Innovation and the dynamics of capability accumulation in project-based firms.

Meaning (all else Cause being equal!) Basis complexity of More complex projects will very plausible projects attract higher fees. relationship complexity of The complexity of projects will very plausible projects slow down project completion. relationship innovative Innovative problem solving very plausible problem within projects results leads relationship solving to better project outcomes. project The completion of projects very plausible completion results in income and adds to relationship rate the financial resources of the

organisation. project As projects get completed the logical completion workload drops. relationship rate quality of The better the quality of very plausible project project execution the better is relationship execution the project outcome. quality of A higher quality of project Cooper, 1980; project execution results in a higher Lyneis et al., 2001 execution project completion rate (due

to a reduction of rework). resource The more resources are logical allocation on allocated away from the central relationship project level level of the organisation the

more can be spent on project

execution. share of A higher share of time logical project level allocated to acquisition relationship time allocated reduces the time available for to acquisition execution. time allocation The more time is allocated to very plausible to execution execution, the faster the work relationship

will be accomplished. time pressure The quality of project Perlow, 1999;

execution will suffer if time Cooper, 1980;

pressures increase. Lyneis et al., 2001 workload An increase of the workload very plausible

results in higher time relationship

pressures. TABLE 4: CAUSAL LINKS--INNOVATION AND CAPABILITY BUILDING Cause Effect Polarity attractiveness to skill of new + highly skilled employees employees capabilities innovative +

problem solving capabilities project comple- +

tion rate central control knowledge +

capture central resource learning from + allocation central research complexity of learning oppor- + projects tunities in com-

plex projects financial resources central resource +

allocation financial resources resource +

allocation on

project level innovative capabilities + problem solving knowledge loss of skills - capture learning by doing capabilities + learning from capabilities + central research learning oppor- capabilities + tunities in complex projects loss of skills capabilities - obsolescence capabilities - share of resources central resource + allocated to centre allocation share of project time allocation - level time alloca- to execution ted to acquisition skill of new capabilities + employees time pressure innovative prob- -

lem solving time pressure knowledge -

capture project comple- learning by + tion rate doing

Meaning (all else Cause being equal!) Basis attractiveness to The skill level of new logical highly skilled recruits will be higher if relationship employees the company is attractive to

highly skilled employees. capabilities Already available Teece et al.,

capabilities support 1997; Patel &

innovative problem solving in Pavitt, 1997

the organisation. capabilities Higher capabilities increase very plausible

the speed with which work can relationship

be accomplished and projects

can be completed. central control A higher degree of central Middleton, 1967;

control ensures that DeFillippi, 2001

procedures to capture

knowledge from a project and

make this knowledge available

across the company are

adhered to. central resource Allocation of resources to very plausible allocation the centre allows carrying relationship

out dedicated central R&D

activities enabling learning. complexity of Complex projects provide more Rockart, 2003 projects opportunities to develop

advanced capabilities. financial resources Higher financial resources logical

allow more spending by the relationship

centre. financial resources Higher financial resources logical

allow more spending on the relationship

project level. innovative Innovative problem solving Gann & Salter, problem solving within projects results in 2000

capability accumulation. knowledge Knowledge capture activities Brady et al., capture (e.g. through better and more 2002

easily accessible

documentation) increases

retention of knowledge in the

organisation. learning by doing Learning by doing adds to Groak &

capabilities. Krimgold, 1989 learning from Learning from central very plausible central research research increases relationship

capabilities. learning oppor- Learning in complex projects Gann & Salter, tunities in complex increases capabilities. 2003 projects loss of skills Capabilities are lost due to Nelson & Winter,

forgetting, staff attrition 1982

etc. obsolescence The level of (useful) logical

capabilities reduces as relationship

capabilities become obsolete. share of resources The higher the share of logical allocated to centre resources allocated to the

centre, the more money will relationship

be available to the centre. share of project A higher share of time logical level time alloca- allocated to acquisition relationship ted to acquisition reduces the time available

for execution. skill of new Higher the skills of new logical employees hires add to an increased relationship

capability level. time pressure Time pressures reduce Gann & Salter,

innovative problem solving 2000

activities. time pressure Time pressures reduce Schon, 1983

knowledge capture activities. project comple- The more projects are Prencipe & Tell, tion rate completed the more 2001

opportunities exist to

accumulate experience and to

learn.