Highlighting Determinants of the Market Positions of Project-Based Companies in the Typical Project Business Segment: A Study Using a Deductive Research Strategy

Prologue

Nearly 12 years ago, I participated in a world congress on organizational sciences which encompassed many different tracks, and it attracted nearly 1,500 participants from different organization-related domains. One of the tracks organized a workshop on the relationship between the organizational management process, organizational structure, and organizational culture. Although I was not concerned with this topic, I was urged by the workshop chairperson, who was a good friend of mine, to participate in the workshop. I had a surprising experience. The entire workshop resulted in a lively discussion between two researchers. One of them stated that, based on the outcomes of his empirical research, organizational culture is determined by organizational structure to a great extent. The other researcher stated that, also based on the outcomes of his empirical research, organizational structure is determined by organizational culture to a great extent. Two contradicting statements, and each of them seemed to be justified by empirical research outcomes. That was the time when I started to think about the likely challenges and pitfalls that might be characteristic of any empirical research undertaken in the management domain.

Project Overview and Context

At the beginning of this decade, I was invited by a professional network to chair a workshop devoted to project marketing. As a professor of project management, I was familiar with the topic to a certain extent; however, I was not an expert in this topic. Thus, to be better prepared for this role, I started to search for up-to-date literature on project marketing. I therefore read a few papers and books devoted to this topic. As a result of this effort, I identified the following two underlying features of this literature:

• The literature on project marketing was written by marketing researchers; thus, it neglected the use of a solid project management perspective.
• This literature focused on a very special segment of the project business, that is, supplying very complex systems, primarily for government agencies (e.g., air traffic navigation systems for the army). Thus, primarily a government-to-business relationship was considered in this literature.

Due to these characteristics, this literature propagated such project marketing solutions and tools that could not be adapted for the majority of project-based companies. These proposed solutions and tools included (a) the use of creative offers, (b) adopting a constructivistic approach, and (c) maintaining relational position with the client and the project milieu. Although this approach was considered by the authors to be applied to the entire project business, the above-mentioned workshop disagreed with this idea. In terms of market position, the market situation described by these researchers resembled a monopsony, which is rather atypical in the majority of project business transactions.

This provided a momentum for me to initiate a research project on project marketing which focused on the typical segment of the project business, taking into consideration the typical project-based companies and using a solid project management perspective. The primary aim of the research was to highlight determinants of the market positions that project-based companies faced in the typical project business segment, such as infrastructure industry, real estate development industry, oil industry, and so on. In other words, this research focused on such segment of the project business in which the business-to business relationship is characteristic.

Researcher’s Dilemma: Which Research Strategy?

Bearing in mind the research aim, I first decided to employ an empirical research method which would utilize information elicited from informants in the frame of interview-based qualitative research. I nearly started the research design when the story mentioned in the prologue suddenly came into my mind, and I had to take into consideration the likely credibility and the associated persuasive power of the expected research findings. The story summarized in the prologue has taught me the following lessons:

• Credibility of the interview-based empirical research findings is determined by the reliability of the elicited information which, at the same time, depends on the informants’ familiarity with the research topic.
• A researcher might yield to temptation, that is, she or he might tend to justify the predefined hypotheses rather than accepting a potential falsification of them. Actually, this kind of temptation is driven by the statement implied in a hypothesis to a certain extent.

Credibility of the outcomes of an interview-based empirical research postulates not only well-established and properly formulated hypotheses, but well-trained informants as well. Moreover, I had to take into consideration the findings of the mainstream project marketing researchers, which were published by marketing researchers, and which were considered to be universally true to a certain extent for the entire project business segment. In other words, I wanted to point out, using a project management perspective, that the likely market positions of typical project-based companies in the typical project business segment are different from the market positions highlighted in the mainstream project marketing papers. At the same time, they are determined by different factors than the market position found in the atypical segment, which is the complex system supply segment of the project business.

Bearing in mind these considerations, I finally decided to adopt and employ a deductive research strategy and the underlying deductive research approach and method instead of an inductive research strategy.

Inductive Research Versus Deductive Research: What Makes the Difference?

In his book on qualitative research, Thomas Pernecky (2016) introduces the two competing approaches to producing new knowledge, which are referred to as empiricism and rationalism. Empiricism is the underlying notion of inductive research, which postulates establishing hypotheses that need to be justified (or falsified) by means of collecting and analyzing empirical information. The outcomes of analyses are generalized which could justify (or falsify) the statements implied in the predefined hypotheses. These justified statements are considered to be new knowledge.

Rationalism is the underlying notion of deductive research, which stems back to the antique Greek mathematician Euclid, especially his axiomatic system. When employing deductive research, new knowledge is produced by means of logical succession. In other words, new knowledge is deduced logically from broadly accepted axioms, or concepts, or theories (e.g., Fidler’s contingency theory). Thus, this research approach, in the course of producing new knowledge, does not consider empirical information, it relies on logical operations, such as syllogism, which adopts the following laws of logic: if p then q; p; therefore q. For example,

As it was emphasized by Harry Gensler (2010) in his book on logics, the truth of this new knowledge is guaranteed by

• the truth of the accepted axioms, concepts, or theories from which the new knowledge is derived
• the appropriate application of the accepted laws of logic (e.g., syllogism) by means of which the new knowledge is derived from the accepted axioms, concepts, or theories

In this way, a researcher does not need to rely on the professionalism of informants in the course of employing a deductive research strategy, while she or he needs to apply the strict laws of logic. Thus, the credibility of the deduced new knowledge is primarily determined by the researcher’s familiarity with the research topic and the truth of the considered axioms, concepts, or theories. Of course, the use of this research strategy requires properly trained researchers. However, the credibility of the new knowledge produced by means of logical succession based on a deductive research approach needs to be empirically tested.

Bearing in mind the underlying features of a deductive research strategy, one might realize that this research strategy adopts a foundationalist ontological positon and the associated positivist epistemological position. David Marsh, Selen Ercan, and Paul Furlong (2018) in their book chapter provide an excellent introduction of different ontological positions and the associated epistemological positions. In this way, we might say that a foundationalist ontological position postulates a real world which is independent of our knowledge of it. At the same time, a positivist epistemological position postulates relationships between phenomena and relies on deduction. Marsh and his colleagues point out the need for testing the validity, that is, credibility of deduction by means of direct observation, that is, empirically. They also emphasize that this observation might be objective in the way the observer completes this observation.

Deductive Research Strategy in Operation in a Project Marketing Research

The primary aim of my research was highlighting determinants of the market positions that project-based companies might face in the typical project business segment. To achieve this end, I adopted a deductive research strategy and its underlying deductive research approach. In other words, I decided to deduce these determinants, and the associated market positions from a broadly accepted and true concept or theory.

Right before launching this research project, I published a book on strategic-oriented implementation of projects (Görög, 2013) which provided a deep insight into project implementation strategy. Project implementation strategy is understood in this book as a means of allocating those risks and responsibilities between the project client and the external project performers (project-based companies) that are associated with the project triangle (the expected project result and the associated implementation time and cost) in the course of implementing the project. The tools by means of which these risks and responsibilities are allocated by the project client organizations are referred to as types of contract and types of payment. From the point of view of the above-mentioned research aim, the types of contract have primary importance.

As to the types of contract that project client organizations might use, one can differentiate (a) traditional, (b) turnkey, and (c) management types of contract. A comparison provided in my above-mentioned book published in 2013 highlighted the features of these contract types, and pointed out, among others, that the following:

• The traditional type of contract relies on work packages that are formulated from the entire work included in the implementation process, and that are contracted out to different project-based companies. In this way, a certain project-based company while performing a certain work package (which is, in comparison with the entire project work, a more or less homogeneous smaller task) requires a limited project management capability.
• In the case of a turnkey type of contract, the entire work, included in the implementation process, as one single big and complex work package, is contracted out to one single project-based company. Consequently, a turnkey project-based company (while performing the complex whole) requires considerable project management capability.
• The management type of contract also relies on work packages regarding the implementation process; however, the management of implementing the project is contracted out separately to a project management contractor company. Thus, a certain project-based company, while performing a certain work package (a more or less homogeneous smaller task), requires a limited project management capability; however, the project management contractor company itself requires considerable project management capability.

Taking into consideration both the research aim and the adopted deductive research strategy, the concept of contract types seemed to be an appropriate concept from which the expected new knowledge regarding the determinants of the likely market positions faced by project-based companies in the typical segment of the project business might be derived. To make it clear, I have formulated the following assumption:

• The market position perceived by project-based companies in typical project business transactions is primarily determined by the type of contract as part of the project implementation strategy deployed by the project client organization.

It is easy to realize that an assumption is also a statement, similar to a hypothesis, although it implies a relationship between a concept (or a theory) and a phenomenon to be explained. The associated expected new knowledge can be deduced based on the accepted laws of logic (e.g., syllogism) from the considered concept or theory. How did it work in our particular case?

It is known from microeconomics, see, for example, Neva Goodwin, Harris, Nelson, Roach, and Torras’ (2015) book on the principles of economics, that the number of competitors determines the perceived market position. That is, the higher the number of competitors, the broader the competition, which results in perfect competition. In the opposite situation, the lower the number of competitors, the narrower the competition is; therefore, this results in an oligopolistic or almost monopolistic competition.

Taking into consideration the above relationships, the idea came to me that due to the use of different contract types, that is, due to the associated varying number of work packages, the very same market positions might occur in the project business as well. Putting this idea into operation, it works as follows:

• The use of work packages formulated from the entire work included in the project implementation process increases the number of those project-based companies who are capable of completing a certain work package. The higher the number of work packages, the higher the number of competing project-based companies; therefore, this results in perfect competition. Thus, the use of a traditional type of contract and that of a management type of contract result in a perfect or a nearly perfect competition for the project-based companies who are interested in completing a certain work package.
• The use of a turnkey type of contract lowers the number of those project-based companies who are capable of completing the entire project; therefore, the use of this contract type results in an oligopolistic or even a monopolistic competition. The use of a management type of contract results in the same market positions for the competing project management contractor companies as this contract type lowers the number of those potential competitors who possess the capability of acting as a project management contractor.

Considering the above deductive thinking, one can easily apply a syllogism. The law of logic applied in syllogism includes that if p then q; p; therefore q. Let me illustrate the use of this law by means of the case when a project client organization uses a traditional contract type. In this case, the applied logical succession includes the following two syllogisms:

• If the project client has decided to use a traditional type of contract, then the number of work packages is high.
• The project client has decided to use a traditional type of contract.
• Therefore the number of work packages is high.
• If the number of work packages is high, then the competing project-based companies need to face a perfect or a nearly perfect competition.
• The number of work packages is high.
• Therefore, the competing project-based companies need to face a perfect or a nearly perfect competition.

Similarly, one can complete all the necessary deductions in cases of turnkey and management contracts. Therefore, taking into consideration the outcomes of the completed deductions, we might say that the type of contract employed by a project client determines the market position perceived by the project-based companies operating in the typical segment of the project business.

The Challenge of Testing the Deduced New Knowledge

Several books provide support for justifying hypotheses formulated when employing inductive, that is, empirical research, especially when quantitative research methods are applied. In comparison, there is no significant support in the literature when testing the credibility of new knowledge produced by means of logical succession based on a deductive research strategy. At the same time, the research papers published in different management journals typically adopt an inductive approach, that is, they are based on empirical research. Thus, I have not found a best practice solution that would be adaptable to my case. At the same time, authors, for example, the previously cited Marsh and his colleagues (2018), also emphasize the need for testing the credibility of a deduction by means of direct, that is, empirical, observation. The authors state that this observation is considered to be an independent test of the credibility of deduction.

Finally, I came to the conclusion that I needed to focus on the number of bidders (i.e., the number of competing project-based companies) when different contact types are used by the client organizations. This idea was supported by the characteristics of different market positions known from the literature on microeconomics. According to this literature, as it was mentioned earlier, the number of competitors plays a pivotal role in differentiating market positions. At the same time, I primarily focused on traditional and turnkey types of contract because the case of a management contract, as it was also mentioned earlier, might be understood and explained by means of these two contract types.

I was therefore sure that empirical observation would justify the credibility of the deduced new knowledge if

• The number of bidders (the competing project-based companies) actually varies according to the varying use of contract types
• The actual number of bidders (the competing project-based companies) is considerably higher when using a traditional type of contract rather than a turnkey type of contract

Thus, to reveal the actual number of bidders (the competing project-based companies), and the likely varying number of bids in the context of different contract types, I initiated an interview-based empirical observation. At first sight, this empirical observation resembles empirical research; however, the aim is different. During empirical research, the aim is to justify (or falsify) the statement implied in a hypothesis by means of collecting and analyzing empirical information. In my observation, the aim was to make sure that the deduced new knowledge operates in practice, that is, testing whether the deduced new knowledge is credible. Thus, to differentiate these two empirical processes, I also use the term observation where testing of credibility is concerned.

To ensure higher level objectivity of the observation, as the importance of it was emphasized by Marsh and his colleagues (2018), I selected project-based companies bearing in mind the following considerations:

• The variety of the contract type in the frame of which the project-based-companies completed their project work
• The variety of industries in which the project-based companies operated
• The number of professionals who were familiar with project marketing employed by the project-based companies
• The variety of industries in which the client organizations of the project-based companies operated

Based on these considerations, 25 informants with at least two informants from each project were selected from eight project-based companies.

In addition, from the point of view of further increasing the potential for objectivity of the empirical observation, I applied data triangulation as suggested by Michel Patton (2015) in his book on qualitative research methods, such as

• Comparing documents with information elicited from informants
• Contacting client organizations to justify information elicited from informants
• Continuous comparing of information from different informants regarding the same project

Corroboration of the empirical findings of the observation was also important from the point of view of testing the deduced new knowledge more objectively. For this, I also relied on Michael Patton’s (2015) suggestions. For this purpose, two workshops were organized with key informants.

All in all, the outcomes of this empirical observation aiming to test the credibility of the previously deduced new knowledge was successful. The final outcome revealed that the average number of bidders (competing project-based companies) was at least twice as high (minimum 10 or more bids) when a traditional type of contact was used in comparison with a turnkey contract type (maximum 5 or less bids). Therefore, it could be said that the statement the type of contract employed by a project client determines the market position perceived by the project-based companies operating in the typical segment of the project business is a true statement as its credibility was empirically tested.

Practical Lessons Learned

In this research project, I used a deductive research strategy for the first time in my professional career. Although I had no doubt about what deductive research is, and I was familiar with the fundamentals of this kind of research strategy, I had no previous experiences in using this kind of research strategy. Ultimately, there were two fundamental reasons for adopting this kind of research:

• My research aim was to highlight the determinants of the likely market positions of typical project-based companies operating in the typical project business segment. Thus, I expected the research outcomes to be different from mainstream project marketing research outcomes. As these outcomes were filtered from inductive research, it made me adopt a different, that is, a deductive research strategy.
• The potential doubt regarding the credibility of empirical research outcomes that relies on an inductive research strategy. This also urged me to adopt a deductive research strategy. Credibility of an empirical research outcome relies on the credibility of the underlying empirical information. While, as it was also emphasized by both Thomas Pernecky (2016) in his book on qualitative research and Harry Gensler (2010) in his book on logics, truth of a deduction is guaranteed by formulating true statements in the syllogisms and the appropriate use of the laws of logic. These features of a deductive research provides a higher potential for credibility of the deduced knowledge, although this research strategy requires high level of researcher’s familiarity with the research topic. However, the credibility of the deduced knew knowledge needs to be tested by means of an objective empirical observation, as it was suggested by Marsh and his colleagues (2018) in their book chapter on ontology and epistemology.

On the surface, the use of a deductive research strategy seems easy. The researcher should consider an accepted concept or theory from which, taking into consideration the laws of logic, she or he can deduce new knowledge. Thus, the new knowledge is derived as a result of logical succession. However, the devil is in the details. Therefore, adopting a deductive research strategy requires highlighting primarily the implications of the considered concept or theory in detail.

In my research, the considered underlying concept was that of contract types as part of a toolkit of project implementation strategies used by project client organizations. Taking into consideration the different types of contract, I had to find such differentia specificum based on which the likely market positions (and their underlying determinants) of project-based companies operating in the typical segment of the project business might be deduced. This differentia specificum was the number of work packages. Indeed, the concept of contract types implies that different types of contract include a different number of work packages. At the same time, I had to understand (from literature on microeconomics) that apart from monopsony, which otherwise was outside the research focus, the differentia specificum of market positions is the number of competitors. Therefore, I could realize that the considered concept would be an appropriate concept from which the determinants and the associated likely market positions of project-based companies operating in the typical segment of the project business could be deduced.

Thus, the first important lesson I have learnt from this research is as follows. Understanding the detailed implications of both the considered concept and the phenomenon to be explained in deductive research provides an appropriate basis for a logical succession, which, in turn, results in true new knowledge.

The other important, although similar lesson is related to testing empirically the credibility of the deduced new knowledge. In the course of testing, I focused again on the implications of the likely market positions. That is, I focused on the differentia specificum of the likely market positions of those project-based organizations that operate in the typical segment of the project business. Thus, during the empirical testing of the deduced new knowledge, the primary focus was on highlighting the varying number of competing bidders (project-based companies) when different contract types were used by the project clients. Highlighting the varying number of competing bidders in the context of different contract types provided an appropriate tool for testing the credibility of the deduced new knowledge. Finally, it made it possible to accept the deduced new knowledge, as it is called in the literature on logics, as true knowledge.

In summary, the primary lesson learnt from this deductive research is recognizing the need for a detailed understanding of the implications of the considered concept (or theory) from which new knowledge is to be deduced, and also that of the phenomenon which needs to be explained by means of deduction (logical succession). Highlighting both kinds of details provides a solid basis for not only an appropriate deduction but also for a credible testing of the deduced new knowledge.

As it was emphasized earlier, undertaking a research project based on a deductive research strategy requires high level of researcher’s familiarity with the research topic and the considered underlying theory as well. Although, a novice researcher, for example, a PhD student, may join an experienced researcher to commonly undertake a deductive research. On the contrary, the author strongly believes that the issues implied in the formulated learning outcomes are properly highlighted in the case study; thus, it might encourage young researchers to employ a deductive research strategy when it seems appropriate.

The first learning outcome relates to the potential pitfalls of employing an empirical-based inductive research strategy. These potential pitfalls are primarily highlighted both in the Researcher’s Dilemma section and the Inductive Research Versus Deductive Research section.

The second learning outcome relates to the way of thinking and formulating appropriate assumptions, while the third learning outcome relates to the challenges that a researcher needs to face when a deductive research strategy is employed. These two learning outcomes are strongly related. Primarily two issues need to be mentioned in this respect. One of them is identifying an appropriate theory or concept, and the other one is formulating relationships between the implications of the considered theory or concept (contact types), and that of the phenomenon to be explained (market positions). This relationship provides an appropriate basis for formulating appropriate assumptions. Each of them postulates a deep understanding of the implications of both the underlying concept and that of the phenomenon to be explained. The associated issues are highlighted in the Deductive Research Strategy in Operation in a Project Marketing Research section.

The fourth learning outcome relates to the differences between undertaking empirical research and empirically testing the outcome of a deduction. The importance of this issue is justified by the fact that there is neither support in the literature nor accumulated experiences regarding this empirical test. Undertaking a successful empirical test of a deduced knowledge also postulates a deep understanding of the implications of both the underlying concept (contract types) and that of the phenomenon (market positions) to be explained. The associated issues are highlighted in The Challenge of Testing the Deduced Knew Knowledge section.

At the same time, the Conclusion section stresses only the core of any deductive research, that is, formulating a relationship between a concept (the contract types) and a phenomenon to be explained (the likely market position of project-based companies operating in the typical project business segment).

Conclusion

This case study is based on a research project which aimed to highlight the determinants of those market positions that project-based companies operating in the typical segment of the project business might perceive in the course of competing for implementing project works initiated by different project clients. To achieve this end, a deductive research strategy was employed. Although this kind of research strategy is known from literature, it is not the most frequently used research strategy in business and management-related research projects. Thus, for me, there was no adaptable previous experience published in research papers. Therefore, I had to cope with a few, partly unknown or unforeseen situations, which were mentioned earlier in this study, primarily due to the lack of adaptable accumulated experiences which made my research journey longer than I expected. This longer journey, at the same time, was rewarded by gaining new research skills.

The use of this research strategy was successful in at least two ways. First, it made it possible to achieve the research aim, that is, identifying unambiguously the determinants of the market positions perceived by project-based companies operating in the typical project business segment. Second, the resulting research paper was accepted by and published in a Q1 professional journal.

However, one needs to bear in mind that the success achieved by adopting a deductive research strategy in this particular research project was based on a detailed understanding of the implications of the concept of contract types and that of market positions. These implications are, in terms of differentia specificum, discussed in a more detailed manner in the previous section of the case study, thus I only summarize them as follows:

• Different types of contract include a different number of work packages.
• Different number of competitors results in different market positions.

Understanding these implications has made it possible to formulate a relationship between the use of contract type and the likely market position of project-based companies operating in the typical project business segment.