"Project Team Absorptive Capacity": An Effector of Project Success

=> Fundamentals of Absorptive Capacity

Connecting Zahra and George (2002) and Turner and Mu?ller (2003) conceptualizations, ACAP is considered as the set of organizational routines and strategic process by which the project temporary organization, and its team, in charge of the project, acquire, assimilate, transform, and exploit knowledge to achieve project success. ACAP of the project team constitutes a potential source of the dynamic organizational capabilities associated to the collective knowledge of the project team. Although associated to Research and Development (R&D) studies, new product development (NPD), and innovation, ACAP can be explored beyond these contexts (Lane, 2006). Towards this direction, a valid measure that captures the multiple dimensions of ACAP was conceived by Flatten (Flatten, 2011). ACAP is an important human resource effector to the project success, and encompasses two components, as reconceptualized by Zahra and George (2002): “Potential Absorptive Capacity” (PACAP) and “Realized Absorptive Capacity” (RACAP).

=> Relevance of ACAP in Project Management

In late 80’s researchers identified project team factors as the main drivers of project success followed by technical issues (Larson and Gobeli, 1989; Pinto and Slevin, 1988). In 90’s scholars (Clark and Wheelwright, 1992; Grant, 1996) have argued that the two most important contributing factors for project success, in particular for the improvement of the capacity of repeated success by enhancing project learning capabilities, are “human resource management practices” and the project team’s knowledge ACAP.

Conceived in the early 90’s, ACAP Theory, in the context of projects, is associated to the project team’s prior-related knowledge derived from the team previous exposure to projects (Cohen and Levinthal, 1990; Zander and Kogut, 1995). Other researchers (Tsai, 2001) have argued that project team’s knowledge ACAP contributes to project success by producing a faster process of knowledge creation and utilization within the project environment.

Most studies have examined knowledge ACAP in the context of research and development (R&D) field, new product development (NPD) projects, and innovation undertakes. Notwithstanding, ACAP is also associated to complex projects (Ahern et al., 2014), a capability to be explored further beyond Research and Development (R&D) studies (Lane, 2006).

A study conducted to explore the impact of project temporary settings indicated that “the existence of stationary ‘parent’ organizations influences the employment form, work processes and resource networks used by temporary organizations” and, by effect, influences both the project temporary organization performance and the project success. The study also argues that in ‘pure’ or ‘virtually pure’ temporary organizations “project activities are predominantly coordinated horizontally”, i.e., the higher the temporary format the higher the decisions are taken at the level of the project team members. These temporary organizations are considerably dependent on the skills and networks of their employees (Modig, 2007) and, by effect, dependent on team capabilities.

ACAP is an important variable in organizational research in recent decades. It is mainly associated to the Research and Development (R&D), new product development (NPD), and innovation. In the many years since it was introduced (Cohen and Levinthal, 1989) ACAP has been used in more than 900 peer-reviewed academic papers (Lane, 2006). ACAP promised to explain the process through which firms learn, develop, and assimilate new knowledge necessary for competitive advantage. It also offered a set of firm capabilities that could potentially explain differences in competitive advantage. Even though, few studies have examined the role of ACAP as a capability in the acquisition, assimilation, and commercial application in other types of business-related knowledge out of R&D (Lane, 2006). In contrast to resources that can be understood as nonspecific input units, capabilities represent productive and explicitly firm-specific skills to use resources: “...resources and capabilities are the primary source of profit for the firm” (Grant, 1991). Despite their differences, all conceptualizations understand ACAP as a capability to address rapidly changing environments (Duchek, 2013). On the Duchek (2013) critical review on ACAP, when referring to Barney (Barney, 1991), it was argued that “all conceptualizations understand absorptive capacity as a capability to address rapidly changing environments. It is assumed to be a higher- order competence that consists of different individual capabilities building on each other to yield absorptive capacity and gives the firm a foundation on which to achieve a competitive advantage”.

In their seminal work over ACAP Cohen and Levinthal (1989) has defined ACAP as “the ability to identify, assimilate, and exploit knowledge from the environment”, what they have called the firm’s ‘learning capacity’ or ‘absorptive capacity’”. They present absorptive capacity explicitly as a learning process and implicitly as a capability – “a feature or faculty capable of development” or “the quality or state of being capable” (Merriam-Webster’s Dictionary today: https://www.merriam-webster.com/dictionary/capability). ACAP was conceptualized as a R&D by-product: “we suggest that R&D not only generates new information, but also enhances the firm's ability to assimilate and exploit existing information” (Cohen and Levinthal, 1989). One year later, Cohen and Levinthal (1990) have suggested a simple generalization that applies at both the individual and organizational level of ACAP: “ACAP is constituted by the stock of prior knowledge”. They pointed that “the firm’s ACAP is dependent on the ACAP of its individual members”. However, they emphasized that “the firm’s ACAP is not the sum of the ACAP of its employees”. ACAP refers not only to the acquisition or assimilation of information by an organization but also to the organization's ability to exploit it to commercial ends in a collective form. They argue that the ability to evaluate and utilize outside knowledge is largely a function of the level of prior knowledge, pointing that prior knowledge catalyzes this ability, both at individual and organizational levels (Cohen and Levinthal, 1990). In 1994 ACAP theory was adjusted by Cohen and Levinthal. They have argued that the firm's ACAP, as a capability, “not only enables a firm to exploit new extramural knowledge, but to predict more accurately the nature of future technological advances” (Cohen and Levinthal, 1994). “A high level of ACAP allows projects to anticipate potential opportunities and challenges. Such projects proactively seek, obtain, and use relevant knowledge to exploit opportunities and address challenges, thereby improving project performance” (Ali et al., 2018). Therefore, ACAP is related to knowledge base capabilities, same as project management and development is, in both individual and collective levels. Knowledge developed in ‘‘pure’’ or virtually ‘‘pure’’ project temporary organizations “needs to be shared within professions to allow transfer of knowledge between projects regarding suitable work-processes and ways to secure access to crucial resources” (Modig, 2007). Ahern et al. (2014) describe complex project management and development as forms of complex problem-solving that typically involves incomplete pre-given information. These circumstances demand a holistic approach to create and coordinate knowledge in the project organization (Ahern et al., 2014), making project definition and development processes, inherent routines, and team interaction, key factors for project performance.

From the literature it was identified that there is room in the project management knowledge domain to view ACAP as a capability rather than a “thing” that is divorced of its context (Lane, 2006). As envisioned by researchers, ACAP is expected to be explored in other contextual research fields. ACAP should be empirically explored in non- R&D contexts using metrics that capture each dimension of the absorptive capacity process in a manner appropriated for that context (Lane, 2006), indicating that complex projects implemented in temporary organization format is an adequate context to explore the ACAP dimensions. It is consolidated the view of project team's knowledge ACAP as a contributing factor to project innovativeness in the short run and to business strategic flexibility in the long run (Jansen et al., 2005; Ritala, 2013). Due to their temporary and unique nature, projects are different from standard organizational processes. They are characterized by discontinuous personal grouping and work contents, a lack of organizational routines, a short-term orientation and a cross-disciplinary integration of internal and external experts. The management of knowledge in temporary organizations is therefore an increasingly important and even decisive competitive factor (Hanisch et al., 2009).

Project management studies put “incompetent staff”, defined as “poorly trained or technically incompetent team members”, as one of the more common risks typically identified. Same studies “found evidence that cooperation positively affects both task and psycho-social outcomes, suggesting that cooperation promotes better task performance as well as general positive feelings of accomplishment from the project” (Pinto, 2002). The capacity of a project team to acquire, assimilate, transform, and exploit new knowledge is expected to affect the success of a capital project.

=> ACAP: 2 Constituents and 4 Parts

ACAP has two constituents and both work together to enhance the ability of the project team in achieving success (Zahra and George, 2002; Popaitoon, 2014): “Realized ACAP” and “Potential ACAP”.

To model ACAP as a variable affecting “project success” the 2 constituents and the inherent 4 parts is set (Zahra and George, 2002; Flatten, 2011):

. Potential ACAP with Acquisition and Assimilation parts:

Acquisition capacity – This part of ACAP entails close personal interaction and mutual trust and respect within project temporary organization team members in order to capitalize on different areas of expertise to successfully import knowledge. This part is associated to the capacity of a project team in developing and exploring connections within and outside their temporary organization to shortening the time to acquire knowledge. These features of the project team facilitate the time and cost-efficient, and effective, identification and acquisition of new and relevant knowledge to perform within the project as a temporary organization.

Assimilation capacity – This part of ACAP is characterized by the ability of the project temporary organization team to work together across professional and structural divisions, including the ability to interact within the parent firm organizational structures in order to make an effectively use of the routines and processes to analyze, process, interpret, and understand the information obtained from external sources. The set of some complimentary skills and the use of a common professional language aid the project team in analyzing and interpreting the new knowledge, thus ensuring timely and economical knowledge processing within the project temporary organization.

. Realized ACAP with Transformation and Exploitation parts:

Transformation capacity – This part of ACAP reflects the ability of the project temporary organization team to combine old and new knowledge, i.e., the ability to combine existing knowledge and newly acquired and assimilated knowledge. It is related to the capability of a project team to yield new insights, fostering an entrepreneurial mindset in its actions.

Exploitation capacity – This part of ACAP is defined by the skill and expertise of the project temporary organization team in knowledge utilization and application. It is related to the capacity of the project team in incorporating knowledge into its operations in a systematic way. It is dependent on the routines and processes that allow the project team to refine, extend, and leverage existing competencies or to create new ones.

PACAP and RACAP are complementary and coexist all times fulfilling the necessary but insufficient condition to improve the performance of a project temporary organization or of a whole firm. “A high PACAP does not necessary imply enhanced performance once is RACAP that involves transforming and exploiting the assimilated knowledge by incorporating it into the firm’s operations, thereby improving its performance” (Zahra and George, 2002). “RACAP is the primary source of performance improvements”, and that “PACAP is a path-dependent capability that is influenced by past experiences that are internalized as organizational memory”.

. Potential ACAP:

Acq1 - The search for relevant information concerning the project was the every-day business in the project environment.

Acq2 - The management, including the project manager and the functional managers, has motivated the project team members to use information sources outside of the project environment.

Acq3 - The management, including the project manager and the functional managers, has expected that the project team members deal with information beyond the project environment.

Ass1 - In the project environment the ideas and concepts were communicated cross- functional.

Ass2 - The management, including the project manager and the functional managers, has emphasized cross-functional support to solve problems.

Ass3 - In the project environment there was a quick information flow, e.g., if a project unit or function obtains important information it communicates this information promptly to all other project units or functions.

Ass4 - The management, including the project manager and the functional managers, has demanded periodical cross-functional meetings to interchange new developments, problems, and achievements.

. Realized ACAP:

Tra1 - The Project Team members had the ability to structure and to use collected knowledge.

Tra2 - The Project Team members were used to absorb new knowledge as well as to prepare it for further purposes and to make it available.

Tra3 - The Project Team members successfully linked existing knowledge with new insights.

Tra4 - The Project Team members were able to apply new knowledge in their practical work.

Exp1 - The management, including the project manager and the functional managers, has supported the development of prototypes and/or tests (to anticipate information and / or potential performance).

Exp2 - The management, including the project manager and the functional managers, regularly reconsiders technologies and adapts them accordant to new knowledge.

Exp3 - The management, including the project manager and the functional managers, has had the ability to work more effective by adopting new technologies.

=> Application on Research Studies

This conceptualization of ACAP was explored in a research study available at:

https://dx.doi.org/10.13140/RG.2.2.33735.78244