Relationship Embeddedness in the Construction Industry : A Case Study of Peab AB

Abstract: Problem description: This study of relationship embeddedness in the construction industry is conducted within the network of the case company Peab AB and limited to their project operations in Finland. The industrial marketing theories, sociological embeddedness theories and construction industry characteristics are forming the foundation of the theoretical framework. The current academic literature has revealed two contradictive approaches of favorable level of relationship embeddedness in the construction industry setting. Therefore, this thesis aims to reveal how embeddedness from structural and relational perspective influences to Peab network relationship development by example of two projects and whether they are developing towards the embedded, high-involvement and closer or arm’s length type of relationships. Purpose of the research: The purpose of this paper is to examine how embeddedness from structural and relational perspective influences relationship development and to reveal which level of embeddedness is favored in the construction industry network by examining two projects of Peab AB. Research question: How does embeddedness influence Peab’s business relationships within its existing network in the construction industry? Methods: This study consists of qualitative research with a case study method, where the chosen case company is Peab AB. The empirical data was gathered by conducting five semi-structured in-depth interviews from the key persons of two different construction projects including the top managers of Peab Foundation Sweden and Peab Infra, Peab Industry/MBR and Tensicon. Interviews revealed in detail two different project conditions from bidding process, selecting the subcontractors, actual performance and adjustment requirements and conditions for cost related and loyal relationship conditions. The theory part in this research consists of theories concerning industrial marketing, construction industry characteristics and sociological theories that were searched through carefully selected academic articles, journals, books and e-books. Conclusion: The Peab network supports closer internal ties and longer-term-oriented external ties, and therefore, the internal ties tend to become stronger compared to the external ties. Structural and relational embeddedness are complimenting and overlapping perspectives and it is recommendable to consider both dimensions when examining relationship development. It should be noticed that the embeddedness has many variations and levels, and therefore, the network and the industry conditions should be examined thoroughly as they all influences the business relationship development. In the Peab network the low price and close relationship goes hand in hand. Nearly always the lowest price determines who gets the project, but through the trusted relationship the price can be adjusted.