Interorganizational Development of Flexible Capital Designs: The Case of Future-Proofing Infrastructure

This mixed-methods study investigates a dilemma that interorganizational groups formed to develop long-lived capital assets invariably face at the project front end: either invest in flexible design structures that cope economically with change in requirements, this is design to evolve - at risk of the extra costs not paying off if the uncertainties fail to resolve favorably later on, or endorse cheaper but more rigid designs - at risk of higher adaptation costs if the uncertainties materialize in the future. Through an empirical study grounded in the British railway sector, we reveal that groups regularly engage in informal future-proofing discussions to address this dilemma. But faced with tight budgets and timescales as well as differing interests, the groups struggle to achieve consensus over the need for flexible designs. Through lab experiments and taking a flat governance structure as given, we unexpectedly find that an administrative device to facilitate multiparty future-proofing talks has limited impact on the outcomes. Hence, we argue that a collective action problem is central to interorganizational development of flexible capital designs. We conclude by discussing alternative structures to govern the project front end, and how to better exploit the value of flexible designs.