Developing commercial capabilities for infrastructure delivery : a dynamic capabilities view

Abstract

This doctoral research investigates how public sector clients (PSCs) charged with the definition and delivery of infrastructure are structured and resourced, and how they undertake projects they promote. It locates its contribution to the theoretical literature on organisational capabilities in general and dynamic capabilities in particular. The point of departure is the emerging literature on owner project capabilities. Specifically, this research focuses on the ability of project owners to manage commercial interfaces with project-based organisations that supply services for effective project delivery, dubbed owner commercial capabilities. With the emergence of new procurement approaches, repetitive PSCs are facing the need to update their existing routines of project delivery associated with a more conventional approach and accordingly develop new commercial capabilities. This research thus seeks to explore how PSCs create and develop commercial capabilities in response to the introduction of new procurement approaches. Three subsets of commercial capabilities are identified from the literature: packaging, contracting, and relational capabilities. A qualitative single-case study was conducted to address the research aim. The study followed an iterative approach. Based on literature review, exploratory interviews, and participant observations over a two-month internship in a Chinese PSC organisation, three theoretical propositions were put forward to guide case study data collection. The chosen case is a state-owned enterprise in China, in charge of metro line project delivery and operation. It has received an order from the municipal government to introduce the Public-Private Partnership (PPP) procurement approach and the case study targets how it is responding to this change. Data collected through semi-structured interviews, direct observations, and documents were used for subsequent coding and analysis. The findings show that owner commercial capabilities are reflected in a coordinated set of activities and routines in packaging, contracting, and relational aspects. The introduction of PPPs leads to the emergence of capability gaps in all three aspects. Both internal capability development and external capability acquisition are found to be effective manners to narrow such gaps. New contracting capabilities are acquired mainly from third-party consulting, while new packaging and relational capabilities are more reliant on internal development. A key finding is that the development of commercial capabilities within the organisation is closely linked to learning from both internal and external sources of experience. The initial stage to establish commercial capabilities relies more on external and vicarious learning, but this reliance decreases as capabilities develop over time. It is also found that learning activities constituted by experience accumulation and deliberate knowledge articulation and codification mechanisms form the basis of capability development. Further, more investments of time and efforts in deliberate learning mechanisms are found at an early stage to create new commercial capabilities. This research attempts to conceptualise owner commercial capabilities and provides a nuanced understanding of how commercial capabilities of repetitive PSCs are created and developed to address changing environments. Organisational learning is identified to play a fundamental role in driving capability development. This research also offers implications to public managers in terms of how to deploy dynamic capabilities to facilitate capability development.