Pinkse Dommisse (2008) BSE definitief

Copyright © 2008 John Wiley & Sons, Ltd and ERP Environment
*Correspondence to: Dr. Jonatan Pinkse, University of Amsterdam Business School, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands.
E-mail: j.m.pinkse@uva.nl
Business Strategy and the Environment
Bus. Strat. Env. (2008)
Published online in Wiley InterScience
(www.interscience.wiley.com) DOI: 10.1002/bse.615
Overcoming Barriers to Sustainability:
An Explanation of Residential Builders’ Reluctance
to Adopt Clean Technologies
Jonatan Pinkse1
* and Marcel Dommisse2
1
University of Amsterdam Business School, The Netherlands
2
ENECO Energie, The Netherlands
ABSTRACT
The construction industry has great opportunities to significantly reduce CO2 emissions by
improving the energy efficiency of residential buildings. However, in this industry, diffusion
of cost-effective clean technologies has been notoriously slow and below potential. This
paper sheds light on factors that explain why construction companies have been reluctant
to adopt energy-efficient technologies. It questions why some companies have intensified
their investments in clean technologies, while others are lagging behind. Based on a mul-
tiple case study of four Dutch building contractors, the paper shows that contractors that
actively gather information and build internal technical capacity are keener on adopting
energy-efficient technologies. Findings also reveal that it will be a major challenge for the
construction industry to communicate the advantages of clean technologies to (potential)
home buyers and create market demand. Copyright © 2008 John Wiley & Sons, Ltd and
ERP Environment.
Received 10 September 2007; revised 28 January 2008; accepted 29 January 2008
Keywords: clean technology; energy efficiency; sustainability; construction industry; dynamic capabilities; stakeholders
Introduction
W
ITH GLOBAL CLIMATE CHANGE GAINING MOMENTUM, THERE IS MUCH ATTENTION TO CUTBACKS IN ENERGY
consumption to reduce carbon dioxide (CO2) emissions. Regarding how emission reductions are
achieved, management research has particularly focused on the industrial sector by looking at climate
change activities of energy-intensive companies that operate in the oil & gas, automotive and electric-
ity industries (Jeswani et al., 2008; Kolk and Levy, 2004). However, a recent study by the McKinsey Global Insti-
tute (MGI, 2007) revealed that particularly in the residential sector – responsible for approximately one-quarter of
global energy use – there are large opportunities to significantly reduce CO2 emissions by improving energy effi-
ciency. According to the McKinsey study, this sector not only has the largest potential to improve energy efficiency,
but can achieve this by adopting already existing – ‘off-the-shelf’ – technologies. The reason for adoption to be
below potential is a slow diffusion of cost-effective energy-efficiency technologies (Jaffe and Stavins, 1994), caused
by various market barriers (Howarth and Andersson, 1993). In the construction industry, the most pressing market

J. Pinkse and M. Dommisse
Copyright © 2008 John Wiley & Sons, Ltd and ERP Environment Bus. Strat. Env. (2008)
DOI: 10.1002/bse
barrier has been a classic principal/agent problem: the home builder that makes the investment in the energy-
efficient technology has no interest in doing so because the benefit – a lower utility bill – is for the end-user of
the building (Shama, 1983; Howarth and Andersson, 1993; Jaffe and Stavins, 1994; MGI, 2007). Recently, however,
green building initiatives have come to the forefront as well (Pernick and Wilder, 2007), meaning that some con-
struction firms are trying to circumvent these market barriers, as they expect to gain from technological innovation
and realize a firm-specific advantage in clean building technologies.
With this paper we aim to shed more light on the factors that determine how contractors deal with technologi-
cal change concerning energy-efficient technologies for residential buildings. We question why some contractors
seem able to develop a firm-specific advantage by building dynamic capabilities in adopting clean technologies,
while others do not break free from the carbon-intensive technological lock-in in which they find themselves
(Unruh, 2000). Based on a dynamic capability framework we argue that the adoption of energy-efficient tech-
nologies is an interplay between existing knowledge, capabilities and managerial processes (Helfat, 1997; Teece
et al., 1997) and the way firms integrate stakeholder interests (Sharma and Vredenburg, 1998; Aragón-Correa and
Sharma, 2003). To examine the process of energy-efficient technology adoption we have conducted a multiple case
study in the Dutch construction industry, comparing and contrasting four contractors: two of which have expressed
their intention to invest in green building, and two others that have not done so. Before turning to the analytical
framework and empirical findings of the case studies, we will first briefly discuss the background of the adoption
of energy-efficient technologies in the Dutch residential building industry.
Dutch Residential Builders and Energy Efficiency
A recent report of the European Commission on the environmental impact of products showed that in Europe
space heating and hot water production are among the most harmful, particularly in their impact on global climate
change (EC, 2006). Nevertheless, this report also concluded that there is much room for improvement in reducing
the environmental impact of the residential sector. In the Netherlands, the largest improvement can be made by
replacing the dominant technology for space heating and hot water production: the ‘high-efficiency gas condensing
boiler’. These boilers use natural gas, which is not surprising, since due to the presence of local natural gas fields
energy supply in the Netherlands is dominated by natural gas (Beerepoot and Beerepoot, 2007). Although their
efficiency has improved considerably over the past three decades, these boilers still rely on a carbon-rich fossil
fuel.
Main alternatives for the gas condensing boilers are solar boilers and heat pumps, which can both completely
replace the gas condensing boilers.1
However, as the latest figures show, in 2006 solar power’s total contribution
in preventing the use of fossil fuels was 787 TJ, just about 1% of total Dutch sustainable energy supply; while the
contribution of heat pumps was 2566 TJ, approximately 3% of the total sustainable energy supply. Moreover,
whereas the number of heat pumps installed each year shows an increasing trend, this has not been the case with
solar boilers, where the added number has been declining due to the abolishment of a subsidy on their installation
(CBS, 2007). It thus seems that the adoption of energy-efficient technologies in the Dutch residential market
has hardly increased, even though they can contribute significantly to reducing CO2 emissions (Beerepoot and
Beerepoot, 2007). In other words, the industry clearly reflects a carbon lock-in (Unruh, 2000), as dominance of
the gas condensing boiler stands in the way of more widespread adoption of clean alternatives.
However, the institutional landscape for the promotion of energy efficiency in residential buildings has been
changing considerably. In 1995 the Dutch government implemented energy performance regulations that set a
norm on the energy performance coefficient (EPC) of a building, which can be met by adoption of energy-efficient
technologies or improved insulation. Over the past decade this EPC regulation has been tightened regularly (Beer-
epoot and Beerepoot, 2007), most recently at the start of 2006. On top of this, in 2003 the European Commission
passed the Energy Performance of Buildings Directive, which lays down that all EU member states have to imple-
ment a policy requiring a certificate for new buildings that shows their energy performance (EC, 2003). For the
1
Another way to improve energy efficiency of residential buildings is to intensify the use of insulation materials. In this paper, however, we
focus on the adoption of technologies for space heating and hot water production.

An Explanation of Residential Builders’ Reluctance to Adopt Clean Technologies
DOI: 10.1002/bse
Netherlands, this means that from 1 January 2008 onwards each new building requires an energy performance
certificate. Alongside these regulatory changes, public awareness of the climate change issue seems to have
increased as well, putting further pressure on the building sector to improve its ‘green’ credentials. Yet, whether
the building industry is receptive to these institutional changes is open to discussion, because it has a longstand-
ing reputation for being conservative (Toole, 1998; Kolk and Pinkse, 2006) and is known for a path-dependent
technology trajectory. This means that, technologically, the industry only changes incrementally over time, and
which path is followed depends much on a company’s particular history, which in this industry most often reflects
a strong attachment to familiar technologies (Beerepoot and Beerepoot, 2007).
Slow diffusion of technologies in the building industry has been attributed to the specific structure of the indus-
try and characteristics of its environment (Beerepoot and Beerepoot, 2007). The structure of the building industry
is complex because contractors are mostly engaged in temporary projects, often of a unique character (Miozzo and
Dewick, 2002). What is more, for each project they interact with a huge number of stakeholders, such as architects,
construction engineers, material suppliers, and subcontractors, who differ per project (Pries and Janszen, 1995).
As a result, it is problematic for contractors to build up knowledge that extends beyond the individual projects
(Miozzo and Dewick, 2002). Another consequence is that contractors are subject to a high degree of uncertainty.
Because they interact with a wide variety of stakeholders and operate in a strongly regulated market, they often
lack the information necessary to make decisions about the adoption of new technologies (Toole, 1998). Another
source of uncertainty is that consumer preferences are not well known, because in the Netherlands residential
buildings are not often commissioned privately (Beerepoot and Beerepoot, 2007). It will come as no surprise, then,
that one way of responding to uncertainty is to be reluctant vis-à-vis unfamiliar technologies and to postpone the
adoption until more information is available (Toole, 1998), which in the case of energy-efficient technologies could
explain the carbon lock-in (Unruh, 2000).
Analytical Framework
Over the past two decades, the residential building industry clearly has had difficulty in adopting energy-efficient
technologies. Nevertheless, this industry increasingly faces pressure to take sustainability into account. In this
paper, we argue that the adoption of clean, energy-efficient technologies depends on the ability of contractors to
develop dynamic capabilities for this purpose. The essence of a dynamic capability is that it enables a firm to adapt,
integrate and reconfigure its organizational competences and resources to maintain a fit with a changing business
environment (Teece et al., 1997). It not only refers to the competence of developing technological expertise for
process improvement or product development through research and development (R&D) (Helfat, 1997), but also
to managerial processes (Eisenhardt and Martin, 2000). Successfully managing sustainability is a typical example
of a dynamic capability because it requires a path-dependent accumulation of institutional and technological
knowledge and integration of diverse stakeholder interests (Aragón-Correa and Sharma, 2003; Russo, 2008).
A question then is what kind of dynamic capabilities the adoption of an energy-efficient technology requires
from a contractor. Adoption of energy-efficient technologies clearly does not involve developing the technologies
itself through R&D, as they are ‘off the shelf’. Nevertheless, it does require a build-up of knowledge about where
to acquire, and how to adopt, these technologies. Much of the uncertainty about technology adoption comes from
a lack of information, which makes the skill of gathering missing information valuable (Toole, 1998; Tushman
and Nadler, 1978). However, being able to gather information about the adoption of new technologies alone is not
enough. It becomes a dynamic capability only when complemented by related knowledge already owned by a
company (Helfat, 1997), because this enables it to process new information (Tushman and Nadler, 1978). Yet,
when a company’s knowledge base is not complementary, it can have a negative influence on technology adoption
as well, by actually reinforcing the technological lock-in (Könnöla and Unruh, 2007). We therefore argue that
contractors need to be able to gather information from various stakeholders and their own complementary knowl-
edge to process the information internally (Toole, 1998; Tushman and Nadler, 1978).
After acquiring a technology, the next difficulty is integrating new technologies into the project-based structure,
characteristic for the construction industry. The dynamic capability that this requires is architectural innovation
(Henderson and Clark, 1990). Architectural innovation refers to a change in the way in which different components

DOI: 10.1002/bse
that together form a product are integrated and connected. It is usually initiated by a change in one of the com-
ponents (in our case the heating and hot water production of a residential building), but the core design of the
product as a whole stays the same (Henderson and Clark, 1990). Originally, architectural innovation was under-
stood as a change in product architecture, but it has been argued that it also entails a change in product develop-
ment, meaning that the role of stakeholders in the innovation process changes in such a way that each
stakeholder’s technical capabilities are utilized optimally (Bozdogan et al., 1998). Architectural knowledge is,
therefore, of great value for contractors because of the complexity of the project-based mode of production and the
many stakeholders involved (Miozzo and Dewick, 2002). Adopting new energy-efficient technologies will mean
that stakeholders that are already part of the production process will also be affected and new stakeholders will be
drawn in. Consequently, we argue that contractors that have more architectural knowledge – either in house or
through relationships with external architects – about the building process and are thereby able to win over their
existing stakeholders as well as integrating new stakeholders (Sharma and Vredenburg, 1998) are more likely to
succeed.
For the development of a dynamic capability in adopting energy-efficient technologies, gathering information
from stakeholders and managing their interests form essential components. However, this argument rests upon
the assumption that the contractor is always in the position to control its stakeholders, which is not always the
case. A contractor itself also depends on its stakeholders for resources and information, which enables these
stakeholders to influence or control firm behaviour (Frooman, 1999; Jawahar and McLaughlin, 2001). In other
words, by influencing contractors, stakeholders can be the initiators of dynamic capability development in the
sector. There are two ways for stakeholders to exert influence: a withholding strategy, where they stop supplying
a resource, or a usage strategy, in which case stakeholders continue to provide the resource, but raise conditions
about its use (Frooman, 1999). Because stakeholders with valuable resources have considerable power, contractors
make a selection as to which stakeholders they give prominence, and are inclined to favour the more powerful
stakeholders as they form the greatest threat to their business (Jawahar and McLaughlin, 2001; Madsen and Ulh∂i,
2001). However, stakeholders that own resources that are crucial for accomplishing the whole building process
are not necessarily also the ones supportive of the adoption of energy-efficient technologies. Three stakeholders
have been identified as crucial for the adoption of technologies in the construction industry: home buyers, local
governments and subcontractors (Toole, 1998). How much power these groups have vis-à-vis contractors and
whether they will be initiators or destroyers of initiatives for energy efficiency is open to discussion.
Research Methodology
For this study we used a case methodology analysing four Dutch contractors. The Dutch building industry consists
of a large number of small contractors and a few bigger players (Beerepoot and Beerepoot, 2007). In our study we
wanted to particularly focus on diversity regarding contractors’ position on energy-efficient technologies. For this
reason, we explicitly looked for contrast on this dimension in sampling our case companies. We first selected two
contractors – Fortis Vastgoed Ontwikkeling and Bouwfonds MAB Ontwikkeling B.V. – that are members of a
business association supporting the adoption of clean technologies (Projectgroep Duurzame Energie Projec-
tontwikkeling Woningbouw2
(DEPW)). The other two cases that were selected – BAM Woningbouw B.V. and
Ballast Nedam Bouw B.V. – are contractors of similar size, but did not publicly support the adoption of energy-
efficient technologies. Table 1 gives an overview of the four contractors that participated in the study, also showing
the number of residential buildings they produced in 2006, and how many were equipped with energy-efficient
technologies.
In the study we analysed archival data and conducted interviews with key informants (two per case). In the first
phase, we collected (annual) financial reports and sustainability reports, and consulted the websites of the case
companies. The aim was to sketch a general picture of the contractors, and identify their motivation for sustain-
ability initiatives. In addition, it provided a background to make sense of the findings from the semi-structured
interviews that were conducted in the second phase of the study (in the first few months of 2007). For the
2
For more information see http://www.depw.nl

DOI: 10.1002/bse
semi-structured interviews we compiled a list of topics based on our analytical framework, to enable a cross-case
comparison. The interviews nevertheless also preserved an open character, allowing new dimensions not identified
in the analytical framework to evolve. On average the interviews lasted about 75 minutes, were digitally recorded
with a voice-recorder and took place at the interviewees’ companies. We analysed the documents and interview
data using a qualitative data matrix with the theoretical dimensions from our framework and dimensions that
evolved from the interviews on the vertical axis, and the case companies on the horizontal axis (Miles and Huber-
man, 1994). We first scrutinized the data for each case separately to subsequently use these findings for a com-
parative analysis across the cases.
Findings from the Case Studies
In this section we present the findings of our analysis. We will first briefly introduce the case companies and their
general approaches towards energy-efficient technologies. Next, we will look into what view they have about recent
trends in the Dutch building industry and how attention to energy efficiency fits into these trends. Subsequently,
we will focus on the dimensions identified in our analytical framework, that is, how contractors acquire knowledge
about energy-efficient technology adoption, what impact it has on existing business processes and which stake-
holders influence the adoption process. We will use the framework not only to shed light on explanations for home
builders’ reluctance to adopt energy-efficient technologies, but also to clarify how some contractors have overcome
this reluctance.
Overview of Case Companies
Fortis Vastgoed Ontwikkeling N.V.
Fortis Vastgoed Ontwikkeling (VO) is owned by the insurance branch of international financial service provi-
der Fortis. Fortis VO consists of three business units – residential building, acquisition and commercial real estate
– but in this study we focus only on the residential building unit. As Table 1 shows, this contractor produced 1500
residential buildings in 2006, but none were equipped with energy-efficient technologies. The rationale is that,
although there is internal support for energy-efficient technologies, adoption does not add value because custom-
ers do not demand such technologies. Nevertheless, this contractor does identify a change in the market in favour
of energy efficiency, on account of the recent tightening of the Dutch energy performance coefficient (EPC) regu-
lation, change in local government energy policy and rising customer demand for more comfort (i.e. cooling in
periods of hot weather). Still, so far, this market change has not led to adoption by Fortis. Important for the reluc-
tance to adopt energy-efficient technologies is the conviction that it will adversely affect the way Fortis VO manages
building projects. Because Fortis VO has limited internal knowledge about energy efficiency, this contractor will
need to rely on new external actors, which means additional risk. Only local governments could convince
Fortis otherwise, but their influence depends greatly on whether they own the building ground, or not. Never-
theless, Fortis VO claims to have several projects in preparation in which they intend to adopt energy-efficient
technologies.
Case Constructor Number of
interviews
Member
DEPW
Houses produced
2006
Clean technology
adoption 2006 (%)
1 Fortis Vastgoed Ontwikkeling N.V. 2 no 1500 0
2 Bouwfonds MAB Ontwikkeling B.V. 2 no 8000 1.9
3 BAM Woningbouw B.V. 2 yes 2400 15
4 Ballast Nedam Bouw B.V. 2 yes 1384 50
Table 1. Overview of cases and interviews
Source: annual reports of case companies and interview data.

DOI: 10.1002/bse
Bouwfonds MAB Ontwikkeling B.V.
Bouwfonds MAB Ontwikkeling is one of the leading contractors for residential building in the Netherlands. It is
an old player in the Dutch residential building market that has been active for more than 60 years. Since 1 Decem-
ber 2006 it has been part of Rabobank, one of the largest Dutch banks. Bouwfonds is made up of three business
units – residential building, multifunctional projects and commercial real estate – but our study only looks at
residential building, Bouwfonds’ largest business unit. The total number of residential buildings that were pro-
duced in 2006 amounted to 8000, but only a few – 1.9% – were equipped with energy-efficient technologies (see
Table 1). Adopting energy-efficient technologies was not an initiative of Bouwfonds, but was a result of local gov-
ernments’ stricter energy policies. If government regulation on green building does not become more stringent,
Bouwfonds will not choose large-scale adoption of energy-efficient technologies. The reason is that acquiring build-
ing ground is this contractor’s core competency, not the technological aspects of project development. Accordingly,
Bouwfonds does not have employees with knowledge and expertise about the adoption of energy-efficient tech-
nologies. Besides, adoption would mean that Bouwfonds had to provide its customers with information in a dif-
ferent way, leading to a rise in communication costs. Apart from local governments, influential stakeholders for
Bouwfonds are financial and business development managers, who will only choose clean technologies when they
improve the financial performance.
BAM Woningbouw B.V.
BAM Woningbouw is a fully owned subsidiary of Koninklijke BAM Groep N.V., which is the market leader in the
Dutch construction industry. BAM was established in 1869 and is the oldest construction company in the Neth-
erlands. At the group level, BAM has launched ten themes regarding corporate social responsibility, of which
energy/climate change is one. This is reflected in BAM’s involvement in several project groups on energy transi-
tion in the built environment. In 2006, BAM Woningbouw realized 2400 residential buildings (see Table 1).
Currently, about 15% have energy-efficient technologies implemented, but the contractor claims that this will grow
to approximately 25% in the next two years. One reason why BAM has decided to increase adoption of energy-
efficient technologies is their belief that the public has become aware of global climate change, combined with
initiatives on this by local governments. This has been set up from within the internal organization, but pre-
dominantly with a marketing approach. This contractor draws on external actors for the technological aspects of
energy efficiency, but sometimes also consults one of the sister subsidiaries of BAM Groep. For BAM, influential
stakeholders include local governments, the national government, and (internal) business development managers.
This contractor expects that customers will only become more influential when they face rising energy bills.
Ballast Nedam Bouw B.V.
Ballast Nedam Bouw (BNB) is one of two core activities of Ballast Nedam, one of the largest Dutch construction
companies. Ballast Nedam has a long history as it was founded in 1899 and became known for eye-catching proj-
ects, such as the Peace Palace in The Hague. In developing projects for residential building, BNB has about 50
years of experience. The main aim of BNB is to provide fully integrated services for residential building, which
means that the company tries to expand its value chain – upstream and downstream – by taking a life-cycle
approach to the building process. As part of this, BNB has its own subsidiary – Bouwborg – that is specialized in
maintenance, renovation and exploitation of buildings. The number of residential buildings that BNB realized in
2006 amounted to 1384, and half of them were equipped with energy-efficient technologies (see Table 1). BNB
indicates that applying energy-efficient technologies is an instrument for their strategic aim to fulfil demand for
complete solutions (from design, building and maintenance to exploitation), which contributes to a differentiation
advantage as well as matching aspirations for corporate social responsibility. Consequently, BNB is the only con-
tractor that has made efforts to develop knowledge about energy-efficient technologies internally. Still, BNB rec-
ognizes the challenge of adjusting communication towards home buyers. The stakeholder that BNB considers as
most influential is the national government.

DOI: 10.1002/bse
General Trends in the Dutch Building Sector
Although the Dutch construction industry is seen as quite traditional and consists of many like-minded companies,
all contractors agree that the market for residential buildings has changed considerably over the past three decades.
The main innovation for the Dutch building industry has been a shift from a supply-driven to a more consumer-
oriented market. A BAM respondent argues that architects of buildings used to be dominant in the building
process, yet ignorant of changes in the market. However, their position has been watered down in favour of cus-
tomers, which, for example, has led to more attention for the aesthetic quality of homes. A BNB respondent
indicates that, while it used to be that roughly every five years a new innovation emerged, now that consumers
have become more outspoken this seems to be occurring more regularly. However, this respondent adds that the
increasingly dynamic nature of the residential building market also creates many uncertainties for his company.
For example, pressure on building costs or an increase in mortgage interest rates can lead to sudden changes in
the type of building that is commissioned or induce realization of cheaper homes.
A stronger focus on customer preferences has not led to an equal increase in demand for energy-efficient tech-
nologies. Based on their research, BAM concludes that only 2% choose an energy-efficient home if this means
spending more money; 15% are willing to choose such a home when the price is the same and 83% do not consider
energy-efficient technologies. For most home buyers, what prevails are other aspects of a house, such as geo-
graphical location, colour of the exterior and the number of rooms. In fact, quite the opposite is the case. Adoption
of energy-efficient technologies further increases risks and uncertainties associated with a dynamic customer-
driven market. BNB argues that it increases the costs of installation of heating and hot water production systems,
which is quite challenging in the context of rising building costs, because this means that other aspects of a resi-
dential building need to be produced less expensively.
Nevertheless, the contractors do observe a trend of increased attention for sustainability as well. Fortis VO notes
that there has been an improvement in the recycling of building materials. Yet, because recycling mainly affects
the building process (done by subcontractors) and not the end-product, it has almost completely bypassed Fortis
VO. Innovations that BNB identifies that have a bearing on sustainability are the adoption of balanced ventilation
systems (which according to their research did not perform properly), and different home architecture that puts
the bathroom in a central location. An important stimulus for this trend is local governments’ integration of sus-
tainability objectives in building policies that contractors have to comply with.
Acquiring Knowledge About Energy-Efficient Technology Adoption
To keep in touch with recent trends, all contractors regularly consult their stakeholders. At the outset, they try to
assess whether there is market demand for energy-efficient technologies. To gather information on the wishes of
potential home buyers, contractors conduct surveys. This is most extensively done by BNB, which surveys home
buyers before as well as after realizing a building project, to analyse customer satisfaction and assess changing
preferences. For Bouwfonds the outcome of regularly surveying its customers is given as their reason not to inte-
grate energy-efficient technologies into business processes, because they have not yet observed any increase in
demand for energy-efficient technologies.
There are various ways for contractors to acquire knowledge about innovations for sustainability. Fortis VO
mentions visiting local real estate agents, investors and suppliers and sharing best practices among colleagues.
However, what led to integration of sustainability in their projects were demands from local government, which
have increased considerably over the past five years. Still, Fortis VO respondents state that government pressure
has not led to the adoption of energy-efficient technologies; the company was able to comply with the tightening
EPC norm through improvements in insulation. BAM got acquainted with sustainable building materials through
visiting exhibitions, and by continually staying in contact with suppliers where most innovations with regard to
building materials took place. However, these innovations were not aimed at energy-efficient technologies, but
either involved changes in the production process or improved forms of insulation. Nevertheless, BAM took a
decision to adopt energy-efficient technologies, and since 2004 has introduced these into its projects. BNB also
gathers information by visiting conferences and exhibitions, and engaging in stakeholder dialogue. This contractor
emphasizes that suppliers and consultants play a pivotal role because of their complementary knowledge and
expertise. However, improvements that have been made in recent years in energy performance have predominantly

DOI: 10.1002/bse
been based on better insulation. It was not until recent tightening of the EPC regulation (in 2006) that BNB chose
to adopt energy-efficient technologies.
What differentiates the contractors is how they build internal capacity to incorporate energy-efficient technolo-
gies into existing business processes. Fortis VO and Bouwfonds are merely developing organizational capacity,
and do not acquire technical skills. Bouwfonds argues, for example, that their core competency is acquiring build-
ing ground on which they can make large profits. Technical aspects of project development receive much less
attention. This contractor does have a centrally organized department occupied with innovation, but it only looks
at constructional aspects of the building process. One respondent remarks that if Bouwfonds were to make larger
investments they would be not in the adoption of energy-efficient technologies but in increasing the size of houses.
Both Bouwfonds and Fortis VO have no employees at their disposal with knowledge of, or expertise in, energy-
efficient technologies. Even so, Bouwfonds has gained some experience over the years with adoption, as they have
been used in a few projects.
The other two contractors follow a different approach. In BAM a number of employees was brought together to
further develop innovation in this area, but predominantly from a marketing viewpoint. This contractor also has
no installation engineers internally, as its focus is on managing projects. What is different though is that BAM
Woningbouw sometimes asks advice from one of the sister subsidiaries within BAM Groep, of which some are
specialized in installation techniques as well as engineering and consulting. Finally, BNB is the only contractor
where stricter regulation gave rise to efforts to build knowledge about energy-efficient technologies internally,
which resulted in one fulltime position. In addition, use is made of specific knowledge of its subsidiary Bouwborg
about engineering and exploitation of buildings.
The (Expected) Impact of Energy-Efficient Technology Adoption
Being reluctant vis-à-vis energy-efficient technologies generally comes from a conviction that it will negatively
impact the way a contractor manages building projects. One challenge contractors identify is that it affects the
maintenance of residential buildings once delivered, because heating and hot water installations become more
complex. Fortis VO, Bouwfonds and BNB all argue that administering and maintaining energy-efficient technolo-
gies entails further outsourcing to new actors, specialized in these technologies. To illustrate, one Fortis VO
respondent states that his company will never integrate this function because it does not fit the core competencies.
However, relying on new actors will mean additional risk for the company (specifically reputation risk, as the
technological risk will be for the proprietor that exploits the building), which it is unwilling to take. For Bouwfonds,
the reason for outsourcing all activities regarding energy efficiency is to deal with technical trouble and complaints,
because the construction company itself does not have sufficient in-house knowledge to follow up on complaints.
Besides, Bouwfonds contends that adoption would also lead to complications for their internal employees to keep
performing their tasks adequately. BNB concurs that even though outsourcing all activities (both installing the
energy-efficient equipment and maintaining it afterwards) lengthens the equipment’s life, it still has consequences
for internal business processes. However, this contractor, which has already equipped buildings with energy-
efficient technologies on a fairly large scale, holds the view that the additional risks and uncertainties were par-
ticularly challenging for senior managers, not on-site project managers. Most on-site project managers are younger
than senior management and are more accustomed to swift changes in the environment. BNB’s senior manage-
ment is only positive about adoption when risks are taken over by actors that can control them or can be insured
against. The proactive role of project managers, on the other hand, is seen in the many initiatives that they have
brought to bear. Nevertheless, BNB still has to decide whether to integrate or outsource exploitation of buildings,
although the company is tending towards integration as it adds more value internally.
Another challenge that adoption introduces is a change in communication towards home buyers. Customers
have to be informed about the different way in which energy-efficient technologies are operated. Moreover, as BNB
explains, besides the contractor many other stakeholders are involved in the communication process, such as real
estate agents, installation engineers and local governments. For Bouwfonds, a rise in communication costs is
decisive in staying put. To be able to communicate to customers, this contractor sees it as a requirement that all
employees and stakeholders have profound knowledge of all rights and duties that adoption of these technologies
brings about, but this is currently missing. Fortis VO adds that its limited knowledge about the technology means

DOI: 10.1002/bse
informing buyers will be an extra effort, causing delays in the building process, and will reduce financial profits.
The importance of good communication is illustrated by BNB’s experience with the consequences of mistakes
made in informing customers. Solar boilers and heat pumps are operated in a different way than gas condensing
boilers, but customers were not given sufficient advice on how exactly to operate the new equipment. The ensuing
mistakes in operating the equipment led to customer complaints about its functioning, which immediately created
a negative impression among stakeholders such as real estate agents about the new technology, which then stood
in the way of further diffusion.
BAM offers a more optimistic view. When it was first adopted in 2004, the impact of energy-efficient technology
was seen as complementary to existing business processes. One respondent explains that it was seen as a way to
improve business processes, and external experts were hired to share knowledge about these technologies with
internal project development teams. What was crucial, though, was an event that took place in 2004, where BAM’s
chief executive officer handed over the Toolkit Duurzame Woningbouw3
to the then Dutch Minister of the Envi-
ronment. After this event sustainability became widely supported internally. The reason why BAM is currently in
favour of adopting energy-efficient technologies is that this controls and lowers future energy costs. This does not
mean that adoption is not without risk, and some on-site project managers are still sceptical, because they do not
observe consumer demand and have no experience with such technologies. Doubts are further fuelled by the fact
that the initial investment is still higher than that for ‘traditional’ technologies. If competitors are not following
the same route, adoption may pose an extra risk. BAM’s respondents therefore call for some sort of government
regulation. Another risk that they identify is uncertainty about the functioning of energy-efficient technologies.
This has the consequence that on-site project managers may still choose familiar technologies that haven proven
their success in preceding projects. BAM tries to minimize these risks by good communication and transparency,
thus overcoming project managers’ reluctance.
Stakeholder Influence on Energy-Efficient Technology Adoption
The specific structure of the building industry is clearly reflected in all contractors’ business processes. They use
many different partners in developing and realizing project for residential building, because these partners possess
knowledge and expertise that the contractors do not have internally. Fortis VO notes that in choosing partners it
predominantly relies on past experience; no contracts exist that go beyond single projects. In contrast, Bouwfonds
has more continuity built in, as several partners are involved in more than one project. For the installation of
energy-efficient technologies, this contractor uses several installation consultants and construction engineers on
a regular basis. For the same purpose, BNB also predominantly utilizes the same partner firms. A danger of this
working method, as one BNB respondent remarks, is that they sometimes accept the advice of external partners
too easily, thus making the contractor vulnerable to external influence. Still, even though installation consultants
and construction engineers have specialized, complementary knowledge on energy-efficient technologies, the other
three contractors maintain that these stakeholders do not have the power to influence adoption.
One stakeholder that Fortis VO, Bouwfonds and BAM identify as being powerful enough to influence the adop-
tion of energy-efficient technologies is local government. Local governments are able to exert influence on contrac-
tors not only by implementing tight norms for energy performance, but, according to BAM, also by creating the
conditions in which adoption is stimulated, that is, by including energy efficiency in public tenders or issuing
competitions.4
Fortis VO and Bouwfonds add that it is critical whether the local government owns the building
ground, because only then can it impose tighter norms on a contractor. Bouwfonds argues, for example, that if
the local government does not own the ground they will not start sustainability initiatives on their own behalf,
because the company will have to raise its prices, thereby losing market share. The stakeholder that BNB deems
most powerful, and one that BAM also considers influential, is the national government. To illustrate, one BAM
respondent argues that innovation and tightening of the EPC regulation go hand in hand; sufficient adoption of
energy-efficient technologies will naturally be followed by stricter EPC regulation.
3
This Toolkit about sustainable residential building is a book that sets out 28 concepts for an energy transition that should lead to a 50%
reduction of CO2 emissions.
4
One of the respondents makes note of the fact that BAM has won many competitions that involve green building.

DOI: 10.1002/bse
Besides external stakeholders, for Bouwfonds and BAM internal stakeholders such as financial and business
development managers also play an important role, because they are free to choose whatever energy concept they
prefer. However, what influence business development managers have is somewhat uncertain. This internal
stakeholder will only go for adoption when it generates a financial advantage in the short run, as performance
evaluation is predominantly based on a project’s returns.
Finally, the stakeholder with the most dubious role is the home buyer, as all contractors experience a lack of
customer demand for energy-efficient technologies. It seems that the contractors share the view that home buyers
would have the power to boost adoption, but are currently not taking on this role. Still, Fortis VO has some doubts
about the power of home buyers, and argues that the Dutch residential building market remains predominantly
supply driven. This contractor argues that as long as energy-efficient technologies require a higher initial invest-
ment, but have no value for potential buyers, no higher margin can be asked. Only when home buyers start to
demand higher energy efficiency or more comfort will the power balance shift towards a consumer-driven market,
potentially leading to higher adoption rates as well. The other contractors feel that some external factor should
lead to a breakthrough in customer awareness. Bouwfonds, for example, believes that the only instance in which
urgency to adopt energy-efficient technologies will increase is when the price of fossil fuels keeps going up, while
BAM expects more urgency when customers face problems in energy supply. Only when home buyers become
aware of rising energy costs will they act, and BAM tries to enhance this by showing them the complete life-cycle
of their home. BNB also sees a role for contractors in making consumers more aware what adverse effects not
using energy-efficient technologies might have for their children, e.g. due to climate change and air pollution.
Discussion
What came out of the interviews was that there is considerable interest about sustainability and energy efficiency
in this industry, but that the scale of clean technology adoption still remains limited. The two contractors we
sampled based on their membership of a ‘clean technology-oriented’ business association (BAM and BNB) are, as
expected, more widely adopting energy-efficient technologies than the other two (Fortis VO and Bouwfonds).
However, reasons contractors give for their actions are quite similar. They all refer to factors such as a higher risk
due to outsourcing, higher communication costs and increased complexity of business processes. However, while
these factors are a barrier for some, they are a challenge for others and a point of departure for dynamic capability
development. The dimensions of our analytical framework – information processing, architectural innovation and
stakeholder influence – helped in clarifying how the same factors could work so differently.
The case study findings show that one major outcome of surveys that contractors conduct among home buyers
is that energy efficiency is not topping customers’ wish lists (see Revell and Blackburn, 2007). Nevertheless, con-
tractors pursue several ways of information gathering, such as consulting real estate agents and suppliers, but
what sets the early adopters – BAM and BNB – apart is that they more actively go to conferences and exhibitions
where innovations for sustainability are put on display. However, these two contractors emphasize that building
internal technical capacity to be able to incorporate the new technologies is more important than information
gathering. Both companies have the advantage in that they can acquire this knowledge from sister subsidiaries of
the construction companies they belong to (although BNB also built technical capacity internally). Hence, it is the
combination of information gathering and internal technical capacity, which has been referred to as a firm’s
absorptive capacity,5
that forms the first dynamic capability that sets competitors apart from one another, as it
enhances the ability to innovate and the flexibility in adapting to changes in the environment (del Río González,
2005; Zahra and George, 2002).
For the other two contractors, acquiring technical knowledge is riskier because they cannot draw on expertise
of their group company – both are part of financial institutions – and thus depend on external actors. The narrow
focus on the organizational aspects of project development alone therefore reduces the absorptive capacity of these
two companies and makes them less able to take up new technologies. The interviews reveal that uncertainty and
5
Zahra and George (2002, p. 186) have defined absorptive capacity as ‘a set of organizational routines and processes by which firms acquire,
assimilate, transform, and exploit knowledge to produce a dynamic organizational capability.’

DOI: 10.1002/bse
irreversibility (adoption generally means no connection to the natural gas infrastructure) associated with energy-
efficient technology adoption are seen as critical impediments. Consequently, the carbon lock-in remains intact,
as adoption would either involve developing technical capacity internally, considered an undesirable move away
from core competencies, or relying on ‘new’ external partners, which is too risky, as failure might damage the
reputation of the financial parent. Another reason for reluctance regarding energy efficiency is the fact that the
Dutch building industry consists of relatively few main companies, which tend to operate in quite similar ways
and often form one front against outside influences (Kolk and Pinkse, 2006). As a consequence, contractors are
influenced by information about projects of competitors, be it positive or negative. This is illustrated by a remark
of one of Bouwfonds’ respondents that one project of BAM equipped with energy-efficient technologies was
generally regarded as a failure by the industry. It thus seems that followers are more open to ‘negative inform-
ation’, as it confirms their own view regarding the technology; still, positive information might also be a route to
adoption.
All contractors agree that, even though energy-efficient technologies would not mean a radical innovation as the
end-product stays the same, they would still have a significant impact on their existing business processes. In other
words, adoption seems predominantly an architectural innovation (Henderson and Clark, 1990), which is only
within the capabilities of BAM and BNB. These contractors seem to have the ability to actively use employees to
assess the impact of adoption for the whole value chain, and communicate to all stakeholders – potential home
buyers in particular – what adoption brings about. As BAM’s case illustrates, this is quite an effort, as even now
several employees still have to be won over. Communication to home buyers is particularly challenging, as it also
relies on either having technical knowledge in house, or being able to hire a trustworthy external proprietor that
is responsible for maintenance of buildings. BNB’s approach of providing fully integrated services, also after
delivery of the residential building, might be an important tool for the contractor to convince customers of the
added value of energy-efficient technologies in the longer run. Consequently, the second dynamic capability key
to home builders is having the communicative skills to convince internal and external stakeholders of the merits
of changing residential buildings to make these more energy efficient. This departs somewhat from the existing
literature, which particularly emphasizes the capability of integrating various stakeholder interests (Sharma and
Vredenburg, 1998). Stakeholder integration only contends with taking in views of stakeholders in favour of sus-
tainability such as regulators, non-governmental organizations and local communities. However, this leaves out
that those stakeholders not as supportive of sustainability will have to be won over as well.
To conclude, then, the role of stakeholders stays rather ambiguous and firms have quite some leverage in decid-
ing how to deal with their requests (Madsen and Ulh∂i, 2001). It is clear that the local and national government
are considered as powerful and have considerable influence. However, the national government’s only instrument
is the EPC regulation, which up till now contractors can comply with by merely improving insulation, so it is not
creating a compelling need for energy-efficient technologies. The local government, on the other hand, can demand
implementation of specific technologies, thus applying a usage strategy (Frooman, 1999), but only has the power
to do so when it owns the building ground, a critical resource for contractors (Jawahar and McLaughlin, 2001).
Whether the customer is a powerful stakeholder is highly debated. Even though a trend can be observed of a
stronger customer orientation, there seems to be some disagreement whether this already means that the Dutch
home market is no longer supply driven. Moreover, even if home buyers have the power that contractors say they
have, it seems that this group does not feel the urgency to choose energy-efficient technologies. A change in con-
sumer preferences is only believed to occur after an external shock, such as faltering energy supply, rising energy
costs or large-scale environmental disasters.
Conclusion
With this paper we have tried to shed light on factors that explain why some contractors are still reluctant to adopt
energy-efficient technologies, while others seem to be building dynamic capabilities for this purpose. We can
conclude that up till now adoption is still occurring in incremental steps, but contractors do see prospects for a
new market based on energy-efficient technologies. To be able to take advantage of the opportunities that will arise,
it seems important for contractors to actively gather information and build internal technical capacity to be able

DOI: 10.1002/bse
to incorporate new technologies in existing business processes. Taking control over the technology to some extent
minimizes the risks that it may bring about. A major challenge will be to make home buyers aware of the advan-
tages of clean technologies and to inform them about the exact consequences of adoption. Although this will
increase communication costs at the outset, once the stakeholders involved have built up the required knowledge,
it can significantly improve the relation with home buyers; a valuable capability in a customer-oriented market.
Although the study has focused on the Dutch construction industry, the findings have implications for other
sectors (in other countries) as well. At the start of this study we believed that the main problem for the construc-
tion industry would be the principal/agent problem that the adoption costs are for the contractor, while home
buyers enjoy the benefit. However, what formed a significant barrier as well was the structure of the industry.
Because technological activities have been outsourced, it is difficult for a contractor to appraise and communicate
about new technological innovations when they emerge. This seems particularly challenging for innovations for
sustainability, because they are considered exceptionally risky as they often involve breaking loose from the prevail-
ing technological lock-in. This process is also likely to occur in many other sectors where companies have limited
internal technical capabilities because they outsourced production activities or where a few main players have a
dominant position. For example, the power generation sector will to have to cope with similar barriers, since most
national markets are controlled by a few power companies, customers seem more conscious of cost than sustain-
ability and departing from the dominant technologies is seen as highly risky. It would be worthwhile to study
whether companies in power generation or other sectors facing similar barriers to sustainability as construction
companies can also overcome these by developing absorptive capacity and communicative skills. More generally,
the effect of outsourcing on the diffusion of sustainability innovations also merits further study. If outsourcing
adds to companies’ risk averse behaviour, this would seriously impede the adoption of clean technologies.
Acknowledgement
Jonatan Pinkse would like to acknowledge the Netherlands Organization for Scientific Research (NWO) for financial support.
References
Aragón-Correa JA, Sharma S. 2003. A contingent resource-based view of proactive corporate environmental strategy. Academy of Management
Review 28(1): 71–88.
Beerepoot M, Beerepoot N. 2007. Government regulation as an impetus for innovation: evidence from energy performance regulation in the
Dutch residential building sector. Energy Policy 35: 4812–4825. DOI: 10.1016/j.enpol.2007.04.015
Bozdogan K, Deyst J, Hoult D, Lucas M. 1998. Architectural innovation in product development through early supplier integration. R&D
Management 28(3): 163–173. DOI: 10.1111/1467-9310.00093
Central Bureau for Statistics (CBS). 2007. Duurzame Energie in Nederland 2006. CBS: Voorburg/Heerlen.
del Río González P. 2005. Analysing the factors influencing clean technology adoption: a study of the Spanish pulp and paper industry. Busi-
ness Strategy and the Environment 14(1): 20–37. DOI: 10.1002/bse.426
EC. 2003. Directive 2002/91/EC of the European Parliament and of the Council of 16 December 2002 on the Energy Performance of Build-
ings. Official Journal of the European Communities L 1/65.
EC. 2006. Environmental Impact of Products – Analysis of the Life Cycle Environmental Impacts Related to the Final Consumption of the EU-25.
EC–IPTS–ESTO: Brussels.
Eisenhardt KM, Martin JA. 2000. Dynamic capabilities: what are they? Strategic Management Journal 21(10/11): 1105–1121. DOI: 10.1002/1097-
0266(200010/11)21:10/11<1105::AID-SMJ133>3.0.CO;2-E
Frooman J. 1999. Stakeholder influence strategies. Academy of Management Review 24(2): 191–205.
Helfat CE. 1997. Know-how and asset complementarity and dynamic capability accumulation: the case of R&D. Strategic Management Journal
18(5): 339–360. DOI: 10.1002/(SICI)1097-0266(199705)18:5<339::AID-SMJ883>3.0.CO;2-7
Henderson RM, Clark KB. 1990. Architectural innovation: the reconfiguration of existing product technologies and the failure of established
firms. Administrative Science Quarterly 35(1): 9–30.
Howarth RB, Andersson B. 1993. Market barriers to energy efficiency. Energy Economics 15(4): 262–272. DOI: 10.1016/0140-9883(93)90016-K
Jaffe AB, Stavins RN. 1994. The energy-efficiency gap – what does it mean? Energy Policy 22(10): 804–810. DOI: 10.1016/0301-4215(94)90138-4
Jawahar IM, McLaughlin GL. 2001. Toward a descriptive stakeholder theory: an organizational life cycle approach. Academy of Management
Review 26(3): 397–414.
Jeswani HK, Wehrmeyer W, Mulugetta Y. 2008. How warm is the corporate response to climate change? Evidence from Pakistan and the UK.
Business Strategy and the Environment 17(1): 46–60. DOI: 10.1002/bse.569

DOI: 10.1002/bse
Kolk A, Levy D. 2004. Multinationals and global climate change: issue for the automotive and oil industries. In Multinationals, Environment
and Global Competition, Lundan SM (ed.). Elsevier: Amsterdam. DOI: 10.1016/S1064-4857(03)09008-9
Kolk A, Pinkse J. 2006. Stakeholder mismanagement and corporate social responsibility crises. European Management Journal 24(1): 59–72.
DOI: 10.1016/j.emj.2005.12.008
Könnöla T, Unruh GC. 2007. Really changing the course: the limitations of environmental management systems for innovation. Business
Strategy and the Environment 16(8): 525–537. DOI: 10.1002/bse.487
Madsen H, Ulh∂i JP. 2001. Integrating environmental and stakeholder management. Business Strategy and the Environment 10(2): 77–88. DOI:
10.1002/bse.279
McKinsey Global Institute (MGI). 2007. Curbing Global Energy Demand Growth: the Energy Productivity Opportunity. MGI: San Francisco.
Miles MB, Huberman AM. 1994. Qualitative Data Analysis – an Expanded Sourcebook. Sage: Thousand Oaks,CA.
Miozzo M, Dewick P. 2002. Building competitive advantage: innovation and corporate governance in European construction. Research Policy
31(6): 989–1008. DOI: 10.1016/S0048-7333(01)00173-1
Pernick R, Wilder C. 2007. The Clean Tech Revolution: the Next Big Growth and Investment Opportunity. HarperCollins: New York.
Pries F, Janszen F. 1995. Innovation in the construction industry: the dominant role of the environment. Construction Management and
Economics 13(1): 43–51.
Revell A, Blackburn R. 2007. The business case for sustainability? An examination of small ﬁrms in the UK’s construction and restaurant
sectors. Business Strategy and the Environment 16(6): 404–420. DOI: 10.1002/bse.499
Russo MV. 2008. Explaining the impact of ISO 14001 on emission performance: a dynamic capabilities perspective on process and learning.
Business Strategy and the Environment in press. DOI: 10.1002/bse.587
Shama A. 1983. Energy conservation in US buildings – solving the high potential/low adoption paradox from a behavioural perspective. Energy
Policy 11(2): 148–167. DOI: 10.1016/0301-4215(83)90027-7
Sharma S, Vredenburg H. 1998. Proactive corporate environmental strategy and the development of competitively valuable organizational
capabilities. Strategic Management Journal 19(8): 729–753. DOI: 10.1002/(SICI)1097-0266(199808)19:8<729::AID-SMJ967>3.0.CO;2-4
Teece DJ, Pisano G, Shuen A. 1997. Dynamic capabilities and strategic management. Strategic Management Journal 18(7): 509–533. DOI:
10.1002/(SICI)1097-0266(199708)18:7<509::AID-SMJ882>3.0.CO;2-Z
Toole TM. 1998. Uncertainty and home builders’ adoption of technological innovations. Journal of Construction Engineering and Management
124(4): 323–332.
Tushman ML, Nadler DA. 1978. Information processing as an integrating concept in organizational design. Academy of Management Review
3(3): 613–624.
Unruh GC. 2000. Understanding carbon lock-in. Energy Policy 28(12): 817–830. DOI: 10.1016/S0301-4215(00)00070-7
Zahra SA, George G. 2002. Absorptive capacity: a review, reconceptualization, and extension. Academy of Management Review 27(2): 185–203.

Pinkse Dommisse (2008) BSE definitief

Recommended

Recommended

More Related Content

What's hot

What's hot (12)

Viewers also liked

Viewers also liked (17)

Similar to Pinkse Dommisse (2008) BSE definitief

Similar to Pinkse Dommisse (2008) BSE definitief (20)

Pinkse Dommisse (2008) BSE definitief