Source of competitive advantage in United States engineering firms
Mayer, Stephen F
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This research provides an in-depth look at the engineering consulting sector in the United States. The engineering sector is arguably one of the most important segments of advanced producer services. All aspects of the built environment and industrial and manufacturing facilities contain substantial engineering inputs. In 1959, Penrose published her work entitled, The Theory of the Growth of the Firm . Her work has become a seminal work and launched extensive research on the resource-based view of the firm. The resource-based view is a strategic concept that focuses on firm-specific assets and resources that can provide a firm its unique advantages. One of the most important contributions of the resource-based view involves the treatment of intangible or "invisible" assets. Advanced producer services, especially consulting engineering, derive their advantages from intangible assets--reputation, relationships, and tacit processes such as know-how and capabilities. To build competitive advantage, firms must engage in a process of continuous improvement and innovation. Innovation in producer service firms is often incremental, non-linear, and non-technical in nature. Technological advancements are enabling services to be easily disseminated and traded among firms, partners, affiliates and clients. This tradable portion contains largely codified or explicit knowledge. Tacit knowledge and face to face time with the client (a vital element of engineering service delivery) remains largely location bound. The data for this study are obtained from a postal survey of the Engineering News Record's Top 300 (Source: ENR Top 500) design firms in the US, a survey of clients, and interviews (14) of senior firm executives. The ENR survey (n = 73) is designed to understand the sources of competitive advantage. The results show that reputation and personal relationships, human resource factors (e.g., project team and manager), experience, and project understanding, and past experience with the client are important factors that make a firm competitive. It is clear that not only experience and local knowledge are important, but trust-based attributes and untraded dependencies play a significant role in a firm's competitive advantage. Reputational and relational assets are built over time and are not purchased in the open market. Experience and capability are also built over time and reflect the learning capabilities of the firm.