BUILDING RESEARCH AND INFORMATION

VOLUME 25

NUMBER 5 1997

Should governments fund construction research?

David Gann
Science Policy Research Unit, University of Sussex, Mantell Building, Falmer, Brighton BN1 9RF , UK This paper considers the role played by government in stimulating innovation to improve quality, pro tability and competitiveness in construction activities. It questions whether governments should fund research and development in construction, and if so, what level and types of support might be appropriate to meet emerging needs. It addresses this with reference to the current debate on the public funding of science, citing Kealey and Pavitt. The author considers speci c construction-related issues and changing conditions, indicating the need for more, rather than less funding by both private and public sectors. In conclusion, the author develops a third way, different from Kealeys and Pavitts approaches. Construction requires a strong and vibrant research base, partly funded by government. Simultaneously, the state requires a research and knowledge base in order to ful l its roles such as for governance of technologies in the built environment. A complementarity effect arises from both public and private funding which is therefore greater than the sum of the parts.
^ Lauteur examine le role joue par le gouvernement en vue de stimuler linnovation pour ameliorer la ^ titivite dans le secteur du batiment. Il sinterroge sur le fait de savoir si qualite, la rentabilite et la compe veloppement dans ce secteur et, si la les gouvernements doivent nancer la recherche et le de pondre aux reponse est positive, quel niveau et quels types de soutien seraient appropries pour re `re besoins qui se font jour. A cet effet, il se refe au debat public qui sinstaure actuellement sur le nancement public de la science et cite MM. Kealey et Pavitt. Lauteur sinteresse aux questions ` ` volution de la situation qui militent en faveur dune speci quement liees a la construction ainsi qua le ^ augmentation du nancement public et prive plutot que dune diminution. Pour conclure, lauteur ` thodes preconisees par MM. Kealey et Pavitt. La propose une troisieme voie, differente des me construction doit sappuyer sur une base de recherche solide et dynamique, nancee en partie par le tat gouvernement. Simultanement, le a besoin dune base de recherche et de connaissances pour tenir ^ ^ son role, par exemple, de gerant des technologies relatives au cadre bati. Il se degage un effet de rieur a la somme des deux parties. ` complementarite des nancements publics et prives qui est supe
Keywords: public policy, competitiveness, regulation, research policy, R&D, construction industry, technical change

Introduction
This paper considers the role played by government in stimulating innovation to improve quality, pro tability and competitiveness in construction activities. In recent years, government agencies in a number of countries have been considering their role in supporting improvements in construction processes, the governance of technology and the protection of public and private interests in the built environment. The paper focuses on whether governments should fund research and development in construction, and if so, what level and types of support might be appropriate to meet emerging needs. These questions are addressed with reference to
0961-3218 # 1997 E & FN Spon

the current debate on the public funding of science. The main arguments for and against government funding are considered with respect to applied research within the building sciences and construction elds. The paper seeks to answer questions about how research needs are identi ed and the types of inputs used in formulating research agendas; such as the ways in which needs of users, clients and practitioners are expressed and acted upon in de ning the focus for research. Construction activity involves inputs from a wide range of industries and in consequence, many vested interests create a complex environment for government policy-making. Furthermore, production and use of the built environment is subject to dynamic forces,

258 such that pressures to innovate as well as inertia to change need to be carefully considered. Knowledge about the production and adaptation of buildings and structures resides mainly within construction organizations, rms in supply industries, research, and industry institutions. Government policy-makers work at some distance from hands-on decision-making regarding the choice of technology and new forms of organizing processes. Moreover, research and development needs to be understood at international, national and regional levels and in relation to the type and size of rm and the nature of product and process. Issues are therefore discussed on four levels: (a) within rms; (b) in projects, characterized by different types of markets such as housing, commercial, industrial, etc.; (c) in industry institutions, which play a role in providing an infrastructure for knowledge transfer and learning; and (d) within government agencies and non-governmental institutions such as research organizations and pressure groups.

GANN with very low ratios of government to industry-funded research such as Japan and Switzerland are growing richer, faster than countries with high ratios such as Germany, France and Britain. His answer is that in countries where the state invests heavily in R&D, rms do not make their own investment because they assume the state is doing it for them. He implies that rms in laissez-faire economies take more responsibility for their own investment in R&D and therefore gain more returns from it; dismissing the notion that rms do not invest because they fear that their non-investing competitors will get a free-ride on the back of the results. In reality, he says, rms nd it very dif cult to get a free-ride on results emanating from other rms or from government-funded R&D: the great myth in science funding is that published research, or other peoples R&D is freely available. Access to it is very expensive. This is because only highly skilled scientists can capture other peoples research and it often takes years of training before a scientist can read research papers properly. If governments intervene to levy tax and use the proceeds to support science, they not only displace private funders, they also fail to put back as much as they displace. For this reason, direct investment on inhouse R&D is argued to be the best strategy for rms. Kealey concludes that governments should not fund research. They should leave it to entrepreneurs and philanthropists. Pavitt refutes Kealeys thesis, arguing that it is simplistic. In most industries, Pavitt argues, the signals and mechanisms which generate innovative activity and the patterns of development which eventually lead to economic success are far more complex {5}. Referring to work on the similarities and differences of scienti c and technological knowledge, and its development and transfer, Pavitt cites two reasons in support of government funding of research {6}. First, publicly funded academic research provides knowledge and skills on which privately funded R&D builds. He says that left to themselves in a pure market economy, companies would invest less than is economically and socially desirable in basic research because a large proportion of the bene ts would leak away. Referring to issues of market-failure in mainstream economics, Pavitt suggests that researchers have two economically ef cient freedoms publishing and changing jobs. Companies would focus on shortterm demands driven by immediate pressures of business. Research necessary to underpin new innovations would be constrained by privatization and secrecy and short-term agendas. Researchers skills and capabilities to conduct long-term enquiries, teaching and diffusing knowledge would deteriorate. The downward path from declining science would extend to declining technology, compromising economic and social progress. Rather than there being a negative relationship between government and industry research, evidence from studies of links between scienti c research and commercial innovations show that companies which carry out R&D cultivate strong links to national sources of academic research {7}. They do this because universities and government laboratories have knowledge which companies nd useful. This is not necessarily published information, but know-how that

The debate for and against public funding of research

Over the past two years a debate has been raging in the science policy community particularly in Britain. Should government fund scienti c research or not? The roots of this debate go back to Francis Bacon, who, in the 16th century rst argued for the government funding of science. His justi cation was that science should be supported for its own sake because the advancement of knowledge was inherently good for society, and secondly that science underpins technology and thereby contributes to wealth creation {1}. The latter argument was the basis for the linear model of innovation, in which scienti c research generates ideas which are developed sequentially through applied engineering and technological development, resulting nally in new products and processes which help to generate economic growth. The linear model is simplistic in terms of explaining innovation in all but a few big science industries such as bio-technology and pharmaceuticals {2}. Even in the few industries which can claim direct economic returns from basic research, the process by which this occurs is by no means linear. Terence Kealey, the main protagonist in the debate against government funding, emphasizes these points. He refers to empirical research into patterns of industrial innovation by Langrish et al. and Mans eld, to argue that most successful technologies are developed by rms {3}. For example, companies who fund pure science, such as those in the US oil and chemicals industries, have increased their productivity. The main point is that technological development takes place in research and development departments of industry, where new technology can be built upon existing technology. Thus it is argued that 90% of innovations arise from the industrial development of pre-existing technology and not from academic science, or science carried out at arms length in government laboratories {4}. Kealey goes on to question why some countries

SHOULD GOVERNMENTS FUND CONSTRUCTION RESEARCH ? cannot be written down {8}. Much of this knowledge can only be accessed by close collaborative links over long periods of time. It often takes time for inventions to become successful commercial innovations. For example, Liquid Crystal Display (LCD) technologies which began through inventions in chemistry laboratories in the 1870s, and LASERS which emerged from military R&D in the 1940s, illustrate the convoluted ways in which original inventions eventually emerge as commercially successful products. In these examples, neither had any immediate or obvious commercial uses when the original discoveries were made, yet both are now important components found in many consumer electronics products. Second, Pavitt argues, there is a need for the state to perform a role in support and protection of the public interest. The protection of workers, consumers and the environment requires answers to complex questions about the development and use of new technologies. Some far-sighted rms are involved in R&D in support of the public good, but it is unrealistic to expect enough rms to invest suf cient resources in this, particularly if the results could harm their own reputation and future business. For example, Pavitt questions whether we could expect BAT Industries (a tobacco conglomerate) to support a balanced programme of research on the effects of smoking on cancer. He says that people are increasingly unable to protect themselves against the unintended and harmful side effects and mistakes caused by technical change. As a result, democratically elected governments nance R&D to protect people against powerful public and private interests. The recent BSE crisis in the UK, e-coli outbreak in Scotland and the need to understand the consequences of genetic engineering in experiments such as Dolly the sheep, provide further examples. Pavitt concludes that in the current period of global competition and rapid technical and organizational innovation, countries need more private investment in technologies in the business sector. They also need more public investment in basic research of international excellence, together with investment in independent research in elds such as health, safety, and the environment, to safeguard public interests. He argues that it would be irresponsible to experiment with the national science and engineering base to test the belief that the private sector would ll the breach. New research on the linear model of innovation and the effects of government policy-making supports Pavitts conclusions, showing that the evidence of any crowding-out of privatesector R&D through excessive government activity in the area is at best limited to a very few countries {9}. The general focus of the debate thus far has been on the relationship between academic research, the underlying linkages with industrial innovation ultimately industrial performance, and issues of public and private interests associated with new technology. The paper now considers how these arguments relate more speci cally to the funding of construction research, the sources of innovation in construction and how wealth may be created from new knowledge, who should fund research and who should perform it {10}.

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How these arguments relate to government funding of construction research

What do we mean by R&D in construction? The de nition of R&D has been a topic of debate for many years. Attempts to standardize the de nition so that comparisons can be made over time, between industries and across countries {11}, resulted rst in a sequence of Frascati Manuals, followed more recently by the Oslo Manual {12}. According to these de nitions, R&D comprises creative work, undertaken on a systematic basis in order to increase the stock of knowledge and the use of this knowledge to devise new applications. It covers basic research, strategic research, applied research, and experimental development. These activities differ depending upon the industrial context. The nature of R&D in project-based industries is not widely discussed in the mainstream literature on innovation {13}. Construction differs in several respects from other industries referred to in the debate on public funding of science, such as biotechnology and pharmaceuticals, oil and offshore exploration, automobiles and aerospace, or IT and software {14}. For example the ability to systematically develop new knowledge, build on and renew technological knowhow, and maintain a high retention of scienti c and technological competence has seemingly not been possible to replicate in construction. For the purposes of this paper, construction is viewed as a process rather than an industry: it includes designing, constructing, maintaining and adapting the built environment. These activities involve a multitude of organizations from a range of different industrial sectors, working together in temporary coalitions on project-speci c tasks. The project-based nature of these activities is important, because this immediately creates discontinuities in the development of knowledge and its transfer within and between rms, from one project and the next. The view that construction is somehow unique, in which each product is different and each process thereby has to be invented anew, reinforces a culture based on difference and masks a real understanding of the changes occurring in the sector, hindering the transfer of knowledge. Accumulated knowledge underpins much R&D activity. Knowledge grows through learning processes and feedback between institutions is particularly important if technological learning is to take place in construction. In the context of construction as a project-based process, the role of intermediaries which form a technical support infrastructure is important in providing the kind of long-term repository of knowledge required to support technical development and implementation. These intermediaries include government agencies, education and R&D institutes as well as professional bodies and industry associations. In order to understand the development and management of technology in project-based processes, it is necessary to clarify the role played by different participants in the value-chain or total production process. Of equal importance is the need to understand the role of actors in the demand-chain, because the built environment is usually paid for, owned, used,

260 re-used and regulated by people from different institutions. Figure 1 indicates the types of actors in the construction system and their roles with respect to technical change. The idea that most technological development takes place in research and development departments of industry, where new technology can be built upon existing technology, holds in the construction case. Data on the amount of funding of construction related research indicates that private rms carry out the majority: about 60% in the UK in 1994 {15}. However, the location of private investments in construction R&D is important. The majority is carried out by materials and components producers who develop products aimed at ultimately improving the performance of buildings and structures. Very little R&D appears to be carried out with the aim of improving construction processes. It is becoming increasingly recognized by industry and government that this adversely affects the performance in use of technologies developed up-stream of the integration, assembly and installation work carried out by project-based construction organizations. Moreover, some large materials and components producers may be the source of major innovations for construction, but they may not regard construction as their primary market in terms of the focus of their R&D efforts. This is the case with chemicals and glazing products for example. Construction is therefore a recipient of the by-product of R&D speci cally oriented towards other industries such as aerospace or automobiles. In this capacity, people with technical capabilities must intercept technologies developed elsewhere in other industries or other countries and recon gure them for speci c purposes within their projects {16}. This interceptor/receptor role is particularly important in the project-based rms shown in Fig 1. Construc-

GANN tion is a transformative activity, which combines technologies from different sources. This means that designers, engineers and managers work as practitioner/researchers taking ideas from other sectors and transferring them into solutions to project-speci c problems {17}. Transfer of technologies from other industries has been a feature of construction for over 150 years from Joseph Paxtons Crystal Palace to Norman Fosters Hong Kong Bank, Richard Rogers Lloyds Building and Frank Gehrys Disney Concert Hall. There are, nevertheless, dif culties with relying upon the interception of research done elsewhere. First, it requires highly competent translators. Organizations with a strong indigenous research base are more likely to be successful at tapping into research carried out elsewhere thereby improving their position further than ones with weaker indigenous research capabilities. Second, many of the most important technical innovations in construction occur through events which happen at the boundaries of core, stable activities, or at the interfaces between systems, existing technologies, professional practices or trades. Firms tend to focus on their core activities in day-today project work and they do not usually have explicit strategies for managing technical change outside this arena. In most countries, the majority of construction organizations are very small, employing less than ten people. Most rms have no explicit technology management skills whatsoever. Of the 200 000 or more private contractors in the UK, only around 10% employ people with formal professional or technical quali cations: i.e., people who are trained to make decisions about the choice of technology in a systematic manner. Of these, only around 1% of rms have a critical mass of ve or more quali ed professionals who may be capable of systematic technical development work {18}.

Regulatory Framework

Activities: technical, economic, environmental and social regulation Actors: government, firms, industry associations

Supply Network

Project-based Firms Projects

Activities: materials, components, equipment manufacture Actors: process, mass- and batchproduction manufacturing firms

Activities: design, engineering, integration, assembly/construction Actors: consultant designers/engineers, project managers, constructors, specialist contractors

Activities: commissioning and using constructed products Actors: clients/owners/users

Technical Support Infrastructure

Activities: long-term technical development and support Actors: government, education and R&D institutes, industry associations

Fig. 1. Construction system activities and actors.

SHOULD GOVERNMENTS FUND CONSTRUCTION RESEARCH ? For these reasons, the technical support infrastructure plays an important role, although its ef ciency and effectiveness is dif cult, if not impossible to measure. Government plays a part in supporting institutions such as those which collect and disseminate information to the myriad of small and medium sized enterprises in construction. Government has traditionally performed three roles in terms of promotion of innovation within construction and the built environment. The relative success of these in many countries supports the arguments made by Pavitt for government funding of research: (a) it has supported the development of the sciencebase in terms of development of public knowledge and competence and technological capabilities in areas where it has perceived market failure on the part of the private sector; (b) it manages regulatory processes, creating a level playing eld in which rms can operate and for the protection of public and private interests. This is necessary because construction activities are highly visible, often dangerous and processes and products have a major environmental impact; (c) it develops knowledge for procurement so that the public sector can be an expert purchaser of goods and services required for ef cient running of the state. For example, until about 1970, 50% of all construction work was purchased by the public sector in the UK, the gure is now around 33%. Governments in different countries have pursued these roles through a number of policy instruments. Some have used direct taxation and funding mechanisms, such as in Sweden. The Swedish levy-grant system for funding construction research has tended to create a dependency culture in which the industry expects the state to conduct research on its behalf, lending some justi cation to Kealeys arguments. It has created a system in which research has become somewhat divorced from its users. In other countries, governments have facilitated construction research by acting as a catalyst to the development of new ideas; some of MITIs Programmes and those of the Ministry of Construction in Japan have been successful in this respect. Other governments have reduced tax on corporate pro ts for those willing to invest in R&D. In the UK, government has recently been involved in a number of initiatives to stimulate collaborative research involving closer activities between industrial practitioners and university researchers the Innovative Manufacturing Initiative and the DoEs Partners in Technology are two examples. In contrast, the construction industry in the US tends to be opposed to government intervention and has organized its own research clubs (such as the Construction Industry Institute in Texas) or made direct collaborative links with academics (as in the Centre for Integrated Facilities Engineering at Stanford). Nevertheless, for many years the military sector has provided a strong base of construction research in the US through the Corps of Engineers Research Laboratory. This actor-analysis of construction R&D highlights a gap in the knowledge systems which can only be lled through government intervention. That is, while the main actors may be able to identify research needs and satisfy these when they relate to core areas of activity, it is very dif cult to see how this can

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happen when research is required which cuts across traditional industrial and institutional boundaries. The failure is because no single institution has a solid enough base of knowledge across the diffuse and wide ranging set of markets and technologies found in construction. For example, demand from the conventional, mainstream areas of industry may be weak for new technologies which they are not currently using. This was the case in the development of some areas of IT for construction: all but a few in industry knew what they wanted from the technology and at the same time, supply of new ideas from the traditional research community was weak. Under these circumstances of weak demand and weak supply of new research ideas, what role should government play? This question emerged during an evaluation of the Swedish national research programme for IT in construction IT-Bygg {19}. The situation could be helped through more technology foresight work and through government and industry partnerships to develop a capability for thinking about future technical needs based on market insights.

The changing nature of construction and emerging issues in the use of the built environment: the need for research
What are the changing requirements for construction research? There are four areas in which changes are occurring and new knowledge is required. First, the economic and market conditions within which construction activities take place are changing. Second, there are new forces for change in the organization of construction processes driven by the need to increase value-added to customers. This is resulting in what have become known as business process changes. Third, innovation is resulting in a number of emerging technologies which require further development. Fourth, there is increasing pressure to understand and develop solutions to the environmental impact of construction and the built environment. Economic aspects The demand for constructed products is changing. Over the long-run, there is strong evidence to suggest that investment patterns for xed capital assets are shifting away from construction. New equipment, plant and machinery, and increasingly information and communications systems are being substituted for traditional investments in buildings and structures {20}. People and businesses require greater choice and exibility in the ways in which they live and work, such that their demands on the built environment are also changing. The economies of advanced countries are shifting from those based on a paradigm of energy-intensive, mass-produced goods to higher levels of sustainability and differentiated choice {21}. At the same time, buildings and structures have become relatively more expensive when compared with other goods and services, fuelling the substitution in investment patterns. These changes lead to questions concerning the type of buildings and structures needed and their future location. Demand is shifting towards lighter,

262 more functional buildings housing more sophisticated equipment, in which structures are subordinated to services with shorter life, cheaper replacement costs and recyclable parts. Users are demanding engineered solutions which offer greater exibility and choice over layout, nishes and aesthetic qualities. Some large clients are demanding that quality and functionality increase while capital and operating costs should fall. These demands are making earlier vintages of buildings obsolete {22}. A second aspect of economic change affects the supply-side. Historically, construction has been a local and regional activity in which local materials and labour have been brought together to meet particular market needs which may partly re ect geological and climatic considerations. Local cultural and socio-institutional contexts have been important. This remains the case to some extent in developed economies and to a larger extent in developing economies. For example, research on earthquakes is a high priority in Japan, while cold-weather construction facilities are important in Nordic countries and Canada. In all countries, many construction activities are carried out by local rms who compete on price, rather than quality of technical competence. In consequence these organizations tend to have an over-developed sense of cost and an under-developed sense of value. Nevertheless, some markets for construction are increasingly becoming global, for example the requirement for specialist technical capabilities in the construction of engineering-intensive projects, like silicon-chip fabrication plants. Added to this, technologies up-stream in the supply industries are being produced by large rms operating in international markets. Technologies used by the project-based industries in construction are increasingly becoming international {23}. There are signs that globalization of production and markets is taking place, although this is not necessarily the case in design and research {24}. But because of the increasing dominance of large, international materials and component s suppliers, there is some evidence to suggest that more design and technical know-how is migrating upstream in the value-chain. These changes are stimulating a system in which technical knowledge is embodied in products which are assembled in faster, more responsive processes on sites, rather than honed using traditional craft skills. Knowledge about installation is increasingly becoming embodied in components for right- rst-time xing, helping to create zerodefect assembly processes on-site. The key project skills within this form of organizing the process are those of systems integrators: the type of people needed to understand the management of technology across disciplines and existing industry boundaries. The third major aspect of change in economic conditions involves the role of the state in procuring constructed products and services. Privatization in many developed economies is leading to the procurement of major projects through new routes, involving new institutional players, such as nancial institutions. The amount of private sector debt and equity sunk into infrastructure has risen sharply since the mid1980s. International contractors are facing changes in the ways in which they operate, organize and nance projects, taking equity stakes, etc. According to the World Bank, the total private sector investment in new

GANN infrastructure projects is estimated to have doubled from around $17bn in 1993 to $35bn in 1995. Size is important in these markets: large contractors can act as catalysts for schemes as well as inspiring greater con dence among private sector investors. These changes have been accompanied by a spate of crossborder take-overs, mergers and joint ventures, some of which have had the explicit aim of acquiring and consolidating technological capabilities. In consequence, government has divested itself of its former technical competences, for example in power station design; and in the new privatized industries, it is not always immediately obvious where this expertise now resides. The political dimensions of changes in demand are therefore important because they affect the timescales in which projects can be started and often completed. There is some evidence that increasing complexity in local, national and international political and nancial regimes may be giving rise to pressures to speed up development, resulting in reductions in lead times for tendering and design work and putting increased pressure on the need to manage technical choices. New business processes The nature of technical development and governance of technologies in construction are intimately linked with changing business structures and multi-functional forms of organizing the process. The de nition of construction as a process linked closely to different types of project (market) has been used throughout this paper. New forms of project are emerging with consequences for the ways in which processes are organized, and hence the research agenda is changing. Construction research has seemingly failed to adapt suf ciently to changes in the organization of production associated with new forms of contracting, partnering and teamwork. These business process changes are affecting the ways in which technology is used because rms are re-organizing internally to provide better value for customers; rms are also developing new ways of co-operation on projects to improve performance, e.g. partnering, supply chain management. While some clients are becoming more demanding, in general, they have not appreciated the bene ts of their contractors and suppliers developing a better technological base and competing through improved technical performance and not solely on price. But they are beginning to recognize the potential delivery, productivity and cost bene ts they can derive if contractors deploy better technical capabilities. Such changes are always likely while the cost of constructed products remains high relative to other goods and services. Clients have a key role in helping to transform the construction industry, and it is very much in their interest to participate in this. Clients long-term interests are to secure the maximum bene t from the buildings they invest in, and to minimize the combined lifetime costs of purchase and occupation. There are major differences in client expectations and requirements across different construction market sectors and these result in different consequences for technologies deployed and ultimately for research inputs. Some clients are driven by the need to obtain the highest quality product which will operate safely

SHOULD GOVERNMENTS FUND CONSTRUCTION RESEARCH ? (for example a nuclear power plant or air traf c control centre), others require their buildings to be produced quickly (silicon chip fabrication plants, fastfood stores), while others wish to obtain their buildings at minimum cost (housing). Clients are increasingly putting pressure on construction to improve on all three: quality, time and cost. Owner-investors may take lifecycle views of their projects. The recent growth in private nance initiative projects, such as design, build, nance and operate may increase the need to understand the management of value throughout the lifecycle. To the extent that clients are successful in minimizing their longterm costs, this can stimulate the creation of a highquality, high-productivity, high-skills construction industry. This invariably involves using technology to increase productivity. In the UK, the Governments Central Procurement Unit has been formed to provide guidance on public procurement. Project managers will not be criticized by the Public Accounts Committee if they accept higher capital cost bids provided they can justify them on grounds of lower lifecycle costs. Similar approaches have been adopted by local authorities and some utilities. Several clients such as BAA, Rover and Marks and Spencer work on this basis already. Changes in client attitude and awareness may therefore be important in stimulating changes in construction research requirements. Technological innovation Technological innovation takes many forms, it can result from imitation/emulation and adaptation, or from various forms of problem-solving. It may result from radical attempts to develop new products and processes. Freeman provides a comprehensive de nition of different types of technological change {25}. For the purposes of this paper we shall consider two simple levels of activity: 1. Small ad hoc changes and adaptations to materials and components are continuously being made by supply and construction organizations. These are sometimes made by skilled operatives, managers and professionals on-site. Such changes are of crucial importance in getting projects nished on time. The technical support infrastructure is particularly important in disseminating information about best-practice performance improvements emanating from such changes. 2. Major changes to materials, components and equipment, resulting from planned research and development carried out usually by rms in the supply-chain. These are generally leading to a shift away from traditional craft practices towards more engineered and assembly methods. Many new technologies developed by component and materials producers aim to improve the quality and/or reduce the cost of building elements. At the same time, they often aim to reduce the content and time required for on-site work. Thus, many major technological changes oriented at improving construction processes occur away from construction sites and are often aimed at reducing the requirements for skills on-site. Value-added in construction is increasingly being produced up-stream in the supply chain by components manufacturers, who

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have invested in capital-intensive production processes. A number of generic new technologies are creating the need for further R&D within construction organizations, these include: IT in construction processes IT in constructed products, relating to new patterns of use new materials new xings new types of components, including standardized and pre-assembled systems on-site plant and equipment bio-chemical materials used in bio-remediation and cleaning processes. Just as changes in technologies create the need for new technical competences and R&D within construction organizations, they also raise issues concerning public safety. Governments continue to have a role to play in protecting the public interest and this must be done whilst creating an environment which stimulates further innovation. Environmental pollution Environmental pollution caused by construction processes and through the use of the built environment is becoming an important issue for all organizations involved in the construction system. Construction is a major air, noise and water polluter. Changing existing practices has implications for business processes, technical capabilities and the need to conduct research. For example, waste of materials in site processes often results in environmental problems and construction has been identi ed by the Environment Agency as being the second worst water polluter after sewerage companies {26}. New social and institutional forces are putting pressure on construction to change. These include environmental pressure groups who may take legal or other action in the pursuit of changing practices. In many cases, construction organizations have no option other than to improve their own technical knowledge and capabilities to deal with these issues and to internalize such concerns rather than treat them as exogenous to their business interests.

The public realm and future of construction research

The previous section of this paper illustrated four major forces for change acting on and within construction. Projects in commercial buildings, housing, energy, transport, urban infrastructure and other elds are vital to the working of the domestic and international economy. As they absorb a large proportion of private and public capital, and as UK rms are important providers of large capital goods to world markets, the ef cient management of projects strongly in uences industrial and macroeconomic performance. At this time, project-based industries are experiencing great change. New technologies are providing many possibilities for advancing design and production processes; there is pressure to reduce lead-times and investment risks; and many aspects of

264 industrial activity are being internationalized. Improving the management of innovation in project-based industries has therefore become an essential task. How can government help in developing an appropriate environment for innovation within complex, messy, project-based activities involving many industries and vested interests? First there is a need for better information in the public domain about markets and technologies for which the private sector is unlikely to pay. The recent Technology Foresight Exercise in the UK has helped to stimulate discussions about this. More needs to be done, however, if a better understanding about the lifecycle effects of construction technologies is to be achieved from land-use through planning, design, construction to operation, maintenance and decommissioning of buildings and structures. Second, there is clearly market failure in the development of technical know-how with respect to SMEs in construction. Governments could play a role in stimulating changes in skills and the motivation to adopt new technologies and develop new business processes among smaller rms. The policy instruments to achieve this have not yet been developed. Third, an interest in the governance of technology remains a central concern of governments. But, given privatization and a diminishing role of the state, questions need to be answered about where independent knowledge resides about the governance of technology in the built environment. The institutions, regulatory players and technologies previously involved in governance are undergoing considerable changes themselves. Governance involves the regulation and protection of public and private interests, such as health and safety legislation. In the built environment these are often associated with the need for long-term planning and knowledge relating to legacy-technologies found within the current installed base. Governance also refers to the creation of regulatory structures and standards to promote an environment of technological competition and innovation within the supply-side, which produces successive generations of technologies. But this needs to be managed within a framework which ensures that social bene ts are not determined and accrued by one set of interests. In this respect, governments may nd themselves supporting contradictory policies: some aimed at developing competitiveness; others aimed at regulating practices. There is nevertheless a need for a neutral party to focus attention on quality-of-life issues, for example, the need for better pavements or the development of alternative solutions to existing housing or to road transportation. As Pavitt argues, the private sector has not always succeeded in pursuing these longer-term issues which may con ict with current business requirements. The shift away from prescriptive regulations to performance-based regulations in the built environment is likely to reduce the burden for governance on the state. But questions concerning who produces, who uses, who polices and who provides underpinning knowledge for these regulations remain to be resolved. The onus of performance-based speci cations is placed in the hands of rms who have to implement them. This can increase operating costs and may be too expensive for individual rms to

GANN comply. There is not yet enough information available to assess these consequences, nor is it likely that such information will be collected within the private sector, and hence the need for research funded by government. Finally, the traditional public research institutions are undergoing considerable changes. Some research laboratories have traditionally been able to add value because of their neutrality and impartiality as advice givers. Others have created an environment for learning and the location for joint ventures between rms and researchers, which have proved fruitful because government has paid for some of the risks in research. These were just two of the bene ts of the traditional government-funded regime within which research on the built environment took place. But new models are emerging of semi-privatized non-governmental laboratories and academic departments which have revenues from governments and the private sector {27}. These institutions are grappling with questions about independence and vested interests. For example whether ndings paid for by public funds go into the public domain and are available to all, or can be sold on as part of private research deals. Others are concerned about the legitimacy of advice and the ef cacy of new research practices. Perhaps of most concern in the long run is whether a competent cadre of research scientists and professionals capable of working with new technologies can be nurtured and sustained. Does government have a role to play in this? The answer is yes. There is a need to maintain a research capability to work as an insurance policy for meeting needs thrown up by uncertain future events: construction disasters like Ronan Point; the impact of Chernobyl; problems of alkalization of concrete; the effects of acid rain on stonework, sick-building syndrome, etc. This is particularly important because constructed products last so long, and no one can accurately predict changing patterns of future use. Moreover, the long life of products is set against peculiarly short time horizons of many of the project-based rms involved in their production. What type of skills are needed in this researchbase? Most problems result from heterogeneous events and a strong analytical capability is therefore required which cuts across traditional building science and construction disciplines. But problem-solving researchers can also work on developing new technologies aimed at the types of performance improvements outlined in the previous section of this paper. These researchers will increasingly require skills which bridge the engineering and social sciences. They will need to be appraised of future developments in particular technical domains, and engage in forecasting activities. For example, changing user needs and market conditions play a major part in innovation, yet little emphasis is placed on improving the understanding of this through better userproducer relationships.

Conclusions
This paper has considered the role of government funding for construction research in the light of the

SHOULD GOVERNMENTS FUND CONSTRUCTION RESEARCH ? current debate on the future of public investment in science. What might be the consequences if we were to accept Kealeys arguments in favour of public sector withdrawal from funding? The logic of Kealeys argument is that private sector funding would be substituted for that previously available from the public sector. Could this be the case in construction? There is no obvious reason why construction rms should step in to fund research if government withdraws. Very few rms are likely to be able to appropriate the results of up-stream science (e.g. materials and computational sciences) and developmental work required to underpin knowledge for innovation in the built environment. Moreover, if this were to occur, appropriation by a small number of very large rms would almost certainly reinforce weaknesses in technical competence of the vast majority of small and medium sized enterprises. Moreover, evidence from the complex interactions involved in construction suggest that the results of academic research and industrial development activities are not simply mixed together in a cognate way, resulting in identi able routes to innovation. Innovation in this arena depends upon many sciences, not one discipline. It occurs through a convoluted network of actors who depend upon in-house capabilities to interface with other external R&D activities. Firms require gatekeepers to take part in these networks and to interpret what is going on. For these reasons, government support for R&D should be seen as complementar y to that of private investment. This view provides a third way forward from the Kealey/ Pavitt positions, in which each needs the other. The role of the public sector has been reduced in many countries. In consequence, governments have lost some of their capabilities to think about the future and plan support for technical innovation. Government policy-makers work at some distance from hands-on decision-makers in industry and they increasingly depend upon outside expertise concerning issues relating to technical change. In order to ful l its duties government therefore needs to purchase credible outside reviews to inform policy making. A diverse range of views are available, but only a few are credible and there may be con icts over the legitimacy of information provided. There is a need for a strong, coherent and cooperative research-base for construction. It is unlikely that this can be fostered solely within the private sector in most countries (with the possible exception of Japan), because of the structure and competitive nature of industry {28}. In developing countries there is often a need to create new building codes appropriate to particular social and physical environments. Regulatory sciences are important here, relating to standards-setting questions. These countries need close association between teaching and research to tackle local problems by building up local know-how embodied in a cadre of well-trained practitioners. In these countries, nancial and other resources within rms tend to be weaker and in some cases governments have been able to play important roles in fostering new technical capabilities. The complementarity argument for the role of public and private investment therefore carries over to questions of concern in developing countries: the emphasis will differ, with additional importance at-

265

tached to transfer, imitation, emulation, adaptation and learning. Types of research relevant to construction are often down-stream of the more basic research carried out in the science disciplines. And, because construction involves systems integration a more interdisciplinary and inter-departmental approach is appropriate. A high priority should be placed on developing and supporting the competences necessary to intercept technologies, integrate systems and bridge the gaps between university research, research associations and industrial research. In this context, as Pavitt argues, universities play a particularly important role because they carry out both R&D and teaching. Technological transfer occurs through the activities of competent people, and those trained close to active researchers normally perform better. For this reason, independent and governmental research laboratories are at a disadvantage, because they are not responsible for postgraduate education and teaching and therefore are unlikely to have such direct routes for transfer. Research and teaching is itself undergoing radical change through the introduction of new technologies such as the Internet. This will have great signi cance in future for the ways in which construction research is conducted {29}. In many countries, government-funded construction research is coming under increasing pressure to demonstrate short-term relevance to industry. Much effort has been expended in the past ve years by UK government and research organizations in trying to set objectives and, often in some mechanistic way, to manage research in the hope that measurable benets will accrue in relatively short periods of time. The sums invested are very small in comparison to the total scale of construction activities: perhaps 50 70 million government funds spread across a number of departments to stimulate improvements in performance in an industry with an annual turnover of 50 billion. Nevertheless, there are signs of success from some initiatives, particularly in collaborative funding, where researchers and practitioners from industry are working together and beginning to understand each other better. It takes time to foster these new relationships and results should not be expected in the rst few years. Rather, the role of this type of government funding should be viewed as a long-term investment required in supporting deep-rooted changes in culture and research practices. Successful commercialization of research outcomes require more than a straightforward linear mechanism for carrying out a precise programme of research. Firms need to be actively involved with researchers in universities and other research institutions to provide a research infrastructure which is capable of developing and sustaining a knowledge base in new areas. The nature of these partnerships will prove particularly important in an industry where producers need to learn more about how to provide value to their clients, and clients need to learn to become more demanding. Research is only one of the ingredients that make for successful creation and adoption of new knowledge which may eventually result in enhanced performance {30}. A national capability to carry out research in the built environment is perhaps the most important asset that a country can develop for

266 construction {31}. It may be more bene cial in the long run than narrowly focused, targeted programmes. Governments have a part to play in funding this resource, not least because they depend upon it to ful l their own roles. The resource is needed to answer questions in a complex environment whether they are posed by users, supplier-organizations, or government. New problems and technical opportunities will always emerge and the issues identi ed earlier in this paper indicate just some of the pressures of change in the built environment. While we can predict the general thematics of under-pinning knowledge required, it is impossible to plan for detailed research projects without long-term links between researchers and practitioners. Issues concerning how the resource-base should be located, nurtured, maintained, managed and contained bearing in mind that throwing money at scientists may not be the best use of a nations scarce nances will have to remain the subject of another paper. Suf ce it to say that we need to plan for a capability, in Louis Pasteurs words, ... chance favours only the prepared mind {32}. There is already enough uncertainty in our construction activities, the least we can do is invest in a little more preparedness.

GANN
NIESR Seminar on Industrial Innovation and Economic Performance, 13 June; and SPRU mimeo, University of Sussex. See Langrish et al., op. cit.; Gibbons, M., Limoges, C., Nowotny, H., Schwartzman, S., Scott, P and Trow, M. . (1994) The New Production of Knowledge, Sage Publications. There are many problems in making comparisons using different data-sets, which need not concern us here. Oslo Manual (1997) The Measurement of Scienti c and Technological Activities Proposed Guidelines for Collecting and Interpreting Technological Innovation Data, OECD/Statistical Of ce of the European Communities, Paris. New work in this area is being developed at SPRU, Sussex University, for example, see Hobday, M. (1996) Complex system vs mass production industries: a new innovation research agenda, paper prepared for CENTRIM/SPRU Project on Complex Product Systems EPSRC Technology Management Initiative; Groak, S., Gann, D. and Hansen, K. (1997) Process representation - an international state-of-the-art review of development tools, Final Report to EPSRC, SPRU, University of Sussex; Davies, A. (1996) Innovation in large technical systems: the case of telecommunications, Industrial and Corporate Change, 5 (4); Hobday, M. with Miller, R., Leroux-Demers, T. and Olleros, X. (1995) Innovation in complex systems industries: the case of Flight Simulation, Industrial and Corporate Change, 4 (2), pp. 363 400; Hobday, M. (forthcoming) Product complexity, innovation and industrial organisation, submitted to Research Policy, February 1997. Mans eld, E. (1995), op. cit. Gann, D., Matthews, M., Patel, P and Simmonds, P. . (1992) Construction R&D: analysis of private and public sector funding of research and development in the UK construction sector, Department of the Environment and IPRA; CFR (1996) The funding and provision of research and development in the UK construction sector, 19901994, Department of the Environment. Gann, D. and Simmonds, P (1993) Pro t from Innova. tion: a management guide for the construction industries, for the Construction Industry Council, IPRA. Groak, S. and Krimgold, F (1988) The practitioner. researcher in the building industry, Bartlett School of Architecture, mimeo. Gann, D. (1991) Future Skill Needs of the Construction Industries, Department of Employment/IPRA. Arnold, E. and Gann, D. (1996) Evaluation of IT-Bygg: the Swedish National Programme on Construction IT, for NUTEK, Technopolis, Brighton. Barras, R. (1995) The capital saving city?, PICT (Programme on Information and Communication Technologies) International Conference on: The Social and Economic Implications of ICTs, Westminster, London, developed further for SPRU seminar, Spring 1997; Mitchell, W.J. (1995) City of Bits: Space, Place and the Infobahn, The MIT Press, Cambridge, MA; Castells, M. (1989) The Informational City, Basil Blackwell, Oxford; Castells, M. (1996) The Rise of the Network Society, Basil Blackwell, Oxford. cf. Freeman, C. and Perez, C. (1988) Structural crises of adjustment: business cycles and investment behaviour, in Dosi, G., Freeman, C., Nelson, R., Silverberg, G. and Soete, L. (eds) Technical Change and Economic Theory, Frances Pinter Publishers, London. Gann, D. and Barlow, J. (1996) Flexibility in building use: the technical feasibility of converting redundant of ces into ats, Construction Management and Economics, 14(1), pp. 55 66; Barlow, J. and Gann, D. (1995) Flexible planning and exible buildings? Re-using redundant of ce space, Journal of Urban Affairs, 17 (3), 26376.

10.

11. 12.

13.

Acknowledgements
I wish to thank my sponsors for their support of research on which this paper is based. Particular recognition is due to the EPSRC/ESRC and Royal Academy of Engineering for the sponsorship of my Chair, and to the BRE for their funding of a project on construction futures. I also wish to thank my colleagues at SPRU particularly Professor Nick von Tunzelmann, for his comments, and Dr Frans Berkhout who has worked with me on the BRE study.
14. 15.

16. 17. 18. 19. 20.

References
1. 2. 3. 4. 5. 6. Kealey, T. (1996) The Economic Laws of Scienti c Research, Macmillan Press, pp. 2 6. Rosenberg, N. (1991) Critical issues in science policy research, Science and Public Policy, 18 (6), 33546. Kealey, T. (1996) Youve all got it wrong, New Scientist, 29 June, pp. 22 6. Langrish, J., Gibbons, M., Evans, W.G. and Jevons, F.R. (1972) Wealth from Knowledge: a Study of Innovation in Industry, Macmillan. Pavitt, K. (1996) Road to ruin, New Scientist, 3 August, pp. 32 5. Hicks, D. (1995) Published papers, tacit competencies and corporate management of the Public/Private character of knowledge, Industrial and Corporate Change, 4(2), 40124; Mans eld, E. (1995) Academic research underlying industrial innovations: sources, characteristics and nancing, Review of Economics and Statistics, 77(1), 55 65. Narin, F. (1996) Exploring the links between scienti c research and commercial innovations, presentation at PRISM, The Wellcome Trust, London, 1 May. Faulkner, W. and Senker, J. (1995) Knowledge Frontiers, Clarendon Press, Oxford. Martin, B.R. and von Tunzelmann, G.N. (1997) Public versus private funding of R&D: a re-examination of the crowding-out hypothesis, paper prepared for ESRC/

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SHOULD GOVERNMENTS FUND CONSTRUCTION RESEARCH ?

23. The debate on National v Technological Systems is instructive: Lundvall, B.A. (1992) National Systems of Innovation, Pinter, London; Carlsson, B. and Stankiewicz, R. (1991) On the nature, function and composition of technological systems, Journal of Evolutionary Economics, 1 (2), 93 118. Patel, P and Pavitt, K. (1991) Large rms in the . production of the worlds technology: an important case of non-globalisation, Journal of International Business Studies, 22(1), 121; Hu, Y.S (1992) Global corporations and national rms with international operations, California Management Review, 34(2), 10726; Pavitt, K.P . (1992) Internationalisation of technological innovation viewpoint, Science and Public Policy, 19 (2), 11923. Freeman, C. (1982) The Economics of Industrial Innovation, Frances Pinter, London. The Agency is putting pressure on construction to clean up its work. In 1995, the building industry caused 800 reported water pollution incidents. Toxic substances used on sites are a particularly serious threat. cf. Gibbons et al., op. cit. Simple parallels cannot be drawn from countries like Japan, because the basic structure of private/public relations is so different from those found in, say, the US or UK. For example, more stable relations in Japan, in which workforces are less mobile create the conditions which facilitate longer-term investment. Whereas in the UK or US, leakage of proprietary technical know-how,

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29.

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through the mobility of key personnel can create disincentives for rms to invest in R&D. The idea of virtual knowledge networks, distance learning, new forms of rapid prototyping and simulation would require a separate paper for proper consideration. The wrong set of economic policies can guarantee the failure of any speci c science and technology programme, no matter how ingeniously conceived. Just as Rosenberg calls for a better roadmap for the interactions between science and technology, we need a better roadmap of the interfaces between construction research, technical development and bene cial innovation. Rosenberg, N. (1991) Critical issues in science policy research, Science and Public Policy, 18 (6), 335 46. I have not tried to quantify the scale of this capability. This has proven almost impossible to do in other industries and there is no reason to believe that it would be any easier in construction. Rather than create an arbitrary size for the research capability it may be better to develop this based on merit and demonstration of research need, in competition for research resources with other sectors of the economy. A starting point for basic competences clearly needs to be de ned. Louis Pasteur - Inaugural Lecture, University of Lille, 1854.