The Global Architectural Firm, Ross O Connell

THE GLOBAL ARCHITECTURAL FIRM
An investigation into the organisational requirements of Irish architectural
exporters entering remote low cost markets
By
Ross O Connell
August 2010

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ABSTRACT
This research investigates the organisational structure and management practice of Irish
architectural firms who export to remote, low cost markets. It profiles the current position of
these firms in terms of both their operational practices and their human and financial
resources. It then assesses that profile in the context of the global architectural market.
Following a literature review and development of a theoretical internationalisation model for
Irish architectural exporters, the research explores the position of the participant firms by way
of a self administered survey and selected follow up interviews. Two further interviews are
then carried out with representatives of Enterprise Ireland (the Irish government export
agency) and the Royal Institute of Architects of Ireland (the Irish architectural representative
body).
The research demonstrates that Irish firms are at a competitive disadvantage to their
international counterparts in terms of both their resources and their international operational
experience. It also highlights how limited formal business management training among
architects has led to firms lacking the commercial expertise required to successfully grow in a
competitive international marketplace.
Based on these findings, the research concludes that firms should maintain a presence in a
range of geographically distinct markets but centre their design operations in Ireland. By
focusing on the design stage as the primary offering firms then can maximise their resources
through the economies of scale that such an arrangement affords.
It also concludes that consolidation within the sector would enhance the collective
competitive position of Irish architectural exporters in the global marketplace by increasing
the availability of human and financial resources.
Finally, the research recommends the up-skilling of architects through specialisation at
undergraduate level and post graduate CPD, supplemented by the acquisition of expertise
through the appointment of key personnel with relevant commercial backgrounds such as
marketing or finance.
Keywords for this research are; Architecture, Internationalisation strategies, Soft capital
management, Organisational structure, Management practice, Professional services
marketing, Services exporting, Market entry modes.

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TABLE OF CONTENTS
Abstract i
Acknowledgements ii
List of Figures and Tables v
Declaration vi
1. Introduction
1.1 Introduction 1
1.2 Hypothesis Development 3
1.3 Aims & Objectives 5
1.4 Overview of the research 5
2. Literature Review
2.1 Introduction; the exporting environment 7
2.2 Factors impacting on the design of an internationalisation strategy 11
2.3 Soft capital as an asset, and the importance of its effective
management within an international context 17
2.4 Competitive strategies, market entry modes and their impact on
organisational structure 24
2.5 Conclusions 29
3. Methodology
3.1 Research gap 34
3.2 Research Objectives 35
3.3 Research Methods 35
3.4 Sample Selection 37
3.5 Research Methodology 39
3.6 Limitations 42
4. Research findings & discussion
4.1 Introduction 44
4.2 Firm Size 44
4.3 Age & Experience 47
4.4 Internationalisation models; internationalisation strategies,
organisational structure and host market commitment 49
4.5 Business Management 52
4.6 Soft Capital Management 53
4.7 Marketing 57
4.8 Discussion 61

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5. Conclusions and recommendations
5.1 Conclusions 67
5.2 Who will this research be of use to? 70
5.3 Further Study 70
5.4 Recommendations 71
5.5 Conclusion 76
Bibliography 77
Appendices
A Survey questions 84
B Interview questions 96
C Top UK & Global Firms 105
D Survey Response 112
E Abbreviations 114

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LIST OF FIGURES AND TABLES
3.1 Firm characteristics profiled
3.2 Sample selection
3.3 Regional breakdown
4.1 Irish architectural turnovers in a global & UK context, 2009
4.2 Irish architectural output, 2008 – 2010
4.3 Geographical spread of Irish Architectural Exports
4.4 Internationalisation models adopted by Irish Architectural firms
4.5 Intellectual capital strategies used by participant firms
4.6 Strategies for cultural capital management
4.7 Marketing devices in place within participant firms

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1. INTRODUCTION
1.1 - Introduction
This research has been carried out as an exploration of the changing nature of the supply of
architectural services in Ireland in the wake of the rapid decline of the Irish construction
sector, following almost two decades of sustained growth. It explores the structure of
architectural practice in terms of both the changing structure of the industry as a whole and
the impact of the new competitive environment on the organisational structure of individual
architectural firms.
There are a number of characteristics of architectural services that define the organisational
structure of a firm. Firstly, architects provide creative design solutions for construction
projects. By the nature of such work, there is a limited amount of explicit knowledge that can
be standardised and carried forward to new projects. The value of an architect therefore lies
in their ability to adapt previous design experience and apply it to new construction problems.
A firm’s primary organisational function is the management of this intellectual capital which,
as a creative service, is largely tacit knowledge.
Secondly, firms must also allow for the changing nature of their role between projects. The
architect’s involvement in a construction process is divided into four stages on which the fee
structure is based; 1) client brief and concept design, 2) planning and designs development, 3)
completion of construction drawings & project procurement, 4) construction supervision. The
services provided by the firm can vary from project to project and they may be involved in
any one, or all, of the above stages.
Lastly, construction design is more often a short term project based industry. Individual
clients may only ever have a requirement for one project or in the case of repeat clients, there
may be considerable sleeping periods between consecutive projects. Therefore, firms are
constantly faced with the challenge of trying to maintain a consistent and sustainable
workflow.
The economic environment in which Irish architectural firms have operated over the past two
decades has also defined their development. Between 1991 and 2008 the Irish construction
sector experienced a period of sustained growth with a total output of €38.5bn at its 2007
peak (DKM, 2009). Residential construction was a key driver of this growth; in 2006 there

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were a total of 93419 housing completions, accounting for 64 percent of all construction
activity that year (Grant Thornton, 2008). Taking the peak year of 2007, private non-
residential construction was dominated by commercial projects with an estimated total value
of €4.4 billion. Industrial projects in 2007 accounted for €680 million (DKM, 2008). This
high level of construction activity facilitated strong growth within the architectural sector but
with a minimum requirement for the management and organisational restructuring that might
ordinarily accompany such an expansion. However, 2008 marked the beginning of a
downturn in the Irish economy and by the end of 2009, the industry’s total output had
dropped by 47 percent (DKM, 2010) with the number of housing completions reduced to
20357 (DOE, 2010). Non residential construction dropped 32 percent year-on-year in 2008
and a further 63 percent year-on-year in 2009 (DKM, 2010). A collapse of this scale
represents a sizable and acute shift in the industry structure.
In line with the reduction in construction activities, employment levels within Irish
architectural practices have also fallen. In 2008 there were approximately 3500 architects
employed in Ireland (ACE, 2008). In February 2010 the Royal Institute of the Architects of
Ireland (RIAI) estimated that approximately 50 percent of architects in Ireland were
unemployed, although a lack of a definitive register of architects means this figure is merely a
conservative approximation (RTE, 2010). This represents a large body of valuable experience
that has been built up over the last two decades and is now at risk of being lost through
inactivity, career change or emigration. The quality of an architectural firm’s intellectual
capital is a key decider in its competitive position as it forms the basis of the firm’s own
unique offering. It is therefore essential that firms protect this asset. In order to maintain and
capitalise on the experience developed over the last two decades, firms need to ensure a
consistent flow of new projects. As Ireland is unlikely to see a return to previous levels of
construction activity this can only be done by targeting overseas markets in a long term and
strategic internationalisation effort.
Irish architectural firms face a number of difficulties in engaging in such a process, the first
being the absence of readily accessible overseas markets. While the contraction of the
construction sector has been particularly pronounced in Ireland, a global economic downturn
has meant that there have also been significant reductions in construction activities in the UK,
Europe and North America. This leaves Irish firms with little option but to expand into
culturally and geographically distant markets such as Asia, South America and the Middle

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East. Such a move often carries a higher level of risk, requiring a greater level of investment
of both financial and human capital, and with market penetration being a longer process.
In addition to this, an overview of the current position of Irish architectural exporters would
suggest a number of further export barriers;
 While Irish firms may have built up a considerable body of exploitable design
expertise through their domestic work, a relatively low presence in overseas markets
would suggest that they lack the operational experience of procuring and managing
projects in remote overseas markets.
 With such a focus on the domestic market it is unlikely that, to date, firms have had to
implement the organisational changes required to operate internationally on a long-
term strategic basis.
 The timescale of the drop in construction activity would suggest that the already
internationally inexperienced architectural sector is now on a steep learning curve
with a reduced timeframe in which these firms will need to see a return on their
international projects.
 Given the contraction in the domestic construction market and the subsequent
reduction in staff numbers, Irish firms would appear to be poorly placed in terms of
the human and financial resources required to implement such a strategy.
 This resource problem is compounded by the nature of the global market place. As the
UK, Europe and North America are all experiencing reduced construction activity,
Irish firms will be competing with many of the top UK, North American and wider
global firms for projects in developing markets. These firms have historically been
operating within a wider catchment area and are therefore significantly larger, better
resourced and more experienced in international operations.
1.2 - Hypothesis Development
Irish firms have developed their current business models in a small geographical catchment
area and during a period of sustained high growth. As a result, there are a number of factors

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Irish architectural exporters must now consider if they are to successfully engage in
sustainable internationalisation.
Firms will need to structure themselves to maximise the flexibility and efficiency of their
resources. There are two reasons for this. Firstly, the current economic climate has placed
significant restrictions on the availability of both the financial and intellectual capital
resources. Secondly, an architectural firm’s ability for credible long term resource planning is
limited by the project based nature of architectural services and by the variation in the
architect’s role (and therefore fee) between projects. This limitation will become more
pronounced in competitive international markets where a higher level of resource
commitment is required.
Firms will also need to address the issue of how best to manage their intellectual capital. As
this is the product they are offering their clients, firms will need to have the appropriate
systems in place to maintain this body of knowledge and manage its application in remote
locations, delivering the required design consistency and standards of quality control on
which the firm’s reputation is based.
Based on this, the hypothesis of this research is that;
“In order to engage in sustainable strategic internationalisation, Irish architectural
exporters need to configure their organisational structures and management practices to
maximise the flexibility, availability and efficiency of their financial and intellectual
resources”
In order to test this hypothesis, this study addresses two general research questions relating
to architectural export practice;
1. What is the current competitive position of Irish architectural exporters and how are
they resourced to compete internationally?
2. What are the effects of organisational structure and management practice on a firm’s
ability to engage in sustainable internationalisation?

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1.3 - Aims & Objectives
The aim of this research is to investigate the organisational requirements of Irish architectural
firms who engage in sustainable strategic internationalisation, based on their current
competitive position. To do this, it is necessary to first analyse the current profile of Irish
architectural export activities and make recommendations based on this assessment. With this
in mind, the objectives of this research are;
1. To develop an internationalisation model that best positions Irish Architectural
exporters within the global construction design market.
2. To profile the current activities of Irish architectural exporters and to assess that
profile in the context of the global construction design market.
3. To investigate the effects of organisational structure and management practice on a
firm’s ability to engage in sustainable internationalisation.
1.4 - Overview of the research
Chapter two is a review of literature relevant to the internationalisation of architectural and
professional service firms. As previously discussed, the main problems facing Irish
architectural exporters are resource limitations, intellectual capital management and an
absence of local overseas markets. As such, the focus of the literature review is on these three
topics and their impact on the internationalisation process. To give these theoretical
implications a practical context, the review then identifies the internationalisation strategies
and organisational structures outlined in the literature, concluding with a discussion setting
out a theoretical framework for the development of an internationalisation model for Irish
architectural exporters.
After outlining the research gap that this study attempts to address, chapter three describes
the methodology used to collect the primary data required. It describes the structure, content
and design of both the survey and interview process and the reasons why each method was
considered appropriate relative to the data collected. It also justifies the quality and credibility
of that data by outlining the selection criteria for the participant firm and providing
background to the selected interviewees. This chapter also describes the source and extent of

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the secondary data used for the comparative analysis and concludes with a discussion on the
limitations that such data (and data collection methods) can impose.
Chapter four presents the findings of the surveys and interviews, based on the issues
previously addressed in the literature review. The format of this chapter is based on an
impartial presentation of the results followed by a detailed analysis of the data presented. The
discussion relates this data to the literature review and comments on the implications of this
for the previously developed theoretical model.
By addressing the questions posed at the start of this chapter, the research closes by outlining
the conclusions drawn from a combination of both the literature review and the primary
research, followed by a final return to the research hypothesis. As a practical reflection on
these conclusions, recommendations are then made for both architectural firms currently
engaged in, and considering the possibility of, the architectural export process. A final
recommendation for potential exporters takes the form of a weighted checklist drawn up to
provide an accessible summary of the contents of this research for firms considering
internationalisation.

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2. LITRATURE REVIEW
2.1 - Introduction; the exporting environment
2.1.1 Architecture as a professional service
The majority of the literature covering the internationalisation process deals with the issues
facing manufacturing firms looking to export their products to remote markets (Knight 1999,
Netland et al 2007). However, the exporting of services is characterised by the intangibility,
inseparability, heterogeneity and perishability of the ‘product’ being offered and therefore
presents its own unique challenges. Although there is a significant theoretical overlap
between the two industries, there is considerable disagreement about the relevance of
strategies and market entry modes for manufacturing firms to service exporters (Edgett et al
1993, Ekeledo et al 2004, Gronroos 1999, Erramilli at el 1993, Javalgi et al 2003) There is
further discord still about the generalizability of the services literature itself due to the wide
range of firm types that come under the services umbrella (Nachum, 1996).
Given the scale of economic activity related the service industry, further classification by
sector should follow. However, there is still very limited classification within the literature
despite numerous attempts to address the issue (Clark et al, 1996, Lovelock at al,1996,
Patterson et al, 1995). Erramilli (1990) makes a widely accepted distinction by classifying
services as hard or soft depending on the level of physical presence required. A soft service
requires a significant local presence (eg. healthcare, catering or accommodation) and a hard
service requires little or no physical presence, allowing business to be carried out from a
remote location (eg. IT, financial services, design). This is furthered by Bloomstermo et al
(2006) who identify hard services as those where production and consumption can be
decoupled, citing architectural services as an example. However, this hard/soft division may
be oversimplification as many firms fall somewhere in the middle, requiring a physical
presence for networking and customer relations while allowing the core work to be carried
out remotely. Others may be considered both hard and soft, requiring different levels of
physical presence at different stages of a business cycle. This is particularly the case with
project based services.
The alternative is to classify services by their operating characteristics. McLaughlin et al
(1996) suggest six operating characteristics that should be considered when classifying

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services; customer contact, customization, complexity, information intensity, labour intensity
and cultural adaptation. However, they stop short of applying them to a specific method of
categorisation. Building on the early classification attempts by Chase (1978), and later
Maister et al (1982), Silvestro et al (1992) proposed three categories of service providers
based on common operating characteristics. Included in this are professional services, a
further subset of the industry. Summarising the main characteristics of professional service
firms as knowledge intensive, intangible, people centred and customised, Netland et al (2007)
consider the traits previously outlined by Silvestro et al (1992); professional service firms are
people orientated and provide specific customised solutions, making standardisation difficult.
They have a lower number of customers with a longer period of interaction and have a higher
level of discretion and customer relations. They are defined by process rather than product
and as a result rely heavily on past performance and current reputation.
For the purpose of classification, architecture could be considered a professional service.
However, the existing body of professional services research is predominantly centred on
industries such as banking, law, insurance, IT and management consultancy (McLaughlin et
al 1996, McNaughton 2001, Freeman et al 2006, 2008, McColl-Kennedy, 2008) and these
industries tend to have long term investment strategies with a geographically static client
base. Architecture is, in contrast, a short term project based industry with varied levels of
physical presence required at different stages in the life cycle of a project. This creates
barriers to internationalisation that are not present in other professional services. This needs
to be considered when reviewing the literature as strategies that have been acknowledged as
successful for other professional services may be of limited application when applied to
architectural exporting. Ultimately, the lack of an established method of services
classification within the literature has hampered the development of generic international
marketing strategies and makes difficult to set clear boundaries for a literature review
(Samiee 1999). Therefore, while the primary focus of this review is on the
internationalisation of project based professional services, literature with a wider focus
covering issues relating to both manufacturing and the broader services sector has also been
included where relevant.

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2.1.2 Exporting professional Services
The reduction of international trade barriers and the increase in global networks have both
been identified as major catalysts in the growth of international services over that past two
decades (Knight 1999, Netland et al 2007). Commentators have pointed to the General
Agreement on Trade in Services (GATS), the establishment of the World Trade Organisation
(WTO) and the growing web of bilateral trade agreements as the foundations for this growth
(Javalgi et al 2003, 2008, Akbar 2000, Samiee, 1999). In a discussion on the background to
marketing services in a global economy, Javalgi et al (2008) identified six key driving forces
of international services growth. Of these, four are directly related to globalisation and the
increasingly relaxed regulatory environment;
 The establishment of the World Trade Organisation (WTO) and its focus on
internationalising services has created a broad range of services across the globe
 Several protective measures in areas such as intellectual property rights, copyrights,
patents, trademarks, etc., have boosted marketers confidence in taking their product
service offerings internationally
 Changing government attitudes towards foreign direct investment have facilitated the
growth and significance of the service sector in both developed and the
developing/transition economies.
 Regional economic blocks (eg. NAFTA, EU) are creating bigger markets, thus more
opportunities, for goods and services
In a United Nations trade and development report on the mobility of the professional
services, Zarilli (2005) observes; “Professional and academic standards, guidelines and best
practices are increasingly being developed by national regulatory bodies and professional
associations and included in bilateral, regional or plurilateral MRAs [Mutual Recognition
Agreements]”. The report concludes that, while these MRAs have had a relatively low take
up among developing countries to date, they represent a significant opportunity for
facilitating the fluid international movement of professionals between both developing and
developed nations.
While there is broad acknowledgement within the current literature that certain trade barriers
still exist in the form of indirect tariffs, there is also a general consensus that global free trade

10

is moving in the right direction. Furthermore, Javalgi et al (2008) and Akbar (2000) both
point out that the WTO/GATS provide a framework for service firms looking to develop
strategies that will circumvent these barriers. It should also be noted that the indirect trade
barriers cited are those relating to the more established banking, insurance and education
sectors and are not necessarily applicable to project based construction design consultancies.
2.1.3 Exporting Architectural Services
Keune (2007) puts all this in an architectural context by outlining the growing number of
bilateral agreements between national architectural representative bodies, citing examples
such as Europe and Mexico, Cuba and the United States, Australia and New Zealand, and
Australia with Singapore and the United States, the United states and the EU (currently under
discussion). This is in addition to the Asia Pacific Economic Cooperation Agreement on
Architectural Service signed by 14 countries in 2005. These agreements allow for recognition
of architectural qualifications across boundaries and facilitate an easier transfer of services.
The International Union of Architects (UIA), a global collective of 117 regional architectural
representative bodies, responded to the increasing globalisation of architecture by adopting
the UIA Accord on Recommended International Standards as a global standard for
architectural practice (UIA, 1999). This was intended as a set of guidelines for governments
looking to review their own national standards and is an effort towards an eventual
streamlining of global architectural standards and conventions. It is a further intention of the
UIA that the accord will provide a basis for governments entering into mutual recognition
agreements on architectural services (Hay et al, 2004).
Fundamental to this global homogenisation of architectural practice is the recognition of
universal educational standard. The Architects Council of Europe (ACE) published its policy
book in 2004 and highlighted the efforts of the EU to maximise movement of professionals
by simplifying cross border recognition of professional qualifications, including architecture
(ACE, 2004). The EU Directive on the Recognition of Professional Qualifications was
enacted in 2007 and allows for a common European standard in architectural education and
subsequent professional recognition.

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2.2 - Factors impacting on the design of an internationalisation strategy
2.2.1 Size
In their research into internationalisation theory Agarwal et el (1994) found that firm size had
a direct effect on the both extent of a firms international operations and on its chosen method
of market entry. Their findings support the idea smaller firms are less likely to
internationalise. If they do, firms tend to opt for low risk/ low potential markets and enter by
a joint venture (JV) arrangement, thereby further diluting their returns. Although their
research showed that these firms were interested in direct investment in high return markets
they were constrained by a lack of resources. This was supported by Freeman (2006) who
found that smaller firms engaged in JVs as a method of reducing both the risks and the initial
costs associated with overcoming the translation and cultural barriers to foreign market entry.
Furthermore, scarce resources arising from a firm’s limited size can restrict the amount of
research and data collection that goes into export decisions (McNaughton, 2001). This can be
exacerbated by a decreased ability to absorb the risk associated with internationalisation and
provide efficient resources for effective management (Javalgi et al, 2003, Winch et al, 2002).
Smaller firms can also be restricted in their choice of destination. Cuervo (2003) found that,
in the context of project based professional services; smaller firms cited cost of doing
business as a primary factor in choosing a location for international expansion.
However, these findings have all been based on exploratory research into management
perceptions of internationalisation. While management attitudes should not be underestimated
in their importance to the success of firm’s international operations, empirical studies would
suggest that the actualities of the process may be somewhat different. In a broad study of 516
Chinese exporting firms Zeng et al (2009) found no significant correlation between firm size
and export performance. Ahmad (2008) points to findings of Knight et al, (1996) who found
that “small firms are just as capable of being successful in international markets as large
firms such that size may be an excuse for not internationalising rather than a reason”. Calof
(1994) also found that while firm size has a positive correlation to export behaviour it is not
necessarily a barrier for smaller firms, citing management attitudes as playing a bigger part in
a firm’s international success. Consistent with this, Javalgi et al (2003) explain the
correlation by demonstrating that firm size has a direct effect on management attitudes to
foreign expansion and this leads to larger firms being more likely to be successful in their
attempts at foreign market entry. Both Freeman (2006) and Calof (1994) also note that while

12

smaller firms were at a resource disadvantage they proved to have a stronger entrepreneurial
mindset and were more flexible in their ability to adapt to new markets. In service specific
research, Eramilli (1991) found that firm size had no apparent effect on the market entry
mode, indicating that both large and small firms had uniform ability to establish wholly
owned international operations. He further dampens the relevance of previous findings to the
export of professional services by highlighting that for services, high control methods are
easily obtained, pointing out that “the cost of establishing a wholly owned subsidiary or
branch office [is] limited to establishing an office.”
Although minimum size may not necessarily be a prerequisite to internationalization, in the
more specific context of competitive advantage in professional services, the benefits to bigger
firms are numerous. Nachum (1996) notes that although professional services don’t
necessarily enjoy the production economies of larger manufacturing firms, the optimal size
for these firms is increasing. Ling et al (2008) and Winch (2008) both point to 48 & 50
respectively as the number of employees in a construction design firm at which the
economies of scale appear to have an impact. This is consistent with the findings of the ACE
report (2008) which showed that, in architectural firms with 1-50 employees, the level of
after tax profits as a percentage of total revenue had a negative correlation to the number of
employees in the firm. Firms with over fifty employees saw a notable reverse of this ratio.
Nachum explains this scale economy as one which is achieved by having a flexibility to
move both human and capital resources to areas of the firm where they are most required.
The same point is made by Eramilli (1991) who observed that services (and particularly
professional services) were allowed a flexibility not common to traditional industries as
resources committed to one market can be easily redeployed, thus facilitated the
implementation of an ethnocentric or geocentric operating philosophy. In a practical example
of this, Norman Foster, founder of the world’s 6th
largest architectural firm Foster &
Partners, credits the success of his firm’s international growth to the flexibility of the
organisation and the ability to relocate resources where they needed most (Building Design,
2008). Winch et al (2002) and Winch (2008) describe the competitive advantages of larger
architectural firms operating in international markets as the ability to employ people with
knowledge of the local markets and government regulations. This was a point also made by
McColl-Kennedy (2008) who found that, due to both greater resources and marketing
expertise larger professional service firms could engage in more sophisticated marketing
practices such as database marketing, the importance of which will be explored later in this

13

review (see section 2.4.2) Larger firms also have clout when negotiating with local
collaborators and have the ability to design more of a specific type of building, thereby
building up a lager body of experience in both design and project administration.
Ultimately, returning to the findings of Ahmad (2008) may resolve the issue of the relevance
of size to the export of project based professional services. In his research into barriers to
internationalisation for Malaysian architectural firms he found that managers identified size
as a key factor to success in entering foreign markets and attempts to provide a counter
argument by citing contradictory empirical evidence. However, the study merely identifies
barriers as perceived by managers and fails to explore the reasons behind these perceptions,
citing broad internationalisation theory as a balance. In this way the validity of his counter
argument is compromised as it fails to include two factors not accounted for in the broader
research that are particularly relevant to project based professional services; client perception
and minimum project size. In a study of Quantity Surveying (QS) firms in Singapore, Ling et
al (2008) cite a minimum size as essential to exporting firms. This arises from a need for QS
firms to have an established track record in order to secure contracts as reputation is central to
a firm’s marketability. Size, through its association with a perception of experience, is seen as
an important factor in inspiring confidence in clients. Furthermore, firms need critical mass in
order to be able to handle large projects that generate the revenue required to justify
international expansion. Nachum (1996) alludes to the same point by citing age, and an
established international presence, as two common traits of successful professional service
firms. It is possible to consider these outcomes, together with the size implications, in terms
of a common theme; the value of a firms cumulative body of experience.
2.2.2 Experience & Scope
Lowendahl (2000; cited in London, 2005) puts it succinctly when he says that, in relation to
the importance of reputation, a professional service firm’s marketability “depends upon the
firm of the individual professional’s ability to sell a credible promise.” This was found to be
the case by Ling (2005) who, in a study of construction design firms investing in china, cites
a need for a strong reputation and track record as requirement of exporting firms, as this is the
key predictor for clients of good future performance. As previously mentioned, a later study
by Ling et al (2008) found that a strong reputation was important to exporting QS firms based
in Malaysia. Further confirmation appears in research by Nachum (1996) who also found a

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positive correlation between success and a strong reputation in professional services firms.
As reputation is a by-product of positive experience, it may be more correct to say that it is
experience (and how this experience is perceived) that can be seen central to a firm’s
marketability.
Building on this, Winch (2008) found that building up a specific body of experience was the
most sustainable method of internationalisation for architectural firms. Winch et al (2002)
also cite specific design experience as central to the successful export of architectural
services in that clients will only appoint firms if they can add value to a building. In order to
accomplish this, a firm must have a strong track record in the provision of the required
building type. This is achieved through the accumulation of a credible body of experience
relating to a specific type of design. This is taken a step further by Javalgi et al (2003) who
suggest specialisation or the identification of a niche market as a requirement for successful
exporting. Reidy (2007) supports this view and, in a study of the internationalisation of UK
construction design services, highlights the need for constructions design consultancies to
develop a unique selling point (USP). He points to specialisation as one such USP but also
suggests organisation management and performance as two less obvious methods of
differentiation. These USPs are essential to a firm’s marketability as “it is unlikely that, in an
international environment, an organisation can compete on price and efficiency alone”
(Reidy, 2007).
In tandem with accumulating a body of relevant experience, there is a consensus within the
literature that firms can also establish a strong competitive advantage by offering a wider
scope of services related to that experience. Keune (2007) refers to the expanding range of
services offered by architectural exporters noting that “The traditional role and image of the
architect as the designer of buildings has been expanded to include feasibility studies, post-
occupancy evaluations, facilities management, etc”. Ling et al (2008) found that successful
exporters of QS services needed flexibility and therefore offered a wider range of services
within the firm. Nachum (1996) concurs and identifies scope as a prominent trait of
successful professional service firms adding that the research “clearly indicates that it does
pay to diversify and [the] potential advantages do materialize”. Javalgi et al (2008) also point
to the benefits of providing supplementary services to the firm’s core offering, noting that
firms can use these to create a significant competitive advantage, providing a basis for their
internationalisation strategy.

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While experience in the design and delivery of a specific type of construction project has
external benefits for the firm in developing a particular marketable expertise, previous
operational and business management experience has internal benefits for the firm as an
organisation and has been shown to affect both the extent and style of the internationalization
process. Agarwal et el (1994) found that firms with previous international experience tend to
be more successful and that those without tend to overestimate problems and underestimate
returns. Alexander et al (2007) and Erramilli (1991) both found that service firms with little
or no experience of international operations were more likely to move into culturally similar
markets with Erramilli (1991), showing a preference among firms for high control (and
therefore high cost) entry modes. In both studies cultural similarities and physical proximity
were found to be a bigger factor in market selection then related market research. According
to Alexander et al (2007) “While it may be more reassuring for investors to presume that
firms select markets on a rational basis, it is undoubtedly more realistic to recognize that a
non-systematic, strongly personalized and essentially belief driven market selection process
is characteristic of many market selection decisions”. Adding weight to this, Freeman (2006)
also identified psychic distance as a major constraint for small firms internationalising citing
their preference for culturally similar markets as a method of gaining experience. This can be
to the detriment of a firm as management may underestimate, and therefore under prepare for,
the realities of a seemingly similar market (O’Grady et al, 1996, Skaates et al, 2002). With a
diversity of experience, firms begin to expand towards more culturally distant markets and
allow for lower control (and by extension, lower cost) entry modes. This would suggest that
experience has another important by-product; increased firm confidence and a positive
influence on managerial attitudes to foreign market entry.
2.2.3 Management attitudes
Javalgi et al (2003) and Ling et al (2008) both identified the ethos of the firm and the
attitudes of the management as being another less tangible but equally significant success
factor in the internationalisation process. Javalgi et al (2003) highlighted managerial attitude
as strong factor in the extent, and ultimately the success, of services exporting. This was
consistent with the findings of Frazer Winsted et al (1998) who, in a study of exporting
engineering firms, found that exporters had a more positive attitude towards the
internationalisation process and a greater confidence in their offering then non exporting

16

firms. Ling et al (2008) found that firms were more likely to export successfully if they were
pursuing internationalisation as an active strategy as opposed to exporting solely as a reaction
to a saturated domestic market. Successful exporters in the study could all be classed as
learning firms and regarded the possibilities provided by new technologies as significantly
important, in contrast to non exporting firms who did not. Exploring this connection, Cort et
al (2007) found that in relation to professional service firms; “once managers believe they
have positively evaluated the firm’s position related to the underlying causal factors of
internationalization, they not only have the expectations of being successful, but in fact, drive
their firms toward internationalization success.” He summarises the practical implications of
this by adding that “Organizations may be able to more effectively employ
internationalization strategies if the managers leading the internationalization initiative
maintain not only a mindset capable of evaluating the firm’s position related to the causal
factors of internationalization success but also of developing strategies to enhance the firm’s
position along those causal factors.” Taking a negative perspective on this, Freeman (2006)
identifies the mindset of management based in both the home and foreign market as a key
internal constraint to services exporting. However, this is only a constraint when firms fail to
recognise methods of overcoming both psychic and geographical distance. In this way
management attitudes, confidence and entrepreneurship play a key role in the
internationalisation process. Chandra et al (2007) also brought this factor to the fore in a
study of the recognition of entrepreneurial opportunities by international knowledge based
firms, finding that ‘firms that exhibit stronger entrepreneurial orientation will be more likely
to discover first time entrepreneurial opportunities in international markets’.
To expand on earlier comments by Erramilli (1991), the mindset of management will have a
significant influence on the operational philosophy of the firm and this in turn will affect the
organizational structure (Hofstede, 1994).The different cultural approaches to
internationalisation are categorised by Sanyal (2001) as ethnocentric, polycentric and
Geocentric. Ethnocentric firms are home country orientated in outlook and measure by that
standard while polycentric firms adopt the style and standards of the host country. Geocentric
firms try to adopt best practice irrespective of locality and adopt a worldwide approach to
management and organisational culture.

17

2.3 – Soft Capital as an asset, and the importance of its effective management within an
international context
2.3.1 Knowledge and experience as a product
To briefly summarise to this review so far, it could be said that firm size is relevant in so far
as it relates to marketable and organisational experience. Experience, and its resulting effects
on management approach, form the basis of what can be classed as soft capital; the collective
body of human knowledge, experience and creative ability that forms the core ‘product’ that
an architectural practice can offer its clients. This soft capital is therefore of primary
importance in terms of asset management. Despite being a less tangible asset then equity or
equipment, investment in soft capital is perhaps more important to the long term
sustainability of an architectural practice as it is key to securing revenue generating
commissions. In this way a long term loss leading approach may be required in the
accumulation of soft capital, although the return on investment may not be easily represented
on the balance sheet (Smedlund, 2008). Furthermore, soft capital (or the perception of) is the
central element of an architectural firm’s marketability (Lowendahl, 2000). Taking these
three factors in account, it is arguable that the accumulation and efficient management of a
firm’s soft capital should be a defining element of its internationalisation strategy. In a study
of the role of soft capital in the internationalisation in architectural services, London at el
(2005) identify the three primary categories of soft capital as Cultural, Social and intellectual.
2.3.2 Cultural Capital
The people orientated nature of professional services means that culture has a significant
impact of the acceptability and ultimate success of a firms operation in a foreign market
(Samiee, 1999). Cultural capital refers to two different, but closely related, aspects of a firm’s
operations, both of which have the effect of enhancing a firm’s market penetration. Primarily
it has to do with a firm’s ability to actually relate to it host market on a level of both personal
and corporate interaction. Cultural awareness is for essential for establishing client relations,
executing client briefs and understanding culturally specific operational problems (London at
el, 2005). Hofstede (1994) identifies the five key underlying cultural dimensions as; power
distance, individualism versus collectivism, masculinity versus femininity, uncertainty
avoidance and long term versus short term orientation. Firms operating in a global market
need to be able to tailor their operations to fit the cultural dynamics of a host market,

18

accounting for the variations in these cultural dimensions. Hofstede (1994) argues that an
organisational structure that allows for this flexibility is paramount to a firm’s successful
internationalisation, and that it is rarely accomplished through a single universally imposed
structural model.
In a broader application, cultural capital refers to the development of a firm’s reputation,
image and its ability to demonstrate cultural awareness and sensitivity. This can be achieved
by developing a reputation for delivering culturally appropriate structures. Similarly, if a firm
is looking to achieve status as an international contender, competing in high profile
international competitions can provide significant relevant cultural capital. Put another way,
cultural capital can be seen as the trust achieved through evidence of past performance
(London at el, 2005).
2.3.3 Social Capital
Social capital, otherwise known to as relational capital (Carson, 2004), is defined by London
at el, (2005) as “the creation of personal relationships and networks based on trust built over
time.” They observe that social capital is relevant to both the firm and its client and project
networks, and that working in a network will spread both risks and marketing costs.
Furthermore, these network relations also serve as an important source of new information on
potential international opportunities (Chandra et al, 2009). Skaates et al (2003) equate the
levels of social (and cultural) capital required with the particular market types. They found
the when entering developed markets a higher level of social capital was required then when
entering less developed markets where product differential provided a stronger competitive
edge. When architectural firms competed globally for prestige projects, territoriality (or
cumulative social and cultural capital) became irrelevant. This can be attributed to the
importance of social networks to marketing of professional services. Ling et al (2008) cite the
development of networks in a host country as central to a firms’ ability to generate new
business. While other marketing routes were also explored, firms in their study mainly used
contacts in the field, or their own local market research, to win new contracts. In explaining
the connection between social capital and international performance Lindsay et al (2003)
point out that the buyer-seller relationship is especially important to services because of the
inseparability of production and consumption. They assert that “the individual is particularly
important in generating acceptance and trust in local networks where strategic and tacit

19

information is only shared at arm’s length”. Refining this further, research by London at el,
(2005) showed that the importance of social capital to an architectural firm was dependant on
its method of internationalisation and the resulting organisational structure. Firms that
adopted a market integration strategy through a series of joint ventures and strategic
partnerships were heavily dependent on external social capital. Firms that adopted a global
outsourcing strategy were less reliant on external social capital but put a stronger emphasis on
maintaining internal networks and relationships.
2.3.4 Intellectual Capital
London at el (2005) define intellectual capital as “a firms collective skills, experience,
competences and knowledge”, noting that it is “critical to the sustainability of firms,
particularly in the international market.” Expanding on this they propose that “a firm can also
acquire intellectual capital through establishing skills and niche expertise by employing
skilled specific staff members, allowing a firm to respond to client requirements more
efficiently. A firm’s skill specialisation is accumulated through its involvement in previous
projects and employment and can contribute to winning further projects as client’s value a
firm’s expertise to deliver satisfying results.” Their research showed that identifying
intellectual capital was central to both effective people management and the development of a
firm’s expertise. Furthermore it was noted that an awareness of skills was essential in
effective redeployment of human resources, a fundamental requirement for operating
efficiently in a constantly changing international environment. The increasingly homogenous
global architectural market is becoming a place where a firm’s intellectual capital can be
easily transferred and be more universally applied (Keune, 2007), furthering the relevance of
skill redeployment as an integral part of sustainable internationalisation.
Intellectual capital can be further subdivided into explicit and tacit knowledge to differentiate
between the knowledge that can be captured and recorded by the firm and therefore easily
shared, and the less tangible human knowledge and experience that is stored in the heads of
employees (Robinson et al, 2005). Perhaps a more defined classification by Carson et al
(2004) is one of human and structural capital. Under this classification, human capital can be
seen as the collection of innate personality attributes and learned skills of employees. As it is
unlikely that one person can hold all the knowledge the firm requires, the capture and
subsequent transfer of this human capital is also relevant. This is structural capital and is

20

defined Carson et al (2004) as the “processes and procedures that are in some way recorded
and hence accessible to the organisation as a record of how things are done in order to
maintain effectiveness”. Structural capital includes both informal ‘fluid’ capital (workgroups,
dynamics, ethos, etc) and more formal ‘crystallised’ capital (procedures, policies, data, etc.).
2.3.5 Management of Soft capital and its effect on organisational structure.
Without effective management soft capital is a wasted resource; “it is not the knowledge of
the organisational members per se which is of critical strategic importance, it is the firm’s
productivity in building, integrating and utilising its intellectual capital which is vital”
(Jordan et al, 1997). London et al (2005) also point to the importance of efficient soft capital
management to the sustainability of a firm’s international operations. They identify the
reflexive capability (ability to react to change) of a firm as central to its efficient
management. Defining the principal characteristics as awareness, responsiveness and
adaptability they argue that firms that facilitate these will have greater ability to deal with
issues that arise in the internationalisation process. As reflexive capability is a positive
reaction to new information it follows that successful exporting firms would have a fluid
internal information flow. Refining this, Carson et al (2004) discuss the importance of soft
capital management in the context of the information flows that transfer human capital into
structural capital. They argue that this is done primarily through the maintenance of formal
and informal networks, putting human resource (HR) practice at the cornerstone of any
management strategy. They state that “continual negotiation and re-negotiation of group
relations needs to be understood as perhaps just as central to the sustainability of any
organisation, since the internal as well as external environments are the outcome of constant
interaction that must be managed”. This is not merely a nod to the HR department however as
it is the project managers and team leaders that are responsible for the implementation of key
HR practices and the maintenance of network relationships within the firm. In this way it is
HR practice rather than HR policy that is central to soft capital management, returning the
emphasis to management and firm ethos (Clark et al, 2005). The importance of these formal
and informal relationships to the transfer of knowledge is compounded by Lindsay et al
(2003) who found that individuals were at the centre of knowledge transfer in an international
organisation as information was stored in and transferred between employees, and this was
particularly evident in the transfer of tacit knowledge. In the international arena “the

21

individual plays a focal role in the transfer of knowledge between parent company and
foreign subsidiary operations” (Lindsay et al, 2003). This was also found to be the case by
Hofstede (1994) who put strong emphasis on the importance of the role of mangers in host
country operations who acted as the direct link between parent company and foreign market.
Koch (2003), in a study of knowledge management in engineering firms, identified the key
areas relating to the development of knowledge management as; culture, office design,
corporate and strategic management, human resources, organisation and information systems.
He cites the relevance of these human resource and ICT “tools” as the basis for the
development of meaningful knowledge management practices. Consistent with this, a study
of UK based exporting construction companies by Robinson et al (2005) outlined a need for
organisations to develop a knowledge management strategy with clearly defined objectives,
appropriate resources and objective benchmarking procedures. This was seen fundamental to
the ability of a firm to capture and reuse knowledge so that it can be considered an asset. The
study discussed two distinct strategies of codification and personal knowledge management,
as previously proposed by (Hansen et al, 1999). Codification involves the harnessing of
explicit knowledge for future use through the use of information communication technology
(ICT). Architecture as a creative, problem solving industry is heavily reliant on tacit
knowledge and so there is a limit to the level of standardisation that is required for a
codification strategy. More appropriate is a personal strategy that concentrates on using ICT
to support human interactive systems that facilitate the exchange of tacit knowledge.
Developments in ICT have been identified in the literature as both an enabler and major
driver in the internationalisation of professional service firms (Knight 1999, Netland et al
2007). The emergence of building information modelling (BIM) means that the architectural
sector is currently in the early stages of a major transformation of both its working practices
and the nature of its relationships with clients, contractors and manufacturers. The
introduction of such a system will allow for the consistent updating and rapid transfer of
relevant, accurate information to all parties within a construction project network irrespective
of geographical distances (Eastman et al, 2008). According to McGraw Hill (2008) the use of
BIM has developed rapidly in the US over the last 5 years, however this review found no
published research, either empirical or explorative, on the effects of BIM on Irish
construction projects. This can be seen as indicative of the relatively slow take up of this
process among Irish firms. While the effects of BIM on the execution on the international
projects will undoubtedly be significant, the rapidly changing nature of technology means

22

that it may be somewhat of a moot point as it is arguably more beneficial to consider the
effects of rapid change and the flexibility required to integrate new ICT, rather than simply
focusing on one specific, constantly evolving, ICT system.
2.4 - Competitive strategies, market entry modes and their impact on organisational
structure
2.4.1 Competitive Strategies.
So far, this review has focused on the various characteristics of the organisation and effects
that these can have on the internationalisation process. In order to give some context to this
largely theoretical discussion, the final section will address the practicalities of exporting
architectural services by reviewing 1); the various competitive strategies outlined in the
literature and 2); how they relate to architectural exporting in terms of the effect they have on
the selection of market entry modes and a subsequent organisational structure. As a starting
point, Porter (1980) outlines three generic competitive strategies which he maintains are
applicable to all forms of business; overall cost leadership, market focus and product
differentiation. He proposes that firms need to pursue a single strategy to remain competitive
as multiple strategies are likely to dilute the process and render a firm’s efforts ineffective.
His first strategy, cost leadership, involves the implementation of practices aimed at keeping
production costs to a minimum and thereby allowing reductions in the price paid by the
consumer. This is achieved through measures such as economies of scale, strict management
of overheads and cost minimization in non-core areas such as R&D, sales, and advertising.
This strategy usually requires a firm to have a significant market share to be successful. The
intangible, perishable and highly customised nature of professional services is at odds with
such a strategy and, as previously cited, “it is unlikely that, in an international environment,
an organisation can compete on price and efficiency alone” (Reidy, 2007). In relation to Irish
architects this strategy is further hampered by the relative costs of Irish architectural services.
A 2008 survey by the Architects Council of Europe (ACE, 2008) showed Ireland was the
most expensive country in Europe in which to hire an architect. Rates for principal architects
were €145 per hour against a European average of €63 per hour. The average annual salary of
an Irish architect was €65000 against a European average of €36000. Given the Europe wide
recognition of architectural qualifications, Irish firms are now competing on a level playing

23

field with other European practices for work in locations outside of Europe (keune, 2007).
Irish firms will therefore need to implement cost saving measures not to gain competitive
advantage but as a means of remaining viable in an international market. This is before
consideration is given to the low cost of local practices in the emerging economies, a key
export market for service providers in developed countries (Freeman et al, 2008).
The second strategy outlined by Porter (1980), market focus, requires a firm to target a
specific buyer group, segment of a production process or geographical market. This focus
must be concentrated on a particular target with all company policy built around that focus.
Ideally a focused strategy is narrow in its appeal with competitive advantage gained through a
high level of commitment to a small consumer base. However, given the possibility of
considerable downtime between projects, even with repeat clients, architectural firms need a
wide client base and scope of services to counteract this and minimise potential revenue
shortfalls (Ling et al, 2008, Javalgi et al, 2008). Market focus as a strategy would suggest an
inflexibility that would appear to be at odds with this.
Porters (1980) third strategy is product differentiation. This involves offering a product or
service that is perceived as unique in one or more ways throughout the industry, allowing a
firm to engage a particular market and encourage client loyalty. In construction design terms
this means providing either a speciality or superior quality service (Ling et al, 2008). More
importantly, this strategy allows for a higher cost service to the consumer as there the reduced
pool of suppliers and the lack of comparable alternatives means clients are less price sensitive
(Porter, 1980). In an architectural context, the four generic competitive strategies for
architectural firms outlined by Winch et al (1993) can all be seen as variants of Porters
differentiation strategy. Strong ambition practices are firms that are newly formed and are
still awaiting a major commission, usually supplementing their income through lecturing or
other external activities. Strong delivery practices focus on the delivery of simplistic
buildings with an emphasis on fulfilling the budget and function elements of the clients brief.
Strong experience practices are firms that have built up a body of expertise relating to a
specific building type and win commissions based on their expert knowledge. Finally, strong
ideas practices focus on high profile, aesthetically driven, projects where the creativity or
artistic merit of the firm gives it its competitive edge. Firms in this last category are few in
number and rely on the cultivation of a specific recognisable brand identity. The vast
majority of exporting practices fall into the categories of strong experience or strong ideas as
simple projects are unlikely to be able to carry the cost of hiring a foreign architect.

24

2.4.2 Identifying a suitable route to market
The most common entry modes for services outlined in the literature are contractual
exporting through licensing or franchising and foreign direct investment through wholly or
partially owned subsidiaries, joint venture or strategic alliances. (Blomstermo et al, 2006).
These entry modes allow for varying degrees of risk, but this is balanced by a compromise in
the level of operational control that each mode affords (Eramilli, 1991). Choosing the correct
entry mode is of critical importance to the success of a firm’s international operations and can
be a costly decision to reverse (McNaughton, 2001, Agarwal, 1994). Despite this, the
decision is often post-rationalised and based more on managerial instinct then on structured
and informed analysis. This is particularly the case with smaller firms who may have limited
research resources (McNaughton, 2001, Alexander, 2008).
Within the architectural arena there are three principal foreign market entry modes; a)
through commissions obtained by recognised design architects on the back of previous high
profile work b) through commissions obtained by architects with specific recognised
experience not readily available in the host market and c) through commissions obtained by
entering international architectural competitions, both open and invited (Keune 2007). Winch
et al (2002) and Skaates et al (2003) outline the same with two similar but more defined
variations; firms that follow the foreign investment operations of existing clients and firms
who proactively adopt a market seeking approach obtain commissions either through formal
invited tender process or informal client discussion. Winch et al (2008) observe that strong
experience practices tend to opt for a direct client following and a market seeking network
approach. Conversely, strong ideas practices generally favour international competitions as
they require innovation and creativity over problem solving and specific expertise. Skaates et
al (2003) observe that by competing for international projects rather than focusing on specific
geographical markets, firms neutralise the risks of entering a speculative market. Furthermore
this approach circumvents the problems of social and cultural capital acquisition associated
with territorially specific marketing strategies. This is a significant advantage as some of the
key barriers to market entry for professional service firms are the cost of face-to-face
communications, language barriers, cultural and communication practices, and acquiring
knowledge of the regulatory environment (Freeman et al, 2008). However, a prerequisite for
this operation is an established international reputation and it may be limited to larger more
established firms. The correlation between strategy and entry mode is explained by winch et
al (2002); “strong experiences firms rarely enter competitions, and if they do, it is unlikely

25

that they will have the flair required to win them. On the other hand, strong ideas firms seek
out the most exciting projects in architectural terms, rather than build up detailed knowledge
of a particular client’s requirements or a building type. They rarely obtain repeat business
from a client, while strong experience firms rely upon it for their success”
With services firms in general, the suitability of a particular entry mode depends largely on
the long term strategy of the expanding firm, the previous experience, the required level of
market knowledge and the level of control required (Ekeledo et al, 2004). Furthermore, the
very nature of the service provided must also be taken into consideration, with soft services
having their own unique requirements and hard services being more aligned with firms
manufacturing exporting tangible goods (Javalgi et al 2008, Blomstermo et al, 2006).
Eramilli (1990) cites engineering design as an example of a service that can be produced in
one country, stored in a tangible form and then exported to another country; the implication
being that engineering and other construction design services can be decoupled from their
point of consumption and treated as hard exportable services. Bloomstermo et al, (2006)
make the same point about the supply of architectural services. This would suggest then that,
in the construction design sector, there is no requirement for a physical presence within a host
market for the production and delivery of services. However, this somewhat crude
classification as it would appear to overlook the construction supervision stage of the project
which is, in effect, the delivery stage. Furthermore, this classification fails to account of the
most important consideration in the design of a sustainable internationalisation strategy;
managing demand and maintaining a consistent supply of new work.
As services (and particularly professional services) are tailored to a client’s needs they are
considered to be a perishable commodity (Bloomsterrno et al, 2006). Firms often combat this
by maintaining a physical presence in a market as a means of minimising distribution
channels and maintaining client contact (Javalgi et al, 2008). The discontinuity, uniqueness
and complexity of project based professional services means that this element of client
contact also plays a central role in securing repeat work, leading to a greater emphasis on
relationship management (Owusu et al, 2007). The process of relationship management refers
to both the maintenance of individual project networks during the lifecycle of the project, and
maintenance of the relationships between the firm and the client on a multi project level,
including sleeping periods or downtime between projects (Skaates et al, 2002). Relationship
management, otherwise known as client relationship management or CRM, was identified by
McColl-Kennedy et al (2008) as the most important element of a professional services

26

marketing strategy. They subdivided this into four further marketing practices; 1) Transaction
marketing; using the marketing mix to attract client, 2) database marketing; using IT
solutions to attract and retain clients, 3) network relations; managing relationships at firm
level, and 4) interaction marketing; maintaining personal one to one client relations. Their
research showed that all firms used CRM at some level irrespective of their size, experience
or specialisation. However, the bigger, more experienced and better resourced firms used the
more sophisticated marketing techniques and had a higher level of formalised marketing
strategy usage.
To illustrate this with a practical example, Ling et al (2008) describe the implementation of a
market seeking strategy by QS firms in Malaysia. In their study, firms established a branch
office in the host country as a means of market familiarisation. Once opportunities have been
identified and projects appear likely firms then set up a new legal entity by forming a
subsidiary firm in the form of a joint venture or a wholly owned subsidiary (keeping it as
separate entity reduces the risk of possible losses to the parent company). This becomes the
local point of contact for both clients and members of the wider construction team for the
duration of the project as all parties need to liaise with the firm regularly throughout the
lifecycle of a project, making long distance travelling unfeasible.
Owusu et al, (2007) explore a possible compromise through the concept of project based
market entry; an entry mode closely aligned with systems exporting (Gronroos, 1999) which
involves an exporting company teaming up with a mutually beneficial firm to gain
competitive advantage (systems exporting is different from a joint venture as it typically
involves an alliance between two firms in complementary business, for example an
architectural practice and a development company). The concept of project business is based
on a firm offering a total package rather than focusing on component parts. Owusu et al
(2007) found that a project based approach required a lower level of capital input and as a
result was a lower risk strategy. It also allowed for a lower level of commitment to a country
resulting in higher flexibility and protection from government and economic fluctuations. The
difficulty for architectural firms is that this mode of market entry is based on maintaining
strong industry and client networks, a requirement for which has been previously identified as
a permanent physical presence within the host market. However, expanding on the strategies
outlined by Groonroos (1999) may offer a partial solution that appears to be relatively
unexplored in architectural terms. He identifies three generic entry modes for
internationalisation of services; client following, market seeking and electronic marketing.

27

The two modes used by construction design firms are client following strategies involving
firms entering a foreign market on the back of existing clients, and market seeking strategies
involving firms pro-actively entering a market in which they recognise potential opportunities
(Winch, 2008, Skaates et al, 2003). The third route identified by Groonroos (1999), electronic
marketing, involves the provision of services primarily through electronic distribution
channels, using location partners to implement final product delivery. While this model is
commonplace today, Groonsroos was the first to identify it as a specific internationalisation
strategy, using the success of the (then) newly emerging internet firm Amazon as example of
a global firm adopting a web based business model. This research was published at a time
when the internet was still in its relative infancy. The intervening decade has seen the
expansion and widespread adoption of both broadband and mobile technology and this in turn
has led to the emergence of new media outlets and the development of internet based tools
such as global-mapping, social networking and tailored search engines. These present
significant new and unexplored marketing opportunities for professional services firms. This
is highlighted by McColl-Kennedy (2008) who point to the introduction of e-marketing and
IT-dialogue by Coviello et al (2001, 2006) into their services marketing typologies and
acknowledge its importance for the future of professional services marketing.
2.4.3 Organisational Structure.
In relation to architectural services, Keune (2007) outlines four operational modes for firms
practicing internationally; a) Cross boarder supply where services are transferred
electronically, b) Foreign consumption where firms are requested for a specific project by an
international client, c) Commercial presence where firms establish a permanent presence to
supply a specific geographical market on an ongoing basis, and d) Presence of natural
persons where architects (usually individuals) move permanently to a foreign country to
provide architectural services. Winch et al (2002) refines this by describing the principal
structural arrangements and noting the relationship of each to the firms overall strategy. The
most common arrangements were temporary joint ventures with local firms for the duration
of a project. A variation on this was a temporary project office that closed once a project was
complete. These methods were favoured by strong ideas practices that competed globally and
therefore did not require a geographic base from which to carry out their marketing functions.
In these temporary arrangements a minimal amount of work is done in the host country, with

28

the home office carrying out almost all work outside of the project management functions.
Two further methods of organisational structure identified were permanent joint ventures and
wholly owned subsidiaries. These permanent arrangements were favoured by strong
experience practices that sought to establish relationship networks and build a client base in a
national market. As a middle ground Winch (2008) identifies a structure that is a slightly
diluted form of the permanent subsidiary. He observed that one strong experience practice set
up an international network of practices that worked individually in their home country but
collectively on international projects. While this was in the context of European construction
market only, the adaptability of such a theory to a global market could be considered as an
area warranting further research.
As previously discussed, there is a limited market for high profile strong design firms and the
majority of exporting architects fall into the category of experience firms. These firms tend to
operate on a market seeking strategy, and, as the operational structure of these firms is
dictated by the requirement of a local presence in the host market, the decision to enter a joint
venture or establish a wholly owned subsidiary must be addressed. Forlani et al (2007) found
that generally, service firms have a preference for mixed-ownership entry modes, which
retain control of proprietary R&D knowledge and outsource the marketing function, as they
are seen to be the best risk-return situation. This perception is somewhat at odds with the
findings of Kirca (2005) who found that firms adopting entry modes that allow for higher
control over marketing strategies perform better in international markets then firms that opt
for low control modes. However, higher control is inversely proportionate to levels of
commitment, risk and overall efficiency (Ekeledo, 2005) and to this end Kirca (2005) does
suggest that managers look at alternative means of exercising marketing control (ie trust,
dependence and cooperation). Sanayl (2001) also extols the virtues of the joint venture and
sets out the principal advantages as reducing risk, access to technology and patents,
acquisition of information and cultural capital, eliminating potential competition and
conforming to government policies of the host country. In a construction design context Ling
et al (2008) came down strongly in favour of a joint venture arrangement; “joint ventures
with a firm in the host country will allow a consultant QS firm to learn and adapt to the
foreign environment and practices more easily. It can tap on the partner’s knowledge of the
local market such as local laws, regulations, prices, practices and culture. This could reduce
the risk exposure, especially if it is just a one-off project. Joint venturing with a firm from the
host country can also boost the confidence of clients. This is because besides having superior

29

international expertise, the alliance is familiar with the conditions in the host country.” The
same study also made the point that joint ventures and mergers with practices from the
county of origin can prove difficult as both practices are on the same learning curve and
merging two separate corporate cultures can have difficulties in itself.
The alternative to the joint venture is to establish a wholly owned subsidiary. This allows a
firm a higher level of control and undiluted returns; however it can prove impossible due to
government regulations or the necessity to acquire social and cultural capital. A method of
circumventing the problem of soft capital acquisition suggested by Gronroos (1999) and
Porter (1980) is the acquisition of a foreign firm, allowing for a higher level of control and
immediate network entry. However, this requires a high level of commitment to a particular
location and, as Porter (1980) points out, is an expensive strategy as the price of a firm is
always higher than the profits it makes. Further to this, the idea of a need for a higher level of
organisational control is contradicted somewhat by Blomstermo et al (2006) who found that
this is not necessarily the case as control can be asserted through various social measures
such as decision vetoes.
2.5 - Conclusions
There are a number of conclusions that can be drawn from the preceding literature review.
Firstly, given that the architectural industry in Europe alone was worth €11.6 billion in 2007
(ACE, 2008), that there is a paucity of literature dealing with the issues facing project based
construction design services looking to internationalise. The body of literature related to
construction design has been carried out from within an Irish context is almost nonexistent.
This lack of relevant Irish professional services literature is notable in that Ireland is a small,
geographically remote, service orientated, economy and has to contend with exporting issues
that are not relevant to even its closest neighbours. Acknowledging this, there is evidence that
the global environment is improving for service exporters and that the body of knowledge
and experience that Irish architectural firms can offer their clients is becoming increasingly
transferable. In exporting terms, this points to an increase in exploitable international
opportunities for Irish architects. This is coupled with a reduction in international trading
barriers for services, a homogenisation of international architectural standards and an
alignment of educational programmes and official certification. In short, architecture is
quickly becoming a borderless service.

30

There is a perception among exporters in general that size is a prerequisite for success in an
international marketplace, however empirical evidence would suggest otherwise citing the
perception itself as a bigger barrier. Therefore, it could be argued that the relevance of critical
mass to architectural firms it is not an issue in terms of capital resources, especially given the
comparatively low costs associated with establishing an international branch office. However,
there are two further points to consider in relation to architectural services. While limited size
may not be an insurmountable barrier in the way that government legislation or access to
tender prequalification may be, it is still a considerable competitive disadvantage; so much
so that it may be impossible to compete against the economies of scale afforded to larger
firms, and thereby becoming an actual barrier. This is particularly relevant when operating in
the growing markets of the developing economies as lower fees dilute the viability of a
commission and firms need to take on larger projects to justify the associated risks.
Furthermore, lager firm size has been identified as providing an assurance to potential clients
and so becomes an important marketing tool for attracting new commissions.
This assurance of size is related in part to a client’s assumption of a proportionate level of
experience. The accumulation of a body of relevant experience is perhaps more important
than size, in terms of turnover or employee numbers, as it represents the closest thing to a
tangible product an architectural firm can offer. A firm’s experience is therefore the defining
factor in its marketability and its ability to credibly offer a particular niche service.
Furthermore, international and operational experience itself has positive implications for
managerial attitudes which are the driving force behind successful internationalisation. A
positive, proactive approach to the internationalisation process has been shown to have a
positive correlation to a firm’s success. Within an Irish context, this would suggest grounds
for exploring the option of consolidation within the architectural sector as a means of
maximising the cumulative experience of the top exporting firms; thereby strengthening their
product offering and operational ability and ultimately increasing their potential for success
in the international marketplace.
As ‘experience’ can be taken to be a broader term for soft capital, the core of an architectural
firms product offering (soft capital referring to the asset of knowledge that a firm can access
and exploit), efficient management of this soft capital is fundamental to the successful
internationalisation of architectural firms. It could be argued that given the high dependence
of an architectural firm on tacit knowledge transfer, a ‘personal’ approach to knowledge
management should be adopted. A strategy of this nature uses ICT to facilitate and enhance

31

the human information flows that form the central knowledge base. Such an approach would
ideally be based on the close physical proximity of employees in order to facilitate the formal
and informal networks at the core of such a strategy. Furthermore, returning to the issue of
economies of scale, the close proximity of knowledge rich employees allows for the
maximum flexibility and growth of the firms intellectual capital. Thus, the case is made for
the adoption of a centralised internationalisation strategy that is focused the on the home
country office as the main design and administration hub, with minimal functions carried out
within the host market.
By placing this theoretical discussion in the context of architectural exports and the
practicalities of internationalisation, two factors emerge that warrant further consideration.
Firstly Irish firms who export need to make provision for the difference in fee levels between
Ireland and other EU countries. In a global marketplace this is can be a considerable
competitive disadvantage, particularly when entering low cost developing economies. Again,
this points to a need for firms to consider the cost reductions afforded by achieving
economies of scale through consolidation. Closely tied to this issue of cost reduction is the
need for architectural firms to develop a niche or particular expertise in order to successfully
compete in the global marketplace. By offering a particular expertise, be it design or
experience based, firms can maintain a competitive edge despite having higher costs, due in
part to the fact that by adopting such a strategy, firms will be operating in a market where
clients are less price sensitive from the outset.
With this in mind there are two principal competitive strategies adopted by exporting
architectural firms and these strategies, strong design and strong experience, dictate the
method of market entry and the subsequent organisational structure. The first strategy, used
by a minority of firms, is strong design. Strong design firms specialise in creative design
projects and operate globally through international design competitions, and later with an
established reputation, through specific high profile commissions. In terms of organisational
structure these firms are usually heavily centralised with temporary offices established in the
host country only for the duration of the project. The second strategy, strong experience, is
the most common strategy for exporting architectural firms. These firms establish a
permanent base within geographical region where they identify a need for their particular
experience. From this host country base they secure work by infiltrating local networks and
building a client base. As these firms require a greater level of cultural integration, more of
the design and production work is done within these host country offices.

32

On practicalities, given the project based nature of the construction design industry, a strong
design strategy has numerous advantageous. It allows for minimal host country presence and,
by extension, reduced overheads. In addition to the increased operational control, quality
control and flexibility of soft capital resources, a centralised organisational structure also
allows for negation of the risks associated with speculative market entry. Firms do not have
to invest until the work is secured and once a project is complete the firm can withdraw from
the market, eliminating costly downtime between projects. Furthermore, minimum host
country commitment eliminates the need for investment in the development of cultural and
social capital resources. Strong experience practices on the other hand must invest both
financial and human capital resources in establishing a presence within a market before any
commissions are secured. Such a strategy ties up capital and so a higher level of resources is
required to ensure such an operation is successful. As this structure carries a lower level of
operational flexibility, there is therefore a higher level of associated risk.
For strong experience firms involved in explorative market seeking strategies (and that is the
majority of exporting architectural firms) there are three factors that determine the need for a
host country presence; marketing, soft capital acquisition and project delivery. As project
delivery is only a temporary project specific function, and soft capital acquisition only
becomes a priority once a project has been secured, the marketing function is the sole reason
for strong experience firms to establish a permanent physical presence within a host market.
Given the impact that this has on the firm’s operations, there should be serious consideration
given to the marketing function and how best to implement the various marketing tasks. With
developments in internet and mobile communication technology and the increase in
broadband availability since the mid 2000s, firms should be exploring the possibilities for
new marketing techniques that would further reduce, or even eliminate, the requirement for a
permanent host country presence. Although much of the current relevant literature is based on
research carried out prior to these developments becoming mainstream, Ling’s (2008)
example of the Quantity Surveying firm with a predominantly centralised structure that sends
out marketing “scouts” to secure new projects could illustrate this point.
In summation, and to expand on a previous conclusion, a review of the literature would
suggest that there is a strong case to be made for the adoption of a centralised
internationalisation strategy and organisational structure. Such a strategy would focus the on
the home country as the main design and administration hub, leaving the host country offices’
to deal primarily with the client facing marketing tasks, supplementing these with soft capital

33

development and project management functions only as individual projects require. Given the
ability of larger firms to facilitate more advanced (and more successful) marketing tasks,
together with the requirement of a credible body of experience and the competitive
advantages of the economies of scale available to larger firms, consolidation within the
industry would appear to be at the very least advantageous, and may even prove a necessary
requirement for Irish firms looking to fully and successfully implement such a strategy.

34

3. METHODOLOGY
3.1 - Research gap
Based on a review of literature relating to internationalisation theory, services exporting and
professional services management there is a limited body of research dedicated to the
internationalisation of architectural services. The only academic research found relating to
Irish architectural exports was a study of the export activities of UK construction design
consultancies operating in Ireland during the period 2000 – 2006 (Reidy, 2007). The only
data currently available that defines the extent of Irish architectural practice in either
domestic or international markets is contained in the ACE report, a Europe-wide study
compiled at a time of unprecedented levels of construction activity (ACE, 2008). The current
Irish architectural market, it would appear, is an empirical unknown.
The current body of international architectural research dates from 1993 -2005 and is based
on management practices that were in place during and prior to the 1990’s. Consequently it
fails to account for the shift in industry structure arising from 1) the reductions in global trade
barriers, 2) the economic downturn and 3) the opportunities afforded by the rapid growth of
new mobile, internet and construction design technology. As these are three factors that have
had a significant impact on the structure of the international architectural market, and could
be considered key drivers in the internationalisation process, this research will be important
addition to the existing body. Furthermore, it will provide a definitive and current empirical
profile of the Irish architectural export sector and develop guidelines specifically for Irish
architectural exporters, taking into account their unique economic circumstance.

35

3.2 - Research Objectives
Section 1.2 outlined the objectives of this research;
1. To develop an internationalisation model that best positions Irish Architectural
exporters within the global construction design market.
2. To profile the current activities of Irish architectural exporters and to assess that
profile in the context of the global construction design market.
3. To investigate the effects of organisational structure and management practice on a
firm’s ability to engage in sustainable internationalisation.
As the first objective of this research was the focus of the literature review, the primary
research dealt with second and third objectives; profiling the current export activities of Irish
architectural firms and investigating the effects of various firm characteristics on this process.
3.3 - Research Methods
Following the literature review and the development of a theoretical internationalisation
model, this research adopted two distinct threads. It first built a profile of Irish architectural
firms and their exporting activities that could be assessed in the context of the global
architectural and construction market. It then explored the reasons behind that position by
assessing the business practices currently used by firms and questioned how these affect the
major strategic operational decisions, particularly in relation to international marketing
strategies and organisational structures. Such research required a combination of both
quantitative and qualitative research methods.
A methodology of action research was initially considered but ultimately ruled out for two
reasons. Firstly, such a process requires close subject interaction and, consequently, would
limit the scope of the research to the problems of a single firm. This would therefore be
suitable only as method of exploring the correlation between various aspects of a single firm
during the internationalisation process, rather than those of the industry as a whole. Secondly,
such a narrow focus presented practical difficulties. Given the volatility of the Irish

36

architectural market, limiting an explorative study to a single firm carried a significant risk of
that firm liquidating mid-process, as happened with one firm contained in the initial sample
selection.
The second methodology considered was a case study. The nature of the case study
methodology allows for a greater “insight” into a particular research topic but makes it
difficult to establish the same definitive boundaries as empirical research (Gerring, 2007).
Previous similar studies (Winch et al 1993, 2002, London et al, 2005) were concerned with
outlining and impartially assessing the various structural and managerial characteristics of
architectural firms in domestic and international markets. Consequently, these studies were
based on qualitative research and adopted a case study methodology, incorporating both
within-case and cross-case analysis techniques. The aim of this research however, was to
define the current competitive position of a specific group of Irish exporting architectural
firms by comparing to their current profile to other international firms and assessing that
profile in the context of the global market. To achieve a measured comparison and make a
balanced assessment, the emphasis needed to be on a quantitative analysis of that position.
For this reason it was considered appropriate not to use a case study methodology, but to
obtain the quantitative data required for that analysis using a survey method.
As the second thread of this research was to explore the impact of managerial and
organisational characteristics on the internationalisation process of Irish architectural firms to
date, there were wider issues of specific management experience and focus that were not
possible to explore fully using a survey method alone. Furthermore, as the Irish architectural
sector is a relative unknown in research terms, it was anticipated that the survey results would
present previously unidentified issues requiring further in depth exploration. Therefore a
follow up interview process with a selection of the relevant survey respondents, together with
representatives of other related industry bodies, was employed to address these issues. This
combination of a literature review, surveys and selected interviews qualified the research by
way of triangulation.
In order to make an assessment of the current architectural export sector the research profiled
characteristics of the individual firms that can be taken as indicative of their current
operational structure and competitive position. These characteristics were observed within the
literature review and are presented on Table 3.1 below;

37

Profile Indicative of...
Size Performance indicator
Age & Experience, Performance indicator
Internationalisation models Current operational structure
Soft Capital Management Current operational structure
Business Management Performance indicator
Marketing. Performance indicator
Table 3.1; Firm characteristics profiled.
3.4 - Sample Selection
There is currently no complete listing of Irish architectural practices available. The most
comprehensive listing is the Directory of Registered Practices published annually by the RIAI
(RIAI, 2008). The 2008/09 directory has been used as the primary source for identification of
a sample selection for this research. The 2008/09 directory was, at the time of sample
selection, the most recent publication available but was due to be updated. However, given
the subsequent decline in construction activity in Ireland, it was reasonable to expect an
increase in the number of firms choosing not to renew their annual subscription. Furthermore,
it was highly unlikely that there would be registration of any new firms, particularly firms
with the capacity for internationalisation. The 2008/09 directory was therefore considered to
be the most appropriate source from which to obtain a sample selection.
For clarity in identifying suitable firms “international operations” was defined as construction
related commercial activities outside of the island of Ireland. From the 2008/09 directory only
firms that listed a website were considered as firms without a web presence were assumed to
be too small to export. Further investigation of these firms identified those that advertised
their international operations on their websites and therefore considered them to be a defined
and continuous element of their business model. Of the firms that advertised international
operations, a number were subsidiaries or host market partners of foreign firms and therefore
considered to be importers. As this research is concerned with export activities of Irish firms,
they have also been excluded from the sample.

38

A final criterion applied to the sample selection was participation in the Leadership 4 Growth
– Construction and the Built Environment programme (Enterprise Ireland, 2010) coordinated
by Enterprise Ireland and delivered by Duke Corporate Education. This programme is
designed for CEOs of companies who are looking to export their products or services and
who’s companies can demonstrate the capacity to engage successfully in that process.
Participation in such a programme demonstrates both a commitment to and a capacity for
strategic internationalisation. The results of the sample selection are displayed on Table 3.2
below;
Source No.
Firms listed in the Directory of Registered Practices 2008/09 612
Firms listing a web address 321
Firms advertising international operations 18
Firms of the above domiciled in Ireland 16
Firms participating in the Leadership 4 Growth programme 9
Total Number of Firms Qualifying for selection 9
Table 3.2; Sample selection
One firm identified as suitable for selection was liquidated before the research began,
narrowing the selection to eight firms. These firms were;
1. Henegan Peng Architects
2. Henry J Lyons Architects
3. HKR Architects
4. NMA Architects
5. O Mahony Pike Architects
6. RKD Architects
7. Scott Tallon Walker Architects
8. Smith Kennedy Architects

The Global Architectural Firm, Ross O Connell

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