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Financial sustainability of the construction firms towards the era of industrial revolution 4.0: The role of technological innovation

As the fourth industrial revolution (IR 4.0) momentum has developed recently, its transformation had made the global infrastructure gap narrower and stimulated economic development in general. However, the construction sector has been uncertain about entirely embracing new technological opportunities. The objective of this study is to examine the impacts of technological innovation on the financial performance of the contractor firms. This study employed panel regression models to examine the 30 largest contractors in the world with a sample period from the year 2010 to 2019. The results showed that technological innovation expenditure and the revenues generated from technological innovation were negatively related to the financial performance of the contractors in the current years. This study provided new insights that the lag effect of the technological innovation expenditure would prompt higher financial performance of the contractors. The results demonstrated that technological innovation might not induce higher revenues but the improvement in business performance was still observed. Rather than blindly increasing the revenues, these results indicated that technological innovation could enhance the project management and procedures, enrich the quality and boost the productivity of the contractors that lead to better financial performance. The implication of this study implied that technological innovation costs arise in the present, the benefits of research and development (R&D), however, are long-term. The lifeblood of the construction industry is R&D. Thus, appropriate promotion and funding of R&D are needed to foster the diffusion of innovations to ensure the sustainability of the construction sector and economic growth.