The development of governance capabilities for project owners and operators : a dynamic capabilities perspective

Abstract

Infrastructure projects consistently exceed budgeted time and cost, fail to deliver expected benefits and in meeting the demands for which they are designed. Concomitantly, project management research emphasises the importance of ‘strong owners’ to the delivery of infrastructure projects. However, the concept of what constitute strong project owners is less explored. Recent works arguing that project owners and operators need to possess ‘owner project capabilities’ bring initial clarity to the strong owner role. This research builds on the ‘strong owner’ concept and extends the conceptualisation of ‘owner project capabilities’ in the direction of governance. Governance capabilities are defined as consisting of a governance framework, and three distinct sub-capabilities: project assurance, project coordination, and asset integration. This study identifies multiple ways in which these capabilities can be deployed. The research further investigates how project owners create, develop and maintain the desired mix of governance capabilities. A single case study approach has been adopted for the study. Guided by the dynamic capabilities theory, a four-phase theoretical framework process of how capabilities are created and developed is formulated: the need for change, engage in search, response formulation, and implementation. A quasi-government project owner that has developed governance capabilities is identified and data was collected through interviews and perusal of relevant documents.

The findings show that project owners gain the awareness to initiate the creation of capabilities when: they experience organisational crises; existing capabilities become core rigidities; and they identify opportunities. However, in the absence of systematic learning and periodic assessment of existing capabilities to create such awareness, strategic path creation initiatives are core to creating the awareness and triggering the development of capabilities. At the search phase, exploratory learning mechanisms that are reliant on managerial cognition are key to identifying alternatives. However, under certain conditions, experiential learning mechanisms are integrated with exploratory learning to identify alternatives. The actual mix of learning mechanisms depends on the managerial cognition leading the search and the importance of existing capabilities to the organisation. The findings show that for organisations that do not engage in systematic learning, regular experience accumulation is core to the development and routinization of capabilities. This process is, however, shaped by managerial oversight which ensures adherence to codified knowledge and revises routines that do not deliver intended outcomes. Maintaining routinized capabilities over time is dependent on: codified guidelines that serve as training documents, strategic recruitment of new employees, and low levels of employee turnover.

The research shows how governance capabilities for project owners operating in relatively stable environments are developed through a four-phase top-down process. It shows that the need for dynamic capabilities deployment can occur in both relatively stable and high-velocity environments. In stable environments, however, the possession of relevant managerial agency is essential to the creation and development of capabilities. The research further contributes to an understanding of where capabilities come from. It shows that the governance capabilities mix of an organisation evolves over time in response to a series of cumulative events rather than as a response to static change.