Organizational Capabilities and Innovation in a Public Setting: the Case of Area C in Milan

Abstract

This paper contributes to the literature applying strategic management theories to public sector organizations, by looking at the relation between innovation and organizational capabilities in a public setting. Based on the analysis of the congestion charge zone (Area C) implemented by the Municipality of Milan in Italy, this work explores (i) how the generation of innovations is linked to the presence and enhancement of dynamic capabilities, and (ii) whether such innovations, in turn, generate other capabilities that sustain the strategic capacity of the public administration in the long run. The results point to the role of organizational dimensions as they assume a particular shape within four categories of resources: actors, physical resources, structure and systems, and culture. These are the resources that the three main dynamic capabilities - knowledge creation and absorption, knowledge integration, and knowledge reconfiguration - use and leverage in order to address internal and external challenge...