Reasons of diversification strategy in construction: a view of senior managers

What the paper says

Purpose Many construction companies use the diversification strategy to take advantage of its various advantages. However, previous studies on this strategy have neither analysed its management perspective nor considered the pre-diversification stage of construction companies. The purpose of this study is to provide a detailed discussion about the diversification motivations of construction companies and to evaluate the pre-diversification decision-making criteria at the corporate level in the construction industry from the perspective of senior managers. Design/methodology/approach The related literature was reviewed to determine the reasons for diversification. The data required to investigate the relationship between company profiles and reasons for diversification were then obtained through a semi-structured questionnaire survey conducted with 40 senior construction managers. The results were analysed through statistical tests. Findings Profiles of construction companies have no significant effect on reasons for diversification. The majority of contractors diversify regardless of typology, risk attitude or diversification modes and describe themselves as a prospector or an analyser, risk-averse and moderately diversified. Finally, the related diversification is more favourable than the unrelated one. Research limitations/implications The questionnaire survey was conducted with companies in Turkey. The scope of the study could be extended to other countries or more companies to increase its generalization capability. This study reveals managerial behaviours required for construction companies to overcome the challenges faced in making a decision to implement a diversification strategy, achieve a sustainable growth and gain a competitive advantage. The study argues for the necessity of establishing a relationship between company profiles and the reasons, advantages and disadvantages of diversification strategy. The findings and recommendations are a valuable source of information and guidance for practitioners, policymakers and researchers. Practical implications Decision-maker practitioners in the construction industry may benefit from the results of this research as a guide during the pre-diversification stage of the decision-making process for implementing the diversification strategy. Originality/value To the best of the authors’ knowledge, this study is the first attempt to present the approaches of senior managers of construction companies on reasons for diversification and the relationship between these reasons and typologies, risk attitudes and diversification modes of companies.