How the reliability of external competences shapes the modularization strategies of industrialized construction firms

Abstract Firms modularize as they move into industrialized construction. Prior research highlights the importance of their modularization strategies, arguing that firms can either build the competence for modularization internally or can source them externally. To understand what shapes a firm’s choice to use external competences in its modularization strategy, we studied three leading construction firms. In this multiple case study, Alpha, Beta and Gamma are leaders in Asian markets, using reinforced concrete solutions in high-rise industrialized construction. Where external competences are available, our analyses show the work firms do to make them reliable and that their choice to use external competences is shaped by their reliability. Alpha modularized in a context with little available external competences, so it built new competences in-house; Beta chose to use the externally available manufacturing and assembly competences, using standards, remote monitoring and control of product architectures to make them reliable for their use in modularization; Gamma had available competences in the external context and initially sought to use them, but reliability concerns led to it modularizing by acquiring the firms to bring these competences in-house. Our contribution is to show how ensuring the reliability of external competences shapes modularization strategies. Further, we have identified actions that firms can adopt to make external competences reliable through: (1) use of international standards, (2) quality control procedures, (3) control of product architectures, and 4) acquisition of external competences. We provide implications for practitioners and policy makers seeking to transition to industrialized construction; and discuss new areas for research.