Geographic market size and low bid competitiveness in construction companies

Abstract

Purpose The purpose of this study is to determine the relationship between the geographic market size of businesses and the competitiveness of being able to bid at low prices. Design/methodology/approach The design of this study is based on a natural experiment approach. Firstly, after controlling for the firm size and other factors, the author sees that firms participating in bidding in a large region are more competitive to bid at lower prices than firms doing business in a smaller region. The author then tests for causality in a natural experiment of the exogenous event. Findings The results show that firms participating in the bidding process in a large area are more competitive to bid at lower prices than firms doing business in a small area. This is tested in a natural experiment, and the result is that they are more competitive because they do business in a larger area. Practical implications The practical implication is that, when aiming for competitiveness, it is most important to consider the nature of the business and to see the essence of the business, for example, that networks are important in the construction industry, and that doing business over a wide area is the way to become competitive. Social implications The social implications are that to make firms more competitive, we must look at the characteristics of the industry and come up with policies that fit the reality, such as encouraging them to do business in a wide area. Originality/value The originality of this study is that this study viewed competitiveness as being able to bid low prices for public procurement and found that doing business in a wide area is competitive. Furthermore, the causal effect of the study was to test the fact that doing business in a wide area does not mean doing business in a wide area because it is competitive, but that doing business in a wide area creates a competitive advantage.