DRIVERS AND BARRIERS TO THE ADOPTION OF SMART CONTRACTS IN THE CONSTRUCTION INDUSTRY: AN INSTITUTIONAL ANALYSIS

Abstract

Payment is the lifeblood of the construction industry, and a project’s success is contingent on the timeliness of payments made across the value chain. As poor payment practices continue to plague the industry, this study recognised the inherent flaws of a traditional construction contract in mitigating payment problems. Amidst these limitations, the advent of smart contracts has beckoned an opportunity for change. While smart contract technologies present many opportunities to reinvigorate the traditional payment process, the construction industry has remained passive towards capitalising on such technologies. Given the intrinsic resistance of construction firms towards radical changes, this study was formulated with the primary aim to assess the institutional factors that influence the adoption of smart contracts. The research aim was supported by five objectives, including identifying the limitations of a traditional contract in mitigating payment problems and assessing construction firms' level of knowledge and willingness to adopt smart contracts. After which, Scott’s Institutional Theory was applied to identify the institutional drivers and barriers that influence the adoption of smart contracts. Recommendations were then provided to address the significant barriers that hinder its commercial adoption. In achieving the research objectives, an extensive literature review was first conducted. A series of quantitative surveys and qualitative interviews were then performed to reinforce the conclusiveness of the research findings. Based on a sample size of 55 survey respondents (n=55), the quantitative data analyses identified four significant limitations of a traditional contract in mitigating payment problems. The analyses identified that construction firms have neither a significant knowledge nor willingness to adopt smart contracts, and a strong and positive correlation exists between the two variables. Twenty-nine institutional factors were also identified to influence the adoption of smart contracts significantly. The quantitative findings were further reinforced through qualitative interviews with five industry experts. With the successful formulation of the significant institutional drivers and barriers, the key findings obtained from this study will be integral in driving the commercial adoption of smart contracts within the construction industry.