How organizational boundary choices impact capability development

As construction-oriented public sector agencies have outsourced more and more of their construction-related activities, they have often suffered from an inability to provide appropriate oversight due to degraded capabilities. This had led to calls for these agencies to rebuild capabilities across different technical areas. A firm’s boundary choices—make, buy, ally and dual modes (make and buy simultaneously)—may impact the ability of a firm to maintain and even build new capabilities, and in this article, we seek to investigate the impact that boundary choices have upon rebuilding capabilities and the extent to which organizations may make sub-optimal choices economically to potentially create opportunities for learning and knowledge sharing. Using qualitative data from three project-based public sector organizations managing large construction projects, we observed that neither pure make nor buy decisions assisted significantly in capability building. Dual modes provided firms with some opportunities to build capabilities, but the most successful decisions seemed to occur in respect of using intermediate governance modes such as alliances. We also observed that the boundary choice was just one dimension of the capability building process and suggest organizations require a multi-pronged strategy to rebuild capabilities over time.