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DEVELOPMENT OF MICRO-
CONSTRUCTION ENTERPRISES
WILLS THOMAS
September 2007
FACTORS AFFECTING THE DEVELOPMENT
OF MICRO-CONSTRUCTION ENTERPRISES
WILLS THOMAS
September 2007
Abstract
ABSTRACT
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.
iii
Table of content
TABLE OF CONTENT
ABSTRACT....................................................................................................................................ii
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
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
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
v
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
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
vi
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
x
List of figures
xi
List of figures
xii
List of abbreviations
LIST OF ABBREVIATIONS
Acknowledgements
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
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
being part of a team provided an atmosphere that you looked forward to coming
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
xv
Chapter1
1. Introduction
1.1. Background
and contribute toward 60 percent of the employment and 40 percent of total turnover
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
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
the larger cohort of SMEs which include all firms which have 0-250 employees and
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
1
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
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
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
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
like fire protection whereas others like bricklayers carry out relatively simple
operations. This variance in the McE’s characteristics calls for isolated focus on
2
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
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
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
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
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
3
Chapter1
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
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,
output and employment is contributed by McE’s thus highlighting the patent role of
taken heed of. This research is aimed at providing a panoptical overview of different
The main aim of this research is to prove or disprove the argument that there are a
corroborate the above assertions and while doing so identify key factors, which
4
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
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.
5
Chapter1
within construction supply chains, McE success and failures, and factors
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
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.
6
Chapter1
performance. These factors have been segregated into endogenous and exogenous
factors, which have been elaborated over in, Chapter 4 and Chapter 5 respectively.
Chapter7, 8 and 9: Elaborate on the research findings and answers the key research
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
Chapter10: Presents the conclusions derived from the overall research findings and
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
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
centric statistics, which helps reveal their current state of affairs. This analysis is
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
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
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
independent and not mostly owned or controlled by large firms. Bolton (1971)
relatively small share of its market…it is managed by its owners or part owners in a
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
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)
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
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
(OJEU, 2003). This report suggested that, “…the existence of different definitions at
community level and national level could create inconsistencies. Following the logic
based on a set of common rules. The pursuit of such an approach is all the more
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
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
enterprise. Thus defining micro, small, and medium sized enterprises under the same
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
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
same heading as small and medium sized enterprises based on the position that it
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-
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
medium sized enterprises would reduce the efficacy of these assistive measures.
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,
The Bolton Committee (1971) whose suggestions were the basis for many of the
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
blunder and continue to look at micro-enterprises within the same category as SMEs.
12
Chapter 2
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
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
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
“…there are four areas in which the assumption of small firm’s homogeneity can
existence of common small business interests and a shared outlook amongst their
13
Chapter 2
finally, the assumption of unitary small business sector discourages the examination
Outwith the ambit of the current argument there exists another problem area in the
Based on the above it would not be wrong to suggest that this erroneous practice of
(EU); when integrated within the unique grouping of SMEs the composite category
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
They contribute about £447,770 Million to the UK economy and employ over
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
2001). The owners of micro-enterprises are, in general more interested in the long-
shareholders and management, are primarily concerned with short-term profit and
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
McCarney, 2003).
Levy (1991, p. 2) argues that SMEs, “…hold the promise of building development
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.
enterprises within the SME cohort. The following section of this chapter is aimed at
15
Chapter 2
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
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
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
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
Fotopoulos and Spence, 2001). Nevertheless, it is the most credible source for
VAT business registration statistics that makes it the best source for measuring firm
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 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
corresponds to the erosion in number of firms and can be calculated using the
The above statistics paint a rather grim picture; with such a high attrition rate, the
registration statistics published by DTI is that the reasons for the de-registrations
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 highlights that there has been 27.3 percent increase in the number of VAT
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
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 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
same period. The above figures highlights a regional variance in the VAT de-
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
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
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
21
Chapter 2
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.,
2) McE’s which did survive the first few months after inception tend to falter as
time progresses.
22
Chapter 2
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
2006).
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
• 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
1.2 million people which accounts for about 4 percent of the total number of
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
PERFORMANCE PERFORMANCE
OF OF
McE's INDUSTRY
PERFORMANCE
OF
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
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
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
reviewed would also aim to decipher factors that might differentiate McE’s from
26
Chapter 3
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
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
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
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
• 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
studies employed.
There have been a few studies, which have looked at developing business
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
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
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
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
difficult to obtain;
• Since the information in small businesses resides with the owners in absence of a
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
considered to be part of the small business cohort and in fact constitute nearly 98
29
Chapter 3
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
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)
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
nature of existing micro-enterprise research highlights the need to look elsewhere for
the required information. Small enterprises even though different in scale have
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
specific. The information sourced from small business literature needs to be adapted
“business success” and “business failure”. Rogoff et al. (2004) suggest that there is,
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,
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
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
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
32
Chapter 3
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
Williams, 1993). This set could also include firms which that were disposed
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
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
and Watson, 1998). Fredland and Morris (1976) suggest that business
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
33
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
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
(1981) calls these businesses, “…firms, which fail to make a go of it”. Altman
failed if the realized return on invested capital, with allowances for risk
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 helps delineate the major scenarios in which a business could be deemed a
pay its obligations when they are due (Frederikslust, 1978) and when its value falls
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
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
inadvertently causes a lot of confusion. Given this scenario, some would call for a
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
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
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
disconnected from the business and hence does not allow for close scrutiny of the
failure.
Of the other two highlighted measures that are outwith the ambit of business closure,
account businesses which might have been sold on even though they are profitable,
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
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
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.
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).
models. These models use financial ratios derived by a statistical search through a
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
38
Chapter 3
qualitative research (mixed research methodology adopted – see the later research
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
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
assessment for a sample, population of McE’s would be carried out. The average
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
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
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
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
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
41
Chapter 3
Boyle and Desai (1991) as part of the research they conducted on turnaround
express the causes of business failure. This matrix was adopted and modified by
CELL 1 CELL 2
Management
Internal:
ENVIRONMENT
control
Events
under
CELL 4
External:
CELL 3
control
under
•MACROECONOMIC
•BUSINESS ISSUES
ISSUES
Response
Figure 3.2. Environment/response matrix distribution with failure (Arditi et al., 2000)
(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
noted that Arditi et al. (2000) developed this matrix by adapting factors of business
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
Figure 3.3 highlights the alternative approach adopted by Dun and Bradstreet
of business failure in the US construction industry. This was in the form of an input/
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
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
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
one of the causes of business failure. However, these models could be used a
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
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
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,
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.
example, if the average profitability of McE’s whose owners have a higher level of
inferred that business success and failure is contingent on the educational level of the
analysis.
46
Chapter 3
PROJECT INDUSTRY
CENTRIC CENTRIC
FACTORS FACTORS
FACTORS
OWNER- WHICH
EFFECT BUSINESS
MANAGER
McE CENTRIC
CENTRIC
FACTORS
FACTORS 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
and exogenous risk factors identified in previous studies in the area of small business
failure.
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
Morris, 1976; Peterson et al., 1983; Hall and Young, 1991; Gaskill and Van Auken,
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
48
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
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
entrepreneurship is a requisite for business survival. Say (1964) notes that success in
knowledge of the world as well as of the business”. Knight (1965) suggests that an
Praag (2003) notes that for business success the owner/entrepreneur requires ‘…
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
SKILLS ABILITIES
Figure 3.6 is a pictorial representation of all the aforementioned factors which 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
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,
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
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,
receivable difficulties, constitute the budgetary issues. The factors which were
Exogenous factors are those factors which are ‘external to’ and ‘envelop’ the
51
Chapter 3
organisational ecologists like Hannan and Freeman (1984) who favour the concept of
Studies conducted by Everett and Watson (1998) suggest that economic factors
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
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-
52
Chapter 3
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
increase with decreasing entry barriers; entry barriers are set by the industry and
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
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
business failure. Five different measures for small business failure were identified
53
Chapter 3
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
54
Chapter 4
4. Endogenous factors
4.1. Introduction
The previous chapter delineated the diverse assortment of factors, which influence
grouped within two cohorts i.e., endogenous and exogenous. This chapter comprises
endogenous factors. Endogenous factors have been fragmented into two namely:
In a McE, the difference between the owner and business centric factors 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
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
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
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).
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
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
applicable to all sorts of small businesses. The contention of this research is that
56
Chapter 4
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
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.
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
or not. This has led to a great deal of impediment in the area of small business
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further notes that, “…too much time and effort is expended in the search for
attempting to understand and assist small businesses are hindered by their efforts to
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
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
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Chapter 4
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
structure designed for planned environmental adaptation”. The craft and promotion
types identified by Filley et al. (1976) are similar to the craftsman entrepreneurs and
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
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both Smith (1967) and Filley et al. (1976). The classical role is akin to the
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
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
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
Dunkelberg and Cooper (1982) failed to identify the managerial type identified by
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
(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
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
1. Craftsman (Smith, 1967; Filley et al, 1976; Stanworth and Curran, 1976;
1976)
Most of the typological studies mentioned above tried to segregate small business
small business owners from entrepreneurs. Carland et al. (1984) were the first to
devoid of the entrepreneurial idiom which preceding typologies were stuck with.
manages a business for the principal purposes of profit and growth. The
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
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
strategic practices and continued growth”. They further note that the
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
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CRAFTSMAN
Firm/career Independence/
Personal control
Business
ownership
PROFESSIONAL ENTREPRENEUR
MANAGER
Exploitation of
Innovation and
Building an Pursuing personal
organisation growth wealth
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
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
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Chapter 4
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
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
Based on this line of thought four other types of small business owner typologies can
and intends to build an organisation centred around his speciality (trade, craft, or
occupation).
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occupation and build an organisation centred around his speciality with the
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
deeply influenced by the personal characteristics of their owners and given that all
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
into different subsets given that it is common knowledge that their inherent
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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+ +
Managerial-
entrepreneurs
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
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
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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
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.
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
It is also revealed that, within owner centric literature, the overarching trend of
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.
(2003) who note that the analysis of behaviour of owners in small businesses and
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
“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
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.
approaches used to assess behavioural factors, which would feed into segregated
There have been a number of studies which employed this approach to describe the
management behaviour (see e.g. Carland, 1984; Hisrich and Peters, 1992; Utsch et
characteristics, mannerism, qualities, style, and traits. Most researchers use these
terms interchangeably while others like Bridge et al. (2003) consider them as distinct
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Chapter 4
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
To further, deliberate on this approach one needs to understand the essence of the
willingness to take risks in order to make a profit”. The term entrepreneurial finds its
It was the famous Irish economist Cantillon (1755) who coined the term
operates a new enterprise or venture and assumes some accountability for the
noted that an entrepreneur is a person who is willing and able to convert a new idea
which by its very nature cannot be insured, or capitalized or salaried to. Casson
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
The time of life of the individual (the older person with little prospect of further
promotion);
2. The types of market (if the preferred market open to the entrepreneur is
3. The entrepreneur versus the corporatist (the person who is fed up with structure
with value by devoting the necessary time and effort, assuming the accompanying
financial, psychological and social risks and receiving the resulting rewards of
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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(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
change and innovation, and compete aggressively with other firms and a non
passive, and reactive. Hyrsky (2000) in a factor analysis research of small business
managers identified work commitment and energy, innovativeness and risk taking,
risks, and being innovative, articulated with an ambition to grow. Sadler-Smith et al.
behaviour promotes a culture of creativity and risk taking, create flat informal
opportunities. Bridge et al. (2003) identified a set of personality traits and qualities,
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Based on the above it would not be wrong to construe that an individual who intends
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
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.
innovativeness and a propensity to take risks (Five of the six literature sources
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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
individuals are endowed with different levels of business acumen, which highlights
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
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
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
discussed earlier in this chapter (see e.g. Dunkelberg and Cooper; 1982; Hornaday,
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
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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Chapter 4
Sadler-Smith et al. (2003) suggest that this approach involves articulating desirable
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
Sadler-Smith et al., 2003). According to Boam and Sparrow (1992), this rising
2. The growing link between business performance and employee skills has driven
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
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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
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.
stems from the different sets of objectives it has been adopted for. Researchers like
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
This contextual irregularity has further extended to how researchers used this
approach within small business research. Researchers like Martin and Staines (1994)
business owners but while doing so failed to give due consideration to the fact that
owners. Caird (1992) was the first to identify a set of entrepreneurial competencies
as different from managerial competencies. She concluded that there are four
skill and psychological variables. Lau et al. (1999) suggest that entrepreneurial
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Chapter 4
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.
various means
Competencies related to person-to-person
Relationship competencies
or individual-to-group based interactions
Competencies related to different
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
for the welfare of small businesses in UK, identified six key managerial
competencies vital for the small business success namely: leadership, technical
research, McE owners would be asked to identify their level of competency in these
areas.
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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
researchers are far too exhaustive and varied and as recognised by Bridge et al.
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
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, “…
management are not exclusive functions instead they are required by firms on a
This line was touted by Mukhtar (1998) who proposed an integrated global
competency approach who suggested that all firms operate inside a global
Smith et al. (2003) further elaborated on this and note that, “…the global
developed a model (Figure 4.3) based on this assertion to ascertain which firms were
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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 highlights the global competency model that was used by Sadler-Smith et
al. (2003) to link the two separate streams of management theory namely
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“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
(high growth).”
positive or negative influence on firm growth. The weakness of this model is that
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
and type of risk taken. If the type of risk taken is of an uncalculated nature he could
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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
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
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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
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’
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
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
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
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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also been identified as important for small business success namely attitude,
The following section of this chapter aims at decipher the key behaviour centric
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
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
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
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
Sexton and Barrett (2003) who defined innovation as the effective generation and
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
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1) Improving the effectiveness of the firm, i.e. making sure that the firm is doing
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
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
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
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
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
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.
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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,
involve oneself in a dangerous situation. Brockhaus (1980) defines the propensity for
risk taking as, “…the perceived probability of receiving the rewards associated with
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)
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
These finding were refuted by Busenitz (1995) who was of the view that, “…
yielded little support”. However, the frailty of Busenitz’s (1995) argument centres
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
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
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success.
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
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 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
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
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,
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Chapter 4
McE OWNER’S
BEHAVIOUR,
COMPETENCIES,
INTENTIONS
AND MOTIVATION
from settings external to and enveloping the McE would have on McE owners
aimed at deciphering the key skill centric factors that are essential for McE success.
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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.
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
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
Multitudes of different factors have been identified as skill centric factors namely
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
• Communication
• Leadership
• Planning
• Productivity management
• Stress management
earlier in this chapter. Lucas (1978) suggests that persons having relatively more
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
owners.
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notes that, “…those who enter self-employment gradually learn about their
revise their ability estimates upward tend to expand output while those embracing
(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
estimate of their abilities whereas in younger firms entrepreneurs have less precise
younger firm might not stand true for serial entrepreneurs. Serial entrepreneurs are
those entrepreneurs who exit one venture before entering into a subsequent one
Georgelli et al. (2000) suggest that the core abilities for entrepreneurship are a
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planning capacity” but noted that not all small businesses are equipped with these
In the context of this research, the skill centric factor that is imperative to McE’s
educated given that the entry barriers into the industry are limited (SBS, 2006).
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
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
the findings of this exercise reveal that, there is in affect a positive relationship
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
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
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
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There are numerous other generic factors, which albeit vital are outwith the scope of
aimed at deciphering the key business centric factors that are essential for McE
success
factors prominent among which were issues related to internal finance (Reid, 1996;
Tucker and Lean, 2003), bank interest rates (Reid, 1995; Storey and Wynarczyk,
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
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
taken by the business owner. The following section of this chapter comprises of a
literature reviewed has been sourced from the area of small business research given
4.7.1. Strategy
The term strategy finds its etymological roots in the Greek term strategos which
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
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
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
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
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,
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Strategy is often also equated to operational effectiveness but Porter (1996) suggest
current position to a future desired position in the market thus reducing the
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
external consultants (Robinson and Pearce, 1984; Schwenk and Shrader, 1993). This
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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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,
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
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
environment with high levels of turbulence and competition whereby very few
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Ssegawa (2003) was of the view that formulating appropriate strategies increases the
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
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
(;Storey, 1994; Glancey, 1998; Mitra and Matlay, 2000; Morrison et al., 2003).
(Evans, 1975; O’Farrell & Hitchens, 1988). O’Farrell & Hitchens (1988) in their
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scale and minimisation of long-run unit costs and is insufficiently concerned with
field of economics. There are many stochastic models of firm growth, but
Gibrat’s law of proportionate effect (1931) stands out, which proposes that
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
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;
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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
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
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
Inhibiting Factors
Intention Ability
• Lack of ambition and • Constrained
vision managerial
• Anti-business competencies
protectionism expansion/production
limitations
• Mature position in
life-cycle • Organisational
structures results in
resources
From the above it can be inferred that the ability to grow is linked to the owner’s
propounded conditions for business growth (Figure 4.7), which are in line with the
1) Prevailing Environment
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CORE CONDITIONS
PERCEPTION
COMPETENCY FOR OF THE
AND SKILL
BUSINESS OWNER
BASE
GROWTH
The influence that the prevailing environment has on business growth is pre-
and Yang (2000) were of the view that having an awareness of both the general and
They further claimed that the external environment, which constitutes the macro-
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,
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
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
operate (Penrose, 1995). Based on the above premise it can be construed that core
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
depends on its skill base; in situations were there is skill shortage the ability of a
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
As has been identified earlier majority of the small business owners are generally
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
business performance. If the findings of this exercise reveal that, there is in effect a
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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
however, a few growth routes were reiterated by most respondents; these key growth
1) Innovation
2) Geographic Relocation
3) Geographic Expansion
4) Partnership
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
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(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
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
small firms suggests that substantial benefits might be obtained through the
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
a) Project Partnering: Here parties come together for the duration of the project.
projects and are not related to partnering at the enterprise level, which involves
production chain. Johnston and Lawrence (1991) states that VAP's have
in some cases have been able to compete with vertically integrated firms.
- Creativity
- High quality
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only when information flows seamlessly but there remain barriers to this.
combination. However, mere adoption of these routes does not guarantee growth;
prevalence of the relevant conditions for growth is vital for achieving optimum
4.8. Summary
This chapter highlighted the fallacy of considering all small business owners as
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
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
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
performance was McE owners education level. Two key generic factors were
identified namely: McE owners inclination to employ external consultants and attend
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
intention to grow. As part of this research, McE owners were asked to identify their
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5. Exogenous factors
5.1. Introduction
The preceding chapters outlined the various endogenous factors, which might affect
factors might be influenced by the exogenous factors, which envelop them. Studies
a number of factors; a prominent few have been enumerated below (see e.g.,
• 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
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
environments. This is not to say that other exogenous settings will not affect McE’s.
3. Conflicts
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
construction industry.
The following section of this chapter comprises a review of literature related to the
aforementioned factors are extremely scarce which curtails the profundity of the
deliberations.
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Section 107, of the Housing Grants, Construction and Regeneration Act (1996) does
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
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
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
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
5.3. Collusion
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
achieve a common goal (Tirole, 1988). Collusion is illegal in UK as per the statutes
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
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CLOSED LOOP
SYSTEM
COLLUSION
MAIN CONTRACTOR SUB
McE's
CONTRACTOR
IMPREGNABLE NEXUS BETWEEN
MAIN AND SUB CONTRACTORS
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,
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
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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
5.4. Conflicts
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
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;
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
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Client v. Supplier;
Client v. Consultant;
Subcontractor v. Supplier;
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
changes
Conlin et al. (1996) Six areas: payment; performance;
administration
Diekmann et al. (1994 Three areas: people; process; and
product
Heath et al. (1994) Seven areas: contract terms;
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proximate causes
Rhys Jones (1994) 10 areas: management; culture;
and workmanship
Semple et al. (1994) Four areas: acceleration; access;
unpredictability
Preliminary project level analysis revealed that McE’s are plagued by conflicts at the
Given that, interactions between McE’s and subcontractors are similar to those
between main contractors and subcontractors what is construed for them could be
Dainty et al. (2001) suggest that the subordinate position of the subcontractor, within
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
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
research in this area as the regressive developments in McE owners psyche could be
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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MAIN
CONTRACTOR INFORMATION
INFORMATION
SENT: A RETREIVED: B
INFORMATION INFORMATION
RETREIVED: A SENT: B
SUB-
CONTRACTOR
INFORMATION INFORMATION
SENT: A RETREIVED: B
NO NOISE ON SIGNAL
NO DISTORTION
Construction industry is renowned for the fragmented structure (Egan, 1998); this
exchange and distribution across the project supply chain (Higgin and Jessop, 1963;
(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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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
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
interactions involved. Information flow from the main contractor to the McE
viewed as a covert act on part of the main contractor or subcontractor as they might
distortion could also be due to the tacit collusion between main contractor and
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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
participating parties where they would integrate at all levels and freely share
(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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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
involving McE’s might remain unknown given their relatively small size and
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
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
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
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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
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.,
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
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
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
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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:
businesses
obligations
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 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
5.8. Summary
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
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
presumed.
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6. Research methodology
6.1. Introduction
importance in guiding the direction and determining the quality of the research
procedures (Grix, 2002). Methodology is often confused with methods; the latter is the
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
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
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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
conundrum with respect to how one delineates the research methodology one employs.
The philosophical and theoretical lenses, which encapsulate research, are varied and
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
Figure 6.1.
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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
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6.3 Assumptions
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
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,
and limited
definitions
Researcher uses Researcher works with particulars
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
of what is required from the research it has been found that the philosophical
methodological assumptions.
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Ontological assumptions address the nature of reality. Creswell (1997) suggest that
that, “…multiple realities exist, such as the realities of the researcher, those 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
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
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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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
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
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
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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).
which would be used both in isolation and in unison. Inductive logic would prevail and
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.
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
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
1. Modernism
2. Post modernism
(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
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
Post modernist theory evolved in the last few decades or so in response to the deficiency
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
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
totalising cultural narrative schema which orders and explains knowledge and
theories thereby dismissing the naturally existing chaos in this world and reinforce
(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
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
This aberration of classifying and stereotyping has been also been common practice in
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.
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).
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
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
Using post modernist research ideology would help to arrive at a teleological doctrine,
which would propagate reconstitution and restructuring of the current esoteric order
approach are that the research would be carried out with an open mind liberating the
wrong to suggest that further studies carried out in the research area might subscribe to
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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
approach for this research, it is beneficial to explore the differences and take into
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
This method uses open questioning techniques and focuses upon ‘processes’ and
‘reasons why’, which differs from that of quantitative research, because quantitative is
(2003) adds that the method can examine contemporary events and (Schramm, 1971)
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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
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
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
so much a weakness of the method, but a statement of the usefulness of the outcome of
the research.
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
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,
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
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
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Clearly both methods can be used with success and are subject firstly to careful design,
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
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
observations.
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(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.
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events? events?
Experiment How, why Yes Yes
Who, what, where, how many,
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
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
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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
fallacy?”
industry?”
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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
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.
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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
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
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
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
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
general perceptions regarding McE’s. This survey would help decipher general
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
different groups of individuals one solely directed towards McE owners and the
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
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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
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
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
such an approach has been viewed as weak sibling of social science methods and
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
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
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
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
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
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
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
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
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
rounds of interviews were carried out on construction sites simultaneously with the
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
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.
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
enterprise owners perceptions regarding key owner centric factors and about the
The third round of interviews was carried out with 40 individuals who owned
had similar characteristics to McE’s. They were asked questions related to skill
centric factors and their overall business performance. This exercise would help
Following this stage, interviews were carried out as part of the ethnographic stage
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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total of 16 contractor’s site agents were interviewed on the five projects which were
selected by the means of theoretical saturation (Strauss and Corbin, 1998). The
individuals interviewed were from different section of the industry and helped
construction projects.
The second round of the interviews was carried out with young trainee operatives
keeping in mind the nature of the respondent. The openness and flexibility of the
to which it is set (Glaser and Strauss, 1967). This exercise was carried out to
The third round of the interviews was carried out with immigrant (non-UK citizens)
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
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
3. Ethnography (Fieldwork)
The ethnographic exercise in this research was carried out in two stages. The first stage
mentioned before in the case research section) for a period of 4 months. This exercise
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
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the day-to-day lives of the people (Creswell, 1997). When involved in ethnographic
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
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 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,
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
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
(Strauss and Corbin, 1998). Aforementioned 5 projects were chosen as case studies and
4. Financial analysis
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Chapter 6
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
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
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
(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
1. Economic profit
2. Break even
3. Loss making
4. Shutdown
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Chapter 6
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
The following section of this chapter highlights the research methodology adopted in
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Chapter 6
FINANCIAL
ANALYSIS
SURVEY
McE
CASE STUDIES ETHNOGRAPHY OUTPUT PROFIT
INTERVIEWS FORECASTING
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
171
Chapter 6
varied with instances when multiple methods have been employed to achieve a singular
research objective. This research strongly espouses the uptake of mixed research
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
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
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
following chapter highlights the findings of the data collected by the aforementioned
research methods.
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Chapter 7
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
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
Financial analysis
Figure 7.1. Stage wise distribution of research methods employed in the research
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Chapter 7
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
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
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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Chapter 7
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
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
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
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
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
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
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
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
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
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 highlights that if all the determining conditions were to remain same, McE
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
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Chapter 7
Figure 7.4. Trends of groupings within McE’s for the period 1995-2005
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Chapter 7
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 linear trend line for McE’s with 0-1 employees has a negative gradient, which
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
The linear trend line for McE’s with 8-9 employees has a positive gradient, which
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
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
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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Chapter 7
which are the recent changes in tax regulations (see Chapter 5). The total number of
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
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
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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Chapter 7
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
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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 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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Chapter 7
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;
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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Chapter 7
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 )
The equations and coefficients of determination for the trend lines in Figure 7.6 are as
shown below:
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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Chapter 7
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:
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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Chapter 7
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;
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
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
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
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
set for 15 percent growth by the year 2010 (MBD, 2006) which could see a further surge
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
40000
20000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Year
Figure 7.8. Comparison of Annual Construction Output (All works) v. total no. of McE’s and total no. of
The equations and coefficients of determination for the trend lines in Figure 7.8 are as
shown below:
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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
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
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
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
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
regarding their business operation and the general position of McE’s within the industry.
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Chapter 8
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 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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Chapter 8
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.
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
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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Chapter 8
performance is directly linked to positive self worth of the owner (Boyd and Vozikis,
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
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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
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
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.
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
related to profile of McE’s within the industry; their relationship and interaction with
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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;
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
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
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
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
people in the direct workforce (Miller et al., 2001) and hence relinquishing any
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
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-
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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.
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
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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
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
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
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
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
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
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
against long-term strategies, which might irrevocably resolve the problem of skills
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
On synthesis of the all the above facts and figures it can be construed that the main
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.
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 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
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
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
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
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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.
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
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
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
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
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
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
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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
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
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
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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• Intention to attend
training programmes
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
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
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Chapter 8
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.
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,
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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
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
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
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
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
(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
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
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
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Willingness to innovate
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
performance”. In the context of this research innovation at its most primal level is
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
innovate” was carried out by Rogers and Shoemaker (1971) who suggest that
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
of innovativeness, which is not innovation specific (Hurt et al., 1977) instead allows the
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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
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
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
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
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Chapter 8
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 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.
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
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
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
(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
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
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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Chapter 8
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’
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
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Chapter 8
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
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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Chapter 8
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
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.
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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
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
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
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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%
0.00%
Freedom Social status Self fulfillment Interest in trade Employment
insecurity
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
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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 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
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
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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%
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Chapter 8
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
The following section of this chapter comprises elaboration of findings related to the
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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Chapter 8
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
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
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Chapter 8
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%
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Chapter 8
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
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)
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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
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
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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Chapter 8
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
factors.
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
237
Chapter 8
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
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
238
Chapter 8
scrutinized had some or the other problem which had arisen due to the absence of a
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 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
better situation as the contractual relationship between them was that of a employer-
239
Chapter 8
employee. Based on the above it can be construed that the McE’s should opt for a
Collusion
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 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
observation, it was revealed that the tacit collusive arrangement that exists between
240
Chapter 8
8.17.
McE’s
PAYMENTS
A INVOLVEMENT
IN PROJECT
F
COLLUSION
F RIGHTS
COLLUSION T INTENTIONS
S
BEHAVIOUR
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
241
Chapter 8
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
Conflicts
adversarial nature (Latham, 1994, Egan, 1998). Conflicts are a daily event on
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
242
Chapter 8
70
86.36% 13.64% 26.19% 73.81% 63.64% 36.36% 26.83% 73.17%
64 minutes
minutes
243
Chapter 8
Table 8.4 reveals that a number of conflicts involving the main-contractor and the
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.
McE
McE
244
Chapter 8
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
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
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Chapter 8
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
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
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Chapter 8
MAIN CONTRACTOR
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 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
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
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Chapter 8
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
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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Chapter 8
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.
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
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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Chapter 8
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
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
construction industry.
Based on the above findings, it can be construed that regular changes in taxation policies
Who is to blame for the abject exogenous factors which adversely affect McE’s?
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Chapter 8
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
Table 8.7. Causal sources for the exogenous factors inhibiting McE success
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
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
251
Chapter 8
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
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
the findings of the preceding two chapter, answers to key research question also
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Chapter 9
9.1. Introduction
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.
This section of the chapter summarises the findings of this research discussed in the
The first stage of this research involved in-depth analysis of relevant McE and industry
• 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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Chapter 9
• 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.
industries revealed that self-employment rates in the constriction industry have been
• 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
• 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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Chapter 9
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
survey was carried out using semi-structured questionnaires which were directed
towards the McE owners, government, and construction industry representatives. The
hence the findings of this exercise have been enumerated in three different sections as
shown below:
• 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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Chapter 9
• 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
• Majority (61.67 percent) of the McE owners who participated in this survey were
• Majority (89%) of the McE’s owners believed that, McE’s were in no position to
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
• 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
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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
• 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
• 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
• Majority (53 percent) of those who took part in this survey believed that McE are
• 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
• Majority (60 percent) of the main contractors directly employ McE and a large
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• Majority (60 percent) of the respondents identified that immigrant labour would
• 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
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
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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
• Most of the McE owners who were shadowed fit a certain standardised profile with
• 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
• Most of them also thought that McE’s were not important for the growth and
• 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
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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
• 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
• 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
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 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
and skill sets affect McE profit levels. The findings of this exercise have been
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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
• 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
• 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
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
The following section identifies the key findings related to the endogenous factors
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
• Propensity to take risks: Majority (88.33 percent) of the McE owners were found
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
(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.
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
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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
• 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
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
• Strategy: Majority (63 percent) of the McE owners who took part in this research
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
• 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.
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
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
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
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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
(highlighted in section on generic statistical analysis) thus negating the infusion of fresh
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 involved fours months of field research that was carried out
to decipher the prevalence of six key exogenous factors which were presumed to affect
relationships between the McE’s and their employers were based on verbal orders,
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
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
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
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,
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.
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
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
• 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
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
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
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.
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
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
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
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.
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
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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:
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%
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
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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
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
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
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
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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
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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
• McE’s (1.53 POT percentage) have lower average profit percentage than small
• The McE owners (most had vocational degrees) have lower education qualifications
undergraduates);
• The majority (85 percent) of the McE owners were against the idea of employing an
• 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
• 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
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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
The above facts reveal that inclinations, perceptions, and skill sets of the McE owners
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.
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
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
the share of actual work done by parties’ in the project. The results of this exercise are
contractor to by McE’s
sub-contractor
BB CM £12,000,000 100% 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
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
This assertion is open to contention however, it does point towards the excessive
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
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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
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
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)
Figure 9.5.Comparison of mean of average POT percentage (2000-2005): McE’s v. Small construction
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
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
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
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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
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:
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
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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
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
2.50%
2.00%
1.50%
POT %
1.00%
0.50%
0.00%
Region of origin Edinburgh Fife Aberdeen Glasgow Dundee Stirlingshire
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.
The number of people employed by McE’s might from vary from zero (i.e., the McE is a
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
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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
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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 %
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:
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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
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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
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
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.
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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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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occupational cohorts. The spider diagrams representing the McE’s offering bricklaying
and plumbing services had the smallest shaded area thus highlighting that the McE
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
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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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
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
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.
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
compared to that of the average McE owners. The results of this exercise are represented
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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
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-
The following section of this chapter is aimed at deciphering which business owner
Review of small business literature revealed that small business owners can be
(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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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
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
mixture of these roles. The findings of this research reveal a gamut of different
owner typologies, which highlights the narrow view, which small business
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
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
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
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
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
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
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discussion format keeping the identity of the researcher anonymous 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
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
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
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
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influence influence
• Ability • Personal • Conflict
• Experience • Payment
• Income delay
• Innovation • Information
orientation asymmetry
• Management and
style distortion
• Motivation
• Propensity to
take risks
• Work-life
balance
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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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
issues which they would need to be aware of while setting of on the pursuit of
The following section of this chapter highlights a few measures, which have been
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
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
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 following section highlights few project centric measures, which could help
During the course of this research a few observation were made which highlighted
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
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CURRENT SCENARIO
MAIN-
MAIN-
CLIENT CONTRACTOR
CONTRACTOR
SPECIALIST
SPECIALIST SPECIALIST
SPECIALIST
SUB-
SUB- SUB-
SUB-
CONTRACTOR
CONTRACTOR CONTRACTOR
CONTRACTOR
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
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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
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
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
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
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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
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
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
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
within construction supply chains, McE success and failures, and factors
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
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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this research, key owner centric factors were identified which were found to
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
within the project supply chain were advocated however, no proof regarding
Develop a set of findings which would help divulge key factors which affect
McE performance. This objective was fulfilled however given the limited scope
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
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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
• 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
and itinerant in type constantly shift from one project to another. Bigger
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.
that youngsters working in the UK construction industry were averse to the idea
businesses would be established. This scenario could irreversibly seal the fate of
the McE’s and thus could impede industrial growth. Government and industry
as a career choice among youngsters joining the industry. This would also
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
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
• Unemployment rate: McE’s accounts for about 4 percent of the total people in
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
Endogenous factors
• McE owner background: The findings of this research revealed that most McE
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
• 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-
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
section most youngsters working in the construction industry are averse to the
idea of self-employment thus negating the aforementioned option. This calls for
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
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
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
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.
During the course of this research, a number of subject areas requiring further
• There is a need for a new information dataset, which would clearly define the
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• 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
• It was found that the use of the terms entrepreneur and entrepreneurship have
consideration to the fact that most small business owners might not be
entrepreneurs. This calls for a clear segregation of small business owner types
researchers to analyse small business owners behavioural traits. This calls for a
singular model which could alleviate the problems associated with multiple
• McE specific research on owner characteristics are all but absent, which calls for
• Studies on McE’s role on construction projects were found to be rare which calls
• 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
335
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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
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
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
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needs to work cohesively but this time in favour of the McE’s without whom the
337
References
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362
Appendix
APPENDIX
363
Appendix
Table A 1.2. Self-employment rate; construction industry v. other industries (Source: DTI, 2006)
Table A 1.3. Comparison of no. of McE’s v. no. of McE’s with 0-1 employees v. industry output
364
Appendix
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%
365
Appendix
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
367
Appendix
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
370
Appendix
371
Appendix
100.00%
80.00%
53.00%
60.00%
40.00% 27.00%
20.00%
20.00%
0.00%
Very important Moderately Not important
important
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
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
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
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
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%
381
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
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
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 %
383
Appendix
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
% of
qualification
ME Undergraduate 70.00% 4.35%
ME Vocational 30.00% 2.90%
ME ‘A’ levels 0.00% -
ME ‘O’ levels 0.00% -
Sample size: 30
Average age of the respondent- 24
386
Appendix
Figure D1.1. What are the main drivers that bring you to UK?
Higher wages
Figure D 1.2. What are the main obstacles that dissuade you from working in UK on
a long-term basis?
387
Appendix
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
37%
Yes
No
63%
Figure D 1.5. Whom do you work for generally within a construction project?
Sub-sub-
13%
contractors
Sub-contractor
33% 54%
Main contractor
389
Appendix
43%
No
Yes
57%
27%
Yes
No
73%
390
Appendix
Educational Qualification
A levels
O levels
7%
13%
37%
Certificate level
20%
23% College Diploma
University
Graduate
391
Appendix
National standard
specific to the
20% trade
43% National minimum
wage
37%
Less than national
minimum wage
7%
20% Daily
43% Weekly
Fortnightly
Monthly
30%
392
Appendix
Short period
depending on the
43% work available
57% Longer sustained
periods
393