THE LOW‐TRUST ROUTE TO ECONOMIC DEVELOPMENT: INTER‐FIRM RELATIONS IN THE UK ENGINEERING CONSTRUCTION INDUSTRY IN THE 1980S AND 1990S*

Abstract

There is a growing body of literature that suggests that advanced economies are experiencing an economic restructuring such that the engines of economic development are smaller, more independent, firms acting in an increasingly cooperative manner. In assessing whether the UK economy is actually experiencing such a shift in inter‐firm relations, the paper firstly assesses the existing evidence. This evidence suggests the continued dominance of large firms and only limited and uneven movements away from a low‐trust system. Secondly, the paper presents evidence on the nature of inter‐firm relations in the UK engineering construction industry in the 1980s and 1990s. the research shows considerable improvement in performance against schedule associated with the emergence of management contractors. Management contractors can improve performance either by adopting a high‐trust route in which they seek to make overall efficiency gains by integrating design and construction, or by adopting a low‐trust route in which they seek to reduce scope for opportunism by rigidifying design, and by passing on risk. Evidence is presented which shows that management contractors in the UK have so far predominantly adopted the low‐trust route to improved performance. Cumulatively, the evidence suggests the dominance of the ‘top down’ control of inter‐firm relations in the UK.

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