 70370 70018 60888

2-3 Employees 50653 50306 53022 55027 55726
4-7 Employees 22455 23963 25704 26865 27238
8-9 Employees 8044 9819 10508 10982 11120

Figure 9.11.Comparison of McE number v. profit (based on McE’s with different number of employees)

On comparing both the graphs in Figure 9.11, it is revealed that the trends for profits

more or less mirror those for numbers. It is interesting to note that the McE’s with 0-1

employees have seen a sharp drop in numbers and average profit percentage during the

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period 2001-2005 whilst increasing or remaining stable for other McE’s. The high

attrition rate of McE’s with 0-1 employees could be linked to their reducing profit

percentages as demise of profits are known to instigate business shutdown. This is a

rather grim scenario, as decreasing profits levels of McE’s with 0-1 employees would

dissuade the people from joining the ranks of the self-employed and further de-motivate

the current McE owners thus negating any change of rectifying the high attrition rate of

McE’s.

Synthesis of the above findings corroborates the central assertion of this research that

the McE’s are not a homogenous grouping, which could also imply that the McE owners

are not homogenous in type. The following section of this chapter is aimed at

deciphering whether the above assertion regarding the McE owners stands true.

9.3.5. Research sub-question 5: “Are all McE owners similar?”

The preceding section of this chapter highlighted that McE are not a homogenous

grouping. The same could be said for people who own these McE’s. The McE owners

who were interviewed for this research had different perceptions and inclination

however, it is interesting to note that McE’s owners belonging to the same occupational

cohort had similar perceptions and inclinations thus entailing that they had similar

characteristics.

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As part of this research the McE owners were segregated on the basis of their

occupational cohorts following which their perceptions and inclinations were assessed to

decipher whether there exists a distinct set of characteristics, which can be associated

with the McE owners from each cohort. The results of this exercise are represented in

forms of spider diagrams in Figures 9.12, 9.13, 9.14, 9.15, 9.16 and 9.17.

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Figure 9.12. McE owners: Bricklayers

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Figure 9.13. McE owners: Electricians

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Figure 9.14. McE owners: Fire protection

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Figure 9.15. McE owners: Joiners

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Figure 9.16. McE owners: Painters

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Figure 9.17. McE owners: Plumbers

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Figure 9.18. Different types of McE owners

The shaded areas in the above spider diagrams (Figure 9.12-9.17) greatly vary in size

and shape which implies that there exists an extreme variation in the skill sets,

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motivations, perceptions, and inclinations of the McE owners belonging to different

occupational cohorts. The spider diagrams representing the McE’s offering bricklaying

and plumbing services had the smallest shaded area thus highlighting that the McE

owners belonging to these cohorts have minimal inclination to employ external

consultants, innovate, grow, take risks and develop long-term business strategies. They

were also found to have lower educational qualifications though differing in their

motivations and inclination to undertake training courses. At the other end of the

spectrum were the McE’s offering electrical services; they had the largest shaded area

highlighting that the McE owners from this cohort had a strong proclivity to employ

external consultants, innovate, grow, take risks and develop long-term business

strategies. They were also found to be well educated and had a genuine interest in their

trade and a majority of them also undertook regular training courses. This large variation

in owners perceptions, inclinations, motivations, and skills set was also found to be

linked to their business’s profitability. The McE owners with minimal inclination and

skills set found themselves at the bottom of the profit ladder while those with a higher

proclivity and skills set like the electricians found themselves at the top.

The above facts clearly highlights a strong heterogeneity in the McE owners population

and hints at the existence of an ideal McE owner who has the right mix of skills set,

positive inclinations and motivations which help him or her generate higher level of

profits. This heterogeneity further strengthens the argument against the classification of

the McE’s within the SME cohort, as every grouping of the McE owners were found to

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be dissimilar. The following section of this chapter is aimed at deciphering who the

ideal McE owner is.

9.3.6. Research sub-question 6: “Who is the ideal McE owner?”

Accretion of the results of the exercise involving comparison of the McE’s profit levels

with the McE owners skills set and other owner and business centric factors revealed

that the McE’s with the highest profit levels had owners whose characteristics were

diametrically opposite to that of average McE owner. This ideal McE owner was

interested in trade and had higher education qualification vis-à-vis the average McE

owners who started their business for independence and had lower educational

qualifications. The ideal McE owner was also found to have an inclination to employ

external consultants, innovate, grow, take risks, employ long-term business strategies,

and undertake training courses. The McE’s owned by ideal owners though extremely

scarce in number stood out and defied the abject trends and characteristics associated

with conventional McE’s. The skill sets, motivations, and inclinations unique to the

“Ideal McE Owner” have been represented as a spider diagram in Figure 9.19.

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Figure 9.19. Ideal McE owners

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The above spider diagram (Figure 9.19) representing the ideal McE owner was deduced

by agglomerating the inclination, motivation, and skill sets, which were found within the

McE owners who had the most profitable businesses. The shaded area in the spider

diagram representing the ideal McE owner is much larger than that of the average McE

owner thus highlighting that the ideal McE owner has higher education qualifications

and proclivity towards the key owner and business centric factors. The ideal McE

owners were largely drawn from the McE’s which offered electrical and fire protection

services. These occupational specialisations are technologically biased hence requiring

greater skill level and an up-to-date understanding of industrial regulation and practices.

Most of these owners were undergraduates with specialised degrees. These firms offered

niche services with minimal employ and capital requirement thus entailing their micro

size. In sharp contrast to the ideal McE owner, average McE owners had vocational

skills and offered services requiring minimal knowledge of industrial regulation.

Preceding sections of this chapter highlighted that profit is contingent on education and

proclivity of the McE owners towards specific owner and business centric factors. If the

McE owners are to offset their high rate of attrition and redress their low profit levels,

they in effect need to metamorphose into ideal owners. This would imply that they

better their skill levels by undertaking training programmes of the type organised by

Construction Industry Training Board (CITB) and try to redress their aversion to

employing external consultants, innovation, business growth, and risk. They would also

need to employ a long-term business strategy and show a keener interest in what they

are doing.

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If all the McE owners were to eventually transform into ideal owners their position in

the industrial hierarchy might also change, as those in the higher echelons in the

hierarchy would be forced to consider them as active participants as against their current

subordinate role. This transformation might also improve the McE owners self-worth

thus enabling them to stand for themselves in the highly fragmented top driven

construction industry.

9.3.7. Research sub-question 7: “How different are McE owners to owners of

micro-enterprises from other industries?”

One of the central assertions of this research is that McE owners are different from

owners of micro-enterprises from other industries. To test the veracity of the above

assertion 40 micro-enterprise owners were interviewed and their responses were

compared to that of the average McE owners. The results of this exercise are represented

in the form of a spider diagram in Figure 9.20.

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Figure 9.20. Micro-enterprise owners from other industries

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Appraisal of the above spider diagram (Figure 9.20) revealed that the shaded area is

significantly larger than the shaded area in the spider diagram representing the

average McE owners. This highlights that inclinations, motivation and skill set of the

owners of micro-enterprises from other industries are far removed from that of the

average McE owners. The average micro-enterprise owners (from other industries)

were interested in trade and were found to have a higher proclivity to employ

external consultants, innovate, grow, take risks and develop long term strategies for

their business vis-à-vis the average McE owners. They were also found to have

higher educational qualifications and a majority had attended training programmes.

Average micro-enterprise’s profits levels for the period 1995-2005 were found to be

about times 4 times more than that of McE’s which could be attributed to their

higher proclivity, skill sets and a genuine interest in trade. Based on the above

findings it can be construed that McE owners are very different from micro-

enterprise owners from other industries.

The following section of this chapter is aimed at deciphering which business owner

typology do the McE owners belong to.

9.3.8. Research sub-question 8: “Which business owner typology do McE

owners belong to?”

Review of small business literature revealed that small business owners can be

segregated into three typologies namely entrepreneurs, managers and craftsmen

(Hornaday, 1990). Given the limitations of these typologies and the variance in

owner and business characteristics four other typologies were devised as part of this

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research, which are managerial-craftpreneurs, managerial-entrepreneurs,

craftmanagers, and craftpreneurs. In an earlier section of this chapter, it was revealed

that the McE owners differ from each other on the basis of their occupational

cohorts. As part of this research, McE owners inclinations, motivations, and skill sets

were compared to the criteria set out for each owner typology.

This exercise revealed that McE owners who offered electrical services were akin to

managerial craftpreneurs, as they practiced a trade and built an organisation centred

on this speciality, with the intention of accruing personal wealth. Those offering

bricklaying, fire protection, joinery, painting, and plumbing services were akin to

craft managers, as they practised a trade and built an organisation centred on this

speciality, with no real intention to grow their businesses. None of the McE owners

were found to be purely entrepreneurs, managers, or craftsmen as they all fulfilled a

mixture of these roles. The findings of this research reveal a gamut of different

owner typologies, which highlights the narrow view, which small business

researchers take while classifying small business owners. There is considerable

scope for further research in this area as clearly deciphering which typology a

business owner belongs to would help develop policies and strategies specific to

their needs. For example, if a small business owner was found to be a craftpreneurs it

would become apparent that he lacks in managerial abilities, which could be hence

used to develop a training package, which would help him develop his managerial

abilities and thus help him become a well-rounded businessman.

The owners on the top of the pecking order are generally managerial-craftpreneurs as

they are profit-seeking entrepreneurs who are adept at managing businesses. Among

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the McE owners, only those offering electrical services were found to fit this bill

while the rest were all craftmanagers who were adept managing a business but had

no entrepreneurial zest. This difference in owner typologies also appeared in the

profit levels of the firms as profits for McE’s providing electrical services were

nearly two to three times more than the other McE’s. This highlights that McE owner

who offer bricklaying, fire protection, joinery, painting, and plumbing services lack

in entrepreneurial zest and thus need to redress their motivations and inclinations to

become more entrepreneurial in type.

9.3.9. Research sub-question 9: “Can immigrant labour redress the skill

shortage in the industry?”

The UK construction is plagued by a severe skill shortage (Agipou et al., 1995). As

part of this research, government and main-contractor representatives were asked to

identify the panacea for this skills shortages and were also asked whether the McE’s

could help redress this situation. In response to the above query the majority of them

identified immigrant labour as the remedy for skill shortage. Government

representatives felt that the McE’s were in no position to redress the skills shortage

though they employ the largest section of the construction industry workforce. The

above facts highlight that the government and main-contractors might be settling for

a short-gap solution by depending on immigrant labour, as against a long-term view

which would have involved utilising the McE’s to recruit, train, and develop staff .

However, it could be argued that the immigrant labour might as well be the remedy,

but this would only be possible if they were to become active members of the UK

workforce and part of community and society in general.

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As part of this research, 30 immigrant workers were interviewed in an open

discussion format keeping the identity of the researcher anonymous to reveal their

actual perceptions. They were asked a number of questions to reveal their

background, general beliefs, motivations, and long-term plans (See Appendix D for

relevant statistics).

This exercise revealed that the majority of the immigrant workers had low

educational qualifications and worked on an itinerant basis i.e., they shift their base

depending on where the work was available. Most of them worked for the McE’s (54

percent) on a daily wage (43 percent). A large number of them had national

insurance number (73 percent) but were found to be working without a CIS card (57

percent) which could be attributed as the reason why a large number of them had

worked in the lump sector (63 percent had previously worked in the black market

construction economy). Their main motivation to come and work in UK was higher

wage levels; however, most of them had no long-term plans to settle in UK (87

percent). The main factor, which dissuaded them from settling in UK, was higher

cost of living (51 percent). Most of them worked in UK for a few years and at the

end of the period went back home with their savings.

The above figures reveal that the immigrant workers had no plans of settling in UK.

They were in UK on a temporary basis and planned to move back to their country

once they had saved enough. Their main motivation to come and work in UK was to

earn money, for which they were ready to work in the lump sector. Based on the

above findings it can be conclusively said that the immigrant work are not the

panacea for the skills shortages plaguing the industry. This further highlights an

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urgent need to reinvigorate the McE’s who were traditionally known as the main

source of skilled and unskilled workforce in the UK construction industry.

The preceding sections of this chapter highlighted the rather sad plight of McE’s in

the UK construction industry especially those employing 0-1 people, however it was

also revealed that their existed light at the end of the tunnel in the form of the ideal

McE’s. These ideal McE’s bucked the trends of the average McE’s and were in fact

performing better than their counterparts higher in the order of the industrial

hierarchy.

The main quest of this research was to determine the factors, which influence the

development of McE’s. The following section of this chapter is aimed at identifying

these factors.

9.3.10. Main research question: “What are the factors which inhibit the

development of McE’s?”

As part of this research, a number of factors apart from those assessed in the earlier

sections of this chapter were identified. Some of these factors were within the sphere

of McE owners control and some outwith. All these factors including those which

have been assessed in earlier sections of this chapter were accrued and segregated

into those within McE owners control and those outwith. The results of this exercise

are represented in Table 9.3.

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Table 9.3. Factors inhibiting the development of McE’s

ENDOGENOUS FACTORS/RISKS EXOGENOUS FACTORS/RISKS

Owner-manager centric Project centric
Able to influence Not able to Able to influence Not able to

influence influence
• Ability • Personal • Conflict

• Education satisfaction • Collusion

• Experience • Payment

• Income delay

• Innovation • Information

orientation asymmetry

• Management and

style distortion

• Motivation

• Propensity to

take risks

• Work-life

balance

McE centric Industry and government centric

Able to influence Not able to Able to influence Not able to

influence influence
• Capital • Inadequate sales • Access to

• Debt training

• Expenses • Availability of

• Growth skilled

employees
• Strategy
• Bank interest
• Training of
rates
employees
• Competition

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• Absence of • Customer base

written contract • Employees skill

level

• Government

policies

• Industry

performance

• Rules and

regulations

The above table contains a few factors which were identified as part of this research,

as vital for the development of an ideal McE, however no claims are made as to

suggest that this list is panoptic in content. There might be many other factors, which

could be identified given a different timeframe and setting. Nevertheless, this list of

factors could be used by McE’s as a checklist to remind themselves of the core

issues which they would need to be aware of while setting of on the pursuit of

becoming ideal McE’s.

The following section of this chapter highlights a few measures, which have been

propounded to redress the current state of McE’s.

9.4. Measures to redress the current state of McE’s

The following sections of this chapter aim to highlight a few measures, which could

ameliorate the current dismal situation, which McE’s find themselves in. These

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measures could pave way for a stronger and more resolute group of ideal McE’s who

would drive the industry rather than finding themselves jostling for survival at the

bottom end of the industrial hierarchy. The measures have been devised on the basis

of the observations made during the ethnographic stage of this research. Given that

this research was restricted to the confines of the McE and the larger project

environment, measures that have been devised are limited to these two settings. The

following section highlights the key McE centric measures.

9.4.1. McE centric measures

During the course of this research a number of observations were made which

highlighted that the McE’s could in fact redress the current abject trends by

employing joint McE level initiatives i.e., those involving a conjoined arrangements

between McE’s in the industry . These observations form the basis of the McE level

measures, which have been represented in a pictorial manner in Figure 9.21.

Figure 9.21. McE level measures

McE
McE McE McE INTERACT McE
McE’s NEED
TO COME
McE TOGETHER ON McE McE SYNTEGRITY McE
A COMMON
PLATFORM
McE McE PARTNER
McE McE
McE

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The measures espoused in the Figure 9.21 involve greater level of inter McE

interactions. This research revealed that the McE’s operate on their own with no

affiliation to any professionals or industry body through which they could raise their

concerns. This calls for a common platform where the McE’s could gather, interact,

and work towards raising their profile in the industry. The McE’s should work

together with a greater level of syntegrity. The term syntegrity has been coined to

define a relationship driven by synergy and integrity the two vital factors required by

the McE’s if they are to redress their status quo.

The following section highlights few project centric measures, which could help

alleviate problems faced by McE’s within project settings.

9.4.2. Project centric measures

During the course of this research a few observation were made which highlighted

that by adopting a collaborative approach, parties working on a project could

enhance the level of productivity and quality of the work. These collaborative

measures would further catalyse a drastic change in how work is carried out in

construction projects and further improve inter party relationships. Two different

project-centric measures have been devised one aimed at restructuring the top down

fragmented structure of the construction project hierarchy and the second aimed at

alleviating the key exogenous factors, which inhibit McE growth. These measures

have been represented separately in a pictorial manner in Figure 9.22.

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CURRENT SCENARIO

MAIN-
MAIN-
CLIENT CONTRACTOR
CONTRACTOR

SPECIALIST
SPECIALIST SPECIALIST
SPECIALIST
SUB-
SUB- SUB-
SUB-
CONTRACTOR
CONTRACTOR CONTRACTOR
CONTRACTOR

McE McE McE McE McE

McE’s AT THE BOTTOM OF THE PYRMAID

“ HIERARCHICAL ORDER” TO “A PROJECT WHOLE”

Figure 9.22. From a hierarchical order to a project whole

Figure 9.22 highlights the first measure, which involves restructuring the project

hierarchy. Findings of this research revealed that construction projects are usually

carried out in a top down manner with the main contractor at the top of the hierarchy

followed by the subcontractor with a host of McE’s at the bottom. This top down

structure is akin to a pyramid with the McE’s at the bottom acting as the foundation.

This pyramidal structure would fail if the foundation i.e., the McE’s are not strong

enough to sustain the constant pressure exerted by those at the apex and the middle

i.e., the main contractors and the subcontractors. This calls for a radical new model

where all the participating members will be part of a cyclic loop constantly

interacting with each other and sharing the workload among themselves. Such a

model would allow the McE’s to play an active role in the proceedings of the project

and would further help improve the productivity in a project as all the parties will be

cohesively work towards a common goal i.e., the project.

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Adoption of a cyclical loop model for construction projects would help negate

wastage, improve quality and help develop better inter party relationships thus

fostering an environment for industrial growth.

Figure 9.23. Parasitic relationship v. symbiotic relationship

IDEAL SCENARIO
P SYMBIOTIC RELATION
A
R
A MAIN-
SUB CO-OPERATE McE's
S CONTRACTOR CO-OPERATE
CONTRACTOR
CURRENT SCENARIO

RESULT
T
I
FEED

FEED

FEED

FEED

C TO
•COHESION
R •CAMARADERIE
SUB-
E •SMOOTH INFORMA-
CONTRACTOR TION FLOW
L
FROM • EXPEDITED
A PAYMENT
T •COLLUSION
FEED

FEED

FEED

FEED

•CONFLICT
I
•INFORMATION
O McE's RESULT DISTORTION
N •PAYMENT DELAY

Figure 9.23 highlights the second measure, which is aimed at alleviating the key

exogenous factors, which inhibit McE’s growth. Research conducted as part of this

research revealed that the relationships between parties on a construction project are

of a parasitic nature. The main contractor sits the top of the cycle feeding of the

subcontractor who further feed of the McE’s. This relationship was found to be the

main source of the project centric problems, which inhibit the McE’s growth. This

calls for a restructuring of the current relationships between the parties. Instead of

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scrounging of the parties lower in the project hierarchy, parties in the construction

project should try and develop mutually beneficial symbiotic relationships, which

would help improve productivity and quality of the project and would further help

alleviate the exogenous factors, which inhibit the McE’s growth. By adopting

symbiotic relationship, collusion would be replaced by cohesion, conflict by

camaraderie, information distortion by smooth information flow and delayed

payment by expedited payment thus and fostering an overall climate of cooperation

in the industry. The measures advocated in the preceding sections are by no means or

way a panacea for the current problems faced by the McE’s. These measures merely

suggest a way as to how the McE and project centric initiatives could stem the rot,

which the McE’s are plagued by. This research is not a prescriptive exercise instead

is aimed at developing a panoptical perspective of factors, which vitiate and inhibit

the McE’s from performing to their optimum capacity.

9.5. Summary

This chapter conclusively proved that McE’s are different from small construction

enterprises and microenterprises from other industries, which further highlights that

inclusion of McE’s within the SME cohort is an erroneous practice. It was revealed

that McE’s share of the construction industry output might be significantly more

than what they are attributed with. McE’s were found to have substantially lower

profit levels than what was considered norm in the construction industry. It was also

revealed that McE owners differ from one another on the basis of region of origin,

number of people they employed and occupational cohorts. The existence of a set of

ideal McE owners was revealed who showed that McE’s had a potential to perform

at the same levels as enterprises placed higher in the industrial hierarchy. The

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findings of this research proved that this reliance on immigrant labour is misplaced

as most immigrant workers intend to go back to their country of origin once they

have made some savings. The following chapter concludes the research and

elaborates potential areas for McE centric research.

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10. Conclusions and recommendations for future research

10.1. Introduction

This research was initiated with the aim of testing the veracity of the assertion that

McE’s are the lifeblood of the UK construction industry. On the face of it, this

assertion seemed valid as McE’s make up nearly 98 percent of all business in the UK

construction industry and contribute toward nearly 60 percent of the employment

and 40 percent of industrial output (DTI, 2006). However, on closer analysis of McE

centric data it was revealed that the status quo was far removed from what the above

figures suggest, as McE’s were found to have a high attrition rate. This revealed a

rather paradoxical situation as the very McE’s which should have had an omnipotent

position in the industry failed to thrive in it. This revelation changed the course of

this research, as the earlier assertion seemed invalid. The aforementioned paradox set

the tone for a new research focus, one aimed at deciphering the factors, which vitiate

the preliminary assertion of the research. The new aim was to decipher if there

existed a set of factors which preclude the development of an ideal McE. This

research aim necessitated multilayered analysis involving different focus areas and

research settings.

The preceding chapters enumerated and elaborated on the various research findings,

which came out of this multilayered analysis. The findings of this research revealed a

multivariate set of factors, which were found to have a causative role in the high

attrition rate of McE’s. This chapter aims to provide a review of these research

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findings and impact on those operating in the construction industry and also the

scope for further development of the research.

10.2. Aim of research

The main aim of this research was to prove or disprove that there are a set of factors,

which inhibit McE growth in the UK construction industry. During the course of

this research, a multivariate set of factors both within and outwith the McE’s were

identified which directly or indirectly precluded McE’s from performing to their

optimum capacity and restrained their growth, thus vindicating the main research

hypothesis.

The following section of this chapter highlights the main objectives of this research

and comments on the status of their fulfilment.

 Developing a robust view of the literature surrounding operation of McE’s;

emphasis would be laid on review of literature in the area of operations of McE’s

within construction supply chains, McE success and failures, and factors

affecting small business success. Literature pertaining to McE’s was extremely

scant which instigated the uptake of literature from the area of small business

research which conflicts with one of the principal assertions of this research that

McE’s are unique.

 Investigate the field dynamics of a range of McE’s. The findings of this research

revealed that. McE’s fulfil varied and itinerant roles within the industry which

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preludes the development of an all inclusive knowledge base regarding McE

roles and functions.

 Investigate the personal characteristics and drivers of McE owners. As part of

this research, key owner centric factors were identified which were found to

influence the profitability of McE’s.

 Investigate factors emanating within construction projects which influence

McE’s. As part of this research, key project centric factors were identified which

affect McE’s however, the relationship which might exist between these factors

and McE’s profitability were not deuced given the scarcity of information.

 Integrate operation of McE’s within the composite supply chain and industry

frameworks. As part of this research a few measures to better integrate McE’s

within the project supply chain were advocated however, no proof regarding

viability of these measures was found.

 Develop a set of findings which would help divulge key factors which affect

McE performance. This objective was fulfilled however given the limited scope

of this research only a limited set of factors were identified.

 Conclude the role of McE’s within the industry framework. This objective was

fulfilled; it was found that McE’s are the lifeblood of the UK construction

industry.

The following section of this chapter provides a panoptical overview of the different

implications of the research findings.

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10.3. Drivers for the industry

Business success and failure

From the findings of this research, it becomes clear that McE’s are at the bottom end

of the industrial hierarchy and have a high attrition rate. It was also revealed that

they have lower profits vis-à-vis other firms in the industry. These findings highlight

the deplorable state that McE’s find themselves in, though in majority in numbers

and contributing the lion share of the employment and output in the industry. The

effect of the above scenario on the industry would be manifold, a few of which have

been speculated below:

• Skill shortage: The above scenario would exacerbate the skill shortage plaguing

the UK construction industry which would be most felt in the run up to the

Olympics in 2012 when an additional workforce of 13,000 construction workers

and 1,500 electricians and plumbers a year would be required(Guardian, 2007).

Aforementioned McE’s employee 60 percent of the total workforce in the UK

construction industry (DTI, 2006) a large number of which are self-employed

and itinerant in type constantly shift from one project to another. Bigger

companies generally absolve themselves from directly employing workers

however; McE’s provide the ideal breeding ground for such a workforce given

the minimal entry barriers, which one finds in a McE. High attrition rate and

decreasing profit levels of McE’s would reduce the number of itinerant workers

in the industry as they would not find alternative employment hence completely

move out of the industry. The overall skill shortage scenario would be further

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exacerbated by the low survival rate of young McE’s as the new source of skill,

which was supposed to redress the skill shortage in the industry fail to survive.

Those in the higher echelons in the industry and government should take

immediate notice of this and initiate measures to redress the attrition of McE’s.

McE’s as a cumulative cohort also need to come together and work towards

raising their profile and sway in the industry which might offset their accelerated

attrition.

• Decreasing interest in self-employment: The findings of this research revealed

that youngsters working in the UK construction industry were averse to the idea

of self-employment. This would further exacerbate the attrition rate of McE as

waning interest levels in self-employment would mean that fewer McE

businesses would be established. This scenario could irreversibly seal the fate of

the McE’s and thus could impede industrial growth. Government and industry

need to take actively promulgate self-employment within construction industry

as a career choice among youngsters joining the industry. This would also

require inclusion of business centric training in apprentice and vocational

programmes, which are dispersed by government and government, sponsored

institutions.

• UK GDP: McE’s account for 40 percent of the total construction industry output

(DTI, 2006) which amounts to about £24 billion of business each year and

around 2.8 percent of the total UK gross domestic product. Drop in McE

numbers could significantly reduce their share of industrial output, which could

effectively lead to a drop in UK GDP. Government need to review their current

McE centric policies and try to develop new policies which would stem McE

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attrition and foster a new phase of expedited McE growth which would be

abreast industrial growth.

• Unemployment rate: McE’s accounts for about 4 percent of the total people in

employment in UK thus a drop in McE numbers would also lead to an increase in

unemployment rates. To redress this situation would require government level

intervention with specific measure directed towards safeguarding McE interests.

This might involve McE specific funding which would help counter business

failures.

The above scenarios are speculative nonetheless they clearly highlight the significant

impact failure of McE’s could have on the whole UK economy. Given the lack of a

cohesive McE cohort, restitution of the current state of McE’s would require active

industry and government level participation. Individual McE’s also require to initiate

business level change which could help them preclude failure.

Endogenous factors

• McE owner background: The findings of this research revealed that most McE

owners tend to be middle-aged Caucasian males thus highlighting the

disinclination of females and individuals from other sections of the society

towards starting businesses within the construction industry, which could be

attributed to an image problem associated with the construction industry

(Sommerville et al., 1993). To redress this scenario requires active government

and industry level initiatives, which would promulgate, McE’s as a career choice

among individuals from different sections of the society. This also calls for an

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industry level makeover, which would require radical reconstitution of the whole

industrial hierarchy and modes of operation.

• Owner and business centric factors: The findings of this research revealed that

average McE owners are lacking in key owner and business centric factors,

which precludes them from performing to their optimum capacity thus initiating

McE failures. It was also revealed that most McE owners were non-

entrepreneurial and were found to have motivations, which deter business

growth. To redress the current scenario most McE owners would need to work

towards reconstituting their traits, inclinations, motivations, and skill sets. Given

that most McE owners were found to be middle-aged, this would be a rather

tumultuous task thus calling for a younger breed of McE owners who would

wilful enough to partake in training programmes directed towards refining McE

owners skill sets, inclinations and motivations. As identified in the preceding

section most youngsters working in the construction industry are averse to the

idea of self-employment thus negating the aforementioned option. This calls for

specific legislations directed towards fostering a new breed of youngsters who

have different perceptions regarding self-employment and are genuinely

interested in the construction trade. This would be a very hard task as the

construction industry is know to have an image problem which put off most

youngsters from considering career options within the construction industry

(Sommerville et al., 1993; Pries and Janszen, 1995).

The above findings highlight a genuine problem facing the current crop of McE

owners as their averse to change and find it hard to keep abreast of the changing

needs of the industry. The above scenario coupled with decreasing interest levels in

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self-employment and negation of certain section of the society diminishes any hopes

of restituting the heydays of the McE’s.

Exogenous factors

Findings of this research revealed that a number of project, industry and macro

environmental factors preclude McE growth. These factors are generally outwith the

control of the McE owner and thus require active industry and government level

participation to amend them. The majority of the factors, which were found to vitiate

McE growth, were found to emanate from the subcontractors thus calling for

stringent government level legislation, which would prevent McE subjugation at

their hands. This would also require negation of the currently popular top-down

project and industrial hierarchy and adoption of an egalitarian industrial and project

structure which would allow all the parties to have an equal sway in the proceedings

within the project and industry at large. Such an egalitarian structure would also

allow the McE’s owners to develop their self worth and would further restrict the

beration McE’s suffer at the hands of those in the higher echelons in the project

hierarchy.

10.4. Recommendations for future research

During the course of this research, a number of subject areas requiring further

investigation were identified which have been enumerated below:

• There is a need for a new information dataset, which would clearly define the

reason for de-registrations.

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 Chapter 10

• There is a general conundrum in the very definition adopted for business failure

for e.g. current small business research fails to delineate businesses which have

been sold off though making profits from businesses which are sold because they

are loss making. This calls for a clear definition for failure which would take into

account different situation pertaining to business shutdown.

• It was found that the use of the terms entrepreneur and entrepreneurship have

been overemphasized within small business literature without giving due

consideration to the fact that most small business owners might not be

entrepreneurs. This calls for a clear segregation of small business owner types

akin to what has been attempted in this study.

• There is a general conundrum in the methods, which have been adopted by

researchers to analyse small business owners behavioural traits. This calls for a

singular model which could alleviate the problems associated with multiple

models of behavioural analysis,

• McE specific research on owner characteristics are all but absent, which calls for

specific studies which would look at McE owners belonging to different

occupational cohorts, regions etc., to try and decipher varying characteristics

associated with McE owners.

• Studies on McE’s role on construction projects were found to be rare which calls

for renewed focus in this area.

• A few project centric factors, which inhibit McE growth, were identified in this

study but given the affect project drivers have on McE performance an in-depth

analysis of the same is required. This exercise would help decipher a host of

other project centric factors, which needs to be addressed if McE’s are to redress

their high attrition rate.

335
 Chapter 10

The above list of subject areas with scope for further research highlight a prominent

few of the multitudes identified during this research. Aforementioned McE centric

research is extremely scant which calls for in-depth McE centric analysis, which

would help, divulge McE, project and industry centric factors, which could help

McE’s avoid business failure.

10.5. Personal reflection

The last three years I have spent in the pursuit of unravelling the mysteries

surrounding McE’s has helped me to get to grips with what real research is. Research

is often associated with lab-based exercises involving hours of painstaking

experimentation and analysis but for me it was more so an intimate experience with

people from all walks of life. Given the scarcity of McE centric research I was forced

to adopt research methods which were unique and unorthodox. I had to move

outwith my comfort zone and interact and work with people whom I had never seen

or known. The most endearing experience I can recall of was an instance when I met

an old McE owner who sat down with me over a cup of tea and told me all about his

life experiences. Such instances opened my eyes to a brave new world where

research was not constrained by statistics and guidelines; instead, it was about

relinquishing all preconceived notions and setting out on an expedition to explore the

far reaches of the McE world. This expedition was filled with experiences aplenty

but most of all I learnt to respect the people who remain hidden, who have no voice

– the McE owner. I have a deep felt empathy for the McE owners who toil away

while others around them share the spoils of their labour. I feel that the industry

336
 Chapter 10

needs to work cohesively but this time in favour of the McE’s without whom the

industry as we know it would cease to exist.

337
 References

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362
 Appendix

APPENDIX

• Appendix A: Generic McE centric information pertaining to preliminary statistical analysis

• Appendix B: Preliminary survey results
• Appendix C: McE centric investigation
• Appendix D: Immigrant workers perceptions

363
 Appendix

Appendix A: Generic McE centric information pertaining to preliminary statistical analysis

Table A 1.1. Number of firms from 1995-2005 (Source: NSO, 2006)

0-1 2-3 4-7 8-9 All

Year
Employees Employees Employees Employees McE
1995 99099 64837 20288 4021 188245
1996 81363 56106 15317 4366 157152
1997 86269 47644 15737 3787 153437
1998 87837 47918 16391 3988 156134
1999 88018 49350 16969 4148 158465
2000 87712 48773 16584 3790 156859
2001 77926 50653 22455 8044 159078
2002 71431 50306 23963 9819 155519
2003 70370 53022 25704 10508 159604
2004 70018 55027 26865 10982 162892
2005 60888 55726 27238 11120 154972

Table A 1.2. Self-employment rate; construction industry v. other industries (Source: DTI, 2006)

Construction All other

Year
industry industries
1995 46.00% 23.00%
1997 42.00% 24.50%
1999 35.00% 25.00%
2001 29.00% 27.00%
2003 25.00% 29.00%
2005 23.00% 32.00%

Table A 1.3. Comparison of no. of McE’s v. no. of McE’s with 0-1 employees v. industry output

No. of McE's with 0-1 Total number of Industry output (£

Year
employees McE's million)
2001 77926 159078 74690
2002 71431 155519 83592
2003 70370 159604 93284
2004 70018 162892 102363
2005 60888 154972 107007

364
 Appendix

Table A 1.4. VAT registration: self-employed individuals perceptions

VAT registration (Interviewees sample size: 32)

Q1. How important is VAT registration and do you have an intention to get your

business registered?
Important 22%
Not important 78%
Q2. What deters you from getting VAT registered?
Additional costs 39%
Increased level of paperwork 30%
Excessive taxes 14%
Lack of required information 11%
Cant be bothered 6%

Appendix B: Preliminary survey results

Appendix B 1 Preliminary questionnaires for McE owners

PRELIMINARY QUESTIONNAIRE SURVEY

365
 Appendix

MICRO CONSTRUCTION ENTERPRISES THE LIFEBLOOD OF

THE UK CONSTRUCTION INDUSTRY

Purpose of the survey:

This survey is based on an on-going research project based at Glasgow Caledonian University.
The goal of this research survey is to divulge perceptions regarding micro construction enterprises
(henceforth referred to as McE’s in this document). Micro enterprises are business, which employ
0-9 people and have an annual turnover or annual balance sheet total does not exceed 2 million
Euro (European Commission, 2003). McE’s constitute about 98 percent of all UK construction
enterprises and contribute towards 60 percent of total employment and 40 of the industry output.
This questionnaire seeks your opinions on a few factors that would define the future course of this
research exercise.
Confidentiality:
As part of a university research programme, there is no commercial, benefit attached to this
research. Information provided through this survey will be treated in absolute confidence. The
results will only be used for the purpose of this research study and the main objective is to add to
the current body of knowledge on McE’s.
Important Notes:
1. There are no right or wrong answers to the questions in this survey. Select the most
appropriate answer for each question based on your view/experience.
2. There may be questions, which appear, irrelevant or impertinent. However, it is necessary in
the study that all questions are answered, as the questionnaire is designed to achieve particular
research objectives, and it is hoped not to offend respondents in any way. If there are
questions, which you are unwilling or unable to answer, skip them, and continue answering
the remainder of the questions.
Keep in mind that both your identity and that of the company you work for will remain strictly
confidential.
Parts of the questionnaire:
Part 1: General information
Part 2: McE centric questions
Enquires:
If you require assistance in completing this questionnaire or if you have any questions or
comments regarding this survey, please contact:
Wills Thomas (Researcher) Professor James Sommerville (Supervisor)
M542 Professor of Construction Management
Glasgow Caledonian University, School of the Built and Natural Environment
City Campus Glasgow Caledonian University,
Cowcaddens Road, Glasgow, G4 OBA City Campus
Scotland, UK. Cowcaddens Road, Glasgow, G4 OBA
Tel: +44-141-331 8037 Scotland, UK.
Mobile: +44 (0) 7886269211 Tel: +44-141-331 3628
Email: wth1@gcal.ac.uk Email: james.sommerville@gcal.ac.uk
Please post or email the completed questionnaire to the researcher on or before
March 31st 2005.

PART 1 – GENERAL INFORMATION

1.1 Please indicate your total years of experience in construction industry:

1.2 Please indicate number of years you have owned the current business for:

1.3 Please identify the nature of specialised service offered by your firm:
1.4 Please identify the region where your business is based:

366
 Appendix
1.5 How many people do you employ in your business?
 0-1  2-3  4-7  8-9
1.6 What kind of employees do you have?
 Permanent  Temporary (Itinerant)  Part-time
PART 2 – McE CENTRIC QUESTIONS
2.1 How important are McE’s to UK construction industry?
 Very important  Moderately important  Not important
2.2 What is the position of McE’s in the UK construction industry?
 Apex  Middle  Base
2.3 Do you think high attrition/failure rate of McE’s could adversely affect the UK construction industry?
 Yes  No
2.4 Are you satisfied with the profit levels of your business?
 Highly satisfied  Moderately satisfied  Not satisfied
2.5 Do you think McE’s can be funded to recruit, train, and develop staff to offset the skill shortage in the
industry?
 Yes  No

*Thank you for taking your time to complete this questionnaire.

367
 Appendix

Section B 1. Findings of the preliminary questionnaires - McE owners

perceptions (Sample size: 60)

Figure B 1.1. What kind of employees do you have?

100.00%
80.00%
60.00% 53.00%

40.00% 30.00%
17.00%
20.00%
0.00%
Permanent Temporary Part-time

Employee type

Figure B 1.2. McE owners perception concerning importance of McE’s to the UK construction
industry

100.00%
78.00%
80.00%
60.00%
40.00%
9.00% 13.00%
20.00%
0.00%
Very important Moderately Not important
important

Figure B 1.3. McE owners perception concerning McE position in the UK construction industry
hierarchy

100.00%
79.00%
80.00%
60.00%
40.00%
19.00%
20.00%
2.00%
0.00%
Apex Middle Base

368
 Appendix

Figure B 1.4. McE owners perception on whether high attrition rate of McE’s would adversely affect
the UK construction industry

100.00% 84.00%
80.00%
60.00%
40.00%
16.00%
20.00%
0.00%
Yes No

Figure B 1.5. McE owners satisfaction levels concerning their current profits

100.00%
80.00% 61.67%
60.00%
40.00% 25.00%
13.33%
20.00%
0.00%
Highly satisfied Moderately Not satisfied
satisfied

Figure B 1.6. McE owners perceptions on whether McE’s can be funded to recruit, train, and develop
staff to offset the skill shortage in the industry

100.00% 89.00%
80.00%
60.00%
40.00%
20.00% 11.00%

0.00%
Yes No

369
 Appendix
Section B 2: Preliminary questionnaires for government and main contractors
representatives

PRELIMINARY QUESTIONNAIRE SURVEY

MICRO CONSTRUCTION ENTERPRISES THE LIFEBLOOD

OF THE UK CONSTRUCTION INDUSTRY

Purpose of the survey:

This survey is based on an on-going research project based at Glasgow Caledonian University.
The goal of this research survey is to divulge perceptions regarding micro construction enterprises
(henceforth referred to as McE’s in this document). Micro enterprises are business, which employ
0-9 people and have an annual turnover or annual balance sheet total does not exceed 2 million
Euro (European Commission, 2003). McE’s constitute about 98 percent of all UK construction
enterprises and contribute towards 60 percent of total employment and 40 of the industry output.
This questionnaire seeks your opinions on a few factors that would define the future course of this
research exercise.
Confidentiality:
As part of a university research programme, there is no commercial, benefit attached to this
research. Information provided through this survey will be treated in absolute confidence. The
results will only be used for the purpose of this research study and the main objective is to add to
the current body of knowledge on McE’s.
Important Notes:
3. There are no right or wrong answers to the questions in this survey. Select the most
appropriate answer for each question based on your view/experience.
4. There may be questions, which appear, irrelevant or impertinent. However, it is necessary in
the study that all questions are answered, as the questionnaire is designed to achieve particular
research objectives, and it is hoped not to offend respondents in any way. If there are
questions, which you are unwilling or unable to answer, skip them, and continue answering
the remainder of the questions.
Keep in mind that both your identity and that of the company you work for will remain strictly
confidential.
Parts of the questionnaire:
Part 1: General information
Part 2: McE centric questions
Enquires:
If you require assistance in completing this questionnaire or if you have any questions or
comments regarding this survey, please contact:
Wills Thomas (Researcher) Professor James Sommerville (Supervisor)
M542 Professor of Construction Management
Glasgow Caledonian University, School of the Built and Natural Environment
City Campus Glasgow Caledonian University,
Cowcaddens Road, Glasgow, G4 OBA City Campus
Scotland, UK. Cowcaddens Road, Glasgow, G4 OBA
Tel: +44-141-331 8037 Scotland, UK.
Mobile: +44 (0) 7886269211 Tel: +44-141-331 3628
Email: wth1@gcal.ac.uk Email: james.sommerville@gcal.ac.uk
Please post or email the completed questionnaire to the researcher on or before
March 31st 2005.

370
 Appendix

PART 1 – GENERAL INFORMATION

1.1 Please indicate your current job title/position:

1.2 Please indicate your total years of experience in construction industry/government:

1.3 Years of experience working in the current position:

1.4 Which of these indicate the type of organisation or company you are working with?
 Contractor  Government
PART 2 – McE CENTRIC QUESTIONS
2.1 How important are McE’s to UK construction industry?
 Very important  Moderately important  Not important
2.2 What is the position of McE’s in the UK construction industry?
 Apex  Middle  Base
2.3 Do you think high attrition/failure rate of McE’s could adversely affect the UK construction
industry?
 Yes  No
2.4 Do you directly employ McE’s?
 Yes  No
2.5 Do you interact with McE’s that you employ on a regular basis?
 Yes  No
2.6 What is the remedy for offsetting skill shortage that plagues the industry?
 Immigrant workers
 Initiating business level training programmes
 Initiating college/university level training programmes
 Other measures
2.7 Do you think McE’s can be funded to recruit, train, and develop staff to offset the skill shortage in
the industry?
 Yes  No

*Thank you for taking your time to complete this questionnaire.

371
 Appendix

Section B 2a. Findings of the preliminary questionnaires – Government

representatives (Sample size: 60)

Figure B 2a.1. Government representative’s perceptions concerning importance of McE’s to the UK

construction industry

100.00%
80.00%
53.00%
60.00%
40.00% 27.00%
20.00%
20.00%
0.00%
Very important Moderately Not important
important

Figure B 2a.2. Government representative’s perceptions concerning McE position in the UK

construction industry hierarchy

100.00%
80.00% 66.00%
60.00%
40.00% 27.00%
20.00% 7.00%
0.00%
Apex Middle Base

Figure B 2a.3. Government representative’s perceptions on whether high attrition rate of McE’s
would adversely affect the UK construction industry

100.00% 87.00%
80.00%
60.00%
40.00%
20.00% 13.00%
0.00%
Yes No

372
 Appendix

Figure B 2a.4. Government representative’s perspective – Does your organisation directly employ
McE’s?

100.00% 80.00%
80.00%
60.00%
40.00% 20.00%
20.00%
0.00%
Yes No

Figure B 2a.5. Government representative’s perspective – Do you interact with McE’s that you
employ on a regular basis?

100.00%
73.00%
80.00%
60.00%
40.00% 27.00%
20.00%
0.00%
Yes No

373
 Appendix

Figure B 2a.6. Government representative’s perspective - What is the remedy for offsetting skill
shortage that plagues the industry?

100.00%
90.00%
80.00%
70.00%
60.00% 53.00%
50.00%
40.00%
30.00%
20.00% 20.00%
20.00%
7.00%
10.00%
0.00%
Im m igrant Initiating training Initiating Other m eas ures
workers program m es college/univers ity
within project and level training
bus ines s program m es
s ettings

Figure B 2a.7. Government representative’s perspective - Do you think McE’s can be funded to
recruit, train, and develop staff to offset the skill shortage in the industry?

100.00%
80.00%
47.00% 53.00%
60.00%
40.00%
20.00%
0.00%
Yes No

Section B 2b. Findings of the preliminary questionnaires – Main contractors

representatives (Sample size: 60)

374
 Appendix

Figure B 2b.1. Main contractor representative’s perceptions concerning importance of McE’s to the
UK construction industry

100.00%
80.00%
60.00% 53.00%
47.00%
40.00%
20.00%
0.00%
Very important Moderately important

Figure B 2b.2. Main contractor representative’s perceptions concerning McE position in the UK
construction industry hierarchy

100.00%
80.00% 67.00%
60.00%
40.00% 33.00%

20.00%
0.00%
Middle Base

Figure B 2b.3. Main contractor representative’s perceptions on whether high attrition rate of McE’s
would adversely affect the UK construction industry

100.00% 93.00%

80.00%
60.00%
40.00%
20.00% 7.00%
0.00%
Yes No

Figure B 2b.4. Main contractor representative’s perspective– Does your organisation directly employ
McE’s?

375
 Appendix

100.00%
80.00%
60.00%
60.00%
40.00%
40.00%
20.00%
0.00%
Yes No

Figure B 2b.5. Main contractor representative’s perspective – Do you interact with McE’s that you
employ on a regular basis?

100.00%
80.00%
60.00% 53.00%
47.00%
40.00%
20.00%
0.00%
Yes No

Figure B 2b.6. Main contractor representative’s perspective - What is the remedy for offsetting skill
shortage that plagues the industry?

100.00%
90.00%
80.00%
70.00% 60.00%
60.00%
50.00%
40.00%
30.00% 20.00% 20.00%
20.00%
10.00%
0.00%
Immigrant workers Initiating training Initiating
programmes within college/university level
project and business training programmes
settings

Figure B 2b.7. Main contractor representative’s perspective - Do you think McE’s can be funded to
recruit, train, and develop staff to offset the skill shortage in the industry?

376
 Appendix

100.00%
80.00% 73.00%

60.00%
40.00% 27.00%
20.00%
0.00%
Yes No

377
 Appendix

Section B 3. Findings of the shadowing exercise

Table C1.1 Findings of the shadowing exercise

Are
Motivation Position in Affect of Role in
Ethnic Age of Education McE's
McE Gender Status Specialisation to start the industrial attrition on precluding
origin owner level importan
business hierarchy industry skill shortage
t
1 Caucasian Male Married 52 Vocational Bricklayer Freedom Base end No No No
2 Caucasian Male Single 47 Vocational Joiner Status Base end No No No
3 Caucasian Male Single 46 O levels Joiner Status Base end No No No
Interest in
4 Caucasian Male Married 53 Vocational Bricklayer Base end No No No
trade
5 Caucasian Male Single 40 Vocational Plumber Status Base end No No No
6 Caucasian Male Married 51 Vocational Joiner Freedom Base end Yes No No
7 Caucasian Male Married 46 A levels Joiner Freedom Base end No No No
8 Caucasian Male Married 35 Vocational Joiner Freedom Base end No No No
9 Caucasian Male Married 53 O levels Electrician Freedom Base end No No No
10 Caucasian Male Married 44 Vocational Joiner Status Base end No No No
11 Caucasian Male Married 46 Vocational Joiner Freedom Base end No No No
Marrie
12 Caucasian Male 39 Vocational Bricklayer Freedom Base end No No No
d
Main
motivation
Average
to start
age: 45
business:
years
Freedom
(58.33%)

378
 Appendix

379
 Appendix

Appendix C. McE centric investigation

Table C 1.1. McE owners profile

McE
Ethnic Education
owner Location Gender Status Age McE type
origin level
no.
1 Glasgow Caucasian male Married 57 A level Bricklayer
2 Edinburgh Caucasian male Single 54 A level Bricklayer
3 Glasgow Caucasian male Single 49 A level Bricklayer
4 Edinburgh Caucasian male Married 55 A level Plumber
5 Dundee Caucasian male Married 47 A level Bricklayer
6 Stirlingshire Caucasian male Single 56 A level Bricklayer
7 Aberdeen Caucasian male Married 53 A level Bricklayer
8 Glasgow Caucasian male Married 56 A level Plumber
9 Aberdeen Caucasian male Married 49 A level Carpenter
10 Fife Caucasian male Married 46 A level Carpenter
11 Glasgow Caucasian male Married 52 A level Plumber
12 Glasgow Caucasian male Single 37 A level Bricklayer
13 Edinburgh Caucasian male Married 55 A level Bricklayer
14 Glasgow Caucasian male Married 47 A level Carpenter
15 Dundee Caucasian male Married 38 A level Bricklayer
16 Dundee Caucasian male Married 54 A level Bricklayer
17 Glasgow Caucasian male Single 43 A level Plumber
18 Glasgow Caucasian male Married 51 A level Bricklayer
19 Glasgow Caucasian male Married 39 A level Plumber
20 Edinburgh Caucasian male Married 44 O level Carpenter
21 Glasgow Caucasian male Single 55 O level Carpenter
22 Fife Caucasian male Married 46 O level Bricklayer
23 Aberdeen Caucasian male Married 42 O level Carpenter
24 Fife Caucasian male Married 37 O level Carpenter
25 Glasgow Caucasian male Single 45 O level Painter
26 Aberdeen Caucasian male Married 38 O level Carpenter
27 Fife Caucasian male Married 54 O level Plumber
28 Edinburgh Caucasian male Married 55 O level Painter
29 Edinburgh Caucasian male Married 43 O level Bricklayer
30 Fife Caucasian male Single 46 O level Bricklayer
31 Glasgow Caucasian male Married 39 O level Bricklayer
32 Glasgow Caucasian male Married 35 O level Carpenter
33 Glasgow Caucasian male Married 39 O level Carpenter
34 Dundee Caucasian male Married 45 O level Painter
35 Edinburgh Caucasian male Single 52 O level Carpenter
36 Fife Caucasian male Married 42 Undergrad Electrical
37 Edinburgh Caucasian male Married 37 Undergrad Fire
38 Edinburgh Caucasian male Married 34 Undergrad Electrical
39 Glasgow Caucasian male Married 41 Undergrad Electrical
40 Glasgow Caucasian male Married 43 Undergrad Fire
41 Fife Caucasian male Married 39 Undergrad Electrical

380
 Appendix

42 Glasgow Caucasian male Single 46 Vocational Bricklayer

43 Fife Caucasian male Married 52 Vocational Carpenter
44 Glasgow Caucasian male Married 43 Vocational Bricklayer
45 Glasgow Caucasian male Single 56 Vocational Plumber
46 Fife Caucasian male Married 49 Vocational Bricklayer
47 Glasgow Caucasian male Single 55 Vocational Bricklayer
48 Fife Caucasian male Married 52 Vocational Bricklayer
49 Stirlingshire Caucasian male Single 48 Vocational Painter
50 Fife Caucasian male Married 45 Vocational Bricklayer
51 Dundee Caucasian male Married 48 Vocational Bricklayer
52 Glasgow Caucasian male Married 39 Vocational Bricklayer
53 Dundee Caucasian male Married 54 Vocational Bricklayer
54 Edinburgh Caucasian male Married 51 Vocational Carpenter
55 Dundee Caucasian male Single 48 Vocational Bricklayer
56 Edinburgh Caucasian male Married 49 Vocational Painter
57 Glasgow Caucasian male Married 48 Vocational Carpenter
58 Glasgow Caucasian male Married 51 Vocational Carpenter
59 Edinburgh Caucasian male Married 47 Vocational Bricklayer
60 Dundee Caucasian male Married 46 Vocational Carpenter

Table C 1.2. McE owner v. McE profit %

Age of McE
Average profits Age of McE Average profits
owner (45 and
(1995-2005) owner (over 45) (1995-2005)
below)
34 3.80% 46 1.90%
35 3.62% 46 2.07%
37 1.90% 46 2.03%
37 1.95% 46 0.83%
37 1.96% 46 0.55%
38 0.87% 47 1.75%
38 1.80% 47 1.85%
39 1.71% 47 3.96%
39 1.85% 48 0.82%
39 1.79% 48 1.87%
39 3.16% 48 1.33%
39 1.85% 48 1.77%
41 4.00% 49 1.59%
42 2.86% 49 1.23%
42 4.65% 49 0.59%
43 2.13% 49 1.65%
43 1.86% 51 2.05%
43 2.14% 51 0.87%
43 1.96% 51 1.97%
44 1.81% 52 0.80%

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 Appendix

45 1.76% 52 3.78%
45 1.99% 52 1.23%
45 1.35% 52 1.82%
Average profits
for McE
2.29% 53 1.26%
owners 45 and
below
54 1.80%
Findings age v. profits
54 3.14%
Number 54 0.61%
of % of
Average
McE’s McE’s
McE profit %
in each in each
owners of 54 0.09%
group age
turnover
(Sample group
size: 60)
55 0.76%
55 0.80%
45 and 55 0.70%
23 38.33% 2.29%
below 55 0.61%
55 1.56%
56 0.39%
56 0.29%
56 0.35%
Over 45 37 61.67% 1.38% 57 0.37%
Average
profits for McE 1.38%
owners over 45

382
 Appendix

Table C 1.3. McE’s v. small construction enterprises profit %

Mean
Standard
Year 2000 2001 2002 2003 2004 2005 POT
deviation
(%)
Average McE
POT % for
2000-2005 1.90% 1.91% 1.71% 1.52% 1.21% 0.95% 1.53% 0.003879519
(Sample size:
60)
Average Small
enterprises
POT % for
3.40% 3.71% 3.76% 4.09% 4.21% 4.30% 3.91% 0.003455672
2000-2005
(Sample size:
38)

Table C 1.4. McE’s v. small construction enterprises v. top 100 v. Gross industry POT %

Mean of
the
Year 2000 2001 2002 2003 2004 2005 average
profit
percentage

McE POT % 1.90% 1.91% 1.71% 1.52% 1.21% 0.95% 1.53%

Small
construction
3.40% 3.71% 3.76% 4.09% 4.21% 4.30% 3.91%
enterprises
POT %
Top 100
construction
5.20% 5.40% 5.70% 6.20% 6.40% 6.60% 5.92%
companies
POT %
Gross
industry 3.00% 3.10% 2.90% 3.30% 3.00% 3.40% 3.12%
POT %

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Table C 1.5. McE owners skills set, inclinations and motivations

McE
Small construction enterprise
A O
Education Undergraduate Vocational O levels Undergraduate Vocational A levels
levels levels
level
10.00% 32.00% 31.00% 27.00% 52.63% 42.11% 5.26% -
External Yes No Yes No
consultants 15.00% 85.00% 65.79% 34.21%
Innovation Yes No Yes No
oriented 10.00% 90.00% 71.06% 28.94%
Intention to Yes No Yes No
grow
26.67% 73.33% 76.32% 23.68%
business
Interest Interest
Motivation Fulfilmen Social Fulfilmen Social
in Freedom Insecurity in Freedom Insecurity
to start t status t status
trade trade
business
12.00% 13.00% 27.00% 38.00% 10.00% 50% 26.31% 10.52% 13.17% -
Propensity to Yes No Yes No
take risks 12.00% 88.00% 65.79% 34.21%
Long-term Short-term Long-term Short-term
Strategic No strategy No strategy
strategy strategy strategy strategy
plans
12.00% 25.00% 63.00% 52.63% 36.84% 10.53%
Training
(Continuous Yes No Yes No
professional
development 25.00% 75.00% 68.42% 31.58%
programmes)

384
 Appendix

385
 Appendix

Table C 1.6 Micro-enterprise owners qualification v. POT %

% of

Business respondents Average

Qualification
type with the POT %

qualification
ME Undergraduate 70.00% 4.35%
ME Vocational 30.00% 2.90%
ME ‘A’ levels 0.00% -
ME ‘O’ levels 0.00% -

Appendix D. Immigrant workers perceptions

Sample size: 30
Average age of the respondent- 24

386
 Appendix

Location- Lanarkshire and Tayside

Information gathered from immigrant workers by means of informal

interaction during out of work setting.

Figure D1.1. What are the main drivers that bring you to UK?

Main motivation to come and work in UK

Higher wages

13% Lacks of jobs in own

37% country
13%
Better professional
opportunities
17% Better life style
20%
To get international
exposure

Figure D 1.2. What are the main obstacles that dissuade you from working in UK on
a long-term basis?

387
 Appendix

Factors which dissuade you from working in

UK

High cost of living

13%
13% Discrimination

51% Different working

environment
23%
Cultural differences

Figure D 1.3. Do you work for an agent?

Do you work for an agent

40%
Yes
No
60%

Figure D 1.4. Have you worked as part of the black market sector operating within
the UK construction industry in any instance?

388
 Appendix

Have you worked as part of the black

market sector operating within the UK
construction industry in any instance

37%
Yes
No
63%

Figure D 1.5. Whom do you work for generally within a construction project?

Whom do you work for generally

within a construction project

Sub-sub-
13%
contractors
Sub-contractor
33% 54%
Main contractor

Figure D 1.6. Do you have a CIS4?

389
 Appendix

Do you have a CIS4

43%
No
Yes
57%

Figure D 1.7. Do you have a NI number?

Do you have a NI number

27%
Yes
No

73%

Figure D 1.8. Educational qualifications

390
 Appendix

Educational Qualification

A levels

O levels
7%
13%
37%
Certificate level
20%
23% College Diploma

University
Graduate

Figure D 1.9. What are your long term plans?

Long term plans

Go back after
earning enough on
a yearly basis (No
long term plans)
13%
Go back once
47% home country
offers better
40% oppurtunities
Settle down for
good

Figure D 1.10. How much do you get paid?

391
 Appendix

How much do you get paid

National standard
specific to the
20% trade
43% National minimum
wage

37%
Less than national
minimum wage

Figure D 1.11. How often do you get paid?

How often do you get paid

7%
20% Daily
43% Weekly
Fortnightly
Monthly
30%

Figure D 1.12. How long do you stay on in the same location?

392
 Appendix

How long do you stay on in the same

location

Short period
depending on the
43% work available
57% Longer sustained
periods

393