Introduction [1]

1Spain’s large construction companies are currently part of the country’s great multinational enterprises; that is, the segment of the Spanish business structure with the greatest presence in international markets and the one which has best responded to the challenges of economic globalization over the last 25 years. These companies, then, are enterprises of great economic power and competitive ability, both inside and outside Spain, and this has given them a high profile as representatives of the national economy. Explaining how they have achieved such a position is thus of the greatest interest. The goal of the present study is to explore this subject and provide some interpretive keys for understanding it from a long-term perspective; this will be done by broadly tracing the evolution of these companies throughout the second half of the 20^th century, a period which coincides with the country’s greatest economic development.

2Nearly all of the large contractors were operating in the middle of the last century, when the Spanish economy began a prolonged period of growth after two decades (the 1930s and 40s) of adversity. For this reason, the first section of this paper presents a chronological account of their creation and details some of their fundamental characteristics. The second section focuses on the period 1950-1975, when Spain became industrialized, and emphasizes in particular the importance of economic growth and internal market expansion in the strengthening and modernization of large construction companies. The third section addresses still another phase of their evolution. This was the period 1975-1985, when these companies found themselves obliged to test their competitive capacities in the international market, after a drop in domestic market activity occasioned by the economic crisis of the 1970s. The fourth section examines the great changes experienced by these companies between 1986 and 2000, in response to the increased competition brought about by Spain’s integration into the EU and by globalization. It was in these years that they were transformed into great construction groups capable of competing in any other country. The paper finishes with a series of conclusions synthesizing the main ideas of the text.

3The academic literature on the Spanish construction sector is relatively scant, especially in terms of historical analysis. Thus, little is known of its long-term evolution. Despite the inarguable socio-economic importance that the sector has had and continues to have in the country’s economy – especially for its weight in the GDP and as an employment provider –, its economic and business aspects have received little academic attention, in contrast to its technical side (architecture, engineering), on which studies abound. Unfortunately, the history of Spanish construction companies is hardly known at all, this having to do at times with an opacity of information, particularly in the case of family-run businesses. This paper, which continues the line of research followed by the author in earlier publications (Torres 2009a, 2009b and 2011), aims to remedy this failing. The documentation upon which it is supported has been drawn primarily from the companies themselves, especially their annual reports and those of the sector’s business organizations, such as Seopan (Subgrupo de Empresas de Obras Públicas de Ámbito Nacional) and Aeci (Asociación Española de Empresas Constructoras de Actividad Internacional). This has been complemented by the newsletters and bulletins of these same entities and by a variety of periodical publications, as in the case of financial and civil engineering annuals.

The origin and founding characteristics of Spanish construction companies

4Most of the large Spanish contractors came into being in the period between the First World War (1914-1918) and the 1950s. However, the greatest frequency of such foundations would occur first in the late 1920s and early 1930s, and then later in the first half of the 1940s (Table 1). This timeframe reinforces the evidence that, in the case of Spain, the construction of much of the country’s railway system in the second half of the 20^th century was not, as it was in England and France, a stimulus for the emergence of domestic companies capable of developing such an important infrastructure. On the contrary, it would be French businessmen and investors (Pereire, Rothschild) who founded and controlled Spain’s principal railway companies (Norte, MZA), which in turn assumed and directed the system’s construction.

5This timeframe suggests that the business opportunities that motivated the creation of construction companies in Spain were strongly linked to the public works policy of the Primo de Rivera dictatorship of (1923-1930), effected in 1926 (the Civil Directory), as well as to the reconstruction of the country and plans for its autarkic industrialization after the Civil War. In any case, in the first third of the 20^th century, the new characteristics of construction demand had created a favourable terrain for the emergence of this type of company. We refer here, firstly, to the demand for industrial construction by a business structure in expansion, especially in the more industrialized regions; secondly, to the demand for building (both residential and non-residential) that resulted from the development of the country’s major cities and an increase in the standard of living; and thirdly, to the demand for civil works by the State (i.e. public works), focused on the following two objectives: 1) widening and improving the system of roads, which increased in extension from 35,000 to 61,000 kilometres between 1900 and 1935; and 2) the Hydraulic Works Plan (for building irrigation reservoirs and hydro-electric plants), proposed as early as 1902 but not put into action until 1926, when the Hydrographic Confederations were created to administrate the resources of Spain’s principal rivers. The number of existing reservoirs would rise from 70 in the year 1900 to more than 200 in 1936 (Villar 1999, 32).

6The efforts of the Primo de Rivera dictatorship in fomenting public works were significant and the guiding figure in this was a civil engineer named Rafael Benjumea Burín, Count of Guadalhorce, who served as Minister of Public Works and Transport from 1925 to 1930. In that time, along with creating a network of official bodies for improving the State’s public works activities, such as the aforementioned Hydrographic Confederations, the Central Port Authority and the Directorate General of Railways and Tramways, he initiated plans for works such as the National Circuit of Special Surface Roads (for 7,000 kilometres of new roads) and an urgent plan to finish building the national railway system. Likewise, he ordered the drafting of a plan for the electrification of the rail system, upon which all such activity of this kind after the Civil War would be based (Sáenz 1996, 186-194).

7Another civil engineer, Alfonso Peña Boeuf, Minister of Public Works from 1938 to 1945, would draw up the General Public Works Plan, approved between 1939 and 1941. Affecting roads, hydraulic works, ports and maritime signals, it would serve as the foundation for the country’s reconstruction in the post-war period. Other notable instances, in the 1940s, of this type of State action were the Plan for the Electrification of Renfe Lines (1946) and the Plan for the Modernization of Roads (1950). Even so, if we consider the relative weight of the Ministry of Public Works budget within the State’s total budget, we find that the level of such spending in the years 1927-1929 (23 %) was in fact much higher than that of 1950 (12 %) [2].

8Table 1 reveals other characteristics of these companies as well. It can be seen that the predominance of Madrid as the headquarters of most bears relation to the fact that a great number of contracts for civil construction and non-residential building (industrial or otherwise) were administrated and/or adjudicated in the Spanish capital, which was the seat of the State’s administrative agencies as well as of most large industrial enterprises, the principal promoters of such projects. Even firms officially headquartered in other cities, such as Huarte (Pamplona), Hidrocivil (San Sebastián) and Focsa (Barcelona) would soon establish permanent delegations in Madrid [3].

9Nearly all of these companies were created to operate as civil works and non-residential building contractors, but with the passage of time would achieve a high level of (horizontal) diversification, in almost every area of construction activity. A few, however, had sought a wider diversification from the beginning, specifically in the area of urban services (street cleaning, waste removal, etc.) through long-term contracts with city governments. Among such companies were Focsa, which did so early on, and Construcciones y Contratas.

10Another phenomenon which should be noted is the creation of construction companies by important business groups to build the industrial facilities required by their member companies. Such was the case of Ocisa, belonging to the Urquijo Group and created to serve the group’s two main energy companies – Unión Eléctrica Madrileña and Energía e Industrias Aragonesas – in the construction of hydroelectric plants; other examples are Constructora Internacional, founded in 1929 as Constructora Fierro by the business group Ildefonso González Fierro, and Auxini, created by the National Institute of Industry (INI) [4].

11The presence of banks among the founders of some of these companies is one more aspect to consider. The most notable case is that of the Central Bank, a principal shareholder of Dragados since its foundation, but this was also true of Urquijo Bank’s backing of Ocisa; Bilbao Bank’s of Obrascon; Mas Sardá Bank, a shareholder of Focsa for nearly a century; and Banco Español de Crédito (Banesto), a leading shareholder in Agromán in the 1970s and 80s [5]. At the same time, the existence of family businesses with no explicit connection to banking entities is also noteworthy, as in the case of Huarte (the Huarte family), Entrecanales y Tavora (the Entrecanales family), Ferrovial (the Del Pino family) and Construcciones y Contratas (the Koplowitz family). Under this family model, self-financing was crucial to company growth, at least until Spanish capital markets had achieved a certain degree of scope and modernization, something which would not happen until the 1970s. Meanwhile, companies with a banking entity among their shareholders had, from very early on, increased possibilities for accessing outside resources.

12In addition, the greater technical requirements for civil and non-residential building projects would oblige these companies to have qualified personnel at their disposal, especially engineers and technicians. It is thus common to find mainly civil engineers at the helm of many such projects, often in association with experienced contractors or master builders. This was the case, among others, of José María Aguirre Gonzalo, the founder of Agromán, a civil engineer and professor at the Madrid School of Civil Engineering; of his partner Alejandro San Román, also a civil engineer and professor at the same school; of José Entrecanales, having the same characteristics as these first two, and who with the contractor Manuel Tavora would found Entrecanales y Tavora; of Enrique Becerril (Ocisa) and José Eugenio Ribera (Hidrocivil), both civil engineers as well as professors at the school; of Antonio Martínez Cattaneo, whose profile was similar, and who managed Auxini since its inception; of Rafael del Pino, founder of Ferrovial and an engineer of the same speciality; of Carlos Fernández Casado, an engineer associated since 1932 with Huarte and that company’s principal exponent of technical development for many years; and José Junquera Blanco, Alfonso Sánchez del Río and Luis Sánchez-Guerra, all civil engineers and the founders of Dragados [6].

13This serves to illustrate the great influence that the School of Civil Engineering would have on the creation of many of the country’s construction companies. Founded at the beginning of the 19^th century, it has to date been the main training ground for the management teams of such companies, while fulfilling its primary function of providing the State with the technicians needed for the planning and managing of official public works projects. The constant presence in its classrooms, as professors, of engineers who also managed important construction firms, served a variety of highly useful purposes for these same firms: first of all, to recruit the brightest engineers of each graduating class; secondly, to keep abreast of technical advances in the field, not only at the national level, but in the other more advanced countries of Europe as well, with which the school maintained academic ties; thirdly, to encourage a technical collaboration between the school and the construction companies, an effort that would enable the creation of such entities of specialized research as the Technical Institute of Construction and Building (1934) or the Spanish Society of Floor and Foundation Technology, founded in 1948; and fourthly, to maintain contact with civil engineers assigned to public agencies and dependencies (such as the Provincial Public Works Delegations and the Public Works Board), whose job it was to design official projects, manage the adjudication of public works and supervise their execution [7].

The impact of Spanish economic development on the growth and modernization of construction companies, 1950-1975

14In general, Spanish construction companies were initially small and of modest capital (between 1 and 5 million pesetas), with one exception (Dragados, at 20 million). Their size, however, would increase considerably between 1950 and 1975, coinciding with the intense development of the Spanish economy. The high demand for construction by the domestic market, both public (State agencies, local and city governments and State-run firms) and private (companies and individuals), was the main factor behind this leap forward. In those 25 years, their activity became concentrated in the construction of transport infrastructures (roads, motorways, railways, subway systems, ports and airports), hydraulic works (dams, reservoirs, canals, water transfer and irrigation systems, and water purification plants), industrial facilities (for the cement, energy, iron and steel, petro-chemical and shipbuilding industries, among others), social facilities (health, education, sports), building (dwellings and office buildings), and tourist facilities (hotels, spas, harbours, conference centres and exhibition halls) (Seopan 1977). The emphasis on civil works should be noted here, a principal component of which was the Hydrological Plan, designed to manage the country’s water resources in the most reasonable manner. Under this plan, hundreds of dams and reservoirs were built, by the late 1960s making Spain the country with the third greatest number of such facilities in the world. Another important component was transport infrastructure: the extension and improvement of the road system, initiated in 1950 (the Plan for the Modernization of the Road System) and continued in 1961 (the General Roads Plan) and 1967 (the Network of Paved Roads Plan and the National Highway Plan); the modernization of the national railway system by Renfe; the extension of the Madrid and Barcelona subway systems; and the construction, extension and improvement of all of country’s ports and airports.

15Such a great volume of construction projects demanded from the companies more and more capital, human resources –particularly trained personnel (engineers, architects and other mid-level technicians)– and sources of financing, as well as a constant improvement of construction techniques, organization and management. Accompanying this was, without any doubt, a prolonged and intense process of experience accumulation, one that would enable these companies to acquire a great knowledge of the business and would prove crucial to their later expansion into foreign markets. This process was helped along by several factors. One was the temporary joint ventures, a formula that allowed companies of different specializations or complementary abilities to undertake projects together. Along with such advantages as the pooling of financial resources or the sharing of risk, these temporary alliances favoured the diffusion of construction techniques and a combined accumulation of experience. Another factor was the presence of foreign firms (especially French, Swiss and Italian) in major infrastructure projects, with the resulting learning effect in the Spanish companies that took part in these alliances or acted as sub-contractors. This occurred particularly in the construction of large-scale hydraulic works (i.e. dams), promoted by the leading Spanish electric companies, as in the case of Dragados [8]. It was, however, especially evident in the construction of US military bases in Spain and in the application of the North American Technical Assistance Program, after the signing of the Madrid Agreement by both countries in 1953 [9]. Lastly, there was the collective action of the large construction companies in forming Seopan (Subgrupo de Empresas de Obras Públicas de Ámbito Nacional). Created in 1957 to represent these firms in dealing with State agencies, Seopan would assume other tasks as well, such as performing studies of the sector and advising its members [10]. Some years later, in 1964, Tecniberia was founded, an organization of engineering – and civil engineering – firms, often the creations of the construction companies themselves.

16Construction intensified throughout the 1960s and the first half of the 1970s. Along with the civil works already mentioned, there was also a great demand for industrial construction [11] – initiated by the State itself (under the Development Plans) and impelled by the country’s growth – and residential building. It was then that the larger-sized construction firms became finally established throughout the entire national territory, at the same time increasing their diversification by introducing new branches of construction. Both processes made the internal organization of these companies more complex, requiring a greater number of managers at all levels and the introduction of more up-to-date management methods and techniques [12], leading eventually to the creation of specialized companies (subsidiary and/or participated). This is what would happen in the real estate sector –which expanded significantly due to a rise in tourism, urban growth and State-run housing plans– and in the construction and management of the first toll motorways: Autopistas Concesionaria Española (1967), Ibérica de Autopistas (1967), Sociedad Bética de Autopistas (1968), Europistas (1968), Autopistas del Mare Nostrum (1971), Autopista Vasco-Aragonesa (1973) and Autopistas del Atlántico (1973).

17The greater size and technical complexity of these projects obliged the companies to make ever greater financial efforts (with their own resources and with bank loans), aimed in large part at a continual expansion and improvement on a technological level of their mechanical equipment, subject as this was to intense, rapid wear and usually acquired abroad (Carreras 1973, 633-635). They were also forced to incorporate the latest construction innovations and techniques (pre-fabrication, pre-stressed concrete, large smokestacks, etc.), by purchasing foreign patents, training teams of engineers abroad at the most advanced centres [13], or creating their own specialized training centres with the participation of foreign technological associates [14]. Likewise, they strove to expand and improve in terms of the qualified human capital (i.e. engineers and technicians) needed to design and execute their projects, as well as to create specialized engineering service companies, sometimes also in collaboration with their foreign associates. Thus, the contribution of knowledge and technology from abroad played an unquestionable role in improving the technical capabilities of Spanish construction companies during these years of development, precisely when some began to take their first steps into international markets.

18As for the latter two aspects (human capital and engineering firms), in 1975 qualified personnel would make up 10.8 % of staff in the companies comprising Seopan (4.1 % high-level technicians and 6.1 % mid-level), the highest proportion reached up to that time [15]. With regard to the creation of subsidiaries to provide civil engineering services, most aimed at promoting the internationalization of construction activities, we should mention the following: Eptisa (Estudios y Proyectos Técnicos Industriales), created by Urquijo Bank in 1956 in connection with the construction of US military bases in Spain and a pioneer in the sector; Eurostudios, S.A., created by Ferrovial and John Laing in 1968; Eyser (Estudios y Servicios), by Huarte in 1969; Internacional de Ingeniería y Estudios Técnicos, S.A. (Intecsa), by Dragados in 1974; Proyectos y Servicios, S.A. (Proser), by Focsa in 1975; and Ibérica de Estudios e Ingeniería (Iberinsa), founded by Entrecanales y Távora [16].

19Quality in the execution of projects, through the use of accumulated resources and technical abilities, was the predominant strategy of most large contractors in this period, a time of expansion and maturity in the domestic market. Their objective was to strengthen their reputations with their principal clients (State agencies [17] and large industrial firms), as a company’s reputation was increasingly an major competitive advantage when bidding for large projects, which in turn were increasingly complex technically and could only be effectively assumed by a limited number of companies. In the public sector, a procedure was followed in which the Ministry of Finance established a “Classification of Contractors” according to the requirements that a company had to meet for each State-backed project. A maximum rating in any of the groups and sub-groups (by project type) allowed a company to compete in any public tender of any speciality and budget [18].

20In the early 1970s, however, the factor of price was still the main criteria in tenders for public works projects, which were adjudicated automatically to the lowest bidder. This would represent 77 % of the total amount adjudicated for such projects, and bears witness to the high degree of competition that these companies faced. Part of this competition arose, in addition, from an increased co-existence with foreign companies from 1970 on, after some of the restrictions they had been subject to were lifted in 1965, and in the light of which any Spanish offer that did not exceed 10 % over a similar offer by a foreign firm was given preference in official tenders. Until 1964, the presence of foreign firms had been very limited and, at least as far as public sector demand was concerned, the Spanish market had been dominated by domestic companies [19].

The economic crisis of the 1970s and the first wave of internationalization, 1968-1984

21Parallel to this intense process of productive, technical and corporate modernization, the large Spanish firms began to enter into external markets, bidding against foreign companies in international construction project tenders. The process began in the second half of the 1960s, although it would have no real significance until the following decade. It is true that projects outside Spanish territory had been carried out before this [20], but these had always been sporadic initiatives “without the necessary character of permanent action” (Seopan 1977, 138). The reason for this can in great part be traced to the enormous effort required from Spanish construction companies to meet the ever-rising domestic demand, and which made it impossible for them to direct their resources and methods toward goals other than this [21].

22The pioneers of this activity include Entrecanales y Tavora, which began doing projects in various South American and North African countries in the second half of the 1960s, and Huarte y Cía., which in 1968 drew up a foreign expansion plan with four objectives: 1) diversify risk; 2) obtain greater prestige; 3) improve management training; and 4) collaborate with the Spanish government, which was interested in increasing exports to reduce its commercial deficit [22]. The most notable case, however, was that of Dragados, at the time the leading company in the sector. Dragados would launch an internationalization strategy which was firm and sustained, and which from the early 1960s was built upon the reputation the company had attained through its construction of large dams (hydraulic works), a segment of the domestic market that was becoming saturated. In 1966, after participating in numerous calls for tender in a variety of countries, it won an international contract to construct the hydro-electric complex of Kadinçik (Turkey), a project financed by the World Bank [23]. After this, its internationalization would not be interrupted. Aside from competing with other large European firms (German and French) in international tenders, it would create subsidiaries with local partners in Argentina and Venezuela, open branch offices in other countries, and form the embryo of its international division, with several subsidiaries specializing in the exportation of construction goods and services [24].

23Similar initiatives were undertaken by other representative companies of the sector in the early 1970s. Beginning in 1974, Ferrovial would again have a presence in foreign markets, but this time a permanent one, through its participation in projects in North Africa (Libya, Algeria and Morocco), the Arab countries of the Middle East and Persian Gulf (Syria, Iraq, Iran and Kuwait) and Latin America (Argentina, Venezuela, Ecuador, Mexico and Paraguay). Along with the ambitions of its president Rafael del Pino, an important motive in this outward expansion was a notable decline of government investment in construction projects in Spain. From the late 1970s through the early 1980s, Ferrovial would provide the nucleus of Spanish activity abroad, with Ferrovial Internacional (1979) as its principal instrument (Ferrovial 1982, 64-70). Agromán, on the other hand, would take a more hesitant approach to its external expansion, which began in 1970 in the Dominican Republic, where it built the hydro-electric complex of Valdesia. In 1975, its production abroad was still not sizeable, although this would begin to change in the ensuing years, after the company was adjudicated important projects in Latin America and the Arab countries, enough for it to be awarded the Gold Medal for Exportation in 1978 by the Spanish government. Impelled by the crisis in the domestic construction market, Agromán would also step up its international activities in the late 1970s and early 1980s [25]. These were precisely the years in which Focsa began its own outward expansion. The activity of the Catalonian firm was more diversified than that of its competitors, becoming increasingly specialized in providing urban services through long-term agreements with local city governments. Late payment on the part of these public entities and the shrinking of the Spanish construction sector would lead the company to seek a presence in foreign markets. Its internationalization took place simultaneously in the areas of urban services and civil construction, as it created its own subsidiaries or established joint ventures with local firms, expanding into the geographical areas in which its Spanish competitors were already active: Latin America and North Africa [26].

24The push outward into foreign markets would thus intensify in the 1970s, as the so-called oil crisis led to a shrinking of the Spanish construction sector [27] between 1976 and 1984. The contractors brought more and more pressure on the government to aid them in their activities abroad. For this purpose, they established within Seopan – the organization which represented their collective interests – a commission specializing in international activity (the International Markets Commission), which in 1976 would become the Asociación de Empresas Constructoras de Actividad Internacional (Aeci). It was comprised of the 15 leading civil works and construction firms operating in Spain and abroad [28]. The Aeci was created with several goals in mind: 1) to support the interests of construction export companies; 2) perform studies and market analyses of the countries of greatest interest to its members; 3) centralize the contacts of its members; and 4) work to uphold their reputations. Another of its functions was to collaborate closely at the institutional level with the Spanish government, before which it was the official voice of the construction export sector. Likewise, the government assigned to the Aeci the tasks of promoting and seeking out markets, by organizing official missions abroad to further the sector’s interests. Lastly, the Aeci provided its associates with international representation, through its participation in the Committee of European International Contractors (Eic), part of the European Construction Industry Federation (Fiec) (Aeci 1982 and 1992).

25In combined terms, the international activity of the Spanish contractors comprising the AECI, measured according to foreign turnover, would continue to grow throughout the 1970s. The increase was modest at first, but quite intense from 1979 onward, reaching a peak in 1984. Then began a marked decline that would continue until the early 1990s (Torres 2009b). In any case, revenues from international activity would rarely reach as high as 20 % of total turnover. The great exception to this was Dragados, which between 1981 and 1985 obtained higher percentages (between 30 and 40 %), similar to the foreign turnover averages of Europe’s leading construction firms (Torres 2009a). Thus, the large Spanish contractors’ first cycle of internationalization lasted approximately 15 years. It began modestly in the late 1960s, but was very intense from 1980 to 1984, coinciding with the end of the construction sector crisis in Spain and the height of international construction demand, stimulated by the oil-producing/exporting countries. The later shrinking of the world market [29], particularly in Latin America and the Arab countries of North Africa and the Middle East, regions in which Spanish construction activity had been concentrated, caused such international activity to diminish [30]. Also contributing to this was the re-activation of the domestic construction market that began in the mid-1980s, especially after Spain’s entry into the European Economic Community in 1986. In any case, this first cycle of internationalization was of unquestionable significance to Spain’s contractors for the accumulation of knowledge and experience from abroad that it brought them.

Concentration and diversification: the creation of the large construction groups, 1986-2000

26During the second half of the 1980s, the dynamism of the Spanish construction market, spurred on by private demand as well as public projects –the Universal Exposition in Seville, the Barcelona Olympics, high-speed railway infrastructures (Ave), the national motorway system, and so on– would re-orient the activity of Spanish construction companies towards their home territory. Institutionally, this was a more complex market, and these companies were forced to re-organize and adapt internally. Between the central and local (city hall) administrations now appeared the regional (the Autonomous Communities), which played an important role in the tendering of civil works projects. This favoured the emergence of medium-sized and medium-large-sized firms with great competitive ability in each region. Parallel to this was a strong entry into Portugal, which also joined the European Economic Community in 1986 and became an extension of the Spanish market [31]. From this time on, both countries began to receive an significant volume of financial resources from the European Union (EU), drawn from the Structural Funds, resources that, together with funds from national public agencies, were designated for various types of infrastructure (civil works) projects.

27Meanwhile, expectations for the creation of an internal EU market in 1993 increased the level of competition in the Spanish/Portuguese market due to the greater presence of European contractors, and caused Spanish companies to think more seriously about the European market, a challenge they had not yet faced and the entry to which was made very difficult by the fact that each national market was dominated by local contractors [32]. In any case, the recovery of international construction activity, in familiar markets (the less developed countries) as well as newer ones (Europe, the USA, Southeast Asia), would essentially force them to compete with the large European companies of Germany, France, Great Britain and Italy [33], against which they revealed two serious limitations: smaller size and smaller financial capacities [34]. Nevertheless, Spanish contractors still held on to the elevated reputation they had achieved internationally, above all, for the execution of large-scale civil works projects [35].

28In response to these challenges, as well as to the shrinking of the domestic market that took place from 1991 to 1994, the fall in State investment in civil works due to budgetary restrictions (the program of convergence toward a single currency) and changes in the national model of bidding for public works contracts (adjudication by concession [36]), the large Spanish contractors embarked in the 1990s on a three-fold strategy: 1) concentration, to increase in size; 2) diversification, to enter markets with different cycles from those of construction, and develop synergies between these diverse activities; and 3) a new drive toward internationalization (García and Úbeda 1997). The fundamental goal was to gain competitive capacity in an environment which was ever more open, and where the differences between operating in internal and external markets tended to disappear.

29The strategy of concentration, generally effected through operations of acquisition and/or merger, from 1990 to 2003 would lead to the emergence of six great construction groups (Table 3): Fcc (Fomento de Construcciones y Contratas), Acs (Actividades de Construcción y Servicios), Acciona, Ferrovial, Ohl (Obrascon-Huarte-Lain) and Sacyr-Vallehermoso. As well as lengthy, this process was complex and not without its conflicts. The leading role fell to Spain’s own companies, although some European firms (French, Italian, German and British, above all) were involved as well. Begun in the late 1980s, the process would reach its maximum intensity in the second half of the 1990s. In any case, by 1995 (Table 2), the profiles of the resulting groups and the principal players in each case were already fairly well drawn. Then, in the final years of the 20^th century, what may be seen as a second wave of concentration took place, culminating in 2003, by which time the six large groups mentioned above had become clearly defined.

30Three of these – Fcc, Ferrovial and Entrecanales (Acciona) – had appeared in the mid-1990s (Tables 2 and 3). Fcc, controlled by the Koplowitz family and the first to be establish, resulted from the 1991 merger of Focsa and Construcciones y Contratas, both companies with long and eventful histories (Table 1) and with similar business structures, as both diversified very early on into different areas of construction (Torres 2009a). In 1995, Ferrovial, the group of the Del Pino family, took control of Agromán, another historical group that was severely weakened at the time. Entrecanales, controlled by the family of the same name, would in 1996 form Acciona, absorbing Cubiertas y Mzov [37], with which it had been increasingly linked since the late 1980s.

31The three others (Acs, Ohl and Sacyr-Vallehermoso) would take shape after this. Acs, led by the civil engineer Florentino Pérez, was formally established in 1997 by the Ocp Group, which in 1996 had gained control of the public company Auxini, and included the Ginés Navarro Group, controlled by the Banca March. However, the operation that would make it the leader in the sector would not take place until 2003, when it incorporated Dragados as well. The sector’s most emblematic company had tried unsuccessfully to carry out its own process of concentration, first with Fcc from 1995 to 1998 and then later with Sacyr, but both attempts had failed. In 2002, it tried a new approach, this time by acquiring Hbg, the leading Dutch contractor. The process was aborted, however, in 2003 with the entry of Acs in the capital of Dragados and the subsequent sale of the Dutch firm [38]. A similar role to that of Florentino Pérez was occupied by Juan Miguel Villar Mir, another civil engineer, in creating the Ohl Group, from the Obrascon Group, which in 1998 acquired Huarte, a historical firm that was suffering serious difficulties, and which was joined by the Lain Group that same year. Finally, in 2003, the Sacyr-Vallehermoso Group was formed by the merger of the two so-named companies [39].

32The six great Spanish construction groups were of a size comparable to that of similar groups in Europe. With respect to total turnover, three (Acs, Ferrovial and Fcc) were among Europe’s ten largest in 2002 (Lleonart and Garola 2004, 131). Their competitive position brought a notable advantage in the domestic as well as foreign markets, including the European market itself. Contributing to this were their greater resources and technical capabilities, along with a new financial strength.

33The strategy of diversification was developed in parallel to this increase in size. It was not, however, the horizontal diversification within the activity of construction which all of these companies had undertaken in earlier decades, the effect of which was to transform them into generalists. Now, rather, it was a diversification outside the field of construction, even if not entirely disassociated from it: urban services, environmental projects, infrastructure management, energy, industrial facilities, transport for individuals and goods, to name a few examples (Tables 2 and 3). These new activities were usually assigned to specialized subsidiaries and in many cases their management was subject to the authority of a public administrative agency.

34With the exception of Fcc, which, as we have already said, had embarked much earlier on this type of diversification, all of the large contractors adopted this strategy in the 1980s. The weight of their new areas of activity in total turnover would grow slowly but steadily as new specialist companies were added to the concentration processes described. At the end of these processes, in 2003, Fcc and Acs were the most diversified of the groups, with more than 50 % of revenue coming from activities other than construction. Diversification in the other four groups was lower, at less than 30 % (Lleonart and Garola 2004, 29).

Conclusion

35The historical trajectories of the large Spanish contractors shows clearly the great influence that the domestic market has had on their growth and consolidation as important agents of the country’s business structure. Both the demand for civil works on the part of the State (public demand) and the demand for residential and non-residential building by private individuals and companies (private demand) have been the motor for their development throughout the 20^th century, especially the second half, when economic growth was more intense and the domestic market more dynamic. Both types of demand provided sufficient incentives for the creation of construction companies in the first half of the century, particularly the interwar period, and both were highly stimulating factors in the development of such companies from 1950 to 1975, favouring an increase in size, the improvement of resources and capabilities, and the modernization of organizational and operating methods. This last, in turn, may also apply to the period 1986-2000, when the domestic market began to recover its protagonism in the activities of Spanish construction firms, in a context of greater competition than existed in earlier periods.

36During the period 1950-1975, the large Spanish contractors would extend their operations to include all manner of construction activities (horizontal diversification) and would establish themselves in all of the national territory, even if these changes did not occur at the same pace and with the same intensity in all companies alike. The greater scale and scope of their operations would also cause changes in their internal organization, which became more complex. Another aspect of this period that should be pointed out is the heightened business knowledge that these companies came to possess as they accumulated the resources and capabilities (technical, financial and management-related) needed to increase their competitive capabilities in the domestic market and to take on the challenge of internationalization. Among the factors that explain this, one that should be noted first of all is the knowledge learnt from foreign companies operating in Spain – the paradigm for this was the case of the American firms which directed the construction of US military bases in the 1950s –, but also important were the technical abilities of engineers trained in the country, particularly those specializing in civil works, who had been closely connected to the construction companies from the start. Another important factor was the acquisition of technology from abroad – whether through the purchase of machinery and equipment, the acquisition of patents or the creation of specialized companies in the form of joint ventures with foreign firms –, as well as the growing availability of capital for investment, stemming in part from the re-investment of profits (self-financing).

37The domestic market ceased to be stimulus to the growth and modernization of the large Spanish contractors between 1975 and 1985, due to the impact of the oil crisis on the Spanish economy. This restriction would oblige them to compete abroad in international markets, generalizing a strategy that the more dynamic and competitive firms (Dragados, Entrecanales) had begun at the end of the 1960s. The experience was a positive one and a step forward in strengthening their role as increasingly important players in Spain’s business structure. Spanish contractors would reproduce, in markets of similar or inferior development (Latin America, North Africa and the Middle East-Persian Gulf), the knowledge and abilities acquired in their own domestic market. In return, they learned much about the functioning of foreign markets which would prove very useful in later phases of their internationalization process, beginning in the 1990s.

38Finally, the large Spanish contractors’ most spectacular advance took place between 1986 and 2003, when they were transformed into great diversified groups capable of competing in international markets as well as at home. In this period, the opening of the Spanish economy to the exterior became firmly established by the country’s entry into the EU and the subsequent creation of a single market and currency (the Euro). In a context which would become more and more open and competitive, where the difference between operating in the domestic and international markets tended to blur, the strategy of the large Spanish contractors was to increase their size (concentration processes) and diversify their activity beyond the field of construction. The result was the creation of six great construction groups which have competed since then in the world market with other large firms of similar characteristics from both developed and emerging nations; six groups that have carved a place for themselves among the leading Spanish multinationals of the 21^st century.