Industrialized building of residential houses - which here means off-site production of large elements - has been a controversial area at least since the Second World War. During the last 50 years industrialized house building in Sweden has had two faces. The first is a series of failed large scale projects that tried to introduce a more industrialized approach to the building of multi-family houses. The last two of these failures were NCC-Komplett and Open House. The second face consists of a number of manufacturers of single family houses that for more than 50 years continuously has produced what in Sweden is called “catalogue houses”.
The theoretical framework used in the article is based on the combination of standard economic theory and transaction cost theory presented in the book “Economics, organization and management “by Paul Milgrom and John Roberts (1992).
Based on case studies the aim of the paper is to explain these successes and failures using a "stress test" approach focusing on how the different systems can handle stresses in the form of changes in the business cycle, changes in tastes, technological problems and problems with suppliers.
The conclusion was that that the new systems for industrialized housing were not designed in such a way that it could handle different types of stress. The successful producer of catalogue houses::
- Spread risk among a larger number of involved actors – e.g. salespersons and local contractors that assembled the product. In this way they also created stronger incentives.
- This company had more direct contact with the market and could both learn from and influence demand to a higher degree.
- This company used established techniques and also more products bought from supplier and subcontractors with which company A had long term relations.
Perhaps the conclusion should also in this area be that revolutions are very difficult. Introducing a radically new way of producing that would in a short period of time change the way houses are produced is then doomed to fail. More interesting developments are then to experiment with smaller steps, where e.g. somewhat larger components are bought from subcontractors.
6th Nordic Conference on Construction Economics and Organisation, April 13, 2011 – April 15, 2011, Copenhagen, Denmark