PurposeThis paper aims to explore how the implementation of gap funding instruments such as Proof-of-Concept (PoC) programs can contribute to developing dynamic capabilities in Public Research Organizations (PROs). The research investigates the processes and practices underlying PoC programs that may provide potential foundations for dynamic capabilities (i.e. organizational microfoundations) in PROs operating within a technology transfer setting.Design/methodology/approachWe conducted an exploratory qualitative study through 37 interviews with the employees of PROs involved in the valorization of 155 technologies within 24 PoC programs. We iteratively triangulated those data with secondary sources.FindingsWe identified four key processes (i.e. management, selection, monitoring and valorization) and their associated practices that act as organizational microfoundations, enhancing the emergence of dynamic capabilities in PROs. We articulated six propositions to advance theoretical understandings about gap funding instruments and dynamic capabilities in technology transfer settings.Originality/valueThis study extends prior research on gap funding instruments by examining the less explored processes and practices underpinning PoC programs, demonstrating their role in enhancing PROs to foster external engagement and adaptation to fast-changing environments. Furthermore, it contributes to dynamic capabilities literature by unpacking those microfoundations that enable PROs to build sensing, seizing and reconfiguring capabilities when interacting with the external environment.