Business Model Innovation and Its Drivers in the Chinese Construction Industry during the Shift to Modular Prefabrication

TLDR

The global construction market forces contractors to innovate, and business‑model innovation is essential for converting technology into commercial value, yet Chinese firms lack quantitative evidence on BMI amid the shift to modular prefabrication. This study seeks to uncover how business‑model innovation relates to its drivers within the Chinese construction sector during the transition to modular prefabrication. An industry‑wide survey was administered and the responses were analyzed using structural equation modeling. The analysis revealed that a favorable business environment boosts both BMI and entrepreneurial cognition, entrepreneurial cognition positively drives BMI, and it mediates the environment‑BMI relationship—marking the first study to identify this mediating effect and offering guidance for practitioners and policymakers.

Abstract

The globally-interconnected construction market forces contractors to embrace innovations for surviving and thriving among competitors. Business model innovation (BMI) plays a decisive role in a company’s success because it quickly converts emerging technology into commercial values and produces four times more revenue growth than product and/or service innovations. Chinese construction companies encounter the BMI challenge when facing the technological shift of modular prefabrication from conventional construction methods; however, little literature provides quantifiable information for them to better understand BMI. Therefore, this study aims to identify the relationships between BMI and its drivers for the Chinese construction industry in the context of such a technological shift. The researchers conducted an industry-wide survey and analyzed the data using the structural equation modeling (SEM). Findings confirm four significant relationships: (1) favorable business environment has a positive impact on BMI; (2) favorable business environment has a positive impact on the entrepreneurial cognition; (3) entrepreneurial cognition has a positive impact on BMI; and (4) entrepreneurial cognition mediates the effect of business environment on BMI. To the authors’ knowledge, this paper is the first attempt that identifies the mediating effect of the entrepreneurial cognition. Outcomes are beneficial for industry practitioners to innovate valuable business models and are helpful for policy makers to promote the implementation of modular prefabrication technology in construction.