This study focuses on innovation at the project level and looks at the dynamic interaction of innovation within construction project components as a system.

The construction industry is suffering from lack of innovation where there has been much effort to explain this issue. Searching available literature creates a kind of confusion and reveals an unstructured knowledge base for innovation. On the other hand, many significant factors are involved in shaping project characteristics and outcomes which, by their nature or set-up, can affect other systems within the project; yet the classification and interactions of these factors are masked through the one-off and complex nature of the project itself.

Many have regarded innovation as a system; therefore, in this study the dynamics of an innovation system within a greater project system is explored.

A project based systematic view is emphasised since other models of innovation generally have either focused at industry level or organisational level. Through the examination of literature different innovation processes and systems are classified and discussed. Using the system dynamic tools an initial simplified system of feedback loops is developed.

Then through participatory modelling phase and a focus group of industry experts a detailed innovation system is formulated. Finally, a causal loop diagram demonstrates the dynamics of innovation system within the project system and practical recommendations are provided.

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