Historical dynamics of construction business systems: an institutional evolution perspective

Abstract

As a kind of basic institutional environment, the construction business system provides an underlying platform of the interactions for stakeholders of construction projects and hence exerts a great influence on the building sector. Taking the view of ‘the construction business system as a complex adaptive system’, a research framework is developed with the aim of understanding how and why construction business systems emerge and evolve over time. The principles of evolutionarily stable strategy and replicator dynamic are briefly introduced. A three-strategy evolutionary game model is developed on the basis of a set of assumptions, with the distinctiveness of the construction industry fully taken into consideration. The model illustrates some characteristic outcomes: multiple equilibria, path dependence, original-state-sensitiveness, the long-term persistence of Pareto-inferior outcomes as well as proneness to the stable equilibrium characterized by more efficient negotiation and higher average payoff. It is expected that introducing ‘revolutionary’ events that are not explicitly modelled, such as non-best responses and exogenous changes, could break the existing equilibrium and bring about new equilibrium outcomes.