Characteristics of Innovative 

Production 

Home Builders 
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need. 
Characteristics of Innovative 

Production Home Builders 

Prepared for: 

The Partnership for Advancing Technology in Housing (PATH) 

U.S. Department of Housing and Urban Development 

Office of Policy Development and Research 

Prepared by: 

Center for Housing Research 

Virginia Tech 

Blacksburg, Virginia 

Authors 

C. Theodore Koebel 

Marilyn Cavell 

June 2006 
Acknowledgments 

The authors gratefully acknowledge the contributions of Ms. Candace Mandel of Market Insights 

and her support staff. Ms. Mandel was instrumental in conducting the pre-survey interviews, 

carrying out the data collection process, coordinating and participating in the qualitative 

interviews, and copy editing. The authors greatly appreciate Ms. Mandel’s advice and expertise 

regarding all aspects of the project. The authors also acknowledge Ed Hudson of the NAHB 

Research Center for consulting on technology issues in conducting this research and for 

providing the sample for the survey. The authors gratefully acknowledge the help and guidance 

provided by Dr. Carlos Martín of the Partnership for Advancing Technology in Housing of the 

U.S. Department of Housing and Urban Development. 

Disclaimer 

The statements and conclusions contained in this report are those of the authors and do not 

necessarily reflect the views or policies of the U.S. Department of Housing and Urban 

Development or the U.S. Government. The authors have made every effort to verify the accuracy 

and appropriateness of the report’s content. However, no guarantee of the accuracy or 

completeness of the information or acceptability for compliance with any industry standard or 

mandatory requirement of any code, law, or regulation is either offered or implied. The products 

and systems described in the report are included only as examples of some available choices. No 

endorsement, recommendation, or evaluation of these products or their use is given or implied. 
TABLE OF CONTENTS 

LIST OF EXHIBITS................................................................................. v

Figures............................................................................................................. v

SUMMARY............................................................................................ vii

Purpose and Significance of this Study ........................................................ vii

Synopsis of Findings...................................................................................... ix

PREVIOUS RESEARCH ON INNOVATION IN RESIDENTIAL 

CONSTRUCTION................................................................................. 1

Organizational Structure ................................................................................. 2

Organizational Culture.................................................................................... 3

Human Resources ........................................................................................... 4

Market Context ............................................................................................... 5

Industry Characteristics .................................................................................. 6

Technical Attributes of the Innovation........................................................... 7

Economic Attributes of the Innovation........................................................... 8

Recent Advances in Innovation Theory ......................................................... 8

Summary of Previous Research...................................................................... 9

STUDY DESCRIPTION ........................................................................ 11

General Description ...................................................................................... 11

Survey Instrument......................................................................................... 11

Population and Sample ................................................................................. 14

Methods and Response Rate......................................................................... 14

Key Definitions and Variables...................................................................... 15

Comparison with 2003 Study of Small to Midsize Builders........................ 16

Qualitative Assessment................................................................................. 17

Summary ....................................................................................................... 17

SURVEY RESULTS.............................................................................. 17

Descriptive Analysis of Building Technology Innovation by Production 

Multivariate Analysis of Building Technology Innovation by Production 

Products and Technologies Included in the Survey...................................... 18

Description of Survey Responses ................................................................. 18

Builders ...................................................................................................... 35

Builders ...................................................................................................... 44

Comparisons with the 2003 Survey.............................................................. 45

QUALITATIVE RESULTS .................................................................... 48

Purpose.......................................................................................................... 48

Findings......................................................................................................... 48

CONCLUSION...................................................................................... 52

Summary of Findings.................................................................................... 52

iii 
Recommendations......................................................................................... 55

APPENDIX A. RESEARCH METHODOLOGY ...................................... 1

APPENDIX B. CORPORATE QUESTIONNAIRE .................................. 1

APPENDIX C. OPERATIONS QUESTIONNAIRE ................................. 1

APPENDIX D. DESCRIPTION OF TECHNOLOGIES/BUILDING 

PRODUCTS.......................................................................................... 1

REFERENCES........................................................................................ 1

iv 
LIST OF EXHIBITS 

Figures 

Figure 1. Factors Influencing Adoption and Diffusion of Innovation in Residential 

Construction.................................................................................................................. 9

Figure 6. Production Home Builders by Sub-Corporate Locus of Decisions on Identifying and 

Figure 7. Production Home Builders with a Strong Advocate of Innovation by Company 

Figure 11. Top Three Factors Influencing the Use of New Building and Construction Products, 

Figure 12. Top Three Influential Sources for Keeping Up-to-Date on New Building and 

Figure 13. Number of Innovative Products Tried or Being Used by Company Size (Units Built 

Figure 2. Factors Influencing Firm’s Use of Innovative Materials, Products, and Processes ...... 10 

Figure 3. Production Home Builders by Market Area Served...................................................... 19 

Figure 4. Production Home Builders by Average Percent of Single-family Units Built.............. 20 

Figure 5. Production Home Builders by R&D and A&D Departments ....................................... 21 

Approving a New Type of Siding............................................................................... 23 

Level ........................................................................................................................... 23 

Figure 8. Head R&D and A&D with Significant Influence in Choosing a New Type of Siding. 25 

Figure 9. Purchasing Position with Significant Influence in Choosing a New Type of Siding.... 25 

Figure 10. Top Three Factors Contributing to Success ................................................................ 28 

Materials, and Practices over the Next 10-20 Years................................................... 30 

Construction Products, Materials, and Practices......................................................... 32 

Per Year) ..................................................................................................................... 36 

Figure 14. Number of Innovative Products Tried or Being Used by Market Area Served .......... 36 

Tables 

Table 1. Production Home Builders by Adoption of New Building Products.............................. 18 

Table 4. Production Home Builders’ Support of R&D for New Building Products or 

Table 6. Production Home Builders by Position with Significant Influence over Decision to Use 

Table 10. Production Home Builders by Approach to Selecting New Building and Construction 

Table 11. Factors Influencing the Use of New Building and Construction Products, Materials, 

Table 12. Production Home Builders’ Information Sources for Keeping Up-to-Date on New 

Table 13. Production Home Builders by Cooperation of Parties in Adopting New Building and 

Table 2. Number of Units Built by Building Type ....................................................................... 19 

Table 3. Production Home Builders by Departments within Company ....................................... 20 

Processes..................................................................................................................... 21 

Table 5. Locus of Decisions on Identifying and Approving a New Type of Siding .................... 22 

a New Type of Siding ................................................................................................. 24 

Table 7. Production Home Builders by Growth Plan ................................................................... 26 

Table 8. Production Home Builders Likely to Invest in Business Objectives.............................. 27 

Table 9. Production Home Builders by Factors Contributing to Success..................................... 28 

Products, Materials, and Practices .............................................................................. 29 

and Practices over the Next 10-20 Years.................................................................... 30 

Building and Construction Products, Materials, and Practices................................... 32 

Construction Products, Materials, and Practices......................................................... 33 

v 
Table 14. Production Home Builders by Impediments for Considering New Building and 

Construction Products, Materials, and Practices......................................................... 34 

Table 15. Production Home Builders by Benefit of Adopting New Building and Construction 

Products, Materials, and Practices .............................................................................. 34 

Table 16. Innovation When Companies Have R&D or Engineering Departments ...................... 37 

Table 17. Innovation under Central or Local Approval................................................................ 38 

Table 18. R&D and A&D Influence and Innovation.................................................................... 38 

Table 19. Purchasing Influence and Innovation ........................................................................... 39 

Table 20. Purchasing Makes Final Decision and Innovation ....................................................... 40 

Table 21. Growth Plan and Innovation......................................................................................... 41

Table 22. Business Strategies and Innovation .............................................................................. 41 

Table 23. Factors Contributing to Success and Innovation .......................................................... 42 

Table 24. Future Trends and Current Innovation.......................................................................... 42 

Table 25. Cooperation by Subcontractors and Innovation............................................................ 43 

Table 26. Perceived Benefits and Innovation ............................................................................... 43 

vi 
SUMMARY 

Purpose and Significance of this Study 

Industry, government and universities in the United States and across the world have 

demonstrated a heightened interest in innovation as a driver of economic growth. That 

innovation—broadly understood as the application of discoveries and inventions—might be 

critically important to the vitality of the economy is not a new notion. Joseph Schumpeter 

identified the centrality of innovation to economic growth in Theory of Economic Development, 

published in 1911, and Adam Smith’s The Wealth of Nations in 1776 reflected the fundamental 

changes spurred by the first industrial revolution. But even a small sampling of business and 

economics books published in the last 20 years shows a continued interest in the role of 

innovation in both broad economic terms and more finite industrial analysis. Such interest has 

permeated national culture, too, as recent biomedical and information technologies have 

dramatically shaped and been shaped by changing popular perceptions and needs. 

The innovation process, though pervasive, is not formulaic. Every industry—and, for that matter, 

every technology within an industry—can displace established practices and companies through 

an idiosyncratic process of “creative destruction” when innovations are successfully 

commercialized.1

 Cycles of creative destruction vary across industries, partly due to the different 

relationships between science and engineering and the technologies associated with specific 

industries (Nelson 1998). Industries with closer ties to science and engineering are likely to 

experience more frequent cycles of creative destruction, while industries less dependent on 

science and technology have longer periods between disruptive innovations and instead rely on 

refinements of existing technologies. 

Housing is clearly in the latter category. For the most part, innovation in this sector has refined 

established technologies and materials or incrementally replaced existing materials and 

equipment. As a result, homebuilding is sometimes criticized as a laggard industry that is 

resistant to change. Technologies and practices persist for long periods in homebuilding for 

various reasons, many still unknown. 

In 2003, PATH commissioned a pioneering study on the diffusion of innovations in the 

homebuilding industry. The report from that study (Koebel et al. 2003) reviewed the research on 

the diffusion of innovation in construction as well as other industries. It reported the results of a 

national survey of home builders on their decisions to adopt new products, processes, and 

technologies and presented an analysis of the correlation of company size and geographic region 

to company innovativeness, measured through the use of several innovative products in the 

National Association of Home Builders Research Center’s Annual Builder Practices Survey 

(ABPS). 

Though not fully representative of the full homebuilding population, the 2003 study resulted in 

the following key findings: 

1

 Schumpeter’s theory of economic growth identified innovation as a central force for long-term growth. In this 

view, innovation is inherently disruptive in the sense that it creates opportunities for change (Schumpeter 1911, 

1942). This “creative destruction” forces existing firms to adapt to new technologies or perish. 

vii 
 At the early stage of diffusion, national and regional firms, multifamily and modular 

builders, and single-family custom builders are more likely to adopt innovations than are 

local single-family production builders. 

 Although sales and supplier representatives, subcontractors, and trade shows are 

important sources of information about new products and materials for all builders, earlystage adopters rely on technology transfer programs and universities more than middle or 

late-stage adopters. 

 Although small, less established manufacturers often are the first to introduce new 

products, residential building construction adopters rely heavily on established 

manufacturers who stand behind their products. 

 A key business strategy for over two-thirds of the builders in the survey was establishing 

a reputation for high quality and durable homes and quickly addressing any problems 

buyers reported in those homes. 

 A higher level of adoption of new products, materials, and practices by home builders 

was generally associated with: having a technology advocate within the firm (most often 

the owner); a company emphasis on being creative and being the first to use new 

products and technology transfer programs; the use of union labor (at least some of the 

time); and explicit demand from informed homebuyers. 

 In contrast, a lower level of adoption was generally associated with local production 

builders and builders who emphasize marketability and profit, who associate the firm’s 

success with land development, and who emphasize the “tried and true” rather than 

risking new materials and products. 

The 2003 report’s analysis of annual diffusion rates for specific technologies from 1995 to 2001 

in the ABPS demonstrated even further complexity. Diffusion of some technologies began with 

larger builders, while small builders spearheaded the adoption of others. Similarly, some 

technologies entered the market in more expensive homes and others in low cost homes. These 

differences reflected the relative advantages of these products within regions, differences in 

supply and demand between market segments, variances in distribution and access to 

technologies, and different business philosophies and strategies. As an example of the last 

potential cause for innovation variances, large builders appeared to stress cost savings, 

improvements in production, reduced call-backs, or reduced exposure to liability, whereas 

smaller builders stressed high consumer awareness (demand pull) and were less concerned about 

price or impact on production processes. 

Most of the responding homebuilders to the 2003 study were small firms. Nearly two-thirds of 

them built fewer than 25 houses in 2001 and three-fourths built fewer than 50 houses. Only 15 

percent of the respondents built 100 or more houses in 2001. Although the findings helped 

identify differences in innovation between larger and smaller builders, the survey predominately 

reflected the experiences of smaller builders. 

viii 
In order to understand innovation among larger builders, specifically large production builders, 

PATH commissioned a national survey of production builders building 200 or more homes a 

year. This universe includes several national (and international) homebuilding firms, of which a 

few have become publicly traded Fortune 500 companies, as well as regional and local housing 

production companies. 

Synopsis of Findings 

The findings of this study advance our understanding of building technology innovation among 

production builders in particular and conceptually for the homebuilding industry at large. The 

key findings are that: 

 Size matters. Larger national production home builders are more innovative than smaller 

production builders. 

 Organization matters. Decentralization contributes to innovation at regional and local 

operational levels, where decisions on innovative products and materials are often 

made—assisted by technology support from national offices. Influence over innovation 

spans across purchasing, marketing, and construction. The opportunities for building 

technology innovation, then, are negotiated throughout these companies. 

 Purchasing matters. While numerous departments within a production builder’s 

organization can influence technology adoption, purchasing departments across the 

company play a large role in influencing and making decisions on new products and 

materials for production builders. The corporate head of purchasing was identified by 

93% of the corporate respondents and 54% of the operations respondents as having 

significant influence over decisions to adopt a new building product, material, or process; 

regional and local purchasing directors were also identified as having significant 

influence. 

 Vision matters. Most production builders believe building technology innovation 

involves serious risks but also that innovation can contribute to higher quality and 

performance. Large production builders agreed with smaller builders that innovative 

products and materials cost more than those they replace and subcontractors are resistant 

to using new products. Production builders with aggressive growth plans included 

building technology innovation as one element in their plans to increase market share and 

profitability. 

 Information sources matter. To keep up-to-date on building and construction products, 

materials, and practices, production builders rely on local offices within the company, 

subcontractors, manufacturers, and wholesalers and suppliers. They also appear to use 

technology transfer programs to a greater extent than small builders, though both sectors 

mostly rely on established manufacturers and suppliers that stand behind their products. 

ix 
 Focus matters. Production builders were most likely to invest in innovations that reduce 

construction defects and call-backs, improving subcontractor dependability, and 

improving the style and attractiveness of the homes they build, followed by investment in 

cost reduction and reduced cycle times. Less than half of the production respondents 

rated investments in building technology as a means to improve market share as very 

likely, and a slightly smaller group rated creation of formal R&D as very likely to affect 

share. However, one-fifth to one-half of the respondents included core aspects of building 

technology as part of their business strategies, and three-fourths of the companies 

identified research and technology development as part of their corporate strategy. So, 

technology can be an important part of production builders’ business models—but only 

one of many. 

 Barriers matter. Production builders are more prone than small builders to think that 

building codes impede innovation, that new building products increase risks of callbacks, and that their own construction workers are resistant to innovation. 

 Opportunities matter. Beyond the reasons for initially investing in technology, builders 

see many opportunities for reaping benefits once the technologies have been 

implemented. Production builders rated increased quality as the highest benefit from 

building technology innovation, followed by meeting customers’ expectations, increased 

competitiveness, creating an image as an innovative builder, and reducing call-backs. The 

opportunities for building technology innovation could increase significantly in the 

coming years, as the survey respondents identified trends in energy costs, land costs and 

availability, labor, and competition from large national builders as likely to influence 

building technology innovation over the next 10 to 20 years. 

Elaboration of each these findings, as well as survey results and further research 

recommendations, is provided in the following discussions. 

x 

PREVIOUS RESEARCH ON INNOVATION IN RESIDENTIAL 

CONSTRUCTION 

Attention to innovation in construction, particularly residential construction, has increased with 

the recent publication of several scholarly books on construction innovation (for example, Gann 

2000; Manseau and Seaden 2001; Manseau and Shields 

2005) and the introduction of a journal (Construction 

Innovation) devoted exclusively to the topic. Further, three 

major public programs devoted to residential construction 

innovation in some form were created: Building America; 

EnergyStar®; and PATH. Significant industry and consumer 

attention has also been paid to residential construction concerns. Although construction is still 

very much underrepresented in the research literature on innovation, more research has occurred 

on innovation in construction in the past decade than in multiple previous decades. 

The focus of this review of literature is to identify the issues that affect the adoption decision and 

the adoption process of innovative technologies by large production builders. (For earlier 

reviews of research on residential construction innovation, see Toole 1998; Slaughter 1993a, 

2000; Koebel et al. 2003; Hassell et al. 2003.) Although firm size is often taken into 

consideration in studies of innovation, in searching the literature revealed no prior studies that 

specifically targeted large organizations within the residential construction industry. Previous 

studies related to innovative adoption practices of home builders were either based on samples 

dominated by small firms or targeted small to medium sized builders. 

In 2003, two significant contributions to the understanding of diffusion of innovative 

technologies in the residential construction industry were published: The Diffusion of Innovation 

in the Residential Building Industry (Koebel et al. 2003) and Building Better Homes (Hassell et 

al. 2003). The former was summarized in the previous section. Hassel et al. (2003) reviewed the 

state of innovation in the building industry and provided strategies for the government to 

promote innovation in the homebuilding industry. They pointed to three major categories that 

motivate builders, manufacturers, or other homebuilding stakeholders to innovate: “seeking 

competitive advantage” (when decisionmakers believe adopting an innovation may differentiate 

their product or reduce costs and increase profits); “improving technological efficiency” (when 

the decision to innovate is not based on need but on a desire to have a better quality product or 

production); and “meeting external requirements” (when the decisionmaker is forced to innovate 

due to a change in building codes or existing consumer demand). They also pointed out that 

decisionmakers’ past experience, context, environment, and professional training contribute to 

More research has occurred on 

innovation in construction in the 

past decade than in multiple 

previous decades. 

their decision of whether or not to adopt an innovation. 

The implications are that “enabling and influencing 

agents” may act to expand a decisionmaker’s frame of 

reference, allowing broader acceptance of new ideas. 

“Enabling and influencing agents” 

may act to expand a decisionmaker’s 

frame of reference, allowing broader 

acceptance of new ideas. 

Hassell et al. (2003) identified the size of builders as an 

important factor relating to the adoption of innovations, although there is disagreement on this 

issue in the literature. Other factors affecting adoption of innovations in the homebuilding 

industry, as discussed by Hassell et al. (2003), were competition (as in the impacts of reputation, 

Characteristics of Innovative Production Home Builders 1 
differentiation, and profits) and business fragmentation. Fragmentation includes several 

dimensions: geography (manifesting in different regulations and codes and/or information 

sharing), horizontal organization (resulting in possible problems in communications between 

builders and in turnover rates), and vertical organization (from independence rather than 

interdependence within the process, information sharing, and the protection of intellectual 

property associated with a new product). In addition, they pointed out that homebuilding is a 

complex process that includes multiple participants with different but often interrelated motives 

that impact innovation. 

The broad categories that Koebel et al. (2003) identified as possible determinants of adoption 

and diffusion serve as a useful organization of the literature pertinent to residential production 

builders. The categories are Organizational Structure, Organizational Culture and Decision 

Process, Human Resources, Market Context, Industry Characteristics (including communication 

channels and social networks, particularly between suppliers and venders), Technical Attributes 

of the Innovation, and Economic Attributes of the Innovation. These categories also serve as 

operationalizing guides for this study. 

Organizational Structure 

The impact of firm size probably has been discussed 

more than any single organizational attribute influencing 

The impact of firm size probably has 

been discussed more than any single 

adoption and diffusion. Yet, size does not appear to have organizational attribute influencing 

a uniform relationship to innovation. The capital, talent, adoption and diffusion. Yet, size does 

and market advantages of large firms could enable them 

to be more innovative, as suggested by Hassell et al. 

not appear to have a uniform 

relationship to innovation. 

(2003), but this is not always the case. Large builders are 

constrained by their responsibilities to shareholders or other investors to not risk losing quality, 

safety, and profitability—all of which may be an outcome of adopting an innovative technology. 

Since they produce a significant number of units quickly, large builders are especially vulnerable 

to compounding the effect of defective innovations. 

Slaughter (1993a) demonstrated that small firms are a significant source of innovation in 

homebuilding. Koebel et al. (2003) found that national builders were more innovative than 

builders operating in a single market area but otherwise found that size was not statistically 

significant. The sample for that study, however, was dominated by small firms. In their analysis 

of the NAHB Annual Builder Practices Survey, they also found that the impact of firm size on 

innovation was mediated by the characteristics of the innovation. Hudson and Cantrell (2004) 

found that larger builders are more likely to be the first to adopt innovative materials if they 

result in cost savings, improvement in production process, or a reduction in call-backs or other 

liabilities. Eastin et al. (2000) argued that small builders tend to adopt modifications of materials 

and technologies to fit the existing housing system, while larger firms are more likely to 

introduce more substantial or radical innovations. Furthermore, small builders might be more 

sensitive to the opinions of their customers, making them more responsive to “demand-pull.” 

Several studies of commercial construction point to higher innovation levels for medium and 

large firms than for small firms (Seaden et al. 2003; Kangari and Miyatake 1997; Nam and 

Tatum 1992) and associate this phenomenon with their greater access to capital and talent. 

2 Characteristics of Innovative Production Home Builders 
Koebel and McCoy (2006) argue that larger firms might be more path-dependent (that is, reliant 

on extant practices) and resistant to change than some small homebuilding firms, where the 

owner has more direct control and can champion innovation more effectively. According to 

several prominent analysts of innovation (Christensen 1997), disruptive innovations (those that 

change industry practices significantly) are most likely to come from—and, similarly, be adopted 

by—new companies (either start-ups or companies entering the industry from some other sector) 

that develop completely new business models for the industry. In short, the verdict is still out as 

to the effect of firm size on innovativeness. 

Further complicating this picture are the definitions and parameters for size. Although measuring 

firm size would appear to be a simple task, it is complicated when data are collected at the level 

of operational offices (most studies have been done on an establishment, or local office, basis). 

Large homebuilding companies decentralize their operations to metropolitan and regional levels, 

in part due to the importance of site variability in construction (Koebel and McCoy 2006). 

Measuring the size of the “company” can thus confuse the size of the local establishment and the 

size of the larger corporation. Research to date has not adequately addressed this complexity. 

A less studied subtopic in the field of organizational effects on construction innovation has been 

the organizational structure of a firm. Since larger firms are likely to have more formal and more 

complex organizational structures, this intervening variable could be a significant causal factor 

for adoption rates. Certainly, the centralization of decisionmaking, organizational complexity, 

and formalization could be possible impediments to innovation. Since most studies of residential 

construction have involved small companies, the relationship among these organizational 

characteristics of larger, more complex firms has not been studied. Among smaller home 

builders, the owner is often both the technology champion and the decisionmaker (Koebel et al. 

2003). When the owner of a small firm is a technology champion, the firm is more likely to be 

innovative, and purchasing, design, and marketing departments have less frequent influence on 

innovation in these firms. There is no evidence in the literature regarding how this plays out in 

larger firms. 

Organizational Culture 

Organizational culture, as opposed to size and structure, reflects the firm’s business strategy, 

approach to innovation, support for innovation champions and R&D, and emphasis on internal 

and external cooperation or competition. Past research has found that business strategies 

emphasizing innovation and the presence of technology champions contribute to innovation. 

Though intuitively obvious, home builders who portray 

themselves as innovative and that have in-house 

technology champions are indeed more innovative. Yet, 

few firms in the construction industry, with the possible 

exception of production builders, have the necessary 

Business strategies emphasizing 

innovation and the presence of 

technology champions contribute to 

innovation. 

resources to maintain a formal R&D program. In 

addition, Koebel and McCoy (2006) argue that a combination of risk factors and difficulties in 

exacting first-mover advantage associated with homebuilding make a second-mover business 

strategy more rational than a first-mover strategy in the industry. 

Characteristics of Innovative Production Home Builders 3 
The construction industry is often criticized as resistant to change and depicted as a “laggard” 

relative to innovation (Koebel 1999; Hassell 2003; Toole 2001). Much of this literature was 

based on studies of small firms with limited resources for innovative strategies or investment— 

the industry’s cultural norm. Although it seems reasonable to assume that organizational culture 

partially reflects the industry within which the organization operates, this has not been addressed 

in the research literature; the link between size and culture must still be explored. It also seems 

reasonable, further, that the recent shift toward greater industrial concentration by national 

production builders is also transforming the industrial culture, though this also remains to be 

explored. 

Other studies of business strategy and organizational culture issues that have been found to 

influence innovation in residential construction are summarized below. 

 Blackley and Shepard (1996) argue that firms that operate in multiple markets reduce 

risks and increase opportunities for regulatory acceptance. 

 Slaughter (2000) claims that small firms are risk-averse. 

 Toole (1998) makes many conclusions relating to organizational culture, including the 

observation that those firms who inadequately manage knowledge and scan for 

technology have reduced innovation and, as a corollary, those that seek wider 

involvement in vetting innovation rates and make better use of diffuse, tacit knowledge 

reduce uncertainties and consequently increase innovation rates. 

 Koebel (2003) discerns correlations in innovativeness among those organizations that 

have no explicit plans for growth or change from those who do (a positive relationship), 

as well as those that do but emphasize “land development” or “increased profits” over 

“increased productivity” within those plans (a negative relationship). 

Again, it is evident that there are a variety of studies in the field, and there are numerous gaps in 

our understanding of innovation in home building. 

Human Resources 

The breadth and depth of internal talent available to a company can promote greater innovation 

through leadership and technological competence as well as increased sources for innovative 

ideas within the company (Ling 2003; Tatum 1984; Tatum 1989; Gann 2000; Nam and Tatum 

1997). The human resources available to a company can also increase its ability to assess or 

reduce the uncertainties associated with innovation (Toole 1998). 

Human resources within the residential construction firms are limited by firm size. Many 

companies have only a handful of direct employees and professional specialization is rare within 

firms. The emergence of larger firms provides more opportunities for depth and breadth in 

human resources, ranging from corporate and regional executives and managers to onsite 

managers, construction supervisors, and laborers. This diversity and depth of talent can create 

opportunities for identifying and assessing innovations, but only if companies develop the 

knowledge management tools to identify, capture, analyze and use this information. The 

4 Characteristics of Innovative Production Home Builders 
relationships between knowledge The emergence of larger firms provides more 

management, organizational learning, and ...depth and breadth in human resources, 

innovation are receiving increased attention ...[which] can create opportunities for identifying 

(Park and Kim 2006) but have yet to be and assessing innovations, but only if companies 

addressed with any depth in the construction develop the knowledge management tools to 

identify, capture, analyze and use this information. 

industry (Demaid and Quintas 2006). 

Market Context 

Market context is said to play a significant role in the adoption of innovation among the 

community of homebuilders. Of greatest interest among the market context factors are: the 

agency of clients and buyers; the restrictiveness of building codes and regulations; and the 

pricing effects of non-construction costs (such as land). 

The role of clients in promoting construction innovation is one of the most striking themes 

running through the literature. The theme is an echo of findings in many other industries (Winch 

1998). Nam and Tatum (1992) and Gann (2000) argue that clients play a key role in requiring 

more innovative construction in large commercial projects. However, Koebel and McCoy (2006) 

argue that client involvement in homebuilding only occurs in high end, custom building, and 

demand-pull is less likely to be significant in other segments of the industry. 

Codes and regulations that increase costs and uncertainty are associated with innovation rates 

(Ventre 1973; Blackley and Shepard 1996; Slaughter 2000; Toole 1998). Gann and Salter (2000) 

address the relationship between governments and builders and argue that government regulatory 

policies exert a strong influence on demand and play an important part in shaping the direction of 

technological change. Regulations that guarantee markets might spur innovation (Miozzo and 

Dewick 2002), but government regulations have generally been seen as hampering innovation 

(Dubois and Gadde 2002). However, in Koebel et al. (2003), more builders disagreed than 

agreed that codes and regulations were a barrier to technology diffusion. 

An increasing contribution of land costs An increasing contribution of land costs relative relative to construction costs also appears to to construction costs also appears to reduce the 

reduce the value of building technology value of building technology innovation ... and as 

innovation (Slaughter 2000), and as a result a result land acquisition might be a primary 

land acquisition might be a primary determinant of profit. 

determinant of profit (Koebel 1999; Ball 1999) 

over productivity or changes (like technology) therein. 

Numerous other market characteristics have been identified as negatively influencing innovation 

in residential construction, including variability and complexity of residential structures (Toole, 

1998); site variability (Toole 1998); demand and price volatility (Slaughter 2000); and time 

frames required for production (Toole 1998). Because these factors are inherently part of 

homebuilding as an industry and homes as its products, further studies in these areas are of a less 

operational interest. Rather, the preceding three issues are of direct relevance to differences in 

perceptions among homebuilders. 

Characteristics of Innovative Production Home Builders 5 
Industry Characteristics 

Koebel (1999), as well as Hassell (2003) and Toole (2001), Complexities within the 

stated that complexities within the construction industry construction industry make 

make introducing innovation technologies difficult, introducing innovation technologies 

because the technology may have to be compatible with difficult, because the technology 

numerous parties (the general contractor, subcontractors, may have to be compatible with 

numerous parties. the lender, and the insurer). The social (organizational) 

networks involved in construction are complex and are 

frequently cited as impediments to innovation adoption, but their role has not been clearly 

established in the research literature. Diffusion theory attributes the spread of innovations to the 

social and communications networks that link people and organizations. The rate and overall 

magnitude of diffusion is based on the density of these networks between the sources of 

innovations (for example, manufacturers and suppliers) and early or later adopters. 

Although the internal social networks associated with larger builders are likely to involve more 

nodes and layers, the impact of this complexity on technological adoption is uncertain. Similarly, 

the difference between that and the complexity arising from the smaller, but more external, 

network of smaller builders is not clear. Social networks could play a significant role in adoption 

behavior for large builders due to the intricacies of the building process and number of parties 

involved in that process. Production builders rely on standardized construction processes and 

relationships with subcontractors, which shorten cycle times (the length of time required to 

complete a housing unit) and assure uniform quality, in order to improve efficiency and 

profitability. Production builders are likely to be resistant 

to changes that interfere with their production process, Production builders are likely to be 

unless the changes are highly likely to contribute to resistant to changes that interfere 

with their production process, unless efficiency and profitability. These relationships are the changes are highly likely to 

managed at multiple levels with site supervisors managing contribute to efficiency and 

scheduling and quality control, while regional managers profitability. 

handle contractual relations. No general research has been 

conducted on whether or how companies manage these 

relationships, let alone research relative to innovation. 

Very little is actually known about how social networks in construction operate. Toole (1998) 

and Slaughter (2000) point to a wealth of tacit knowledge, the ability to provide field testing, and 

involvement in integrating products within the housing system as advantages that builders have 

within the industry in deploying innovation but did not investigate whether relationships between 

manufacturers, suppliers, and builders impede or facilitate innovation. Harkola (1995) observed 

that firms that attempt to formalize that tacit knowledge increase innovation adoption within 

international infrastructure construction firms. 

Within residential construction, the multi-firm production of housing and industry fragmentation 

(dominance of the industry by small firms) has often been cited as an impediment to innovation, 

but Blackley and Shepard (1996) did not find any impact attributable to industry fragmentation. 

In Koebel et al. (2003) sales and supplier representatives, subcontractors, other builders, and 

trade publications were the most influential sources of information on innovation, while 

universities and technology transfer programs were the least influential (Koebel 2003). Suppliers 

6 Characteristics of Innovative Production Home Builders 
were rated the most important for cooperation in innovation, followed by subcontractors, 

manufacturers, and project managers. In addition, innovators relied on established companies 

that stand behind their products. If coordinated, following this logic, innovation channels could 

conceivably overcome purported fragmentation barriers. 

The quality and quantity of use of these social network and communication channels, of course, 

are just as important as their existence. Toole (1998) found that a greater number of information 

sources reduced uncertainty associated with innovation. Builders who process and gather more 

information about innovations are more likely to be early adopters, obviously. Adoption of high 

risk innovations requires more sources of 

information and greater quality of information as Builders have an advantage over manufacturers 

well as knowledge of multiple sectors of the in being able to demonstrate the efficacy of an 

environment. Slaughter (2000) argues that 

inadequate opportunity for field testing reduces 

innovation in construction. Builders have an 

innovation through field testing but do not 

necessarily have difficulty obtaining the market 

benefits from that field testing. 

advantage over manufacturers in being able to 

demonstrate the efficacy of an innovation through field testing but do not necessarily obtain the 

market benefits from that field testing. 

One particular set of relationships in this network is particularly worthy of mention and 

elaboration: the supply chain. The 2003 survey results (Koebel et al. 2003) pointed to the 

possible influence of supply-chain relationships on innovation among homebuilders, although 

there was very little data collected on this topic. Innovative homebuilders emphasized both the 

roles of manufacturers and suppliers as important sources of information about new products, 

and their reliance on manufacturers that they trust to stand behind their products. Other, albeit 

largely anecdotal, evidence also suggests the importance of supply-chain relationships to 

builders’ decisions about innovation. 

Given the strategic placement of manufacturers and suppliers, it is surprising that their role in 

innovation in the homebuilding industry has been overlooked until very recently. Slaughter 

(1993a, 1993b) found that manufacturers largely ignored the opportunities to commercialize 

innovations originated by homebuilders. As noted already, field testing is critical for reducing 

uncertainties surrounding new building products but Slaughter finds that manufacturers leave 

this to builders who are willing to absorb first-mover risks. Koebel and McCoy (2006) argue that 

these risks contribute to the reluctance of home builders to adopt innovations that have yet to be 

proven in the field. This area deserves additional scholarly attention. 

Technical Attributes of the Innovation 

The magnitude of change required for implementing an 

innovation is part of its complexity and is assumed to be The magnitude of change required for 

positively associated with risk and, in turn, negatively implementing an innovation is part of 

its complexity and is assumed to be 

associated with adoption. Slaughter’s (1998) positively associated with risk and, in 

classification of innovations might similarly reflect risk, turn, negatively associated with 

but she does not address the relationship among these adoption. 

categories to risk: “incremental” (small, based on 

existing experience and knowledge), “radical” (a breakthrough in science or technology), 

Characteristics of Innovative Production Home Builders 7 
“modular” (a change in concept within a component only), “architectural” (a change in links to 

other components or systems), or “system” (multiple, integrated innovations). She does report 

that integrative innovations are seen as prohibitively risky. Similarly, Toole (1998) reports that 

builders are reluctant to adopt architectural or system innovations due to uncertainties 

surrounding costs and benefits and assumptions that innovations are too risky without ample 

field testing and demonstration of results. Comparisons of qualitatively different technologies’ 

adoption rates are needed, while being conscious of the effect of different technologies among 

respondents’ biases. 

Economic Attributes of the Innovation 

Nam and Tatum (1992) explored the role of potential economic causes for innovation (that is, 

supply-push versus demand-pull) as well as the processes involved in converting those causes to 

internal innovation decision-making. Yet very little work explores the microeconomic patterns 

(or macroeconomic ones, for that matter) of construction innovation. 

Rather, more work explores non-financial economic causes. Competitive advantage is one of the 

major motivations for builders, manufacturers, or other 

homebuilding stakeholders to innovate (Hassell 2003; When innovations are first introduced, 

it can be very complex and difficult to Mitropoulos and Tatum 1999). Mitropoulos and Tatum clearly establish their relative 

(1999) also demonstrate that the factors influencing advantage. In addition, consumers 

adoption of innovations among construction companies prefer visible benefits (aesthetics) and 

change over time as the innovation matures and gains discount invisible building 

market share. When innovations are first introduced, it improvements that do not have 

demonstrable short-term payoffs. All can be very complex and difficult to clearly establish of these factors contribute to a fairly their relative advantage. In addition, consumers prefer widespread perception among 

visible benefits (aesthetics) and discount invisible builders that innovation always costs 

building improvements that do not have demonstrable more than current products and 

short-term payoffs. All of these factors contribute to a practices without providing equitable 

fairly widespread perception among builders that returns or benefits. 

innovation always costs more than current products and 

practices without providing equitable returns or benefits (Koebel et al. 2003). 

Recent Advances in Innovation Theory 

Some recent work sheds additional light on atypical innovation processes—such as that found in 

residential construction. For example, traditional theories of innovation assume that the profit 

incentive to innovate is primarily captured by manufacturers through patents and other 

protections. Recent history challenges that assumption and demonstrates that a “distributed 

innovation process” can exist (von Hippel 1988) and that innovation profits can be captured 

outside of manufacturing. This democratizing of innovation (von Hippel 2005) promotes usercentered innovation as an alternative to manufacturer-initiated innovation. There is, however, 

still little evidence of this playing out in the residential construction sector. Experience in hightech industries demonstrates that companies can successfully search for innovative ideas to 

commercialize without having to be the originator of those ideas through their own R&D 

programs (Chesbrough 2003). Approaches to open innovation involve technology scanning, 

knowledge management, and data mining to capture ideas from others and to promote learning 

8 Characteristics of Innovative Production Home Builders 
internally. Advances in information technology, for example, are enabling companies in other 

industries to overcome the inertia of path dependency and to become adaptive learners. The 

implications of these approaches for residential construction, if any, have yet to be explored. But 

they do suggest that there are emerging opportunities to look at innovation in residential 

construction in new ways, and in finding innovation throughout the supply chain and beyond 

traditional sources. 

Summary of Previous Research 

The themes identified in previous studies of construction innovation are summarized in Figure 1, 

through the seven major categories already identified. 

Figure 1. Factors Influencing Adoption and Diffusion of Innovation in Residential Construction 

Market Context Industry Characteristics 





Buyers/clients 

Production factors 

o Property 

o Products built 

o Labor 

o Productivity 

o Regulations 

o Competition 

 Industry concentration 

 Communication Channels and Social Networks 

o Manufacturers, suppliers 

o Subcontractors 

o Trade Associations 

o Government 

o Buyers/clients 

o Universities, labs 

o Field testing 

 Supply Chain and Distribution 

Organizational Structure Organizational Culture Human Resources 





Size and resources 

Organizational complexity 

o Corporate, region, local 

o R&D 

o Purchasing 

o Other departments 

 Business strategy 

o Markets served 

o Growth plans 

o Core competencies 

o Emphasis on land, building 

science, process, customer 

service, profit 

 Innovation champions 

 Value of innovation and R&D 

 Cooperation and openness 

 Risk aversion 

 Organizational position and 

role of decisionmaker 

 Centralization of influence and 

decisions 

 Number of employees 

 Technical specialization 

 Knowledge management 

Technical Attributes of Innovations Economic Attributes of Innovations 









Radical vs. incremental 

Product, material, process 

Improved quality 

Improved performance (reduced call-backs) 

 Relative advantage 

 Profitability 

 Uncertainty/risk 

 Labor saving or materials saving 

 Improved productivity 

Characteristics of Innovative Production Home Builders 9 
Figure 2 places these categories into a conceptual model of a company’s use of innovative 

building materials, products, and processes. The building firm is at the center of the model, 

reflecting its role in decisions to adopt building technology innovations though this certainly 

does not imply that builders are the only actors in innovation. Double-headed arrows indicate the 

organizational and social networks that influence the building firm’s decision to adopt and use 

building technology innovations. The model captures the complexity of innovation diffusion in 

residential construction. 

Figure 2. Factors Influencing Firm’s Use of Innovative Materials, Products, and Processes 

Industry Characteristics 

Manufacturers Suppliers Government

• R&D 

• Innovative Products 

Production Building Firm 

• Org Structure 

• Org Culture 

• R&D 

• Human Resources 

Industry & Trade 

Associations 

Market Context 

Production Factors 

• Property 

• Products built 

• Labor 

• Productivity 

• Regulations 

• Competition 

Buyers/Clients 

Industry 

Concentration 

Subcontractors 

Characteristics 

of the Innovation 

Firm’s Use of 

Innovative 

Materials, 

Products, 

Processes 

Note that the survey was designed to investigate as many of these themes as possible and to help 

illuminate the numerous potential paths of influencing technology diffusion among 

homebuilders. As such, measures covering each of these categories were included in the survey 

and are further discussed in the next section. 

10 Characteristics of Innovative Production Home Builders 
STUDY DESCRIPTION 

General Description 

PATH commissioned the authors to conduct a national survey of large production home builders 

in order to define characteristics of innovative residential builders, including how and where they 

make the decisions to use new technologies and materials. In this study, large production home 

builders are defined as companies building 200 or more single-family residential units per year 

from stock plans rather than custom designs. 

The authors designed a survey instrument based on a review of literature relating to innovation in 

the construction industry and pre-survey interviews with industry contacts. Questions that would 

address the seven factors influencing innovation shown in Figure 1 were developed. 

Since respondents would be representatives of large national or regional builders, information 

obtained from corporate headquarters could be different from information obtained from an 

operations office serving only some market areas. This relationship between corporate and field 

or operations offices became an additional area of interest falling under numerous categories. 

The survey then became a potential vehicle for exploring this relationship. Two versions of the 

survey instrument were produced: one targeted for respondents working in the corporate 

headquarters and one for respondents working in field operations or market area offices. 

Questionnaires (either a corporate version or an operations version) were sent to approximately 

1,700 NAHB individual members affiliated with the 400 largest builders in the United States. To 

increase the response rate, telephone interviews were conducted based on a shortened version of 

the questionnaire. In addition, an online version of the questionnaire was offered. The results are 

based on 84 responses, 42 corporate and 42 operations level. 

To bring a qualitative perspective to the information collected through the mailed surveys, 

telephone interviews, and online responses, three concentrated personal interviews were 

conducted. Questions based on the results of the quantitative survey were asked of 

representatives whose quantitative responses indicated a high level of interest in innovation. 

Survey Instrument 

To determine the characteristics of innovative production builders in the United States, a 

questionnaire was developed to measure the variables that were identified in the literature review 

as influencing technology adoption, as well as those obtained from pre-survey interviews with 

production builder staff. 

Two versions of the questionnaire were developed, one for respondents working in corporate 

headquarters and one for respondents working in field or operations offices. The two versions 

had slightly different wording in the introduction, which explained the purpose of the survey. 

Questionnaires for both respondent groups explained that additional questionnaires were being 

sent to both operations level and corporate offices for their respective firms. For the most part, 

the same questions were asked of both the corporate respondents and the operations respondents, 

Characteristics of Innovative Production Home Builders 11 
though the operations questionnaire had an additional series of questions asking for basic 

information about the operations level office. 

The questionnaire contained three major parts, plus the one additional part for operations level 

respondents only. These included: 

1. New Building and Construction Products asked about influences generally affecting the 

use of new building and construction products, materials, and practices (decision factors, 

information sources, perceived benefits, costs, and impediments) and covered both the 

company’s activities and the respondent’s personal opinions regarding new building and 

construction products, materials, and practices. 

2. Use of New Building and Construction Products, Materials, and Practices sought 

information about adoption of specific new building and construction products, materials, 

and practices. Corporate level respondents were asked to answer for their company and 

the operations level respondents to answer for their office. First, a list of technologies was 

provided and respondents were asked about their use of each of those technologies. 

Respondents were asked to write down one specific technology (the first technology the 

respondent indicated they currently use). Three questions followed, which asked the 

respondents to refer to the one specific technology in answering those questions. 

3. Corporate Characteristics asked for information about the company as a whole related to 

human resources, organizational structure, market context, and organizational culture. 

Both operations level and corporate level respondents were asked to respond for the 

company as a whole. Questions posed to the corporate respondents but omitted on the 

operations questionnaire were: departments at the corporate level, corporate profit 

projections, and number of full time employees. 

4. Characteristics of the Office Where you Work (asked of operations level respondents 

only) asked for information about the operations level office regarding human resources, 

organizational structure, market context, and organizational culture. 

The questions on the survey instrument were purposely organized to flow methodically for 

respondent convenience rather than by the factors identified in Figure 1. For the purposes of this 

discussion, however, questions are categorized according to their related typology factor in 

Figure 1. A brief description of each question is provided followed by the corresponding 

question number on the corporate questionnaire and the corresponding question number on the 

operations questionnaire. For the actual questions and possible responses, see Appendix B 

(corporate) and Appendix C (operations). 

• Organizational Structure 

 The number of homes built in the United States in 2004 (Q16; Q1 and Q25). 

 The market areas your company serves (Q15; Q24). 

 Proportion of single-family units that are a specific type (Q17; Q2 and Q26). 

12 Characteristics of Innovative Production Home Builders 
 Departments your company has at the corporate level (Q21; Q3). 

 Ways your company supports research and development for new building products and 

processes (Q19 and Q20; Q28 and Q29). 

• Organizational Culture: Influence and Locus of Decisionmaking 

 Level of the company that identifies and approves use of a new type of siding (Q1; Q10). 

 Whether anyone would be considered an advocate of innovation (Q3; Q12). 

 Professional positions with significant influence over decision to use a new building 

material and professional position making final decision (the respondents rated the 

influence of various positions in deciding to use a new building material and identified 

the positions participating in the final decision to use the material) (Q4 and Q12; Q13 and 

Q21). 

 Where in the company (national, regional, local) decisions are made (Q18; Q27). 

• Organizational Culture: Corporate Philosophy and Business Strategy 

 Increase in net profits over the next 5 years (Q22; Q4). 

 Degree of likelihood (not likely to very likely) your company will invest money to meet 

the following objectives in the next 5 years (Q24; Q8 and Q30). 

 Degree of contribution (low, average, high) of business practices to your company’s 

success relative to your competitors (Q25; Q9 and Q31). 

 Company approach toward selecting new building and construction products, materials, 

and practices (Q2; Q11). 

 Involvement in Master Planned Communities (operations only Q7). 

• Human Resources 

 The number of employees (Q23 and Q6). 

 Use of union labor (operations only Q5). 

• Market Context 

 The perceived level of influence of factors in the use of new materials and building 

techniques in your work over the next 10-20 years (Q9; Q18) 

• Industry Characteristics 

 The level of influence (no influence to high influence) of information sources (Q5 and 

Q13; Q14 and Q22). 

Characteristics of Innovative Production Home Builders 13 
 Importance of cooperation from sources in adopting new building and construction 

products, materials, and practices (Q8; Q17). 

• Technical and Economic Attributes of Specific Innovations 

 The degree of agreement with statements in your individual consideration of new 

building products, materials, and practices (Q6; Q15). 

 The main perceived benefits from adopting new building and construction products, 

materials, and practices (Q7; Q16). 

 The impact of decision factors in deciding to use new building and construction products, 

materials, and practices (Q14; Q23). 

Population and Sample 

The questionnaires were mailed to over 1,700 large production builders (342 to representatives 

of corporate offices and the remaining to representatives of field or operations offices) using 

procedures described in the methodology section (see Appendix A for a detailed discussion of 

methodology). The sample of large production builders was drawn from the NAHB membership 

list and was stratified by company size (all individual members associated with one of the 400 

largest U.S. builders, otherwise referred to as a top 400 builder). It was assumed that the top 400 

builders would include all builders within the definition for the study (a large production builder 

was defined as a company that builds 200 or more single-family residential units in a year). As a 

precaution, respondents whose company did not meet our definition were asked to return the 

questionnaire to us incomplete. 

Methods and Response Rate 

Our results are based on a total of 84 responses. Using Dillman’s Total Design Method for 

mailed surveys (which involved sending the questionnaire accompanied by a personalized letter, 

sending a reminder postcard, and sending a second questionnaire and personalized letter), 58 

completed mail surveys were received. In response to slow returns after the first mailing and 

reminder postcard, online versions of both questionnaires were developed and the second 

mailing offered instructions for electronic completion as an option. Four online completions 

were received. To further increase the response rate, telephone interviews with selected 

respondents who did not return a completed mail survey or respond online were conducted, 

specifically targeting corporate respondents from the top 100 companies. They were called and 

asked to complete a shortened version of the mailed questionnaire via telephone. The phone 

interviews resulted in 15 completed phone interviews, and an additional seven online 

completions also resulted from of the phone contacts. 

Through the combined methods of the mailed survey, online option, and telephone interviews, 

responses were obtained from representatives of 42 corporate offices and 42 operations level 

offices (that the sample sizes are equal is coincidental). 

Following the general description of the survey responses in the next section on Survey Results, 

a descriptive analysis of building technology innovation is introduced. 

14 Characteristics of Innovative Production Home Builders 
Key Definitions and Variables 

To set the stage for the discussion of survey responses, certain ideas and variables need to be 

clarified and defined. 

• Innovative Technologies 

As part of the survey, the respondents were asked about their use of 11 technologies (products 

and processes). These are listed here and are more fully described in technical detail in Appendix 

D. 

1. Structural Insulated Panels (SIPs). 

2. Laminate flooring. 

3. Spray-in foam insulation (Icynene). 

4. Pre-cast concrete foundation walls. 

5. Enterprise Resource Planning software. 

6. Factory built wall or floor panels. 

7. Wood/plastic composite or cellular PVC exterior trim. 

8. GPS land tracking. 

9. Web-based scheduling. 

10. Wood I-joist structural floors. 

11. Handheld PCs or PDAs for project scheduling & management. 

“Innovative” technologies and products with a broad range of market penetration were purposely 

chosen (some technologies were known to be widely used, and some were known to be used by 

relatively few builders). Based on studies conducted by the NAHBRC (a January 2005 survey 

and a 2002 study of data technologies), four of these technologies or products (structural 

insulated panels, laminate flooring, spray-in foam insulation, and pre-cast concrete foundation 

walls) were in the early stage of diffusion with 2% or less market penetration; three (Enterprise 

Resource Planning software, factory built wall or floor panels, and wood/plastic composite or 

cellular PVC exterior trim) were in a middle stage of diffusion with 5 to 9% market penetration; 

and four (GPS land tracking, Web-based scheduling, wood I-joist structural floors, and handheld 

PCs or PDAs for project scheduling & management) were in a late stage of diffusion with more 

than 26% market share. 

In analyzing the results, however, the definition of an innovative product or technology could 

include anything as long as it was “new” to the adopter. This definition does not distinguish 

between mature products that have already achieved a high level of market penetration (and 

might be subject to replacement by newer products) and those that are new to the market and 

have low levels of market penetration. The “newness” of a product can also be difficult to 

measure accurately since some products go through a longer process of refinement before they 

can be fully commercialized. For example, structural insulated panels (SIPs) have been available 

for more than two decades, but they have not reached full market penetration. So while the list of 

11 technologies (see Appendixes B and C, Part on Use of New Building and Construction 

Products, Materials, and Practices) was developed based on prior studies and knowledge of 

market penetration, the operational definition of innovation in this study is based on the degree 

of market penetration among the respondents of this study. 

Characteristics of Innovative Production Home Builders 15 
• Innovation Measures 

Rather than utilize the pre-selection criteria for product innovativeness, the overall percent of 

respondents who were currently using or had tried but discontinued using a product was used in 

order to classify the innovativeness of the products. Determined by the product’s degree of 

market penetration, three new categories resulted: early-stage, middle-stage, and late-stage 

innovations. Four products were classified as early-stage innovations (SIPs, pre-cast concrete 

foundation walls, Enterprise Resource Planning software, and GPS land tracking) based on a 

market penetration of approximately 25% or lower. Five products were classified as middlestage innovations (spray-in foam insulation, factory built wall or floor panels, wood/plastic 

composite or cellular PVC exterior trim, Web-based scheduling, and handheld PCs or PDAs) 

based on a broad middle range of market penetration (from 30%-75%), and two products above 

75% market penetration were classified as late-stage innovations (laminate flooring and wood Ijoist structural floors). 

Two related measures of innovation were created for each respondent. The first innovation 

measure has three categories identifying (1) those respondents who never tried any of the four 

early-stage technologies (N=47 or 56%); (2) those respondents who had used only one of the 

four early-stage technologies (N=22 or 26%); and (3) those respondents who had used two to 

four of the early-stage technologies (N=15 or 18%).2 Cross-tabulations and chi-square tests of 

this innovation measure with other measures in the survey were prepared to help identify 

statistically significant associations between these measures and innovation. Only statistically 

significant associations (at the .10 or lower level) are reported in the following analysis of the 

results of the survey. 

The second innovation measure is a weighted index of the degree to which the respondents used 

any of the products. Early-stage innovations have the most weight (4) in the index; middle-stage 

innovations have a weight of 1; and the two late-stage innovations have a weight of 0. The 

maximum score for this innovation index is 21 (16 points for the four early-stage innovations 

and 5 points for the five middle-stage innovations). A similar weighting scheme was used to 

calculate the innovation index used in the 2003 study report (Koebel et al. 2003). 

The highest score for the innovation index was one company with 19 (using all four early-stage 

innovations and three middle-stage innovations). Three companies used three of the early-stage 

innovations and had index scores from 15 to 17. Eleven companies used two of the early-stage 

innovations and had index scores from 9 to 13. Twenty-two companies used one of the earlystage innovations and had index scores from 5 to 9. The remaining 47 companies did not use any 

of the early-stage innovations and had index scores from 0 to 4. The innovation index is used in a 

multivariate analysis of innovation reported in the Survey Results section. 

Comparison with 2003 Study of Small to Midsize Builders 

To put the results of this study in perspective, a section that compares the responses of large 

production builders with those of small to midsize builders from an earlier, similar study (Koebel 

et al. 2003) is included, removing builders that reported building 200 or more residential units in 

2

 Since two of the four early-stage innovations involve information technology, they were checked to see if they 

occurred together and would thus bias the innovation measure. They appear to be independent. 

16 Characteristics of Innovative Production Home Builders 
a year from the prior study’s database so that only small to midsize builders would be compared 

to the group of large builder respondents. There were 216 respondents in the 2003 sample after 

removing the larger builders. For a deeper discussion of that survey, refer to Koebel et al. 2003. 

Qualitative Assessment 

While the quantitative assessment of diffusion of innovation for large production builders 

provided valuable information, it also presented issues needing further clarification. Following 

an initial analysis of the data collected from the survey instrument, questions were formed whose 

answers could help give a qualitative perspective to some of the results. Considering responses 

from a number of survey questions, a measure of interest in innovation was derived. A list of 

corporate respondents with high interest scores was compiled, and personal interviews were 

subsequently arranged with three high-level corporate respondents and were conducted on-site. 

These interviews not only helped make sense of the quantitative data but also provided key 

information beyond that which had been collected from the mailed survey (for further 

methodological discussion, see Appendix A). This information is presented in the section on 

Qualitative Results. 

Summary 

Both survey instruments as well as an expanded methodology are presented in appendixes to this 

report: an extensive methodological discussion is included in Appendix A; Appendix B provides 

the corporate office questionnaire; and Appendix C provides the operations-level office 

questionnaire. 

SURVEY RESULTS 

The survey results are presented in five sections covering the products and technologies included 

in the survey: a description of survey responses including significant relationships between the 

variables identified in the typology and model presented in Figures 13 and 2; a descriptive 

analysis of building technology innovation by production builders including significant 

relationships between the variables identified in the typology and model presented in Figures 1 

and 2; a multivariate analysis of building technology innovation by production builders; and a 

comparison of the 2003 survey results for small builders with the results from the current survey 

of larger production builders including significant relationships between the variables identified 

in the typology and model presented in Figures 1 and 2. 

Depending on the question, results are presented below combining the corporate and operations 

level responses except where noted, either because of strong variances between the two or 

because the analysis requires a distinction. It should be noted that there was little difference 

between the answers of corporate and operations respondents on most questions. Any important 

differences are reported in the discussion. On some questions, missing data resulted in a reduced 

number of responses. 

3

 The factors presented in Figure 1 are discussed in a different order in the Survey Results section of this report to 

demonstrate that these issues work from the industrial level, to the firm level, to the level of the innovation in 

question. 

Characteristics of Innovative Production Home Builders 17 
Products and Technologies Included in the Survey 

The primary objective of the survey was to learn about the diffusion of innovation among 

production home builders. The survey covered 11 products and process technologies with 

various levels of market penetration (Table 1) among production home builders. The first tier of 

products or process technologies (SIPs, pre-cast concrete foundation walls, Enterprise Resource 

Planning software, and GPS land tracking), with market penetration (previously tried or currently 

using) of 25% or less, represents the most innovative or early-stage innovations based on the 

combined responses for currently using and tried but discontinued. The second tier of products or 

process technologies (spray-in foam insulation, factory built wall or floor panels, wood/plastic 

composite or cellular PVC exterior trim, Web-based scheduling, and handheld PCs or PDAs), 

with approximately 30% to 75% market penetration, represents middle-stage innovations. The 

third tier of products or process technologies (laminate flooring and wood I-joist structural 

floors) represents late-stage innovations. 

Table 1. Production Home Builders by Adoption of New Building Products 

Products Never Tried Tried but Discontinued Currently Using 

Structural Insulated Panels (SIPS) 93% 4% 4% 

Pre-cast concrete foundation walls 83% 2% 14% 

Enterprise Resource Planning software 82% 1% 17% 

GPS land tracking 74% ----- 27% 

Spray-in foam insulation (Icynene) 67% 15% 18% 

Handheld PCs or PDAs for project

 scheduling & management 42% 6% 52% 

Web-based scheduling 41% 2% 57% 

Factory built wall or floor panels 38% 12% 50% 

Wood/plastic composite or cellular 

 PVC exterior trim 37% 7% 55% 

Laminate flooring 23% 21% 57% 

Wood I-joist structural floors 9% 11% 80% 

Corp and operations combined. Operations asked to answer for their market area office. 

Depending on the question, N=82 to 84 

See Appendix B, Q10 and Appendix C, Q19 for complete wording of questions. 

General Survey Responses 

• Organizational Structure About a third of the total 

As intended, the respondents represent relatively large firms respondents built between 1,000 

and 10,000 units, and 5% were 

who mainly build single-family detached houses and among the very largest builders in 

townhouses. Fewer than 1 in 5 respondents had annual the nation. 

production below 250 units (Table 2). Since operations level 

respondents were asked to answer for their market area office, the size of the corporations is 

understated. Whereas 35% of corporate respondents reported production of 2,500 or more units, 

18 Characteristics of Innovative Production Home Builders 
only 6% of the operations respondents reported production of this magnitude. Nonetheless, about 

a third of the total respondents built between 1,000 and 10,000 units, and 5% were among the 

very largest builders in the nation. Nearly all of the respondents built single-family detached 

units and nearly 60% built townhouses, but only a quarter built apartments or condo units. 

Table 2. Number of Units Built by Building Type 

Number Single-family Townhouse Apartment Total 

of units detached or duplex or condo units 

0 6% 41% 75% ----- 

1-249 22% 34% 12% 18% 

250-999 37% 18% 6% 39% 

1,000-2,499 22% 3% 3% 26% 

2,500-9,999 9% 4% 4% 12% 

10,000+ 4% 0% 0% 5% 

Corp and operations combined. Operations asked to answer for their market area office. 

N=68 

See Appendix B, Q16 and Appendix C, Q1 for complete wording of questions. 

Nearly half of the respondents were from companies operating throughout the nation (Figure 3). 

Although there are not many national home builders (at the corporate level this category only 

accounted for 15% of respondents), the extensiveness of their operations resulted in national 

companies having nearly two-thirds of the operations level respondents. Between one-fourth and 

one-fifth of the respondents operate in only one or two metropolitan areas. 

Figure 3. Production Home Builders by Market Area Served 

Throughout the nation 

Across one or more regions of 

the nation 

Only in one or two metropolitan 

areas 

Corporate Operations Combined 

Production Builders 

Operations asked to answer for company as a whole. 

Corp N=26, operations N=42, combined N=68 

See Appendix B, Q15 and Appendix C, Q24 for complete wording of questions. 

The respondents serve every market type, from starter to luxury (Figure 4). About half build for 

the move-up market and one-third build for starter homes, and 16% build luxury homes. 

15% 

44% 

59% 63% 

17% 

34% 

26% 

20% 22% 

0% 

10% 

20% 

30% 

40% 

50% 

60% 

70% 

Percent 

Characteristics of Innovative Production Home Builders 19 
Figure 4. Production Home Builders by Average Percent of Single-family Units Built 

A

verage Percent Single-fa

mily 

Units 70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

33% 

29% 30% 

44% 

61% 

54% 

23% 

11% 

16% 

Starter 

Move-up 

Luxury 

Corporate Operations Combined 

Production Builders 

Operations asked to answer for their market area office. 

Corp N=26, operations N=40, combined N=66 

See Appendix B, Q17 and Appendix C, Q2 for complete wording of questions. 

Based on corporate and operations respondents, most of the companies responding to the survey 

had Finance, Marketing, and Purchasing Departments (Table 3). Corporate respondents were 

more likely to identify an Information Technology Department (81%) than did operations 

respondents (45%), but corporate IT departments might be less visible at the operations level. 

Table 3. Production Home Builders by Departments within Company 

Departments within Company Corp Operations 

Research and Development 17% 24%

Architecture and Design 57% 57% 

Information Technology 81% 45%

Finance 95% 86%

Purchasing 81% 93%

Marketing 88% 98%

Engineering 36% 21%

Operations asked to answer for their market area. 

Corp N=42, operations N=42, small builders N=214 (those building under 200 units per year)

See Appendix B, Q21 and Appendix C, Q3 for complete wording of questions. 

This organizational structure gives these companies substantial resources in business operations, 

but they are less likely to have internal departments dealing with the technical aspects of 

homebuilding. Among departments dealing more directly with building science, the most 

frequent is Architecture and Design (A&D). This was reported by over half of the corporate and 

operations level respondents. Engineering and Research and Development (R&D) Departments 

were reported by about a quarter to a third of the respondents (Figure 5). 

20 Characteristics of Innovative Production Home Builders 
Figure 5. Production Home Builders by R&D and A&D Departments 

17% 

24% 

57% 57%

0% 

10% 

20% 

30% 

40% 

50% 

60% 

Percent

Research and Development 

Architecture and Design 

Corporation Operations 

Production Builders 

Operations asked to answer for their market area. 

Corp N=42, operations N=42, small builders N=214 (those building under 200 units per year)

See Appendix B, Q21 and Appendix C, Q3 for complete wording of questions. 

Although formal R&D departments are found infrequently, production companies can support 

technology development in a variety of other ways. Most of these companies have a technology 

champion who keeps others abreast of innovative products and processes (Table 4). About half 

support R&D efforts at the regional or local operational levels and use technology innovation as 

part of their marketing strategy, which could help push R&D support down to the level where 

opportunities and needs for new products often originate. Partnerships with manufacturers, 

which were reported by two-thirds of the respondents, provide another avenue for capturing 

greater technical capacity in building science; companies also use these partnering arrangements 

for product branding and advertising. 

Table 4. Production Home Builders’ Support of R&D for New Building Products or Processes 

Support of Research and Development Corp Operations Combined 

Has a champion within the company to keep

 abreast of innovative products and processes 76% 68% 72% 

Supports regional or local operations in R&D efforts 43% 53% 48% 

Uses innovative products or processes as part of our 

 marketing strategy 50% 60% 55% 

Has formed partnerships with manufacturers 62% 70% 66% 

Does not support research and development of new 

building products or processes 12% 18% 15% 

Corp and operations asked to answer for the company as a whole. 

Corp N=42, operations N=40, combined N=82 

See Appendix B, Q20 and Appendix C, Q29 for complete wording of questions. 

The lack of a formal R&D department does not mean that the company does not support R&D in 

more informal ways—indeed, a majority of the respondents indicated that their companies do 

support R&D in some fashion, despite the lack of a formal R&D department. Very few 

Characteristics of Innovative Production Home Builders 21 
A majority of the respondents indicated that their 

companies do support R&D in some fashion, despite the 

lack of a formal R&D department.... Perhaps the best 

description of R&D within the industry is that it is 

prevalent as an informal activity but is only emerging as 

an organized effort. 

respondents (15%) indicated that their 

companies do not support R&D. Perhaps 

the best description of R&D within the 

industry is that it is prevalent as an informal 

activity but is only emerging as an 

organized effort. 

• Organizational Culture: Influence and Locus of Decision-Making 

The current survey demonstrates that there are 

multiple points of influence and dispersed 

authority to make decisions about innovations in 

the companies responding to this survey. Among 

these production builders, the responsibility for 

identifying a new type of siding (used as an 

example of innovation) is shared across the 

corporation from the corporate level to the local 

level (Table 5). Although the authority to approve 

a new technology is more centralized than influence over that decision, in a majority of firms the 

decision is made at or shared between the local and regional levels (Figure 6). 

There are multiple points of influence and 

dispersed authority to make decisions about 

innovations in the companies responding to 

this survey... Although the authority to 

approve a new technology is more 

centralized than influence over that decision, 

in a majority of firms the decision is made at 

or shared between the local and regional 

levels. 

Table 5. Locus of Decisions on Identifying and Approving a New Type of Siding

 Identifies Approves 

Locus Corp Operations Corp Operations 

Corporate level 15% 25% 40% 33% 

Sub-corporate level

 Regional level 19% 0% 8% 5%

 Local level 27% 45% 28% 35%

 Shared between headquarters 

 and regional offices 31% 18% 20% 10%

 Shared between regional

 and local offices 8% 13% 4% 18% 

Operations asked to answer for their market area office. 

Corp N=26 on Identifies and N=25 on Approves, operations N=40 on both Identifies and Approves 

See Appendix B, Q1 and Appendix C, Q10 for complete wording of questions. 

Many of the production builders 

participating in the current survey have 

a strong technology advocate within the 

firm. 

Many of the production builders participating in the 

current survey have a strong technology advocate within 

the firm (Figure 7). Corporate respondents were more 

likely to identify technology advocates at the corporate 

level, but a majority also knew of technology advocates at the operations level. Operations 

respondents were just as likely to identify operations level technology advocates as they were 

corporate level advocates, perhaps reflecting better knowledge of their own operational level. 

22 Characteristics of Innovative Production Home Builders 
Figure 6. Production Home Builders by Sub-Corporate Locus of Decisions on Identifying and Approving a 

New Type of Siding 

100% 

Percent

80% 

60% 

60% 

68% 

85% 76% 

Corporate Operations 

Production Builders 

40% Approves 

20% 

0% 

Identifies 

Sub-corporate excludes national or corporate level. Sub-corporate includes regional, local, 

or any combination of company levels. 

Operations asked to answer for their market area office. 

Corp N=26 on Identifies and N=25 on Approves, operations N=40 on both Identifies and Approves 

See Appendix B, Q1 and Appendix C, Q10 for complete wording of questions. 

Figure 7. Production Home Builders with a Strong Advocate of Innovation by Company Level 

100% 

Percent

80% 

60% 

40% 

20% 

0% 

78% 

62% 

53% 

65% 

Corporate Operations 

Production Builders 

Corporate level advocate

Operations level advocate

Corp N=41 on corporate level and N=40 on operations level, operations N=34 on corporate level and N=37 on 

operations level 

See Appendix B, Q3 and Appendix C, Q12 for complete wording of questions. 

Table 6 shows that influence and decision authority on innovative products among large 

production builders is not controlled by the CEO or a board member (even though in some 

companies the founding owner serves as chairman of the board). Obviously, these positions have 

influence, but the sources of influence and decisions are spread across departments at the 

corporate and operations levels. 

Characteristics of Innovative Production Home Builders 23 
Table 6. Production Home Builders by Position with Significant Influence over Decision to Use a New Type of 

Siding 

 Significant Influence Final Decision 

Position Corp Operations Corp Operations 

Board Member 19% 5% 4% 0% 

Chief Executive Officer 52% 12% 30% 12% 

Chief Financial Officer 11% 0% 0% 0% 

Head of Research & Development 22% 32% 7% 10% 

Head of Purchasing 93% 54% 37% 34% 

Chief Designer/Architect 44% 44% 0% 10% 

Chief Engineer 4% 7% 0% 2% 

Head of Sales/Marketing 41% 27% 4% 0% 

Others in corporate offices 22% 5% 15% 5% 

Regional Office Dir. 11% 24% 0% 7% 

Regional Purchasing Dir. 48% 46% 7% 27% 

Regional Senior Project Mgr. 26% 12% 0% 0% 

Regional Project Mgr. 15% 15% 0% 0% 

Others in regional offices 7% 5% 0% 0% 

Local Office Director 7% 44% 4% 27% 

Local Purchasing Dir. 48% 76% 7% 24% 

Local Senior Project Mgr. 19% 46% 0% 7% 

Local Project Mgr. 22% 42% 0% 0% 

Others in local offices 11% 37% 0% 15% 

Corp N=27, operations N=41 on Significant Influence, corp N=21, operations N=22 on Final Decision 

See Appendix B, Q4 and Appendix C, Q13 for complete wording of questions. 

Table 6 and Figure 8 reveal that while R&D and While R&D and A&D departments frequently A&D departments frequently have significant have significant influence over decisions on new 

influence over decisions on new products, they products, they seldom make the final decisions on 

seldom make the final decisions on adoption. adoption. These departments provide depth in 

These departments provide depth in technical technical aspects of building systems, but 

aspects of building systems, but decisions are decisions are made by others with broader 

made by others with broader responsibilities for responsibilities for business operations. 

business operations. 

Purchasing departments play a large role in influencing Purchasing departments play a large and making decisions on new products and materials 

role in influencing and making decisions 

on new products and materials among among these production builders. The corporate head of 

these production builders. purchasing was identified by 93% of the corporate 

respondents and 54% of the operations respondents as a 

24 Characteristics of Innovative Production Home Builders 
Figure 8. Head R&D and A&D with Significant Influence in Choosing a New Type of Siding 

50% 44% 44% 

Percent

30% Corporate 22% 

Operations 20% 

10% 10% 

10% 7%

0% 

0% 

Head R&D Head R&D Head A&D Head A&D 

Significant Final Significant Final

Influence Decision Influence Decision

Corporate Position 

40% 

32% 

Corp N=27, operations N=41 on Significant Influence, corp N=21, operations N=22 on Final Decision 

See Appendix B, Q4 and Appendix C, Q13 for complete wording of questions. 

significant influence on decisionmaking (Figure 9). In addition, regional purchasing directors 

were identified as having significant influence by about half of the corporate and operations 

respondents. Local purchasing directors were just as frequently mentioned by corporate 

respondents and were identified as having significant influence over new product decisions by 

76% of the operations respondents. 

Figure 9. Purchasing Position with Significant Influence in Choosing a New Type of Siding 

7% 7% 

27% 

76% 

24% 

48% 48%

37% 

93% 

46% 

34% 

54% 

0% 

20% 

40% 

60% 

80% 

100% 

Percent 

Corporate 

Operations 

Head Head Regional Regional Local Local 

Purchasing Purchasing Purchasing Purchasing Purchasing Purchasing 

Influential Final Influential Final Influential Final 

Decision Decision Decision 

Purchasing Position 

Corp N=27, operations N=41 on Significant Influence, corp N=21, operations N=22 on Final Decision 

See Appendix B, Q4 and Appendix C, Q13 for complete wording of questions. 

Characteristics of Innovative Production Home Builders 25 
• Organizational Culture: Corporate Philosophy and Business Strategy 

Growth is an important element of a company’s business strategy. The corporate respondents 

among larger production builders reported aggressive plans for growth (Table 7). Although the 

operations level included more diverse expectations about growth, three-fourths reported plans 

for similarly aggressive growth in their market areas. 

Table 7. Production Home Builders by Growth Plan 

Growth Plan Corp Operations 

Plan to increase net profits over the next 5 years: 

Expect reduction in net profits due to downsizing 

Net profits less than 5% a year 

Net profits 5-10% a year 

Net profits more than 10% a year 

No specific plan for growth 

0% 

0% 

68% 

32% 

-----

2% 

10% 

29% 

57% 

2% 

Operations asked to answer for their market area office. 

Corp N=25, operations N=42 

See Appendix B, Q22 and Appendix C, Q4 for complete wording of questions. 

The production builders in the current survey were In terms of objectives related directly to 

asked to rate the likelihood of investing time and construction, the highest ratings (72%-81%) 

money over the next five years toward a variety of were given to reducing construction defects 

management and building technology objectives. and call-backs, improving subcontractor 

In terms of objectives related directly to dependability, and improving the style and 

construction, the highest ratings (72%-81%) were attractiveness of the homes they build. 

given to reducing construction defects and callbacks, improving subcontractor dependability, and improving the style and attractiveness of the 

homes they build (Table 8). Again, the themes of quality and marketability come through clearly. 

Cost reduction and productivity (reduced cycle time) were rated as very likely by 61% or 62% of 

the respondents. Less than half of the production respondents rated investments in building 

technology as a means to improve market share as very likely, and a slightly smaller group rated 

investments in R&D as very likely. 

Production builders’ business models are revealed somewhat by identifying business strategies 

that they see as contributing highly to their success (Table 9). Three-fourths of these firms 

emphasize customer service in terms of quickly addressing problems in new homes. This aspect 

of customer service rates in importance well above the next two items, providing amenities 

within the communities they develop and offering high quality architectural design (Figure 10). 

Structural quality and better mechanical systems, two building technology items, were rated by 

half of the respondents as contributing highly to the company’s success, and fewer than half 

rated homes with desirable finishing features this way. One-third, a good-size minority of these 

firms, rated energy-efficient, environmentally sensitive homes as a high contributor to success. 

Only 19% saw investing in the development of new building technologies as contributing highly 

26 Characteristics of Innovative Production Home Builders 
to success, and 22% saw it as having low contribution. The only item of less importance was 

providing a lower cost per square foot home. 

What emerges from this is a dominant business strategy 

oriented towards customer service, community design 

and house design. From one-fifth to one-half of the 

respondents include core aspects of building technology 

as part of their business strategies. 

What emerges from this is a dominant 

business strategy oriented towards 

customer service, community design 

and house design. 

Table 8. Production Home Builders Likely to Invest in Business Objectives 

 Objectives Not Likely Somewhat Likely Very Likely 

Likelihood of investing time and money

 over the next 5 years in: 

Improving style and attractiveness 

 of our homes 5% 23% 72% 

Improving subcontractor dependability 5% 19% 76% 

Reducing costs through use of new 

 building and construction products, 

 materials, and practices 2% 36% 62% 

Reducing cycle times 7% 31% 61% 

Improving our ability to purchase 

 and develop the best land 7% 10% 83% 

Protecting or improving market share 

 through use of new building and 

 construction products, materials, 

 and practices 6% 45% 49% 

Reducing construction defects/

 call-backs 4% 16% 81% 

Reducing overhead costs 4% 38% 58% 

Offering the best mortgage financing 

 to homebuyers 21% 31% 48% 

Researching new products, materials, 

 and practices 11% 43% 46% 

Educating buyers about new 

 technologies 18% 51% 31% 

Corp and operations combined. Operations asked to answer for their market area office. 

Depending on the question, N=83 to 84 on corp and operations combined 

See Appendix B, Q24 and Appendix C, Q8 for complete wording of questions. 

Characteristics of Innovative Production Home Builders 27 
Table 9. Production Home Builders by Factors Contributing to Success 

Low Average High 

Factors Contribution Contribution Contribution 

We provide a lower cost per square foot home 34% 46% 19% 

Our homes have more desirable features (for

 example, countertops and trim work) 4% 50% 46% 

Our developments have more desirable 

 features like public areas, trails, bike- 

 paths, gated access 7% 35% 57% 

We offer energy-efficient, environmentally 

 sensitive homes 13% 52% 35% 

Our homes have higher structural quality 

 and better mechanical systems 3% 46% 51% 

We have a strong reputation for quickly

 addressing problems in new homes 2% 24% 75% 

Our land acquisition capabilities and ability to

 gain government approvals for development 6% 50% 44% 

We offer high quality architectural design 4% 38% 57% 

We invest in the development of new 

 building technologies 22% 59% 19% 

Corp and operations combined. Operations asked to answer for their market area office. 

Depending on the question, N= 27 to 68 

See Appendix B, Q25 and Appendix C, Q9 for complete wording of questions. 

Figure 10. Top Three Factors Contributing to Success 

57% 57% 

75% 

0% 

20% 

40% 

60% 

80% 

Percent 

Offer High Offer More Customer 

Quality Desirable Service/ 

Architectural Features Addressing 

Design Problems 

Factors Highly Contributing to Success 

Corp and operations combined. Operations asked to answer for their market area office. 

Depending on the question, N= 27 to 68 

See Appendix B, Q25 and Appendix C, Q9 for complete wording of questions. 

28 Characteristics of Innovative Production Home Builders 
Table 10 provides responses to another question about business strategy more specifically 

targeting building technology innovation. Two of the responses reflect conservative stances 

toward innovation: waiting until other builders demonstrate the success of new products and 

encouraging homebuyers to stick with “tried and true” products and materials. Two other 

questions represent strategies that embrace innovation: being the first to offer new and 

innovative building products and distinguishing themselves as creative by offering distinctive 

and unique materials and products. 

The answers reveal several interesting patterns. Among corporate respondents, about half were 

Among corporate respondents, about half were clearly in the “second-mover” position relative 

clearly in the “second-mover” position relative to to innovation in building technology, and 

innovation in building technology, and between between one-third and one-half endorsed 

innovation and creativity as part of their one-third and one-half endorsed innovation and 

approach to selecting new building and 

creativity as part of their approach to selecting construction products, materials, and 

new building and construction products, practices. 

materials, and practices. Both stances were more 

likely among corporate respondents than operations level respondents, although they express the 

same level of support for being a first-mover relative to new building products (about one-third). 

Table 10. Production Home Builders by Approach to Selecting New Building and Construction Products, 

Materials, and Practices 

Approach Corp Operations 

We like to wait until other builders have successfully 

 offered new building and construction products, 

 materials, and practices before we use them 48% 22% 

We are often the first to offer a new and innovative

 building product or system 31% 29% 

We encourage homebuyers to stick with “tried and true” 

 materials and products 50% 15% 

Our goal is to set ourselves apart, to be creative, and to offer 

 materials and products that are distinctive and unique 52% 32% 

Operations asked to answer for their market area. 

Corp N=42, operations N=41 

See Appendix B, Q2 and Appendix C, Q11 for complete wording of questions. 

• Market Context 

Perspectives about market trends that will 

influence the use of new materials and techniques Perhaps the single most important trend that 

over the next ten to twenty years can point to could affect future innovation in building 

emerging business strategies among these technology is the increase in energy costs 

builders (Table 11). Perhaps the single most 

important trend that could affect future innovation in building technology is the increase in 

energy costs. Seven of ten respondents rated energy costs as influencing building technology 

innovation over this time span. In addition, our qualitative interviews with builders confirmed 

that energy costs will likely play a major role in pushing technology innovations into the market. 

Characteristics of Innovative Production Home Builders 29 
Table 11. Factors Influencing the Use of New Building and Construction Products, Materials, and Practices 

over the Next 10-20 Years 

Factors Low Influence Average Influence High Influence 

Energy costs 1% 29% 70% 

Land costs/availability 10% 29% 62% 

Labor costs/availability 2% 37% 61% 

Labor quality 5% 40% 56% 

Competition from large national builders 6% 41% 54% 

Cost savings achieved through technology 8% 46% 45% 

Higher quality buildings created through

 technology advances 8% 49% 43% 

Government regulations 8% 54% 38% 

More centralized control over production 

 within our company 25% 39% 36% 

Consumers becoming more aware of

 building technologies 7% 63% 30% 

Decentralized, local decisions over production 39% 55% 6% 

Innovation by smaller builders 42% 51% 7% 

Corp and operations combined. Corp and operations asked to answer from an individual perspective. 

N=84 

See Appendix B, Q9 and Appendix C, Q18 for complete wording of questions. 

Also identified as highly influential in building technology innovation over the next two decades 

were land costs/availability and labor costs/availability with nearly two thirds of the survey 

respondents rating these trends as having high influence (Figure 11). Labor quality and 

competition from large national builders were other trends identified by half or more of the 

survey respondents as highly influential in building technology innovation over the next 10 to 20 

years. 

Figure 11. Top Three Factors Influencing the Use of New Building and Construction Products, Materials, and 

Practices over the Next 10-20 Years 

Labor Costs/ Land Costs/ Energy Costs

Availability Availability

Factors Highly Influencing Innovation over the 

Next Two Decades

Corp and operations combined. Corp and operations asked to answer from an individual perspective. N=84 

61% 

62% 

70% 

56% 

60% 

64% 

68% 

72% 

Percent 

See Appendix B, Q9 and Appendix C, Q18 for complete wording of questions. 

30 Characteristics of Innovative Production Home Builders 
As noted earlier, the respondents did not include cost savings as a primary business strategy. 

They compete more on quality, land, community amenities and customer services than on price. 

Only a third of the respondents identified government regulations, consumer awareness of 

building technologies, and centralized control over production as highly influencing building 

technology innovation over the next twenty years, but over 90% rated government regulations 

and consumer awareness as having average to high influence. In addition, these larger builders 

saw innovation by smaller builders as having relatively low influence in their own use of 

technology innovation. 

• Industry Characteristics 

Technology scanning is a relatively new strategy for companies to keep abreast of innovations 

that they can exploit to improve operations, increase profits, expand market share, or develop 

new markets. Since few home builders invent or create new homebuilding products or 

technologies, they are primarily reliant on internal and external sources of information about 

technology advances. 

Production builders rated the following information sources as having a high level of influence 

on keeping them up-to-date on building and construction products, materials, and practices: local 

offices within the company; subcontractors (more so at the operations level than corporate level); 

and manufacturers (Table 12 and Figure 12). Wholesalers and suppliers also were identified by 

nearly a third of the survey respondents as having a high level of influence on keeping them upto date. Production builders’ reliance on local offices (as well as subcontractors) as a source of 

information on new products fits their corporate culture of decentralization, particularly related 

to construction. They also appear to rely somewhat more on manufacturers than on suppliers, 

perhaps due to the direct access large builders have to manufacturers. Larger builders are much 

less reliant on other builders, trade shows, trade publications and technology transfer programs to 

keep them informed about new products. Universities are the least influential sources of 

information about new building and construction products, materials, and practices. 

Residential construction requires cooperation among multiple parties, none of which controls the 

entire process. The production home builder manages the assembly of the product—the house— 

at the final site. Although the degree of site assembly varies based on the number of preassembled components, homebuilding relies on a complex network of companies, including 

manufacturers, suppliers, corporate offices of the production builder, regional and local offices 

of the production builder, project/construction managers, and subcontractors, among others. 

Seven of ten production builders rated cooperation 

by suppliers, manufacturers, and subcontractors of 

high importance, much more so than cooperation by 

their internal architects or engineers, regional 

managers and project/construction managers (Table 

13). 

Seven of ten production builders rated 

cooperation by suppliers, manufacturers, 

and subcontractors of high importance. 

Characteristics of Innovative Production Home Builders 31 
Table 12. Production Home Builders’ Information Sources for Keeping Up-to-Date on New Building and 

Construction Products, Materials, and Practices 

Sources No Influence Some Influence High Influence 

Company headquarters 15% 59% 27% 

Company regional offices 23% 60% 17% 

Company local offices 10% 48% 42% 

Trade shows 15% 59% 26% 

Homebuyers 39% 45% 16% 

Internet in general 43% 50% 7% 

Internet sites like HousingZone.com

 or Toolbase.org 58% 37% 5% 

Retail Outlets (Home Depot, Lowe’s) 70% 30% -----

Wholesalers and suppliers 12% 55% 33% 

Manufacturers 3% 57% 41% 

NAHB and other trade associations 19% 65% 16% 

Other builders 29% 57% 15% 

Subcontractors 7% 48% 45% 

Technology transfer programs like 

 PATH, EnergyStar, Building America, 

 or local green building programs 35% 52% 13% 

Trade publications 22% 67% 12% 

Universities 82% 16% 2% 

Corp and operations combined. Both corp and operations asked to answer for the company as a whole. 

Depending on the question, N=60 to 68 on corp and operations combined 

See Appendix B, Q5 and Appendix C, Q14 for complete wording of questions. 

Figure 12. Top Three Influential Sources for Keeping Up-to-Date on New Building and Construction 

Products, Materials, and Practices 

Manufacturers Local Area Subcontractors

Offices

Highly Influential Sources of Information 

Corp and operations combined. Both corp and operations asked to answer for the company as a whole. 

Depending on the question, N=60 to 68 on corp and operations combined 

41% 

42% 

45% 

39% 

40% 

41% 

42% 

43% 

44% 

45% 

46% 

Percent 

See Appendix B, Q5 and Appendix C, Q14 for complete wording of questions. 

32 Characteristics of Innovative Production Home Builders 
Table 13. Production Home Builders by Cooperation of Parties in Adopting New Building and Construction 

Products, Materials, and Practices 

Parties of Cooperation Low Importance Average Importance High Importance 

Suppliers 1% 27% 71% 

Manufacturers 5% 24% 71% 

Subcontractors 7% 23% 70% 

Corporate architects or engineers 20% 50% 30% 

Regional managers (if applicable) 8% 40% 52% 

Project/construction managers in

 local offices 18% 42% 41% 

Corp and operations combined. Corp and operations asked to answer from an individual perspective. 

N=84 on corp and operations combined 

See Appendix B, Q8 and Appendix C, Q17 for complete wording of questions. 

• Technical and Economic Attributes of Innovation 

Various factors associated with the characteristics of 

innovations have been identified as possible In general, the respondents felt that 

impediments to adoption of innovations in residential innovative products and materials cost 

more than those they replace and that their construction. In general, the respondents felt that subcontractors are resistant to using new 

innovative products and materials cost more than those products 

they replace and that their subcontractors are resistant 

to using new products. They agree their companies rely on established manufacturers and 

suppliers that stand behind their products (Table 14). About one-fourth to one-third think that 

building codes impede innovation, new building products increase risks of call-backs, and their 

own construction workers are resistant to innovation. One-fourth reported they identify 

competitive advantage through innovation as part of their company’s business strategy, and few 

felt that their customers resist innovation. They are evenly split in their impressions about 

whether manufacturers and suppliers provide inadequate support for new products. 

Although many production companies include Although many production companies include technology innovation as part of their business technology innovation as part of their business 

strategy, the specific benefits to their strategy, the specific benefits to their companies 

companies from innovative building and from innovative building and construction 

construction products, materials, and practices products, materials, and practices are not as clear 

are not as clear. Quality of homes built was the (Table 15). A majority (64%) of the production only factor identified as highly beneficial by a builders in the current survey only rated increased majority of the survey respondents. quality as being highly beneficial. Given their 

perceptions about the higher costs associated with 

new products and materials, decisions to innovate might rely heavily on consumers’ willingness 

to pay the price of higher quality. Between 41% and 45% of production builders rated four other 

potential benefits from using new building products: meeting customers’ expectations, increased 

competitiveness, creating an image as an innovative builder, and reduced call-backs. 

Characteristics of Innovative Production Home Builders 33 
Table 14. Production Home Builders by Impediments for Considering New Building and Construction 

Products, Materials, and Practices 

Impediments Disagree Neutral Agree 

Building codes make it difficult to use new 

 building and construction products and materials 16% 45% 39% 

New building and construction products and materials 

 generally cost more than ones we currently use 15% 33% 52% 

Our customers prefer the “tried and true” and don’t 

 like nontraditional products or features 38% 51% 12% 

It is dangerous to be among the first firms 

 who try new things in our market 32% 38% 30% 

Our bankers and insurance companies are hesitant

 to underwrite projects with new products and materials 57% 38% 4% 

Manufacturers and suppliers generally do

 not provide enough support for new products 29% 41% 30% 

Gaining competitive advantage by using new building

 and construction products and materials is not an 

 important part of our company’s business strategy 59% 29% 12% 

Using new building and construction products

 and materials increases our risk of call-backs 19% 41% 41% 

Subcontractors in our market do not usually want to adapt

 to new building and construction products and materials 13% 46% 41% 

Our construction workers find it difficult 

 to learn a new way of building 12% 45% 44% 

Our firm only uses new building and construction 

 products and materials from established companies 

 that stand behind their products 4% 18% 78% 

Corp and operations combined. Both corp and operations asked to answer from an individual perspective. 

Depending on the question, N=68 to 69 on corp and operations 

See Appendix B, Q6 and Appendix C, Q15 for complete wording of questions. 

Table 15. Production Home Builders by Benefit of Adopting New Building and Construction Products, 

Materials, and Practices 

Benefit over Past 5 Years Low Benefit Average Benefit High Benefit 

Decreased costs of building 23% 55% 23% 

Created image as an innovative builder 17% 43% 41% 

Increased productivity 11% 54% 35% 

Increased quality of homes built 4% 32% 64% 

Helped comply with codes and regulations 20% 55% 25% 

Increased profit 25% 52% 23% 

Increased competitiveness 17% 38% 45% 

Helped meet customers’ expectations 6% 48% 46% 

Reduced build time 25% 52% 23% 

Reduced call-backs 11% 47% 42% 

Corp and operations combined. Corp and operations asked to answer from an individual perspective. 

N=84 

See Appendix B, Q7 and Appendix C, Q16 for complete wording of questions. 

34 Characteristics of Innovative Production Home Builders 
The potential for reduced call-backs was also perceived as a high benefit by 42% of the 

production builders, who were also three times more likely to rate increased productivity as a 

high benefit (35%) than as a low benefit (11%). Increased quality, the highest rated benefit from 

innovation, should result in reduced “call-backs.” Production builders should be receptive to new 

building products from manufacturers who can deliver products with these attributes. 

Fewer production builders believe that building technology innovation can generate higher than 

average benefits in terms of decreased costs, increased profits, compliance with building codes, 

or reduced build times. 

Survey Responses Based on Innovativeness 

The operational definition of innovation in this study is based on the degree of market 

penetration of peer-determined technological innovations among the respondents. The overall 

percent of respondents who were currently using or had tried but discontinued a product was 

used in order to classify the innovativeness of the products. Based on their degree of market 

penetration, products were classified as early-stage innovations (25% or lower market 

penetration), middle-stage innovations (30%-75%), and late-stage innovations (above 75%). 

To create a measure of innovation for each respondent, the degree of use of the early-stage 

products described above was determined. Three categories were used to identify (1) those 

respondents who never tried any of the four early-stage technologies (N=47 or 56%); (2) those 

respondents who had used only one of the four early-stage technologies (N=22 or 26%); and (3) 

those respondents who had used two to four of the early-stage technologies (N=15 or 18%). 

Cross-tabulations and chi-square tests of this innovation measure (referred to in the following 

tables as “Number of Innovations Tried or Being Used”) were prepared with the other measures 

in the survey to help identify statistically significant associations between these measures and 

innovation. Only statistically significant associations (at the .10 or lower level) are reported in 

the following analysis of the results of the survey. 

• Organizational Structure 

Company size, as measured by units built, is Company size, as measured by units built, is 

associated with the number of innovative associated with the number of innovative products 

products adopted (Figure 13). Among adopted. ... [In addition,] production builders 

companies producing fewer than 1,000 operating throughout the nation were much more 

likely to use the early- stage innovations. 

housing units, 38% had used one or more of 

the early stage innovations in the survey and only 8% had used two to four. This increases to 

47% and 12% for companies building 1,000-2,499 units and to 54% and 36% for companies 

building 2,500 or more houses in a year. 

Production builders operating throughout the nation were much more likely to use the earlystage innovations measured in the survey (Figure 14). This could be a reflection of their larger 

size, but these firms might also be more innovative because of their business philosophies. 

Although national companies are more likely to be innovative in building technology, innovation 

does occur in some non-national companies. 

Characteristics of Innovative Production Home Builders 35 
Figure 13. Number of Innovative Products Tried or Being Used by Company Size (Units Built Per Year) 

30% 

8% 

35% 

12% 

45% 

18% 

36% 

63% 

53% 

0% 

10% 

20% 

30% 

40% 

50% 

60% 

70% 

Percent

<1,000 units, N=40 

1,000-2,499, N=17 

2,500+, N=11 

0 1 2-4 

Number of Innovative Products Tried or Being Used 

Corp and operations combined. Operations asked to answer for their market area office. 

See Appendix B, Q16 and Appendix C, Q1 for complete wording of questions. 

Figure 14. Number of Innovative Products Tried or Being Used by Market Area Served 

70% 66% 

60% 

47% 50% 

Percent 40% 33% Throughout the nation, N=30 

30% 26% Regional or local, N=38 

20% 

20% 

8% 10% 

0% 

0 1 2-4 

Number of Innovative Products Tried or Being

Used

Corp and operations combined. Operations asked to answer for company as a whole. 

See Appendix B, Q15 and Appendix C, Q24 for complete wording of questions. 

Commentaries on innovation in construction often suggest that the industry’s low level of R&D 

investment impedes innovation. But the relationship between R&D and innovation in 

construction has never been addressed empirically. The representation of several firms reporting 

R&D departments in this survey provides an opportunity to examine if the presence of R&D 

increases innovation. It should be noted that the survey results cannot be interpreted as an 

estimate of the national frequency of R&D among production builders, since the low response 

rate could have reduced the randomness of the sample, and the survey left the respondent to 

define “research and development.” Since R&D is thought to be rare in homebuilding firms, it 

might be overrepresented in this survey. 

36 Characteristics of Innovative Production Home Builders 
The survey results do not indicate a clear 

relationship between an R&D department and 

innovation. Having an R&D department increased 

the likelihood of trying or using one of the 

innovative products measured in the survey, but not two or more (Table 16). Overall, based on a 

chi-square test, the relationship was statistically insignificant. Having an Engineering 

Department was statistically associated with an increased likelihood of trying or using two or 

more of these products. The presence of other departments was not related to the use of these 

innovations. 

The survey results do not indicate a clear 

relationship between an R&D department and 

innovation. 

Table 16. Innovation When Companies Have R&D or Engineering Departments 

 Number of Innovations Tried or Being Used 

Departments within Company 0 1 2-4 N 

With R&D Dept 47% 35% 18% 17 

Without R&D Dept 58% 24% 18% 67 

With Engineering Dept 38% 29% 33% 24 

Without Engineering Dept 63% 25% 12% 84 

Corp and operations combined. Operations asked to answer for their market area office. 

See Appendix B, Q21 and Appendix C, Q3 for complete wording of questions. 

Since manufacturers typically initiate the 

commercialization process for new products (and often 

are the source for invention or creation) and builders 

have greater ability to field test new products, the lack 

of partnership between manufacturers and builders 

noted by Slaughter (2000) could impede technology 

development and commercialization in residential 

Large companies can use their size to 

their advantage with organizations 

up-stream in the supply chain, and the 

current survey indicates that many of 

them are indeed starting to develop 

closer ties with manufacturers. 

Builders need to develop new 

approaches in order to exact firstmover advantages in technology 

innovation by bundling technology 

innovation, marketing, and customer 

service. 

construction. Large companies can use their size to their 

advantage with organizations up-stream in the supply 

chain, and the current survey indicates that many of them 

are indeed starting to develop closer ties with 

manufacturers. Two-thirds of the production companies 

responding to the survey had formed partnerships with 

manufacturers. Although the nature of these partnerships 

was not explored, increased development of manufacturer-builder relationships should create 

additional opportunities to bring innovations to the market. As noted elsewhere (Koebel and 

McCoy 2006), builders need to develop new approaches in order to exact first-mover advantages 

in technology innovation by bundling technology innovation, marketing, and customer service. 

• Organizational Culture: Influence, Locus of Decisionmaking and Innovation 

The impact on innovation of multiple points of influence and decentralized or participatory 

decision-making is not transparent. A single decisionmaker who allows relatively few sources of 

influence might act more quickly and perhaps more rashly when making decisions than multiple 

Characteristics of Innovative Production Home Builders 37 
parties. The current survey results indicate that centralization of decision-making for production 

builders might discourage innovation, although the results are somewhat uncertain (Table 17). 

When decisions to adopt a major new product were approved at the corporate or regional level, 

companies had lower levels of adoption of only one of the innovative products included in the 

survey but equal rates for having adopted two to four of these technologies. 

Table 17. Innovation under Central or Local Approval 

 Number of Innovations Tried or Being Used 

Locus 0 1 2-4 N 

Corporate or regional approval 74% 14% 11% 27 

Local or shared approval 50% 39% 11% 38 

Corp and operations combined. Operations asked to answer for their market area office. 

See Appendix B, Q1 and Appendix C, Q10 for complete wording of questions. 

Overall, a majority of the respondents reported an inhouse technology advocate at either the 

corporate or operations levels. This allows us to examine the impact on innovation of champions 

at both the corporate and operational levels. Companies with corporate or office level technology 

advocates were somewhat more likely to have used one or more of the innovative technologies 

measured, but the difference was insufficiently large to be statistically significant. 

Although R&D and A&D departments frequently have 

significant influence over decisions on new products, Although R&D and A&D departments 

they seldom make the final decisions on adoption. These frequently have significant influence 

over decisions on new products, they departments provide depth in technical aspects of seldom make the final decisions on 

building systems, but decisions are made by others with adoption.

broader responsibilities for business operations. 

Companies where R&D had significant influence on new building products were more likely to 

have adopted two to four of the innovative items in the survey (Table 18) but were not any more 

likely to adopt one or more of these products. 

Table 18. R&D and A&D Influence and Innovation 

Number of Innovations Tried or Being Used 

Position 0 1 2-4 N 

R&D influential 58% 16% 26% 19 

All others 57% 35% 8% 49 

A&D influential 67% 17% 17% 30 

All others 50% 40% 11% 38 

Corp and operations combined. 

See Appendix B, Q4 and Appendix C, Q13 for complete wording of questions. 

A&D influence, on the other hand, was associated with companies with somewhat lower levels 

of innovation—34% of companies with A&D influence used one or more of these products, 

38 Characteristics of Innovative Production Home Builders 
while 51% of other companies did so. A&D influence 

A&D influence could be based on design could be based on design criteria unrelated to technology criteria unrelated to technology innovation, whereas R&D influence is likely to innovation, whereas R&D influence is 

likely to concentrate on improving concentrate on improving building performance through 

building performance through the use of the use of new products and technologies. The 

new products and technologies. differences are not clear-cut, as A&D departments likely 

evaluate new technologies in companies without R&D 

departments. 

These findings suggest that R&D influence increases the 

frequency of innovation, perhaps due to the company’s These findings suggest that R&D 

greater ability to identify and evaluate new products and influence increases the frequency of 

innovation, perhaps due to the technologies. The impact of R&D is apparently mediated company’s greater ability to identify by other departments and priorities within the company. and evaluate new products and 

Although three-fourths of the companies identified technologies. 

research and technology development as part of their 

corporate strategy, these companies were no more likely than others to use the technologies 

measured. Having an R&D department at the corporate level does, however, appear to increase 

the likelihood of innovation. 

Influence by purchasing departments has either a positive or Influence by purchasing 

departments has either a positive or neutral association with innovation (Table 19), but decisionneutral association with innovation, making power by regional or local purchasing departments 

but decision-making power by might negatively impact innovation (Table 20). Companies 

regional or local purchasing where purchasing had significant influence over decisions to departments might negatively use a new building material were more likely to use one or impact innovation. 

more the innovative products covered, and companies where 

regional purchasing managers were influential were significantly more likely to use two or more 

of these products. Companies where the corporate head of purchasing made decisions on new 

building materials were also more likely to have used two or more of the products measured. But 

when this authority was exercised by purchasing departments at the regional or local levels, the 

companies were less likely to have used one or more of these products. 

Table 19. Purchasing Influence and Innovation 

 Number of Innovations Tried or Being Used 

Position 0 1 2-4 N 

Corp Purchasing influential 55% 28% 17% 47 

All others 62% 33% 5% 21 

Regional Purchasing influential 59% 19% 22% 32 

All others 56% 39% 6% 36 

Local Purchasing influential 55% 32% 14% 44 

All others 63% 25% 13% 24 

Corp and operations combined. 

See Appendix B, Q4 and Appendix C, Q13 for complete wording of questions. 

Characteristics of Innovative Production Home Builders 39 
Table 20. Purchasing Makes Final Decision and Innovation 

 Number of Innovations Tried or Being Used 

Position 0 1 2-4 N 

Corp Purchasing decides 58% 21% 21% 24 

All others 57% 34% 9% 44 

Regional Purchasing decides 77% 8% 15% 13 

All others 53% 35% 13% 55 

Local Purchasing decides 75% 25% 0% 12 

All others 54% 30% 16% 56 

Corp and operations combined. 

See Appendix B, Q4 and Appendix C, Q13 for complete wording of questions. 

Although these associations are statistically weak 

(particularly given the relatively small number of Purchasing departments also can 

positively impact building technology 

companies participating in the survey), they help identify decisions through their influence at 

a complex pattern of influence and authority in decisions corporate, regional, and local levels. 

about new building materials. The technical expertise in However, if purchasing departments 

building science represented in R&D or possibly in A&D below the corporate level have 

departments can positively influence innovation, but decision-making authority, the impact 

becomes negative. these departments rarely have the authority to make the 

final decisions. Purchasing departments also can 

positively impact building technology decisions through their influence at corporate, regional, 

and local levels. However, if purchasing departments below the corporate level have decisionmaking authority, the impact becomes negative. Corporate purchasing departments are probably 

more likely to be influenced by R&D or other technology advocates at the corporate level, 

whereas regional and local purchasing departments might be more sensitive to incentives 

associated with reducing costs. Companies emphasizing innovation as part of their business 

strategy should be cautious in assigning decision authority to purchasing departments except at 

the corporate level, or they may need to carefully evaluate the incentives provided to purchasing 

departments at regional and local levels 

• Organizational Culture: Corporate Philosophy, Business Strategy and Innovation 

An aggressive growth plan was also associated with 

recent building technology innovation (Table 21). Based An aggressive growth plan was also 

on questions about commitment to research and associated with recent building 

development and about various aspects of corporate technology innovation... Building 

technology both benefits from and philosophy, building technology both benefits from and contributes to growth. contributes to growth. On the one hand, growth generates 

the corporate revenues that allow a greater commitment 

to R&D and to building technology innovation. At the same time, companies with 

aggressive growth plans appear to be including building technology innovation as one 

40 Characteristics of Innovative Production Home Builders 
element in their plans to increase market share through increased quality, reduced callbacks, and higher performance. 

Table 21. Growth Plan and Innovation

 Number of Innovations Tried or Being Used 

Growth Plan 0 1 2-4 N 

Annual growth >10% 50% 34% 16% 32 

All others 68% 26% 9% 35 

Corp and operations combined. Operations asked to answer for their market area office. 

See Appendix B, Q22 and Appendix C, Q4 for complete wording of questions. 

For the most part, there were no clear associations between business strategies and current or 

past use of the innovative technologies measured in the 

survey. However, companies planning to invest in Building technology innovation by 

educating buyers about new technologies were much production builders is not pulled by 

more likely to have adopted one or more of the early- demand... [and] the successful 

innovator will need to be highly stage innovations measured (Table 22). This pattern skilled in communicating the benefits confirms other findings stating that building technology of a better quality product. 

innovation by production builders is not pulled by 

demand and suggests that these innovators focus on their 

role in (or even the necessity of) educating buyers about the benefits of higher building 

performance. Given that many building technology improvements are invisible to the consumer, 

the successful innovator will need to be highly skilled in communicating the benefits of a better 

quality product. 

In addition, the companies who were very likely to invest in their land development capability 

were less likely to have adopted two to four of these innovations. Surprisingly, the nine 

companies that were “not likely” to invest in researching new products had higher adoption rates 

for the innovative technologies than companies who were somewhat or very likely to invest in 

this strategy. 

Table 22. Business Strategies and Innovation 

 Number of Innovations Tried or Being Used 

Investment very likely in 0 1 2-4 N 

Ability to purchase and develop the best land 59% 25% 16% 69 

All others 43% 29% 29% 14 

Educating buyers about new technologies 39% 35% 27% 26 

All others 64% 22% 14% 58 

Corp and operations combined. Operations asked to answer for their market area office. 

See Appendix B, Q24 and Appendix C, Q8 for complete wording of questions. 

Characteristics of Innovative Production Home Builders 41 
Companies that rated providing a lower cost per square foot home as a high benefit were 

significantly less likely to have adopted one or more of the innovative technologies (Table 23). A 

business strategy that emphases quality and performance above costs appears to better promote 

building technology innovation. 

Table 23. Factors Contributing to Success and Innovation 

 Number of Innovations Tried or Being Used 

Saw high benefit from 0 1 2-4 N 

Lower cost per sq ft 46% 46% 8% 13 

All others 61% 24% 15% 54 

Corp and operations combined. Operations asked to answer for their market area office. 

See Appendix B, Q25 and Appendix C, Q9 for complete wording of questions. 

• Market Context 

The only significant association between these perceived trends and current building technology 

innovation was for higher quality buildings created through technology advances (Table 24). 

This is consistent with the other data from the survey supporting a business model that 

emphasizes the building quality benefits of innovation. 

Table 24. Future Trends and Current Innovation 

 Number of Innovations Tried or Being Used 

High Influence from 0 1 2-4 N 

Higher quality buildings created through technology 47% 25% 28% 36 

All others 63% 27% 10% 48 

Corp and operations combined. Corp and operations asked to answer from an individual perspective. 

See Appendix B, Q9 and Appendix C, Q18 for complete wording of questions. 

Fundamental changes in the diffusion of innovative 

building technologies could result from the confluence 

of market trends with the recent emergence of large 

national housing production companies. These 

companies and some regional housing production 

companies have the capital, talent, and size to develop 

business strategies to allow them to exact first-mover 

advantages from innovation. This outcome will require 

new approaches that combine builder-manufacturer 

partnerships, knowledge management, open innovation, 

marketing, and customer service with building 

technology innovation to build, sell, and service a 

higher quality house. 

Fundamental changes in the diffusion of 

innovative building technologies could 

result from the confluence of market trends 

with the recent emergence of large 

national housing production companies. ... 

This outcome will require new approaches 

that combine builder-manufacturer 

partnerships, knowledge management, 

open innovation, marketing, and customer 

service with building technology 

innovation to build, sell, and service a 

higher quality house. 

42 Characteristics of Innovative Production Home Builders 
• Industry Characteristics 

Larger production builders tend to be more innovative 

For the most part, the influence of than smaller production builders for a variety of 

information sources had no association reasons, including their access to internal sources of 

with the company’s use of one or more of information and to manufacturers. 

the innovative products measured in the 

survey. The only source of information that had a positive impact on innovation was the 

company’s local offices. Even though the association is weak, this reinforces other evidence in 

the survey identifying a decentralized approach to innovation among production builders. Two 

sources had slightly negative impacts on innovation—retail outlets and trade associations. This 

impact is complicated by the effect of company size: these sources are more important to smaller 

builders, and company size is positively associated with innovation. Larger production builders 

tend to be more innovative than smaller production builders for a variety of reasons, including 

their access to internal sources of information and to manufacturers. 

Production builders who rated the importance of cooperation by subcontractors as high were 

somewhat less likely to have used one or more of the innovative products in the survey (Table 

25). This emphasis on cooperation by subcontractors could reflect resistance by those 

subcontractors to innovation. No other aspects of communication channels and social networks 

were associated with the level of innovation by production builders. 

Table 25. Cooperation by Subcontractors and Innovation 

Number of Innovations Tried or Being Used 

High Cooperation from 0 1 2-4 N 

Subcontractors 63% 22% 15% 59 

All others 40% 36% 24% 25 

Corp and operations combined. Corp and operations asked to answer from an individual perspective. 

See Appendix B, Q8 and Appendix C, Q17 for complete wording of questions. 

• Technical and Economic Attributes 

Production builders who saw high benefit to their competitiveness from building technology 

innovation were more likely to have used one or more of the innovative products in the survey 

(Table 26). In addition, those who saw high benefit in reduced build time (less than one in four 

production builders) were more likely to have used two to four of these products. No other 

perceived benefits were associated with the innovation measure. 

Table 26. Perceived Benefits and Innovation 

Number of Innovations Tried or Being Used 

High Benefit from 0 1 2-4 N 

Increased Competitiveness 45% 40% 16% 38 

All others 65% 15% 20% 46 

Reduced Build Time 37% 26% 37% 19 

All others 62% 26% 12% 65 

Corp and operations combined. Corp and operations asked to answer from an individual perspective. 

See Appendix B, Q7 and Appendix C, Q16 for complete wording of questions. 

Characteristics of Innovative Production Home Builders 43
The impact of perceived impediments is not very clear. Although it is hard to dismiss the 

potential impact of perceived impediments on innovation, none of the perceived impediments 

had any association with the company’s use of 

the innovative products covered in the survey. 

Innovation by production builders appears to 

rely on their ability to identify the building 

innovations that they can successfully 

communicate to consumers, thereby increasing 

their competitive position. Innovation in 

building technology does not operate independently of the company’s broader business strategies 

and has to be bundled into those strategies in order to realize their benefit to the company. 

Innovation by production builders appears to rely 

on their ability to identify the building 

innovations that they can successfully 

communicate to consumers, thereby increasing 

their competitive position. 

Multivariate Analysis of Building Technology Innovation by Production 

Builders 

In order to examine the joint impacts of several variables on building technology innovation by 

production builders, a multivariate regression analysis was conducted using a weighted index of 

the degree to which the respondents used any of the products. Early-stage innovations have the 

most weight (4) in the index; middle-stage innovations have a weight of 1; and late-stage 

innovations have a weight of 0. The maximum score for this innovation index is 21 (16 points for 

the four early-stage innovations and 5 points for the five middle-stage innovations). Koebel et al. 

(2003) used a similar weighting scheme in calculating their innovation index. 

The highest score for the innovation index was one company with 19 (using all four early-stage 

innovations and three middle-stage innovations). Three companies used three of the early-stage 

innovations and had index scores from 15 to 17. Eleven companies used two of the early-stage 

innovations and had index scores from 9 to 13. Twenty-two companies used one of the earlystage innovations and had index scores from 5 to 9. The remaining 47 companies did not use any 

of the early-stage innovations and had index scores from 0 to 4. 

The innovation index was used in a multivariate analysis. Several variables were analyzed, but 

only a few had statistically significant relationships with building technology innovation. Given 

the size of the sample and our rather rudimentary knowledge of innovation in residential 

construction, it is not very surprising that only a few significant relationships in a multivariate 

analysis would be isolated. Nonetheless, this analysis helps us to understand further the factors 

that more strongly influence innovation. 

The most important of these variables is the size of the 

company, as measured by the total number of units 

produced. Larger production builders had higher 

innovation index scores. In addition, centralization reduced 

innovation. If decisions about new products were 

controlled by company headquarters, the company’s innovation index was lower. Further 

reinforcing the negative consequences of centralization, companies with board members or 

CEOs making these decisions had even lower innovation index scores (although this relationship 

was of borderline significance in the final equation). 

If decisions about new products 

were controlled by company 

headquarters, the company’s 

innovation index was lower. 

44 Characteristics of Innovative Production Home Builders 
The number of highly perceived benefits from adopting new building and construction products, 

materials, and practices was also positively associated with the company’s innovation index 

score. As noted earlier, the most frequently perceived benefit was increased quality. 

The percent of starter homes in the company’s production reduced its innovation index score. 

This further supports the conclusion that companies pursue building technology innovation to 

achieve quality and to improve production rather than to decrease costs. 

Finally, companies operating at the national level had higher innovation index scores even when 

the number of units produced was taken into consideration. National companies, perhaps more 

than others, have the potential to invest in building 

National companies, perhaps more than technology innovation and to exact market rewards from 

others, have the potential to invest in that innovation. Other housing production companies 

building technology innovation and to 

might successfully include building technology exact market rewards from that 

innovation. innovation in their business strategies, but national 

companies appear to have an edge in doing so. 

Comparisons with the 2003 Survey 

A study by Koebel et al. (2003) similarly reported on diffusion of innovation in the residential 

building industry but primarily sampled small to midsize builders. Although the questionnaires 

were very similar between the two surveys, there were some important differences, particularly 

in the technologies included in the surveys. 

In order to explore differences between large production builders and smaller builders, responses 

to survey questions that were common to both studies were compared. Respondents from the 

earlier study that built 200 or more residential units per year (the definition of a large builder for 

the current study) were eliminated to ensure a valid comparison. There were 216 respondents in 

the 2003 sample after removing the larger builders. For an indepth discussion of that survey, 

refer to Koebel et al. 2003. 

• Organizational Structure 

Koebel et al. (2003) found that national home builders were more likely to be innovative than 

builders with only local or regional operations. Additionally, Blackley and Shepard (1996) found 

that operating in multiple markets reduced risks and increased opportunities for regulatory 

acceptance. 

The companies responding to the survey of large production builders have much more 

organizational depth than the smaller builders who participated in the 2003 survey. Few of the 

latter were organized into different departments. The respondents to the production builders’ 

survey were very likely to have multiple departments, particularly finance, marketing, 

purchasing, and information technology. 

Characteristics of Innovative Production Home Builders 45 
• Organizational Culture 

The relationship between innovation and corporate philosophy or business strategy is stressed 

throughout the literature and this report. The 2003 study demonstrated the importance of the 

owner’s vision of the contribution of building technology to the image of the company and its 

responsiveness to its customers. Large production builders represent much more complex 

companies with multiple departments and organizations spanning national and sometimes 

international markets. Innovation does not exist in isolation but as part of the company’s overall 

orientation to growth. 

The multiple roles played by owners and Whereas influence and decision authority are dispersed 

general managers in these [small] firms, in large production building companies, both influence 

including the ... authority to make the final and decision-making were heavily vested in the owner, decision about innovation ...could be one president, or general manager among the builders reason why small firms are often reported responding to the 2003 survey—for 90% of the to be more innovative than larger firms. respondents, the owner-CEO-general manager position 

made the final decision on new products. This partly 

reflects the lack of organizational depth in small firms. It also reflects the multiple roles played 

by owners and general managers in these firms, including the nearly universal authority to make 

the final decision about innovation. This autonomy could be one reason why small firms are 

often reported to be more innovative than larger firms. If owners and CEOs champion 

technology in these companies, they also have the authority to purchase the technology and to 

take the associated risks. 

Toole’s research (1998) emphasizes the importance of reducing uncertainty in the decision to 

adopt innovations. Toole found that decisions about low-risk innovations can be made more 

easily by a single individual, whereas innovations involving greater complexity and uncertainty 

were more likely to be adopted if more people participated in the decision. 

Consistent with nearly every study of innovation, the 2003 study found that the presence of a 

technology advocate within the firm—very often the owner—increased the likelihood of using 

innovative building products and technologies. The current study documented the widespread 

presence of technology advocates among production builders, but they did not have a discernable 

association with higher levels of innovation. 

The production builders differed from the smaller builders in the 2003 study in terms of their 

growth plans. One-third of those smaller builders had no specific plan for growth or expected to 

downsize. Another 16% planned growth in profits of less than 5% per year. In contrast, the 

production builders surveyed in the current study reported aggressive plans for growth. 

Production builders in the current survey were generally 

very similar to small builders in the 2003 survey when The largest difference between 

rating the likelihood of investing time and money over the large and small builders was the 

next five years in a variety of management and building likelihood of investing in their 

ability to purchase and develop the technology objectives. The largest difference between large best land. and small builders was the likelihood of investing in their 

ability to purchase and develop the best land (83% among 

46 Characteristics of Innovative Production Home Builders 
production builders and only 51% among small builders). 

• Market Context 

Production builders are more prone than small builders to think that building codes impede 

innovation, that new building products increase risks of call-backs, and that their own 

construction workers are resistant to innovation. They are less likely than small builders to agree 

that their customers resist innovation, and they are more likely to identify competitive advantage 

through innovation as part of their company’s business strategy. 

• Industry Characteristics 

Among the small builders surveyed in 2003, more than 40% identified wholesalers and suppliers, 

other builders, subcontractors, trade publications, homebuyers, and trade shows as highly 

influential sources of information. Larger builders are much less reliant on other builders, trade 

shows, and trade publications to keep them informed about new products. They also appear to 

use technology transfer programs to a greater extent than small builders but rate these programs 

as moderately influential rather than highly influential. 

The lower reliance on homebuyers as a source of information for large production builders 

compared to small builders could mean that technology innovation by large production builders 

is less a matter of demand-pull. Production builders rely on delivering a specific product with a 

defined set of options. The impact of consumer demand on these builders is probably less direct 

than on smaller builders, as consumer preferences are mediated through marketing departments. 

• Technical and Economic Attributes 

In general, the large production builders agreed with the smaller builders in the 2003 survey that 

innovative products and materials cost more than those they replace and that subcontractors are 

resistant to using new products. Both types of builder agree their companies rely on established 

manufacturers and suppliers that stand behind their products. 

The primary benefit of technology innovation in builders’ eyes is its contribution to improving 

quality, whether expressed directly or more narrowly as reductions in call-backs. About twothirds of builders, whether small or large, identify increased quality as a “high benefit” of 

building technology innovation. This is substantially higher than creating an image as an 

innovative builder (identified by 40% of small and large builders as a high benefit of building 

technology innovation). 

Home builders evaluate other potential benefits of innovations against their exposure to risks. 

Corporate respondents from large production builders were much more likely to identify high 

benefit from building technology innovation than either operations respondents or the small 

builders responding to the 2003 survey in the following areas: decreased costs; increased 

productivity; increased competitiveness; and reduced call backs. 

Characteristics of Innovative Production Home Builders 47 
QUALITATIVE RESULTS 

Purpose 

Information collected through personal interviews with representatives of large production 

builders provided added perspective to the survey results. In this section, information resulting 

from three post-survey onsite personal interviews and the pre-survey interviews that were used to 

help formulate the survey questions is presented. In addition, information drawn from comments 

provided by survey respondents is incorporated. 

Findings 

• Organizational Structure 

Increased concentration among the top national housing producers became a pronounced trend 

during the past twenty years. Our qualitative interviews indicated that these large producers 

expect the trend to continue and that they will increase market share through their competitive 

advantages in implementing aggressive plans for growth. 

The qualitative interviews suggested that large national 

firms might be able to exploit first-mover advantage The risks associated with building 

through innovation in building technology better than innovations are magnified by the 

volume of units built by a large non-national firms, but they are also very reliant on the production builder. Without 

success of established business models. The risks substantial field-testing to 

associated with building innovations are magnified by the demonstrate the performance and 

volume of units built by a large production builder. benefits of an innovation, the risks 

Without substantial field-testing to demonstrate the faced by large production builders 

generally outweigh any advantages performance and benefits of an innovation, the risks associated with being a first-mover. faced by large production builders generally outweigh 

any advantages associated with being a first-mover. 

Nonetheless, some companies are clearly investing in their The successful business models that 

combine open innovation, capacity to identify, assess, and deploy innovative building 

knowledge management, technology technologies where performance is clearly established and 

scanning, incentives tied to the risks are limited and are outweighed by probable 

successful innovation, marketing, rewards. This strategy is still an emergent trend, and the 

and a variety of other strategies successful business models that combine open innovation, have yet to be clearly established. knowledge management, technology scanning, incentives 

tied to successful innovation, marketing, and a variety of other strategies have yet to be clearly 

established. And although national companies are more likely to be innovative in building 

technology, innovation does occur in some non-national 

companies. Some companies operating within a region or It remains to be seen which 

even a few metropolitan areas are also investing in their companies will be able to move 

more quickly or nimbly in capability to develop business models that include identifying ways to increase market building technology innovation. It remains to be seen share and profits through building 

which companies will be able to move more quickly or technology innovation. 

nimbly in identifying ways to increase market share and 

profits through building technology innovation. 

48 Characteristics of Innovative Production Home Builders 
• Organizational Culture 

The corporate cultures of homebuilding companies value 

The corporate cultures of local knowledge; this includes tacit and formal information 

homebuilding companies value 

on market conditions, site variability, consumer preferences, local knowledge; this includes tacit 

and formal information on market supply-chain relationships, and subcontractors that occurs 

conditions, site variability, within regions and local market areas. National 

consumer preferences, supply-chain homebuilding corporations grew out of the success of a local 

relationships, and subcontractors operation and value the contribution of local autonomy to 

that occurs within regions and local profitability. Growth strategies include purchasing market areas. homebuilding companies operating within market areas 

targeted for expansion. This strategy involves capturing the 

best features of national management techniques, purchasing power, and access to capital with 

local autonomy on construction. 

Local autonomy also helps manage the risks 

Companies interviewed in this study expressed in homebuilding associated with local 

reluctance to force decisions about innovation in markets and with the variability among building technology onto regional and local operations 

and prefer to use incentives and communications to construction sites. Our qualitative 

promote corporate goals for building technology. interviews reinforced our survey findings 

Decisions about business operations, however, are made emphasizing decentralized decisions about 

at the corporate level more readily. building materials and products. Companies 

interviewed in this study expressed 

reluctance to force decisions about innovation in building technology onto regional and local 

operations and prefer to use incentives and communications to promote corporate goals for 

building technology. Decisions about business operations, however, are made at the corporate 

level more readily. 

The importance of purchasing departments in new Companies are looking to integrate (or product decisions was also identified in our qualitative “sell”) building technology innovation interviews. Given the influence of purchasing throughout their corporations. Strategies 

departments at all levels, their criteria and incentives in include the development of national 

product selection are central to managing technology purchasing agreements, incentives that 

innovation among production builders. The criteria and reward increased profitability on the total 

house rather than on individual the financial incentives motivating purchasing components, incentives for adopting best 

decisions can be antagonistic to new products, practices in materials and processes, field 

particularly if they reward cost savings over potential testing to confirm performance, monitoring 

improvements in performance. Quite logically, to correct problems quickly, and crossincentives encourage purchasing to buy the desired corporation communications about 

building technology and performance. products at the lowest possible price, which might Knowledge management remains more ad 

involve discounts negotiated with manufacturers and hoc than structured, but there is increased 

suppliers based on volume. A new product, even if interest in information technology tools 

identified as improving building performance and that enable organizational learning. 

profits, could be disadvantaged due to higher initial 

costs and lower volumes. 

Characteristics of Innovative Production Home Builders 49 
These companies are looking to integrate (or “sell”) building technology innovation throughout 

their corporations. Strategies include the development of national purchasing agreements, 

incentives that reward increased profitability on the total house rather than on individual 

components, incentives for adopting best practices in materials and processes, field testing to 

confirm performance, monitoring to correct problems quickly, and cross-corporation 

communications about building technology and performance. Knowledge management remains 

more ad hoc than structured, but there is increased interest in information technology tools that 

enable organizational learning. 

• Market Context 

The housing market in recent years has been a “sellers’ market,” and there has not been much 

competitive pressure to innovate. Several shifts in market trends could create a better 

environment for building technology innovation, including a slowdown in the housing market, 

rising energy costs, and increased materials and supplies costs. Each of the interviews identified 

the strength of housing demand over the last several years as decreasing the returns to building 

technology innovation. Shortages in skilled construction labor in terms of both overall 

availability and the inadequacy of training by small subcontractors is pushing companies to look 

to solutions that include process and quality control technologies and vertical integration. The 

impact of rising energy costs was less clear, but there was some indication that energy efficiency 

could provide an opportunity for differentiating a company from competitors. 

Land is also an essential component in housing production and is becoming more scarce and 

expensive. Our interviews indicated that large production builders are focusing on their land 

inventories as part of their business strategy. This could Our interviews indicated that large 

prevent smaller builders from obtaining desirable production builders are focusing on 

locations for development and could accelerate their land inventories as part of 

concentration in the industry. their business strategy. This could 

prevent smaller builders from 

The importance of land in the cost The importance of obtaining desirable locations for 

of housing and in corporate success land in the cost of development and could accelerate 

concentration in the industry. diminishes the potential impact of housing and in building technology innovations. As corporate success “bricks and mortar” contribute 

proportionately less to final cost, diminishes the potential impact of building technology 

the contribution of building innovations. As “bricks and mortar” contribute 

technology innovation to proportionately less to final cost, the contribution of building 

profitability declines. technology innovation to profitability declines. For example, 

opportunities to reduce cycle times through innovation were 

seen as much less important as process controls that 

assure the delivery date. This supports the survey results This supports the survey results that 

emphasize the impact of innovation that emphasize the impact of innovation on quality and on quality and customer satisfaction customer satisfaction rather than costs or profits and rather than costs or profits and 

reinforces the need to integrate building performance reinforces the need to integrate 

quality into marketing strategies. building performance quality into 

marketing strategies. 

Higher land costs could also push development inward 

within large, high growth metropolitan areas towards opportunities for building more densely. 

50 Characteristics of Innovative Production Home Builders 
Our qualitative interviews affirmed this trend to look inward and upward. Some housing 

production companies have already gone “vertical” in the development of midrise and high rise 

residential buildings. This will create new opportunities for technology innovation and could 

facilitate the migration of building technologies from commercial construction to residential 

construction. 

The key to marketing building The companies have yet to integrate building performance 

performance appears to be into marketing, although they are pushing to do so. They 

customer satisfaction rather than agreed that technology innovation was not being pulled by 

engineering details. Some demand and that customers need to be educated about the 

companies believe they can develop benefits of improved building performance. The key to brand loyalty and repeat customers 

through improved building marketing building performance appears to be customer 

performance, but this has yet to be satisfaction rather than engineering details. Some companies 

established and will require several believe they can develop brand loyalty and repeat customers 

more years of documenting the through improved building performance, but this has yet to relationship between building be established and will require several more years of performance and customer 

satisfaction. documenting the relationship between building performance 

and customer satisfaction. 

• Industry Characteristics 

Manufacturers and suppliers remain key sources of information about new products. Selling a 

new product remains the primary communication channel, and there are examples of crossbranding (including the building company’s name on the manufactured product). In developing 

installation requirements for the product to remain within warranty, manufacturers rely on lab 

testing rather than field testing and review by construction personnel. But there are also 

indications that a more sophisticated relationship between manufacturers, suppliers, and large 

production builders is emerging. This includes cooperation in addressing supply-chain problems, 

field testing, and joint development of products. 

Large production builders are also “professionalizing” 

home building from top to bottom. At corporate levels, Large production builders are also

“professionalizing” home building corporate culture is increasingly driven by management from top to bottom. At corporate 

and finance professionals. Corporate managers are levels, corporate culture is 

coming from other industries bringing perspectives and increasingly driven by management 

approaches that are still new to homebuilding. And the and finance professionals. 

companies are recruiting university graduates in Corporate managers are coming 

from other industries bringing engineering, building construction, and business as perspectives and approaches that 

construction superintendents. (Staff turnover was cited as are still new to homebuilding. 

an ongoing challenge to the industry.) These changes in 

human resources are likely to facilitate deployment of best practices in building science, though 

the effect on the full supply chain has yet to be studied. 

• Technical and Economic Attributes 

National and regional production builders are experimenting with building technology 

innovations that range from factory produced panels to incremental improvements in existing 

Characteristics of Innovative Production Home Builders 51 
processes. The easy opportunities are in identifying improvements in the company’s core 

competency of managing the construction process and improving quality. 

The risks and costs of innovation remain as serious impediments. Site variability and 

subcontractor variability were stressed as ongoing challenges to the deployment of building 

technology innovations. 

R&D efforts are primarily devoted to finding improved products or processes, troubleshooting 

problems identified by operations, and developing quality control procedures. Even incremental 

changes frequently are ahead of building codes, and approvals involve increased costs in 

communication and time. So, increased technical complexity—combined with either increased 

cost or the inability to predict cost—increases the likelihood of not adopting technologies among 

the production builders interviewed. 

CONCLUSION 

Summary of Findings 

This study helps to provide a clearer perspective of 

innovation among large production homebuilders. Among Among these builders, size matters. 

these builders, size matters. Larger companies have greater Larger companies have greater 

access to a variety of factors that 

access to a variety of factors that contribute to successful contribute to successful 

implementation of building technology innovation as one implementation of building 

part of the company’s business strategy. Large companies technology innovation as one part 

have greater leverage to form partnerships with of the company’s business strategy. 

manufacturers that could increase the benefits and reduce 

the risks associated with innovation. They have greater organizational depth and are much more 

likely than small builders to invest in research and development. Operating at a national level 

further contributes to the company’s use of innovative building technologies. 

Whereas centralized decisions by a Whereas centralized decisions by a technology champion in 

technology champion in a small a small company facilitates innovation, in larger housing 

company facilitates innovation, in production companies innovation is fostered through larger housing production decentralization. Regional and particularly local offices play companies innovation is fostered 

through decentralization. important roles in providing information on new building 

technologies, influencing decisions about new products, and 

making decisions about building technology innovations. The dominant business model in the 

industry involves a significant commitment to 

decentralized authority. The innovative production The innovative production builder has to 

meet the challenges of providing adequate builder has to meet the challenges of providing technology support, incentives, adequate technology support, incentives, communications, and knowledge 

communications, and knowledge management to management to foster innovation at 

foster innovation at regional and local operational regional and local operational levels. 

levels. 

52 Characteristics of Innovative Production Home Builders 
In addition to occasionally providing inhouse R&D expertise, production companies support 

technology development through technology champions, supporting R&D efforts at the regional 

or local operational levels, and using innovation as part of their marketing strategy. Having R&D 

increases the frequency of innovation, somewhat obviously, but the impact of R&D is mediated 

by other departments and priorities within the company. 

One of the key findings of this study is that

One of the key findings of this study is that purchasing departments play a large role in purchasing departments play a large role in influencing and making decisions on new products influencing and making decisions on new 

products and materials among production and materials among production builders. The 

builders. The influence of purchasing is felt influence of purchasing is felt throughout the 

throughout the corporation... As a result, it corporation, from the corporate head of purchasing, 

is important to align the criteria and regional purchasing directors, and local purchasing financial incentives motivating purchasing directors. As a result, it is important to align the decisions at the regional and local levels 

with the company’s building technology criteria and financial incentives motivating 

goals. purchasing decisions at the regional and local levels 

with the company’s building technology goals. 

Production builders rely more on manufacturers and technology transfer programs and are much 

less reliant than small builders on other builders, trade shows, and trade publications to keep 

them informed about new products. Larger production builders tend to be more innovative than 

smaller production builders for a variety of reasons, including their access to inhouse sources of 

information and to manufacturers. 

These large production builders agreed with the smaller builders surveyed in 2003 that 

innovative products and materials cost more than those they replace, that subcontractors are 

resistant to using new products, and that their companies rely on established manufacturers and 

suppliers who stand behind their products. Production builders are more likely than small 

builders to think that building codes impede innovation, that new building products increase risks 

of call-backs, and that their own construction workers are resistant to innovation. 

Although many production companies include technology innovation as part of their business 

strategy, the specific benefits to their companies from building technology innovation are not as 

clear. Given their perceptions about the higher costs associated with new products and materials, 

decisions to innovate might rely heavily on consumers’ willingness to pay the price of higher 

quality. Innovation by production builders appears to rely Innovation in building technology on their ability to identify the benefits of building does not operate independently of 

innovations that they can successfully communicate to the company’s broader business 

consumers, thereby increasing the company’s competitive strategies and has to be bundled 

position. Innovation in building technology does not with those strategies in order to 

realize their benefit to the company. operate independently of the company’s broader business Innovation does not exist in 

strategies and has to be bundled with those strategies in isolation but as part of the 

order to realize their benefit to the company. Innovation company’s overall orientation to 

does not exist in isolation but as part of the company’s growth. 

overall orientation to growth. 

Characteristics of Innovative Production Home Builders 53 
Growth itself is an important difference between these larger production builders and the smaller 

builders covered by the 2003 survey. Whereas nearly half of the smaller builders planned growth 

in profits of less than 5% per year, many of the corporate respondents among larger production 

builders reported aggressive plans for growth exceeding 10% per year. Companies with such 

aggressive growth plans were also more likely to be using building technology innovations. They 

include building technology innovation as one element in their plans to increase market share 

through increased quality, reduced call-backs, and higher performance. 

In terms of the likelihood of investing time and money over the next five years toward a variety 

of management and building technology objectives, the highest ratings were given to reducing 

construction defects and call-backs, improving subcontractor dependability, and improving the 

style and attractiveness of the homes the companies build. Investing in building technology and 

R&D are not seen as very likely means to improve 

market share, reinforcing the theme that building Given that many building technology 

improvements are invisible to the technology innovation has to be integrated into broader consumer, the successful innovator will 

business models oriented to customer service, need to be highly skilled in 

community design, and house design. Given that many communicating the benefits of a better 

building technology improvements are invisible to the quality product. Large production 

consumer, the successful innovator will need to be builders can also capture greater 

benefits from building technology highly skilled in communicating the benefits of a better innovation through partnerships with 

quality product. Large production builders can also manufacturers, purchasing incentives, 

capture greater benefits from building technology marketing strategies that emphasize 

innovation through partnerships with manufacturers, building quality and performance, and 

purchasing incentives, marketing strategies that customer service. 

emphasize building quality and performance, and 

customer service. 

Several emerging trends, particularly increasing energy costs, could significantly affect building 

technology innovation over the next ten to twenty years. Other trends include land costs and 

availability; labor costs, availability and quality; and competition from large national builders. 

Land costs and availability could push development inward within large, high growth 

metropolitan areas to find opportunities for building more densely. Production builders going 

“vertical” in the development of midrise and high rise residential buildings could create new 

opportunities for technology innovation and could facilitate the migration of building 

technologies from commercial construction to residential construction. 

Fundamental changes in the diffusion of These companies and some regional housing 

production companies have the capital, talent, innovative building technologies could result 

and size to develop business strategies that allow from the confluence of these trends with the 

them to exact first-mover advantages from recent emergence of large, national housing innovation. This will require new business models production companies. These companies and 

combining building technology innovation with

some regional housing production companies builder-manufacturer partnerships, knowledge 

management, open innovation, marketing, and have the capital, talent, and size to develop 

customer service in order to build, sell, and business strategies that allow them to exact firstservice a higher quality house. mover advantages from innovation. This will 

require new business models combining building 

technology innovation with builder-manufacturer 

54 Characteristics of Innovative Production Home Builders 
partnerships, knowledge management, open innovation, marketing, and customer service in order 

to build, sell, and service a higher quality house. 

Recommendations 

The diffusion of innovative building technologies could be positively impacted if large builders: 

 Form partnerships with manufacturers that could increase the benefits and reduce the 

risks associated with innovation. 

 Provide adequate technology support, incentives, communications, and knowledge 

management to foster innovation at regional and local operational levels. 

 Provide inhouse R&D expertise and support R&D efforts at the regional or local 

operational levels that could more readily track and adapt to emerging trends in all 

construction sectors. 

 Encourage technology champions. 

 Use technology innovation as part of a marketing strategy, finding better ways to 

communicate the benefits of using innovative technologies to consumers. 

 Align the criteria and financial incentives motivating purchasing decisions at the regional 

and local levels with the company’s building technology goals. Firms could bundle 

technology innovation with broader company business strategies such as increasing 

quality, reducing call-backs, and improving performance. 

While these recommendations address industry concerns, there are additional needs in 

scholarship that this study might also recommend. In the literature review, more detailed lists of 

research gaps are provided but specific priority areas for study that this work’s findings point to 

include: 

 The role of technology champions in large production home building companies. 

 The role of R&D and A&D departments in identifying, testing, and vetting innovations. 

 The role of purchasing departments in identifying and choosing building technologies 

and materials. 

 The impact of investment markets on technology innovation by large, publicly-traded 

production home builders. 

 The development of knowledge management to identify, evaluate, deploy, and exploit 

technology innovations. 

 The development of partnerships between builders, manufacturers, and suppliers in 

identifying, testing, deploying, and marketing technology innovations. 

Characteristics of Innovative Production Home Builders 55 
 The evolution of business models that bundle technology innovation, building quality, 

marketing, and customer service. 

In pursuing these industrial and intellectual initiatives, a wider understanding and, in turn, 

opportunity for technological innovation is likely to emerge. 

56 Characteristics of Innovative Production Home Builders 
APPENDIX A. RESEARCH METHODOLOGY 

Characteristics of Innovative Production Home Builders A-1
Research Methodology 

The project team consisted of Ted Koebel and Marilyn Cavell of Virginia Tech, Ed Hudson of 

the National Association of Home Builders Research Center (NAHBRC), and Candace Mandel 

of Market Insights. The first course of action in carrying out the project was to conduct a 

literature review of diffusion in the construction industry. The procedures for execution of a 

national survey of large production builders were then established. To help prepare for the 

national study, personal interviews with contacts representing large production builders were 

conducted. Based on the literature review and the personal interviews, questionnaires were 

designed to find out how large production builders make decisions to use new building products, 

materials, and practices. Following pre-testing of the survey instrument, a large national mailing 

was carried out and the information collected was processed. Based on preliminary results, 

points needing clarification were established. Additional questions that would give a qualitative 

perspective to the quantitative data from the survey were formulated and several personal 

interviews with respondents who showed high interest in innovation were conducted. With a 

better perspective of the quantitative results, a more indepth analysis of the data from the 

national survey was completed. The research methodology that was followed is discussed below. 

• Literature Review 

The current literature on technology diffusion in the construction industry was reviewed. The 

goal was to identify variables that affect the adoption decision and the adoption process of 

innovative technologies by large production builders. Since the study would be the first related to 

innovation to focus solely on large production builders, there was particular interest in reviewing 

the literature that discussed size as a factor. Although size is very often taken into consideration 

in technology adoption studies, conflicting views as to its impact on the construction industry 

show the need for further study. 

The information gained from the literature review was used to develop the survey instrument. 

For example, Cantrell and Hudson (2004) reported that two surveys conducted by NAHBRC led 

to some generalizations about large builders and their propensity to try particular technologies. 

The information on market penetration from those surveys was used in forming a question on use 

of specific technologies. In addition to using the literature review to help develop the survey 

instrument, the review of information for this report was summarized. 

• Pre-survey Interviews 

In order to better understand the target respondents and to formulate questions that would 

provide information most beneficial to the project goal, personal interviews with a few 

representatives of large production builders were arranged. The January 2005 NAHB 

International Trade Show in Orlando was used as a forum. Attendees from the top 400 builders 

(the sample for this study) were identified and called prior to the Show to attempt to arrange an 

interview. Eight interviews (Director of Purchasing, VP for Construction, President, Secretary/ 

Treasurer, Strategic Operations Manager for Construction and Purchasing, Construction 

Manager, and two Area Managers) were conducted. In addition to asking what position in the 

company might best be able to answer the survey (VPs for Purchasing and Construction were 

A-2 Characteristics of Innovative Production Home Builders 
most often suggested) and gathering information for developing and refining the survey 

instrument, the representatives were asked how their company handled innovation technologies 

and processes. 

• Questionnaire 

A questionnaire was designed that would provide information about how large production 

builders make decisions about using new technologies and materials. It was determined that large 

production builders would have a corporate headquarters office and field or operations offices. 

Not knowing where decisions regarding innovation are made and wanting to explore 

relationships between the corporate and operations level offices, two versions of the 

questionnaire, one targeted for corporate level offices and one for operations level offices were 

created. 

The corporate questionnaire was divided into three parts: Part 1. New Building and Construction 

Products (asked about the company’s activities and the respondent’s personal opinions regarding 

new building and construction products, materials, and practices); Part 2. Use of New Building 

and Construction Products, Materials, and Practices (asked for information about the company’s 

adoption of specific new building and construction products, materials, and practices); and Part 

3. Corporate Characteristics (asked for basic information about the corporation as a whole). 

The operations questionnaire was divided into four parts beginning with a part unique to 

operations: Part 1. Characteristics of the Office Where You Work (asked for basic information 

about the operations level office); Parts 2, 3 and 4 were the same as Parts 1, 2 and 3 on the 

corporate questionnaire with only a few minor question differences. 

The questionnaires were formatted into 41⁄4 × 51⁄2 inch booklets. The corporate questionnaire was 

printed on ivory paper, whereas the operations questionnaire was printed on white paper (this 

was to help the researchers determine easily if a questionnaire was corporate or operations). The 

corporate questionnaire had a total of 25 questions, and the operations questionnaire had a total 

of 31 questions. For the most part, the respondents were asked to check a box or circle a number 

to indicate their response. Many of the questions consisted of a series of statements requiring the 

respondent to circle a number indicating the degree to which he or she felt a statement was 

important, influential, and so forth. The respondents were given the option to write comments at 

the end of the questionnaire and to provide an e-mail address for receiving a copy of the survey 

results. 

• Pre-test 

Key industry contacts were asked to provide names of VPs for Purchasing, Operations, or 

Construction for companies identified as large production builders. The executives identified 

were called and asked to pre-test the questionnaire. The questionnaires were mailed to four 

executives who agreed to participate with the understanding they would receive a follow up 

phone call to discuss any comments or concerns. After repeated attempts to complete the pre-test 

process, comments were received from one corporate executive. In addition, comments were 

received from three construction industry colleagues who completed both the corporate and 

operations questionnaires. 

Characteristics of Innovative Production Home Builders A-3 
• Sample 

The target respondents for the survey were large production home builders in the United States. 

“Large” builders were defined as builders producing over 200 single-family residential units per 

year from stock plans rather than custom designs. To assure achieving an adequate number of 

responses, the sample selected included all members from the NAHB membership list associated 

with the top 400 builders in the United States. The original sample provided by NAHBRC 

consisted of 1,750 members and multiple names associated with the top 400 builders. NAHBRC 

was asked to identify the top 100 corporate offices and provide phone numbers. The 100 

corporate offices were called to verify the address and get names and titles of key individuals 

(corporate VP for Purchasing or Construction or other person with knowledge of how decisions 

are made to use new building products and technologies). This process resulted in some 

replacement of names on the original sample list and addition of names. In addition, the records 

(N=54) associated with one builder who agreed to coordinate dissemination of the survey were 

removed. Rather than mailing questionnaires to members associated with that firm, one point of 

contact was used to secure its responses. After the adjustments to the sample list, the final sample 

consisted of 1,711 members (371 from corporate offices and 1,340 from operations level 

offices). 

• Data Collection Procedure 

To promote a satisfactory response rate, Dillman’s Total Design Method was used to conduct the 

mailed survey. Using the electronic file of the sample provided by NAHBRC, a master address 

data file was created in Microsoft Word and mail merge was used to produce personalized letters 

and mailing labels. The packet mailed to respondents contained a number of items that had to be 

carefully matched by respondent name and address. Along with the questionnaire, a cover letter 

explaining the purpose of the study was included which stressed the importance of participation 

and assured confidentiality of information. Each of the 1,711 letters was printed on Virginia 

Tech letterhead signed electronically by the project manager. A 9 × 6 inch brown business reply 

envelope printed with the Virginia Tech return address was included so that a respondent could 

return the completed questionnaire easily and at no expense. Each respondent was assigned a 

unique control number that was printed on the questionnaire, on the personalized cover letter, 

and on the business reply envelope. All of the above components were put into a 9 1⁄2 × 6 1⁄2 inch 

brown envelope and the respondent’s personalized mailing label was affixed. The envelope was 

then sent to the respondent by first-class U.S. mail. 

As completed questionnaires were returned, the control number was recorded so that no 

additional mailings would be sent to those who had already responded. The control numbers of 

those packets returned as undeliverable were also recorded to ensure that no additional mailings 

would be sent to faulty addresses. For any packet that was returned with forwarding information 

(N=49), the address was updated on the master address data file and the respondent was sent a 

new questionnaire. 

Two weeks following the first mailing, a reminder postcard was mailed to those who had not yet 

responded. Two to three weeks following the postcard, a second copy of the questionnaire (in 

case the recipient had misplaced the original or never received it) was mailed to those who had 

not yet responded along with a personalized letter and a business reply envelope. In the cover 

A-4 Characteristics of Innovative Production Home Builders 
letter included in the second mailing, the respondent was offered a choice to either complete the 

questionnaire and return by mail or access an online version and complete the questionnaire 

electronically (an electronic version of the questionnaire was created in hopes of improving the 

response rate). 

Reacting to slow mail returns, an online version of both the corporate questionnaire and the 

operations questionnaire was developed as an alternative and faster method of responding. 

Corporate and operations respondents each had their own Web site containing their version of 

the questionnaire. In the cover letter of the second mailing, a URL address to access the online 

questionnaire along with a unique ID for the respondent to enter once at the site was provided. 

The online versions were nearly identical to the hard copy questionnaires and required the 

respondent simply to click on the appropriate answer and submit. The Web site was periodically 

checked for returns and the information was downloaded into a data spreadsheet (Excel). 

Approximately six weeks into the data collection process, respondents were called and asked to 

complete the survey by phone interview. No operations respondents were contacted for phone 

interviews. Corporate respondents in the top 100 companies were targeted since a correct phone 

number and contact name for this group had already been determined. If a top 100 company had 

more than one contact name, one name was chosen to contact. Also, any company that had 

already responded was removed from the list. The initial call list included 76 respondents. A 

detailed phone protocol was produced so that the telephone interviewer would be ready for any 

situation. The caller first asked the contact to complete the survey over the phone. If the contact 

did not have the time, the caller asked for an e-mail address so that instructions for responding 

online could be sent. The survey (excluding some questions) was streamlined for the telephone 

interviews to keep the phone interview time commitment to a minimum (approximately 20 

minutes). To increase the likelihood of the contact agreeing to a phone interview, an incentive of 

$25 was offered. The call list was later expanded to include corporate contacts from smaller 

companies. 

• Post-survey Personal Interviews 

To augment the quantitative data collected through the mail survey, online survey, and phone 

interviews, personal interviews were conducted with respondents identified as having high 

interest in innovation. Using variables from the mailed survey that indicated an interest in 

innovation, an index was created and an innovation score was calculated for each respondent. A 

subset of respondents with scores indicating high interest in innovation was created and those 

respondents identified were contacted in an attempt to set up personal interviews. Three 

respondents agreed (one from the mid-Atlantic region, one from the Northeast, and one from the 

Midwest). Two represented companies that were top 10 builders, and one represented a company 

that was closer to a top 100 builder. After establishing questions about issues needing 

clarification, those questions were shared with the respondents prior to visiting their company. 

The indepth interviews resulted in qualitative information that provided valuable perspective to 

the survey data. 

Characteristics of Innovative Production Home Builders A-5 
• Responses 

The total number of responses was 84, 42 corporate and 42 operations (the equal N’s was only 

coincidental). Of the 1,711 questionnaires mailed to large production builders, 47 completed 

questionnaires were received through the mail and four were completed online for a total of 51 

responses. However, three had to be eliminated because the company did not fit the definition of 

a large production builder, resulting in 48 useable responses. In addition, 14 completed 

questionnaires were received from the firm who agreed to coordinate dissemination internally 

(13 from operations and one from corporate). An additional 22 completions (a shortened version) 

were obtained from the phone survey: 15 responses resulted directly from the phone interviews, 

and an additional seven responses resulted from online completions by respondents who 

provided an e-mail address through the phone contact and were subsequently sent information 

necessary for completing the questionnaire online. 

The response rate for the survey was 6% (70/1,205). In calculating the response rate, the fact that 

38 questionnaires were returned not completed with the respondent saying their company was 

not a large production builder was taken into consideration. Also taken into consideration were 

the 468 questionnaires that were returned as undeliverable. There were 1,205 potential returns 

after subtracting 506 from the original sample of 1,711. There were 70 completed returns after 

subtracting the 14 completions from the firm who agreed to coordinate dissemination internally 

from the 84 total responses. 

Electronic files were prepared containing the names and addresses of returned surveys and were 

sent to NAHBRC for updating the NAHB member list. The rate of undeliverable surveys (27%) 

was unexpected and unexplained. Ordinarily about 10% would be expected to be returned as 

undeliverable. A file containing the names and addresses for surveys that were returned by 

respondents indicating that their company was not a large production builder (N=38) was 

prepared and forwarded to NAHBRC. A file containing the names and addresses for surveys that 

were returned as undeliverable (N=468) was prepared and forwarded to NAHBRC. A file 

containing the names and addresses for surveys that were returned by the U.S. Post Office with a 

forwarding address (N=49) was also prepared. The file prepared included both the original 

address and the updated address and was forwarded to NAHBRC. 

• Analysis 

A master codebook for both the corporate and operations questionnaires was created and used as 

a guideline for entering data into a data spreadsheet (Excel). The questionnaires were designed to 

facilitate coding of the data, so most questions were “precoded,” meaning a number was 

provided as an answer. For questions that did not have a number answer, a number was assigned 

for coding purposes. The data were entered into a spreadsheet directly from each questionnaire. 

The data from each questionnaire were entered a second time and compared for errors. After a 

thorough check, the data from the spreadsheet were imported into a format for statistical analysis 

(SPSS PC). 

A slight modification to the online data was implemented make it consistent with data from the 

hard copy returns for both corporate and operations. The online data were incorporated into the 

corporate and operations database containing data from the mailed-back questionnaires. The 

A-6 Characteristics of Innovative Production Home Builders 
information obtained from the phone interviews was recorded on a shortened hard copy 

questionnaire. The responses from the telephone interviews were coded into a form consistent 

with the data from the original corporate questionnaire. The phone data were then incorporated 

into the corporate database containing data from the mailed-back questionnaires. 

Once the data from all sources had been entered, statistical software was used to run frequencies 

on all the variables. Frequencies were run separately for the corporate responses, the operations 

responses, and combined corporate and operations responses. For all three sets, cross-tabulations 

(two-way tables comparing variables) were preformed on selected variables. 

New variables from existing variables were created to provide measures of innovation. A key 

variable created was based on the number of innovative specific products respondents reported 

having tried or were currently using. Early-stage innovation products were defined as those 

having low market share penetration (approximately 25% or lower) as determined by the overall 

percent of respondents who had tried or were currently using the products. Four products met the 

criteria for early-stage innovation (Structural Insulated Panels or SIPs, Pre-cast concrete 

foundation walls, Enterprise Resource Planning Software, and GPS land tracking). Respondents 

were categorized into three levels of innovation, ranging from those who had never tried nor 

were currently using any of the four early-stage products, those who reported having tried or 

were currently using one early-stage product, and those who reported having tried or were 

currently using two to four early-stage products. Cross-tabulations were run for the categorical 

variable representing use of early-stage products with other measures in the study, calculating the 

chi-square statistic as a measure of association. 

Multivariate linear regression was performed with several sets of independent variables to 

identify the variables having the best association with a weighted index of innovation. A 

weighted index was created based on the adoption penetration of specific products reported by 

respondents as having tried or currently using and the number of those products the respondents 

had tried or were currently using. As reported earlier, early-stage innovations were defined as 

those having low market share penetration (25% or lower) as determined by the overall percent 

of respondents who had tried or were currently using the products. Respondents were assigned a 

weight of 4 for using an early-stage product. Middle-stage innovations were defined as those 

products having market penetration of 33% to 68% and respondents were assigned a weight of 1 

for using a middle-stage product, of which there were five. Finally, late-stage innovations were 

defined as those products having market penetration greater than 68% and respondents were 

assigned a weight of 0 for using a late-adoption product, of which there were two. If a 

respondent had never used a product, the product was assigned a weight of 0. The innovation 

index was created by adding the weighted values for the eleven specific products, resulting in a 

maximum score of 21. 

To bring perspective to this study, responses were compared to those of a similar earlier study 

targeting small to midsize builders (Koebel et al. 2003). The data set from the 2003 study had an 

N=216 after removing respondents that met the definition of large builder for the current study 

(building 200 or more residential units per year). This ensured that the comparison would be 

between small and large builders. Frequencies and cross-tabulations were run to explore 

differences. 

Characteristics of Innovative Production Home Builders A-7 
APPENDIX B. CORPORATE QUESTIONNAIRE 

B-1 Characteristics of Innovative Production Home Builders 
Characteristics of Innovative Production Home Builders B-2 
B-3 Characteristics of Innovative Production Home Builders 
Characteristics of Innovative Production Home Builders B-4 
B-5 Characteristics of Innovative Production Home Builders 
Characteristics of Innovative Production Home Builders B-6 
B-7 Characteristics of Innovative Production Home Builders 
Characteristics of Innovative Production Home Builders B-8 
B-9 Characteristics of Innovative Production Home Builders 
APPENDIX C. OPERATIONS QUESTIONNAIRE 

Characteristics of Innovative Production Home Builders C-1 
C-2 Characteristics of Innovative Production Home Builders 
Characteristics of Innovative Production Home Builders C-3 
C-4 Characteristics of Innovative Production Home Builders 
Characteristics of Innovative Production Home Builders C-5 
C-6 Characteristics of Innovative Production Home Builders 
Characteristics of Innovative Production Home Builders C-7 
C-8 Characteristics of Innovative Production Home Builders 
Characteristics of Innovative Production Home Builders C-9 
C-10 Characteristics of Innovative Production Home Builders 
Characteristics of Innovative Production Home Builders C-11 
APPENDIX D. DESCRIPTION OF TECHNOLOGIES/BUILDING 

PRODUCTS 

D-1 Characteristics of Innovative Production Home Builders 
Technologies Referenced in Table 1 (Corp Q10, Operations Q19) 

Structural insulated panels (SIPs): Structural panels consisting typically of a rigid foam core sandwiched by two 

structural wood panels, such as oriented strand board or plywood. SIPs may constitute the load-bearing floors, walls, 

and roofs of homes. 

Laminate flooring: Flooring typically consisting of a medium or high density fiberboard base that incorporates a 

transparent wear layer, a decorative layer that typically resembles wood, and a moisture-resistant backing. Laminate 

flooring is generally installed as a “floating” floor—not attached with nails or glue to the floor. 

Spray Foam Insulation: Using special equipment, a liquid polymer is sprayed into open cavities of walls, ceilings, 

or floors to provide the primary insulation for a home. The liquid quickly expands into foam to fill voids and provide 

an insulated, air-tight building assembly. 

Pre-cast concrete foundation walls: Basement or crawlspace walls consisting of factory-cast, concrete wall 

elements with steel-reinforced wall studs, top beam, and integral footing that are delivered to the job site and set into 

place to form permanent foundation walls. 

Enterprise Resource Planning software: An information technology tool that integrates all facets of business— 

planning, manufacturing, sales, and marketing—into a single platform. ERPs typically incorporate the functions of 

inventory control, customer service, financing, and human resources. 

Factory-built wall or floor panels: Wall or floor assemblies using light-frame building materials; the panels consist 

of framing with attached sheathing and are assembled in a factory and delivered to the construction site. The panels 

are set in place with the aid of a light crane. 

Wood/plastic Composite Exterior Trim: Exterior trim and molding materials that are made from a mixture of 

recycled or virgin plastic and waste wood fiber extruded into solid lineals that resemble wood. 

Cellular PVC exterior trim: Exterior trim and molding materials that consist of foamed or cellular PVC and are 

either molded or extruded into solid shapes or boards. 

GPS land tracking: A Global Positioning System uses a satellite triangular to find a global position or a particular 

location point. GPS is often used in conjunction with Geographic Information Systems for mapping purposes. 

Web-based scheduling: Software system that uses a Web site as the communications hub for managing the 

scheduling of the construction project, including home builder and subcontractor activities. 

Wood I-joist structural floors: Sometimes called “wood I-beams,” this engineered wood structural member 

consists of a thin oriented strand board (OSB) web material with natural lumber or laminated veneer lumber (LVL) 

top and bottom flanges. The wood I-joist is most often used in place of 2 × 10 and 2 × 12 lumber joists. 

Handheld PCs or PDAs for project scheduling & management: Use of handheld PCs or PDAs, which are linked 

(typically) via wireless communications to a central computer database, by construction project staff to access realtime project status updates and communications. 

Characteristics of Innovative Production Home Builders D-2 
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