Productivity, institutional environments, and international contract success: asymmetric moderation evidence from Japanese construction firms

Abstract

International projects are central to construction firms’ growth, yet whether firm productivity predicts international contract success and why productivity advantages translate differently across institutional settings remain underexplored. This study examines how firm productivity and host-country institutional environments jointly shape international contract success among publicly listed Japanese construction firms. Using firm-level panel data for 2000–2024, drawn exclusively from Official Development Assistance (ODA) and World Bank–financed procurement, and a contract-value-weighted Institutional Environment Index, two-step System Generalised Method of Moments (GMM) estimation examines contract value and contract count as complementary success dimensions. Firm productivity is positively and robustly associated with contract count, and positively but only marginally with contract value, providing direct firm-level evidence of a link previously theorised but not established. Institutional environments do not produce uniformly positive effects: stronger institutions are associated with fewer contracts, suggesting they concentrate awards rather than broaden access. Critically, institutions moderate productivity payoffs asymmetrically: in stronger settings, productivity advantages translate more strongly into contract value, whereas no comparable effect emerges for contract frequency. These findings advance the institution-based view by showing that institutional environments function primarily as payoff-structuring mechanisms shaping how firm-level capabilities are evaluated and rewarded in international construction procurement.