The interplay between dynamic capabilities’ dimensions and their relationship to project portfolio agility and success

Abstract

Recent literature emphasizes agility's importance for a project portfolio's success in a dynamic environment. Conceptually, dynamic capabilities should be relevant antecedents for portfolio agility since they help organizations cope with dynamic environments. Dynamic capabilities disaggregate into three dimensions: sensing market and technology opportunities, seizing opportunities through prioritizing and exploiting them, and continuously reconfiguring assets and structures. Although previous literature emphasizes the importance of dynamic capabilities for project portfolio management (PPM), former research rarely analyzed dynamic capabilities in PPM empirically. Further, dynamic capabilities can be conceptualized differently, and it remains unclear how different conceptualizations coexist and what effects they have on the results of a study. This paper quantitatively investigates the relationship between dynamic capabilities’ dimensions (sensing, seizing, and reconfiguring) and project portfolio agility and success using a multi-informant, cross-industry sample of 135 project portfolios. The findings show that dynamic capabilities positively relate to portfolio agility and that portfolio agility mediates the relationship between dynamic capabilities and portfolio success. Surprisingly, sensing, seizing, and reconfiguring do not have entirely complementary effects. Instead, at least two of the three dimensions must be strongly present to enhance portfolio agility positively. The study underscores the importance of dynamic capabilities for portfolio agility. It contributes to the literature on portfolio agility in PPM and a more differentiated view of dynamic capabilities' dimensions and their consequences.