Research Article: 2022 Vol: 21 Issue: 4
Vickie Cox Edmondson, Tuskegee University
Citation Information: Edmondson, V.C. (2022). Revisiting Edmondson’s typology of competitive strategies of black-owned businesses in the U.S. construction industry. Academy of Strategic Management Journal, 21(4), 1-20.
With increased attention to the importance of Black business success in the U.S., we need success stories. This paper aims to examine the question around how Black-owned businesses compete once they overcome barriers to entry. Two studies are presented. First, the authors revisited Edmondson’s 1996 unpublished study at the University of Georgia of competitive strategies used in Black-owned businesses in the U.S. construction industry to introduce and advance Edmondson’s typology in the literature, thus explaining the entrepreneurial intentions of Black business owners in a more detailed and consistent way. A typology of five competitive strategies is set forth along five owner intent and motivation dimensions. Then, through a study to illustrate, and provisionally support Edmondson’s typology, illustrative case examples of a Black-owned construction firm that use each strategy are presented and discussed. While Edmondson (1996) focused on differences in competitive strategies of minority-owned and non-minority- owned businesses, this work focuses primarily on Black-owned businesses and concludes with a discussion of why Edmondson’s study is relevant today. It is beyond the scope of this paper to provide a detailed history and analysis regarding the causes of the barriers that these businesses must overcome or to compare their efforts to those of other small businesses. Aspiring and existing entrepreneurs as well as the majority firms that seek to do business with them would benefit from a curriculum that supports learning about the intentions and motivations and ensuing strategies used in businesses owned by persons of color.
Black Americans, Business Ownership, Competitive Strategies, Construction Industry, Strategic Decision-Making.
One of the great American dreams is to own your own business, be your own boss, control your own destiny through self-employment, run a successful business, become an employer, become an entrepreneur, etc. The roles that entrepreneurs play in economic growth have been well-documented in the entrepreneurship and public policy literature (Minniti, 1999; Baron, 2021; Kreft & Sobel, 2005). Arguably, academic researchers Ivan Light, Timothy Bates, Butler (1999); Fairlie (2020); Boston (1998), along with Dingle (1990), longtime editor of Black Enterprise magazine, have had the most influence on the development of Black entrepreneurship research, and to a certain extent, collectively defined the field. Much of the emphasis has been on business formation rates because of entry barriers. An unpublished study conducted by Edmondson at the University of Georgia in 1996 provided some insights into the competitive strategies used in minority-owned businesses in key industries, specifically in the U.S. construction industry. Edmondson (2018) defined competitive strategy as an approach used to meet objectives in a single business unit. She identified three entry barriers that minority-owned firms must overcome: 1) lack of capital, 2) access to credit, and 3) the Good Ole Boy Network. Once firms overcome these barriers to success, they must determine a strategy to compete.
Edmondson (1996) examined typologies of generic competitive strategies applicable in all industries regardless of size (Abell & Hammond, 1979; Astley & Fombrun, 1983; Hofer & Schendel, 1978; Miles & Snow, 1978; Porter, 1995) but noted that none fit the special circumstances of minority-owned businesses. These models assume that the business has the resources to operate “normally” and is not constrained by resources that are available to most firms in a competitive environment. Thus, Edmondson integrated and built upon two generally accepted academic typologies that have been used to study competitive strategies in small business and entrepreneurial ventures to identify strategies MBEs used to compete: Miles et al. (1978, Typology of Strategy Types and Astley and Fombrun's (1983) Collective Strategy Framework. As a result, Edmondson identified four strategy types (Anchors, Adventurers, Adaptors, and Amateurs) that were presented to a focus group of Black business owners in the construction industry for them to establish face validity and expand the list of practices for use with each strategy. A mailed survey identified a fifth strategy type, Amplers. Also, with the aid of these owners, she identified four dimensions that determined their strategies: (1) aim of the owners, (2) key relationships the firm has with other players in the industry, (3) kind of opportunities pursued, and (4) owners’ attitude toward risk. Again, once the survey results were analyzed, a fifth dimension that was inherent to their decision; capital and access to credit, was relevant.
The overall purpose of this revisit is twofold: to advance and introduce Edmondson’s (1996) typology into the literature explaining the entrepreneurial intentions of Black business owners in a more detailed and consistent way, and to provide case examples of Black-owned construction firms that use these five strategies in 2022, more than twenty-five years after Edmondson’s work. While Edmondson (1996) focused on differences in minority-owned (Black-owned in particular) and NonMBEs, the focus of this study is not a comparison of Black-owned businesses to NonMBEs, immigrant versus native-born populations; active owner-operator vs owner financial input only. Similarly, while knowing well that many of the issues faced by Black business owners are rooted in vestiges of slavery and segregation, we do not focus on issues of racism or discrimination in the banking and finance industry or the financial performance of the businesses under consideration. However, as in the 1996 study, we limit my work to firms in the U.S. construction industry. Yet, we acknowledge where changes to the typology are relevant.
The paper is structured as follows. In the next section, we briefly outline the foundational theoretical framing regarding the importance of sizeable employer-businesses and the key strategic decisions Black owners make during ideation. We then introduce Edmondson’s (1996) Competitive Strategy Typology and what we consider to be key developments that necessitate revisiting the Edmondson study. In the following section, empirical data and the descriptive statistics of Edmondson’s study, and the methodology used to combine findings from the original study with more recent research are discussed. The sixth section identifies case examples extracted from five companies. The paper ends with a discussion, limitations of the study, and a conclusion.
Sizeable Employer Businesses
Researchers have asked the logical question: can minorities in business be considered successful simply based on ownership? As Bates (1997) and Butler (1999) point out, ownership is no guarantee of viability. Moreover, can a two-person operation be successful? The answer is certainly, “yes”. But like previous scholars, (Christopher, 1998; Perry & Romer, 2020), we argue the kind of business success that leads to economic progress and socioeconomic advancement in the Black community demands sizeable employer businesses competing for and winning contracts that historically have been awarded to firms based largely on business and personal connections. Christopher (1998) asserted that a business is successful if it assists in economic activity at the local level and weathers local business conditions. Furthermore, she maintained that a short-term economic indicator of business success includes the employment of local residents (p. 39). A sizeable Black-owned business has enough full-time equivalent employees that it is not forced to rely consistently on temporary staff and subcontractors to take on larger contracts or deal easily with varying demands. While a viable adjustment strategy, according to McKinsey & Company (June, 2020), relying on temporary staff and subcontractors hampers productivity, limits economies of scale, and reduces output quality and customer satisfaction.
Perry & Romer (2020) explored the state of Black-owned employer businesses using data collected from the Census Bureau’s 2018 Annual Business Survey (ABS) and noted that while Blacks comprise approximately 14.2% of the U.S. population; Black businesses comprise only 2.2% of the nation’s 5.7 million employer businesses. The researchers show that if Black businesses accounted for 14.2% of employer firms (equivalent to the Black population), there would be 806,218 more Black businesses and if the employees per firm matched non-Black businesses, it would create more than 19 million jobs. They note that of the two million Black-owned businesses counted in America, fewer than 125,000 have employees, and most times, those businesses hire an average of 10 persons. It is well-known that most of the jobs available in small businesses are extended to family members, friends, and friends of friends who are of the same race as the owner or founder. Moreover, almost half of construction firms (47%), were home-based in 2017 (U.S. Small Business Administration, 2020).
Key Strategic Decisions during Ideation
Black business owners tend to make decisions in the business-ideation stage that are likely to keep their businesses small (Baboolall et al., 2020). Key decisions that Black business owners make during the business-ideation stage are:
1. What industry to enter?
2. Whether and in what category to register with government agencies?
3. How to overcome social and economic barriers beyond relying on government support?
Answering these questions is a part of strategic planning, one of the first and most important steps that a business owner can take. In a small business, this endeavor is usually not as formal as the process that is often used by large corporations, given that, at this stage, the owner may be the sole strategist (Edmondson, 1996). Some small firms choose not to perform this step at all (Edmondson, 2018). Instead, they rely on their instincts and use adjustment strategies in uncertain times (e.g., getting less sleep or hiring temporary help during hectic periods (Olson et al., 2003). Moreover, the 10-20 page strategic plans have been replaced with a compelling one-page topical summary of their business strategy (Harnis, n.d.).
Industry Choice
The industry choice decision determines the specific industry where they will compete with their products and services, and as Hofer and Schendel (1978) asserted, small business owners may further segment the market to identify and develop a niche. Black business owners are associated with specific industrial categories. Establishing and owning a firm in these industries requires a considerably larger amount of capital than establishing and owning personal services such as restaurants, food stores, beauty salons, and taxicab operations (Edmondson, 1996). A recent report published by McKinsey & Company (October, 2020) reported that Black-owned businesses are overrepresented in low-growth, low-revenue industries such as food service and accommodations and tend to earn lower revenues in most industries, indicating that equitable access to resources and opportunities remains an important barrier to entry into viable industries in the U.S.
To Register or Not
Shelton & Minniti (2017) assert that Black business owners in the U.S. can leverage their minority status to gain access to government set-asides, commercial supplier diversity programs, and MBE certification. Minority Business Enterprises are one of six major small business set-aside designations that minority owners can self-designate as when registering with the SBA (Gibson et al., 2012) or a state or city business enterprise program (Chatterji et al., 2014; Reuben & Queen, 2015; Rice, 1992; Watson et al., 2003). All designations require that the business meets the definition of "small" and provide documentation of 51% ownership by a member of the group identified others such as the socially disadvantaged/8a businesses category requires an additional certification process. Owners can self-select all categories for which they meet the standard (Gibson et al., 2012). For example, Black women can select at least two categories. This certification is needed because of the partnerships, joint ventures, and strategic alliances made with White Corporate America (Walker, 2004).
Some minority owners find it difficult to decide whether to market their companies as minority-owned businesses. For instance, some minority business owners view set-aside minority contracts as too limiting, keeping minority businesses out of the wider business circle (Edmondson, 1996; Gallman, 1991). Additionally, some agencies that strive to assist in the growth of MBEs may also dissuade owners who they deem as ill-prepared from starting new businesses (Mescon, 1987). While some owners may defy their advice and not move forward, others proceed without registering as an MBE.
Beyond Government Support
Rahim et al. (2021) point out the reciprocal supportive role that government plays in business ownership and entrepreneurship growth, in particular they note that having entrepreneurs makes the economy more efficient and having entrepreneurs helps the government. Procurement is an area where the federal government has intervened to assist in the development of MBEs (Shelton & Minniti, 2018; Bates et al., 2018). Construction procurement involves obtaining materials and awarding contracts to general/prime and specialty subcontractors. An ordinary supply in a construction project includes engineers, architects, prime contractors, multiple subcontractors and sub-subcontractors, and material suppliers on a single project. The larger the project, the more likely the number of contractors increases. Arguably, the most important part of procurement is finding the right suppliers and determining how they will work together to achieve project objectives and deliver the product as designed.
Two types of preferential procurement programs that require minority business participation exist: (1) direct government project set-asides and (2) indirect set-asides that require the prime contractor to use them as subcontractors (Rice, 1991). Subcontracting on large construction jobs opens opportunities for MBEs that lack the size, scope, and capital to compete for large prime contracts. With government work, procurement has to be visibly fair, and all potential suppliers must be allowed to submit a bid or proposal for a government contract.
Hatcher (2019) observed that supplier diversity has evolved from being of interest only to government contractors into a 21st Century business imperative. At the time of Edmondson’s study, about 75 percent of Fortune 500 companies actively sought opportunities to work with MBEs as suppliers and customers (Edmondson, 1996; Gallman, 1991; Watts, 1995). While difficulty locating an MBE has been noted (Edmondson et al., 2008), in 2021, it is estimated that 97% of the Fortune 500 set percentage or dollar goals on supplier diversity (LSQ, 2021). Firms that are committed to using supplier diversity as a true business strategy can include Black-owned businesses and commit to having multiple suppliers within one specialty, creating competition while speeding up the organization’s response time when an incident occurs. Key Performance Indicators will likely include: increases in diverse count (i.e., the number of diverse suppliers that a company executes contracts with), and increases in diverse spend (i.e., how much money a company is spending with diverse suppliers) both directly (Tier 1- your diverse subcontractors) and indirectly (Tier 2- your diverse subcontractors’ diverse subcontractors).
Several observations can be drawn from this discussion. First, not all Black Americans are alike in their beliefs or attitudes and it is dangerous to lump them into one category. It is evident that some business owners do not rely solely on government aid, nevertheless, they achieve success.
Edmondson’s 1996 Typology
Dimensions of the Strategy Types
According to Edmondson (1996), the competitive strategies used in minority-owned businesses can be explained based on five dimensions: (1) the aim or objective of the owners, (2) the key relationships the firm has with other players in the industry, (3) the kinds of opportunities pursued, (4) the owners’ attitude toward risk, and (5) capital and access to credit. She acknowledged that this is not an exhaustive list of firm performance antecedents, but that they represented a common set of factors that influence strategic decisions. Before proceeding with the strategy types, these dimensions are discussed.
Aim or Objective of the Owners
The importance of linking career decision-making to an individual’s values and linking strategy to the personal objectives of the owners is well-documented in the literature (Botsaris &Vamvaka 2016; Sjögrén & Syrjä, (2011). While Black-owned businesses are a special case of entrepreneurial ventures and small businesses, there is a key underlying difference in the owners of these firms: their aim or business objective.
Edmondson cited Schein (1985) and Katz (1995) to point out differences in business owners: those who want autonomy and those who would be considered entrepreneurs. This observation is supported by Botsaris and Vamvaka (2016) who pointed out that entrepreneurship is not driven solely by extrinsic, pecuniary rewards like income, but also by nonmonetary, intrinsic rewards. Edmondson noted that minority owners who want autonomy are not as concerned with profits and firm growth as they are with maintaining control over their destiny or working for themselves and survival. On the other hand, those minority owners who would be called entrepreneurs are concerned with profitability and firm growth.
Kinds of Business Opportunities Pursued
Edmondson noted owners who are considered entrepreneurs pursue different business opportunities than those who want autonomy. She maintained that profit-oriented entrepreneurs pursue business opportunities that will improve their ability to reap above-average profits. Additionally, she noted that owners who are primarily interested in autonomy or survival will not aggressively pursue the same customer as a firm owned by someone who is profit-oriented. Regardless of their objective, it is common for profit-oriented and autonomy-seeking owners alike to operate on a cash or line of credit basis, focusing mainly on small jobs based on their skills and training. Decades later, entrepreneurship scholars note that one of the undesirable effects of lack of access to credit and the harsher loan terms is that Black business owners rely disproportionately upon personal equity (e.g., savings) and consumer forms of debt (e.g., credit cards) to finance their operations (Bates et al. 2018a; Reuben & Queen 2015).
Key Relationships the Firm has with Other Players in the Industry
Porter (1997) identified five competitive forces, which collectively determine the ultimate profit potential in an industry. They are (1) rivalry among existing firms, (2) the threat of new entrants, (3) the bargaining power of suppliers, (4) the bargaining power of buyers, and (5) the threat of substitute products. Edmondson refers to these forces as "players” to coincide with terms used by Black-owned businesses. While careful thought and analysis should be given to each, three of these forces embody relationships that have a special impact on Black-owned businesses: (1) rivalry among existing firms, (2) the bargaining power of suppliers, and (3) the bargaining power of buyers. She noted that in most industries in which Black-owned businesses compete, a great deal of rivalry exists among firms. The strategies included in the practitioners’ typology are directed toward managing this rivalry. Because of the power that the Network has in most industries, Black-owned businesses have very little bargaining power as buyers or suppliers. Therefore, those Black-owned businesses that are owned or controlled by people who are considered entrepreneurs must strive to develop key relationships with their competitors and/or other Black-owned businesses. These relationships help to improve their bargaining power.
In contrast, autonomy-seeking owners are not inclined to develop key relationships with other competitors or Black-owned businesses. Instead, they are inclined to form relationships with customers that can result in the repeat and referral business necessary to ensure their survival.
Owners’ Attitude toward Risk
Although entrepreneurs are considered to be risk-takers, they differ on the amount of risk they will undertake. Evidence exists that the more risk people are willing to take, the more profits they can expect (Buzzell et al., 1987). This difference can affect strategic decision-making. Risk-takers lean more toward opportunistic strategies, where visionary moves can produce a big payoff over the long term. Risk-takers prefer innovation to imitation, and bold strategic offensives to defensive moves to protect the status quo (Thompson & Strickland 1995).
Five Strategy Types
Next each strategy type will be described in turn based on four of the five dimensions listed above. Edmondson (1996) did not posit how capital and access to credit impacted strategy choice for each strategy type. However, in the second edition of The Thinking Strategist, she acknowledged that only Amplers had sufficient capital and access to credit (Edmondson, 2022). Thus, we present Table 1 to show each strategy type along the dimensions.
Table 1 Edmondson’s Five Competitive Strategy Types For Mbes | |||||
Dimensions | MBE Strategy Types | ||||
Anchors | Adventurers | Adapters | Amplers | Amateurs | |
Aim or Objective | Profit/Growth | Profit/Growth | Profit/Growth | Profit/Growth | Autonomy/Survival |
Key relationships | Buyer-Supplier | Competitor-Competitor | Buyer-Supplier Competitor-Competitor | Buyer-Supplier | Competitor-Customer |
Opportunities Pursued | Narrow Markets | Unrelated to Core Business | Related to Core Business | Related to Core Business | Skill Based |
Attitude toward risk | Averse | Takers | Averse | Adverse | Takers |
Capital and Access to Credit | Limited | Limited | Limited | Sufficient | Limited |
Anchors
Aim or objective of the owners
The owners of firms classified as Anchors are in business to make a profit and are interested in firm growth. These owners compete by differentiating their firms from other firms in an industry.
Kinds of Business Opportunities Pursued
Firms that are able to differentiate themselves effectively can choose a position in the industry and maintain or defend that position. These firms typically penetrate the market by targeting a certain type of customer and guarding that market. For example, once they have chosen which market to target (only minority customers, or opportunities for minority set-asides, or companies with minority purchasing programs), they are able to specialize. They use their kinship (Kusmer, 1986) with their respective minority communities as a means of making money. Because they know their customers well, they are better able to meet their customers’ needs by focusing on customer service, or emphasizing quality or other competitive advantages.Olson
Those MBEs that do business with certain markets know the needs of the communities they serve. Often this includes extending a service that meets the needs of the community that outside firms may not offer. Outside firms may not be aware of the customers' needs, or they may be unwilling to accommodate the customers to get their business. Similarly, those MBEs in pursuit of government contracts learn how to complete the forms required for bidding and where to go for assistance. Likewise, MBEs that pursue opportunities with corporations that have minority purchasing programs learn the procedures for each company.
Key Relationships the Firm has with Other Players in the Industry
Whether one is examining the relationships an Anchor firm has with its buyers or its suppliers, the key relationship is vertical. As buyers, Anchor firms strive to develop strong relationships with their suppliers so that they can improve their bargaining power over time. As a supplier, Anchor firms strive to develop customer loyalty so that their customers will primarily buy from them, thus providing a steady revenue flow.
Owners’ Attitude toward Risk
Anchors are owned by people who are somewhat risk-averse. They prefer relying on a steady buyer or supplier as a source of income rather than seeking new customer bases. In summary, the Anchor category integrates the competitive strategy from the practitioner's typology, the Defenders strategy from Miles et al. (1978) typology, and the Conjugate strategy from Astley & Fombrun (1983). This is a competitive strategy because the owners are attempting to differentiate themselves from other firms by focusing on minority customer needs, providing good customer service, targeting large corporations, or striving for quality. These firms are closely related to Defenders because they choose a position in the environment and attempt to maintain (or defend) that position. Furthermore, some evidence of collaboration might be seen in the form of a Conjugate strategy: strong buyer-supplier relationships exist between the firm and its customers or competitors.
Adventurers
Aim or objective of the owners
Like Anchors, the owners of firms classified as Adventurers are also in business to make a profit and are interested in firm growth. These minority owners pursue opportunities they deem to have above-average profit potential, but that they are unable to pursue without the help of another firm or organization.
Kinds of Opportunities Pursued
The owners of these firms do not target a particular market but will venture into different markets. Although they primarily pursue a certain type of customer, they actively seek new opportunities that may not be closely related to their core businesses (unrelated diversification). These firms link to one another to strengthen their capabilities (Light, 1986).
Key Relationships the Firm has with Other Players in the Industry
What sets Adventurers apart from other owners is their willingness to join forces with firms that have similar management goals. These relationships between MBEs and other firms (competitors working together) enable these firms to compete for business that they could not otherwise handle, due to their lack of capital or access to credit.
Owners’ Attitude toward Risk
Of all the strategy types set forth, Adventurers are most willing to take risks. They take more risk and expect a higher payoff for their investment The Adventurer strategy type integrates the Collaborative strategy from the Practitioner's typology, Prospectors strategy from Miles et al. (1978) typology, and Confederate strategy from Astley & Fombrun's (1983) typology. Their Collaborative nature can be seen in their efforts to pursue government set-asides as either the prime contractor or the subcontractor, form joint ventures or strategic alliances with other firms, and take part in minority purchasing programs as a supplier for a major corporation with which they are not in direct competition.
They are closely identifiable with Prospectors because they often seek business opportunities that may not be closely related to their core business. Finally, they are also closely identified with the Confederate collective strategy because, although they may compete against another firm, they will form strategic alliances or other collaborative efforts with other MBEs or NON-MBEs.
Adaptors
Another group of firms will be identified as Adaptors. Firms that are managed or owned by persons who like the stability of working with a few buyers or customers, but are sometimes willing to take risks, are more likely to use than strategy than the other strategies. Following is a brief description of this group among the four dimensions.
Aim or Objective of the Owners
In addition to the owners of Anchors and Adventurers, the owners of firms classified as Adaptors are in business to make a profit and are interested in firm growth. These owners want to improve their chances of success or to "hedge their bets" (Light, 1986).
Kinds of Business Opportunities Pursued
Adaptors, too, penetrate and develop a particular market, but these firms will pursue additional opportunities that are closely related to what they do well. For example, MBEs that are suppliers to major corporations may spend most of their efforts meeting the needs of these corporations. However, when opportunities beyond their control force the firm to seek customers from the minority community, they are well-positioned to shift their focus from the corporation to the minority community. Overall, these firms adapt easily.
Key Relationships the Firm has with Other Players in the Industry
This dimension of the Adaptor strategy is probably the most challenging aspect in following this strategy. Adaptors must have both key vertical and horizontal relationships for their strategy to work. For example, one owner described a scenario in which his firm competes against a company on one project, and then teams up with it on another, mandating that he pays close attention to the relationships he has with this company as both a competitor and a partner. If either relationship is threatened, it could result in the loss of business opportunities for the firm.
Owners' Attitude toward Risk
The owners of firms classified as Adaptors are also risk-averse, but not as much as those owners of firms classified as Anchors. While Anchors use only competitive strategies, Adaptors use competitive and collaborative strategies when necessary. The Adaptor strategy type integrates the Combination of Collaborative and Competitive strategy from the Practitioner's typology, Analyzers strategy from Miles et al. (1978) typology, and Confederate and Conjugate strategies from Astley & Fombrun's (1983) typology.
Their use of a combination of collaborative and competitive strategies can be seen in their willingness to pursue opportunities with other firms that have similar management goals when it would benefit both companies, yet to compete against them when it would not. Adaptors are closely identifiable to Analyzers because they try to maintain a nucleus of established products and customers while diversifying into closely related areas. Notwithstanding, they are also identifiable with those firms that collaborate using both Confederate and Conjugate strategies because they might join forces with other firms that they compete with (competitor-competitor), as well as with those firms that they do not compete with, in addition to pursuing government set-asides (buyer-supplier). Again, these firms are quite adaptable.
Amplers
The owners who would be identified as Amplers were not identified by Edmondson prior to the study and thus she does not delve into this strategy type.
Aim or Objectives of Owners
Profit or growth
Kinds of Business Opportunities Pursued
Pursue opportunities that involve their core business and sometimes pursue those that are related to their core business.
Key Relationships the Firm has with Other Players in the Industry
Concentrate on building strong relationships with other companies that they are not in competition with, or on building strong relationships with their customers.
Owners’ Attitude toward Risk
Lean toward conservative “safe” strategies that minimize risk and have reasonable high probable returns. This strategy type is identical to the Anchor strategy type on three out of four of the dimensions. However, it differs on the kinds of business opportunities pursued. Whereas Anchors pursue opportunities that only involve their core business, this new strategy type of firm is more aligned with Adapters in this dimension because they pursue opportunities that involve their core business and sometimes pursue those that are related to their core business. This strategy type does not need to team up with its competitors to compete for business opportunities that are not in their core area. Firms following this strategy type will be referred to as “Amplers,” which is representative of their ability to pursue opportunities without the assistance of others.
Amateurs
Aim or objective of the owners
Unlike the other three strategy types, the owners of firms classified as Amateurs, while acknowledging the need to make a profit, are in business because they want to control their own destinies, they want to be their own bosses, and they do not want to work in Corporate America, which is often viewed by minorities as being controlled by the dominant culture. Survival of the firm will be a key objective.
These MBE owners are individualistic and find success just by being in the right place at the right time (Light, 1986). These owners lack or do not develop strategies, plans, and policies. They may have a business plan, but they do not use it to guide the business. Instead, their strategy is informal and evolves from day to day. Moreover, they often underbid their competitors to secure business.
Kinds of Business Opportunities Pursued
Amateurs primarily operate on a cash or line of credit basis, which affects the type of opportunities they can pursue. Typically, Amateurs pursue only opportunities for which they are skilled or trained. Although some of these firms market themselves as *jacks of all trades" capable of handling work in a general area, they primarily offer a basic service based on a specific skill.
Key Relationships the Firm has with Other Players in the Industry
Owners of firms classified as Amateurs are knowledgeable about what similar firms are doing in the industry, and they price their products or services accordingly, making little if any attempt to distinguish themselves from their competitors. Although they may have a minimum price that they will not reduce at the point of sale, they quote prices for their services primarily based on what their customers tell them other competitors charge to complete the project. Moreover, they tend to build relationships with customers rather than suppliers or competitors. These relationships lead to referrals and repeat business that composes the majority of their business. They can also lead to jobs for members of the community.
Owners’ Attitude toward Risk
Although it was stated earlier that risk-takers prefer innovation to imitation, these owners are risk-takers. They are willing to "barely get by” as a business owner rather than work for someone else and receive a steady paycheck. That decision involves a great deal of risk, especially when families are involved. The Amateur strategy type was not identified in the Practitioners’ typology. It resembles the Reactors strategy from Miles et al. (1978) typology and the Agglomerate strategy from Astley & Fombrun's (1983) typology.
Next, we will examine the methodology used by Edmondson to develop the typology in 1996 and then discuss the study used to confirm her 1996 work.
Data Collection
Data collection for the original study took place in three phases. Phase I involved two semi-structured interviews with the owners of several minority-owned construction companies (firms in the high sales range for small businesses and firms in the low range) and nonminority-owned construction companies of similar sales volumes. Phase II involved a pilot study to clarify the content and wording of the survey and to determine its ease of use and ease of coding.
Any known problems with the survey and measurement were addressed during this phase and modifications to the survey instrument were made wherever necessary. Phase III involved a mail survey for the owners, CEOs, or some other knowledgeable person in the firm. The survey instrument consisted of five parts: (1) a series of questions designed to help describe the firms taking part in the study, (2) a series of statements regarding views about the competitive nature of the construction industry and the two entry barriers that were of interest in this study, (3) a group of statements that represented the four strategies identified in the typology of small businesses and entrepreneurial ventures, (4) a set of questions regarding the company’s financial performance and the owners' perception of their firms’ performance based on some factor other than financial performance (if appropriate), and (5) a series of statements about the dimensions presented earlier in this dissertation. See Table 2 for a summary of the respondents of MBES.
Table 2 Edmondson’s 1996 Response Rate From Mbe’s | |
Total Numberof MBEs Contacted | 987 |
Total Number of Unusable Responses from MBES (Undeliverables and the Like) | 7 |
Total Number of Usable Responses from MBEs | 238 |
Response Rate | 24.3 |
Data Analysis
Edmondson used two approaches to identify the firms’ strategy: self-typing and cluster analysis.
Self-typing Statements
Respondents in the Edmondson (1996) study were asked to check one of four descriptions of the category that most closely fit their strategies (self-typing). Following are the statements representing the strategy types identified by Edmondson prior to the study:
Anchor: Our company pursues business opportunities with only customers that are in our target market(s) — residential customers, customers in a certain geographical area, government set asides. Thus, we are better able to meet their needs by focusing on quality service, customer service, or some other aspect of our business that differentiates us from other companies in the industry. We do not team up with our competitors to secure business opportunities.
Adventurer: Our Company pursues as many business opportunities as possible. This often means teaming up with other companies in the industry as either the prime contractor or the subcontractor on multiple projects, and forming joint ventures or strategic alliances. These business opportunities may be unrelated, but if the potential for profit is satisfactory, we are willing to team up with others to secure the business.
Adaptor: Our company mainly pursues a certain type (or types) of customers or business opportunities. However, we pursue additional opportunities that are related to what to do well. This could include extending our services to customers outside of our target market when necessary, as well as teaming up with another company to pursue an opportunity that fits well with the other projects in which we are involved.
Amateur: Our company pursues all customers who are interested in our special skills or services. We make changes in our operation as often as necessary and price our products or services competitively in order to secure the business. Thus, our strategy is informal and allows for maximum flexibility.
Dimension Statements
Edmondson also asked the respondents to select a statement that matched the strategies used by their firm along the dimensions of each of the four strategies listed in the theoretical framework (as a reliability check).
Cluster Analysis
Edmondson used SAS FASTCLUS for the cluster analysis and to obtain the descriptive statistics, (Pearson) correlations. This program used Euclidean distances to cluster centers based on least squares estimation (k-means model) and ensured that each firm was placed in only one cluster using the following indicator variables.
Each of the four strategy types confirmed by the practitioners was represented in the self-typing and cluster analysis. While the respondents were forced to choose from one statement provided, most were able to identify their firm’s strategy in self-typing. Though they did not provide an explanation, eighteen firms did not complete this part of the survey. Perhaps some or all did not complete this part of the survey because their strategy was not represented in the four statements provided. Perhaps these respondents did not complete this part of the survey because they were required to choose only one statement and their strategy might have fallen within two statements. It could also be argued that some failed to complete this part of the survey because of time constraints since upon a closer look at the data it was revealed that several firms did not provide information about their strategy at all.
Moreover, the FASTCLUS results made a convincing argument for the existence of a fifth strategy type. Therefore, Edmondson determined that a closer examination of this new strategy type was appropriate and profiled that cluster along the four dimensions. There is one immediate question regarding these "outlier" cases. Should they be excluded given they were not confirmed prior to the mailing? Given their significance to the study and practice, the answer was definitely "no" and the “data suggested” strategy was added.
See Tables 3 and 4 for Edmondson’s (1996) frequency counts of the strategy types for self-typing, the frequency counts for strategy types based on the cluster analysis and descriptive statistics.
Table 3 Mbe frequency counts for strategy types (self-typing) |
||
Strategy Type | Frequency | Percent |
Anchors | 16 | 14 |
Adventurers | 22 | 19 |
Adaptors | 26 | 22 |
Amateurs | 38 | 33 |
No Response | 14 | 12 |
Table 4 Mbe frequency counts for strategy types (cluster analysis) |
||
Strategy Type | Frequency | Percent |
Anchors | 29 | 25 |
Adventurers | 17 | 15 |
Adaptors | 42 | 36 |
Amateurs | 26 | 22 |
Missing | 2 | 2 |
Again, Edmondson surmised that the no responses could infer that a strategy type was missing.
Study 2 Methodology and Findings
In this study, the authors introduce five cases to illustrate and discuss evidence of Edmondson’s competitive strategies in today's U.S. construction industry. We do not focus on theory testing or justification but on discovery (Yadav, 2010).
Data Collection
In revisiting the study to determine if the strategies identified in the Edmondson typology could be identified in 2022, a purposive sample and public (primary) sources were used to identify at least one Black-owned construction firm for each of the five strategy types. The five firms identified were located throughout the U.S., led by women and men, founded between 116 and 12 years ago, and employed between 14 and 162 employees.
Data Analysis
The authors looked at the firm’s websites, web articles, news reports, and public information sources. It is reasonable to believe that Black-owned construction firms will use these communication channels to provide examples of management's assertions regarding their business approaches and that their achievements and contract awards would appear also in the press.
Illustrative Case Examples
Anchor case example
GMA Construction Group, headquartered in Chicago, IL with regional offices in Dallas, TX, and New York, NY, is an example of a Black-owned construction firm using the Anchor strategy and is led by Cornelius Griggs, President and CEO. The firm identifies as a minority-owned prime contractor with an M/WBE plan to achieve a 70% MBE subcontractor participation, far exceeding a 26% MBE goal. GMA achieved similar results with 22% subcontracted to WBEs, exceeding a 6% WBE goal. The company is fully integrated to provide General Contracting, Construction Management, Design-Build, and Cost Engineering services.
Some indicators of the Anchor strategy include statements: 1) Today, GMA lives the mission through mentorship of our employees as well as providing job and training opportunities for members of the communities in which we work. We seek work that improves the quality of life for underserved communities, increases operational efficiency for the federal government, and provides sustainability for future generations, 2) GMA starts each project with a long-term partnering goal, working hand-in-hand with the entire project team because we understand that success depends on collaboration, 3) One of our key differentiators is our ability to provide accurate and consistent cost models throughout the design process so that our clients can account for every dollar spent. 4) GMA understands that great people drive greater success, GMA’s growth also impacts its employee growth. Join a company that is well-positioned for long-term stability.
With 100 employees, GMA is proud to have been ranked the 76th largest contractor in the Midwest according to Engineering News Record. This is their first year on the list. See the website – http://gmaconstructiongroup.com for fuller details.
Adventurer Case Example
Powers & Sons Construction Co. Inc., headquartered in Gary, IN, is an example of a Black-owned construction firm using the Adventurer strategy and is led by CEO and Chairman of the Board, Mamon Powers, Jr. Although recognized as a top minority or Black-owned business by MBE by Black Enterprise and Crain’s Chicago Business, the firm identifies as a family business. A third-generation, family-owned construction firm, Powers & Sons started as a home building firm and, by the 1970s, expanded to include industrial, institutional, and commercial construction. In 1980, the company received certification as a federally recognized 8(a) company, qualifying it for the set-asides. Mamon worked with his father and company founder to drive company expansion and growth throughout Indiana and Illinois. He was integral in managing Powers and Sons' transition from its early focus on residential construction to large public works, commercial, industrial, health care, education, and other types of general contracting and construction management projects.
Some indicators of the Adventurer strategy include statements: 1) With over five decades of experience, Powers & Sons has delivered multimillion-dollar new construction and renovation projects for public and private clients ranging from major global retail brands to government agencies and real estate developers. 2) We are collaborative partners who will share your goals and priorities. 3) We offer a company culture that is focused on innovation, safety, and quality. . . Thanks to advanced planning and having the right people and the right systems in place, our team was positioned to pivot and embrace a virtual business environment. 4) Strategic expansion to the Chicago market was a decisively important decision and "a major move. "But, I had no clue, quite honestly. I knew I wanted to build buildings, in addition to houses. That's something I wanted to do; something that black contractors were not doing [at the time]." However, this decision was an evolutionary leap forward for the company . . . So major, in fact, that business in Chicago added roughly $45 million to the company's bottom line.
Lakeside Alliance is a joint venture between Powers & Sons Construction Company, UJAMAA Construction, Inc., Brown & Momen, Inc., Safeway Construction Company, and Turner Construction Company. “Our primary mission is to be transformative,” says Kelly. “We want to leave the construction landscape different than when we first began.” Lakeside Alliance, an innovative team of experienced construction management specialists, was selected to build the Obama Foundation Center. With three offices in Indiana and Illinois, Powers & Sons Construction has completed over $1 billion in business since 1967. In 2021, the firm was recognized as one of the Best Places to Work in Indiana (small companies’ category (15-74 U.S. employees) (Orr, 2018).
Adaptor Case Example
H.J. Russell and Co., headquartered in Atlanta, GA, and C.D. Moody Construction Inc. headquartered in Lithonia, GA, are examples of Black-owned construction firms using the Adaptor strategy. These firms are one half of the four-partner joint venture team of Holder Construction, Hunt Construction Group, H.J. Russell & Company, and C.D. Moody Construction, the joint venture that collaborated to provide construction management services for Mercedes-Benz adjustable-seat capacity Stadium in Atlanta, GA, arguably, the most significant construction project of 2017. H. J. Russell & Company employs 160 team members and C.D. Moody Construction has 35 employees according to Dun and Bradstreet.
Some indicators of the Adaptor strategy include statements or observations: 1) Both minority-owned firms have construction projects at HBCUs and work on the terminals at major airports and other major projects, 2) H. J. Russell & Company, founded over 60 years ago, is a vertically integrated service provider specializing in real estate development, construction, program management, and property management. We believe to effectively contribute and provide impactful service to our clients; we must take a holistic approach to any assignment. 3) H. J. Russell & Company will be a collaborative partner, evaluating potential opportunities through a big picture perspective. Russell has provided services to clients ranging from small businesses to Fortune 500 companies. 4) C.D. Moody Construction Company, Inc. (CDM) founded in 1988 ago is an award-winning general contracting and construction management firm. . . Today, CDM is a well-established company with an excellent, professional reputation, and sound financial backing. Our firm continues to be deeply committed to building for the future – structures that last, relationships that endure, and community involvement that grows. 5) C.D. Moody Construction Company, Inc. requires subcontractors to complete a Pre-Qualification Statement. H.J. Russell’s news page reveals joint ventures are common. Herman J. Russell Center for Innovation and Entrepreneurship (RCIE), the largest non-profit center for Black entrepreneurs in the nation. The firm identifies as a minority and veteran-owned small business. See websites – http://www.hjrussell.com/ and http://www.cdmoodyconstruction.com/ for fuller details.
Ampler Case Example
Coleman Construction Inc., headquartered in Los Angeles, CA, is an example of a Black-owned construction firm using the ampler strategy. Led by Sharon Coleman, Founder and CEO, the firm identifies as a UBZONE/UDBE/MBE/WBE/SBE certified business and lists services: construction management services, structural engineering, design-build, new construction and renovations including tenant improvement projects, commercial and industrial buildings, demolition, complete building and selective site development, excavation, site work underground utilities, and retail construction. There is evidence of strategic planning as the firm promotes its vision, mission, and core values on its website.
Some indicators of the Ampler strategy include statements: 1) We offer a complete range of services from preliminary planning and budgeting to site selection permitting, architectural and construction management. Our well–trained staff along with our various in-house capabilities allows us to provide customer satisfaction, superior construction work and deliverance of a safe, quality on time and within budget finished product. 2) Coleman Construction’s philosophy has remained unchanged for 25 years: Deliver a quality [sic] on time and in budget. 3) We regard safety as a visible demonstration of care and concern for our employees, our clients and the public. 4) The reputation of Coleman Construction Inc. for integrity and fair dealing is one of our most valuable and protected assets. Additionally, Coleman Construction highlights work on major projects they have completed; no partners are identified, thus touting their capabilities. Zoominfo reports the firm employs 14. See the website – http://www.colemancon.com/ for fuller details.
Amateur Case Example
McKissack & McKissack, the nation’s oldest African-American and women-owned design and construction professional services firm founded in Nashville, TN as McKissack Brothers Construction Company is an example of a Black-owned construction firm using the Amateur strategy. Cheryl McKissack Daniel, President and CEO, provides the strategic direction and leadership that governs the firm in Brooklyn NY, with offices Philadelphia, PA and New Jersey and her twin sister, Deryl McKissack, PE., leads an outgrowth of the company based in Washington, D.C. with offices in Detroit, Miami, and Los Angeles, In 1990, Deryl opened McKissack & McKissack of Washington, and now manages $15 billion in projects nationwide. In 1991, Cheryl opened the New York business, buying the original McKissack & McKissack in 2000 (Black EOE Journal, 2020). Both entities employ 150+ employees. Deryl graduated from Howard University with a Bachelor of Science degree in civil engineering and Cheryl earned her bachelor's in civil engineering in 1981 and her master’s in 1983 from Howard University.
Some indicators of the Amateur strategy include statements: 1) “We have done everything to stay alive. We have gone through slavery, Jim Crow, segregation (and) Me Too. We went through all those eras and we survived those eras. I think a lot of it had to do with our work with the Black community.” 2) With over 150 employees, the firm is large and diverse enough to have the full range of technical capabilities to manage our clients’ projects, yet still small enough that each project receives the attention it deserves. 3) We have a diverse selection of subcontractors and a database that can support any level of required diversity participation requirements. 4) McKissack’s business strategy has been to build long-term client relationships. Over the past 100 years, the firm has attracted and retained hundreds of clients by providing them with superior service and value. 5) Deryl acknowledged, "I got a line of credit for $25,000 my second year, which helped me a lot in terms of ensuring that my six employees were paid." 6) Our construction management personnel are well versed in the current best practices in cost estimating, labor and equipment management, cost and schedule control, quality management, work process review and documentation, contract administration, construction inspection, change management and dispute resolution (Kimble-Ellis, 2000, White, 2014).
The significance of Edmondson’s 1996 study is that rather than relying on generic competitive strategies to explain how Black-owned US construction firms operate, Edmondson sought to identify the intentions and motivations of Black business owners that could lead to a particular competitive strategy in industries that had the potential for significant earnings and profits for business persons of color. At the time, those industries included business services, wholesale trade, construction, and manufacturing (Chen & Stevens 1984; Edmondson 1996). The construction industry remains viable in 2022 and beyond as Biden’s $973 public infrastructure plan will increase work on aging roads and bridges, transit systems, etc. in the US (Jennings & Gimont, 2021).
Additionally, as noted by Bocanet et al. (2021), unexpected challenges with the COVID-19 pandemic have forced businesses to reevaluate their strategies to adapt to evolving market conditions worldwide. As Black-owned companies increasingly embrace collective strategies as a business philosophy, they are realizing that their performance and ability to go after larger contracts is impacted by how they work with other actors in an entrepreneurial ecosystem. As shown in this current study, classifying these firms based on size or perception alone would not be appropriate.
These economic conditions present an opportunity for strategy and entrepreneurship scholars and educators to shift from exploring problematic issues that Black business owners face to describing and analyzing the strategies that they use to compete once they have overcome these barriers. Those Black-owned businesses that can develop and implement strategies that exploit these dimensions will be the most successful. Therefore, the author predicts Edmondson's 1996 and this revisit will make an important contribution to the literature and future research.
As noted by previous scholars, categories generated through typology are rarely exhaustive. While no typology is likely to specify every strategy, this paper identified five strategy types that are evident in Black-owned businesses in the construction industry. Edmondson's 1996 study lacks generalizability of results given its focus on one industry. Moreover, Edmondson (1996) cautioned against making generalizations to other industries or all Black-owned businesses given the low response rate. Further research is needed to explore if similar results can be obtained in other contexts. Moreover, she cautioned against perceiving firms that choose the amateur strategy as unsavvy or unsuccessful and as the choice for owners who want to remain small. Lastly, this current study relied on the authors’ evaluation of social media and public information to classify firms. We did not engage the principals in telephone or email discussions for comment. Further research is needed to develop case studies on these and other firms using each strategy.
Although written more than 25 years ago, the Edmondson dissertation is relevant today given the dearth of research on competitive strategy in Black-owned firms, the perceived importance of small business to the community and national economic growth, and what business ownership means to individuals in the Black community and their families (e.g., economic security, independence, and self-actualization). Aspiring and existing entrepreneurs as well as majority firms that seek to do business with them would benefit from a curriculum that supports learning about the strategies used in businesses owned by persons of color.
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Received: 01-Apr-2022, Manuscript No. ASMJ-22-11659; Editor assigned: 04-Apr-2022, PreQC No. ASMJ-22-11659(PQ); Reviewed: 21-Apr-2022, QC No. ASMJ-22-11659; Published: 28-Apr-2022