Journal of Business Research 69 (2016) 3447–3458

Contents lists available at ScienceDirect

Journal of Business Research

The role of top management involvement in firms performing projects: A

dynamic capabilities approach
Víctor Hermano ⁎, Natalia Martín-Cruz
University of Valladolid, Spain, Faculty of Economics and Business, Av. del Valle Esgueva, 6, 47011 Valladolid, Spain

a r t i c l e i n f o a b s t r a c t

Article history: The role of top managers in firm performance is central to strategic management. Specifically, the influence of top
Received 21 April 2014 management involvement in project and portfolio performance has been widely research. However, the nature
Received in revised form 26 January 2016 of that influence is still unknown. Based on an international sample of firms performing projects, this paper ad-
Accepted 27 January 2016
dresses the question of how top managers influence project, portfolio, and firm performance. Results of our struc-
Available online 12 February 2016
tural equation model show that the relation between top managers and project, portfolio, and firm performance
Keywords:
is mediated by operational and dynamic capability building. Thus, the building of operational capabilities at pro-
Top management team ject level and dynamic capabilities at the portfolio level appears as the generative mechanism for top managers'
Dynamic capabilities influence over firm performance.
Project management © 2016 Elsevier Inc. All rights reserved.
Mediating effects
Project capabilities

1. Introduction
Firms are increasingly using projects to achieve their business objec-
tives (Engwall, 2003; Söderlund & Tell, 2009). Moreover, scholars claim
that today's society is suffering a projectification process in which the so
called project-based firms1 are taking the leading role (Soderlund,
2005). Project and portfolio implementation is viewed as an organiza-
tional strategy ideally suited to compete in turbulent and dynamic envi-
ronments since it provides the firm with the flexibility and innovation
capacity needed to address environmental changes (Hobday, 2000;
Söderlund & Tell, 2009; Turner & Keegan, 1999). However, research
evidence is still limited on the superiority of these project-based struc-
tures and the critical factors for achieving project and portfolio perfor-
mance remain hidden (Reich et al., 2013).
Theoretical research on these project-based structures has focused
on the influence of top management's involvement on project
(Pinto & Slevin, 1987) and portfolio performance (Cooper, Edgett, &
Kleinschmidt, 2000; Meskendahl, 2010), which directly affects firm per-
formance. Meanwhile, empirical research has been restricted to studies
that provide lists of good practices for top managers or case studies that
analyze the influence of certain top managers' actions that, at best, con-
stitute lip-service advice or exhortation but are far removed from the
root cause of top managers' influence on project and portfolio
⁎ Corresponding author. Tel.: +34 983 18 4560; fax: +34 983 42 3299.
E-mail addresses: vhermano@eco.uva.es (V. Hermano), ambiela@eco.uva.es
(N. Martín-Cruz).
1
Project-based firms are frequently defined as a firm in which projects are the primary
unit of production, innovation, and competition (Hobday, 2000: 874).
performance (Jarvenpaa & Ives, 1991; Young & Poon, 2013). Therefore,
although top management involvement is considered a necessary and
sometimes sufficient condition for project and portfolio performance
(Young & Poon, 2013), empirical research shows that top managers
are usually reluctant to play an active role during the project life cycle
because they consider projects to be operational concerns rather
than strategic tools (Crawford, 2005; Young & Poon, 2013). Moreover,
during the last 30 years, scholars in project management have been
misdirecting their efforts by stressing the importance of technical fac-
tors such as budget, schedule, and quality management as the main suc-
cess factors in projects and relegating to second place managerial factors
such as top management involvement and decision-making processes
(Morris, Pinto, & Söderlund, 2012; Thomsett, 1989). Thus, in order to
shed light on the real critical success factors for projects and portfolios,
a cross-fertilization between project and strategic management is need-
ed (Grundy, 1998). By applying a business perspective, future research
will clarify that the expert advice of project managers and researchers
has less impact on project success than previously believed and will
also confirm that the involvement of top managers is mandatory for
increased firm performance (Young & Poon, 2013).
In the strategic management literature, the effect of top managers on
firm performance has been profusely studied (Hambrick & Mason,
1984). Research in strategic management has addressed top managers'
role from three key perspectives. The first perspective, the agency theo-
ry (Fama & Jensen, 1983; Jensen & Meckling, 1976), focuses on the costs
associated with the separation between firm property and control.
According to agency theory, to enhance firm performance, both the
manager's and the firm's objectives should be aligned (i.e., managerial
pay must be linked to firm performance). The second perspective, the

http://dx.doi.org/10.1016/j.jbusres.2016.01.041
0148-2963/© 2016 Elsevier Inc. All rights reserved.
3448 V. Hermano, N. Martín-Cruz / Journal of Business Research 69 (2016) 3447–3458
upper echelons theory (Hambrick, 2007; Hambrick & Mason, 1984),
posits that firms are a reflection of their key decision-makers (i.e., top
managers) and thus focuses on how different characteristics of the top
management team, such as its size and the different personal traits of
its members, influence the performance of the firm. The third perspec-
tive, organizational behavior theory, explores the questions of how a
CEO's leadership behaviors influence firm outcomes (Bass & Stogdill,
1990; Cannella & Monroe, 1997; Waldman & Yammarino, 1999). Specif-
ically, most recent scholars focus on charismatic and transformational
leadership as antecedents of organizational performance (Elenkov,
2002; Jung, Wu, & Chow, 2008; Kissi, Dainty, & Tuuli, 2013; Shamir,
House, & Arthur, 1993; Waldman & Yammarino, 1999).
Although these perspectives have enriched our understanding of top
managers' influence on firm performance, they have yet to examine
fully the important aspects of this relation. Some empirical studies
find the direct relation between managerial pay and firm performance
posited by agency theory to be inconsistent (Barkema & Gomez-Mejia,
1998), and thus some scholars suggest that this relation may be influ-
enced by issues such as governance factors and environmental contin-
gencies (Barkema & Gomez-Mejia, 1998). In addition, although the
upper echelons theory examines the influence of top managers on
firm performance, the essence of that influence – that is, the generative
mechanism of that influence – is still unknown (Boonstra, 2013). Final-
ly, there is some degree of controversy regarding the influence of top
management leadership on firm performance (Bass & Stogdill, 1990;
Hunt, 1991).
We address the question about how top managers influence projects
and portfolio performance. Specifically, we provide a deeper under-
standing of the process by which top managers enhance project and
portfolio performance using a dynamic capabilities approach. We
focus on top managers' capability building, both at the project and port-
folio levels, and on the role of these capabilities in enhancing both pro-
ject and portfolio performance. Top management involvement, defined
as “devoting time to the [project] in proportion to its cost and potential,
reviewing plans, following up on results and facilitating the manage-
ment problems involved with integrating [project management] with
the management process of the business” (Young & Jordan, 2008:
715), plays a crucial role in creating the conditions needed for project
success. Thus, top management involvement is considered a critical
factor in project success (Staehr, 2010). In addition, top managers
have the potential to build the architecture of communications within
the project-based firm. Their involvement is a sign of project-based
organizational maturity, which fosters inter-project and project-to-
organization learning (Söderlund & Tell, 2009) and leads the firm to
achieve overall performance through multiple project implementations
(Boh, 2007).
The remainder of the paper is structured as follows. Section 2
presents a literature review on the role of top management. Section 3
introduces our theoretical model and our set of hypotheses. In
Section 4, we apply partial least squares (PLS) structural equation
modeling (SEM) to test our model on a sample of project-based firms.
Finally, Section 5 discusses the main results of model testing and offers
some conclusions and implications for research and practice.
2. The role of top management in the firm
Top managers are identified as a firm's top tier members, and they
are viewed as the driving force behind a firm's performance
(Hambrick & Mason, 1984). The influence of top managers and their in-
volvement in firm performance are two of the most widely studied is-
sues in strategic management (Hambrick, 2007; Menz & Scheef, 2013;
Ozer, 2010; Smith, Houghton, Hood, & Ryman, 2006). Three different
perspectives address the influence of top managers on firm perfor-
mance. First, agency theory focuses on the so-called agency dilemma,
which concerns the difficulties associated with ensuring that the
agents (i.e., top managers) act in the best interest of the principals
(i.e., shareholders) rather than pursuing their own interests (Jensen &
Meckling, 1976). Thus, agency theory states that top managers are
self-serving and that mechanisms such as monitoring or reward struc-
tures must be developed to align top managers' objectives with share-
holders' objectives (Fama & Jensen, 1983; Jensen & Meckling, 1976).
One of the most researched topics inside agency theory is top manage-
ment compensation and especially the relation between top managers'
compensation and firm performance (Barkema & Gomez-Mejia, 1998).
Despite numerous studies, empirical research has found weak statisti-
cally significant relations between compensation and performance,
and researchers are exploring the role played by context and contingen-
cy factors such as research and development level, national culture,
and market growth (Barkema & Gomez-Mejia, 1998). Upper echelons
theory stresses the predominant role of top managers as firm key
decision-makers (Hambrick & Mason, 1984). This theory suggests that
the personal traits of top managers such as age, education, experience,
and race influence firm performance (Hambrick, 2007). Although
prior empirical studies support this perspective, recent research finds
that managers' personal traits are nearly irrelevant to firm performance
(Elenkov, Judge, & Wright, 2005). A possible explanation for these
mixed findings may be that the processes that managers developed or
even their emotions rather than their personal traits are the actual
cause of their influence on firm performance (Elenkov et al., 2005;
Harmancioglu, Grinstein, & Goldman, 2010). Charismatic or transforma-
tional leadership emphasizes the importance of leaders' relations with
followers and includes six different dimensions articulating a vision,
providing an appropriate model, accepting group goals, communicating
high performance expectations, support for individuals and intellectual
stimulations (Cannella & Monroe, 1997; Podsakoff, MacKenzie,
Moorman, & Fetter, 1990; Wang, Tsui, & Xin, 2011). Transformational
leadership approach suggests leading changes in followers making
them to look beyond self-interest in favor of group objectives generat-
ing followers' confidence in the leader and so causing followers to do
more than they are expected to do (Pieterse, Van Knippenberg,
Schippers, & Stam, 2010; Yukl, 2002). However, empirical papers have
found ambivalent results for the influence of transformational leader-
ship on firm performance. On the one hand, some authors found that
top management leadership is an important ingredient for the revitali-
zation and performance of firms (Peterson, Smith, Martorana, & Owens,
2003; Thomas, 1988). On the other hand, scholars have argued that
top management leadership is inconsequential to firm performance
(Agle, Nagarajan, Sonnenfeld, & Srinivasan, 2006; Meindl, Ehrlich, &
Dukerich, 1985; Pfeffer, 1977). One of the reasons for these mixed re-
sults is that leadership effects have been mainly studied at employee
level (Waldman & Yammarino, 1999), hence, some scholars call for
more research on leadership influence through various levels of media-
tors and moderators at firm level (Waldman & Yammarino, 1999).
Given that empirical literature has found ambivalent results for the
agency theory, upper echelons' theoretical perspective, and transforma-
tional leadership approach, we turn to project management literature in
an attempt to discover the essence of the influence of top management
in project and portfolio performance, and so, in overall firm perfor-
mance. Project management literature considers top management a
critical stakeholder whose support and involvement must be ensured
(Lin, 2010; Ragu-Nathan, Apigian, Ragu-Nathan, & Tu, 2004). Thus, top
management involvement is considered a critical success factor both
for projects and portfolios (Fortune & White, 2006; Pinto & Slevin,
1987). Ensuring top management involvement is essential for providing
projects with the appropriate conditions for their success (Staehr,
2010). Specifically, an involved top management team provides the pro-
ject with the necessary resources along with visibility and legitimacy
that reinforce project team effectiveness and inter-project conflict reso-
lution (Boonstra, 2013; Rodríguez, Pérez, & Gutiérrez, 2008; Swink,
2000). Recently, different empirical studies stress the importance of
top management involvement in different project contexts, as informa-
tion systems (Ragu-Nathan et al., 2004), alliances (Wittmann, Hunt, &
 V. Hermano, N. Martín-Cruz / Journal of Business Research 69 (2016) 3447–3458
Arnett, 2009), new product development (Rodríguez et al., 2008), and
internationalization (Hutzschenreuter & Horstkotte, 2012). However,
despite the efforts to identify top management involvement as a key
factor in achieving project success, the theory2 supporting this
statement is unclear (Boonstra, 2013), and a conceptual model
linking top management involvement and project success is missing
(Ragu-Nathan et al., 2004).
Top management involvement is also necessary to translate overall
project-based firm strategy into a project portfolio (Unger, Kock,
Gemünden, & Jonas, 2012). Top management involvement helps portfo-
lio managers to reconfigure portfolio composition and to establish prop-
er resource allocation among individual projects, therefore reinforcing
the performance and strategic fit of the portfolio (Beringer, Jonas, &
Kock, 2013; Unger et al., 2012). Top managers, however, tend to cater
to their pet projects, leading them to provide these projects with
resources or to keep them in the portfolio beyond justification (He &
Mittal, 2007; Unger et al., 2012). Therefore, more empirical evidence is
needed to help clarify the nature of the influence of top management
involvement over project and portfolio performance (i.e., positive, neg-
ative, inverted u-shaped; Unger et al., 2012).
3. Top management involvement from a dynamic capabilities
approach
The dynamic capabilities approach explains firms' abnormal returns
under conditions of uncertainty and environmental change (Teece,
Pisano, & Shuen, 1997). Specifically, the dynamic capabilities approach
argues that to gain strategic advantage possession of unique resources
or capabilities is not sufficient; rather, these resources and capabilities
must be reallocated and reconfigured to address environmental chang-
es (Teece, 2007, 2009; Teece et al., 1997). Thus, dynamic capabilities re-
volve around two main aspects: the capacity to renew the firm's
competences in the face of changing business environments and the
key role of top management in adapting, integrating, and reconfiguring
both resources and capabilities to address environmental changes
(Petit, 2012). Thus, top managers play a prevalent role within the dy-
namic capabilities framework. Top managers are responsible for contin-
ually evaluating and deciding on asset deployment such that their
perceptions of the environment will trigger change in the way that re-
sources are utilized (Easterby-Smith, Lyles, & Peteraf, 2009; Teece,
2007). Top managers also provide the vision of processes that shape
the dynamic capabilities (Easterby-Smith et al., 2009). Thus, Teece
(2007:1346) finds that dynamic capabilities reside in large measure
with a firm's top management team.
The capabilities model for top management involvement, provided
in Fig. 1, directly links top management involvement to both project
and portfolio performance. This model shows the direct effect of top
managers' involvement on performance. The model also indirectly
links top management involvement to both project and portfolio perfor-
mance through the development of dynamic capabilities at the project
and portfolio levels. We suggest that the relation between top manage-
ment involvement and project and portfolio performance is mediated
by the development of project [operational] capabilities and portfolio
dynamic capabilities, respectively. Therefore, project [operational] ca-
pabilities and portfolio dynamic capabilities represent the generative
mechanism through which top management involvement influences
both project and portfolio performance (Baron & Kenny, 1986).
2
Project management is often defined as a practitioner-driving discipline with an im-
plicit theoretical framework (Pollack, 2007). Therefore, scholars are nowadays applying
strategic management theories to project management studies in an attempt to provide
project management discipline with more robust theoretical foundations.
3449
Project
Project
Operational
Performance
Capabilities
Top
Management
Involvement
Portfolio Portfolio
Dynamic Cap Performance
Fig. 1. A dynamic capabilities model for top management involvement.
3.1. Top management involvement and project performance
Top management involvement appears as the most-cited projects'
critical success factor (Fortune & White, 2006). Moreover, prior studies
find that top management involvement is necessary and sometimes a
sufficient condition to ensure project performance (Young & Jordan,
2008; Young & Poon, 2013). The reason being is that top management
involvement is believed to stimulate project performance by enhancing
the understanding of the project among their users (Dong, 2008;
Kearns, 2006). Delving into the reasons for the influence of top manage-
ment support in project performance, we find two main factors
explaining this situation, top managers have a crucial role in shaping
the context and providing the conditions to promote project success
(Staehr, 2010), and top managers can play the role of project champions
(Naranjo-Gil, 2009).
Generally, top managers play an important role during the early
stages of the project life cycle because they participate in both the pro-
ject definition and the composition of the project team (Boonstra,
2013). Top managers also have the capacity to allocate the appropriate
funds and resource endowment to ensure project completion
(Boonstra, 2013; Swink, 2000). Thus, top managers have the capacity
to provide the conditions needed for project success. Moreover, as the
head of the organizations, top managers are empowered to make diffi-
cult decisions, such as those that affect important stakeholders, and to
resolve problems when crisis and conflicts arise among the project
team or between organizational departments (Rodríguez et al., 2008;
Young & Jordan, 2008; Young & Poon, 2013). Top managers can also en-
hance project success by turning into project champions who sell the
project to the whole organization by unequivocally supporting the pro-
ject team (Naranjo-Gil, 2009). When organizational members perceive
top management involvement, they become more enthusiastic about
the project and more willing to accept required changes and to work
in a coordinated manner (Boonstra, 2013; Rodríguez et al., 2008).
Project champions can be considered as transformational leaders that
motivate project team to do even more than they thought possible
(Kissi et al., 2013).
Finally, an involved top management team could shape the institu-
tional environment in order to enhance project success. Specifically,
when the environment is uncertain and turbulent, projects become
more important for firm survival, but at the same time projects become
more difficult to be managed (Jung et al., 2008; Petit, 2012). In turbulent
environments, project managers need to go beyond traditional risk
management (e.g., develop activities for identifying and assessing
risks and planning and implementing responses; Petit & Hobbs, 2010)
adopting roles oriented toward flexibility and learning that are usually
played by top managers (De Meyer, Loch & Pich, 2002; Petit & Hobbs,
2010). Under turbulent environments, the management of uncertainty
requires top managers to manage variability in organizational activities
that have an impact on more than one specific project and to develop
3450 V. Hermano, N. Martín-Cruz / Journal of Business Research 69 (2016) 3447–3458
different approaches for addressing aspects of project-related uncertainty
located beyond the scope of individual projects. (Petit, 2012; Petit &
Hobbs, 2010). Thus, top managers have the capacity to shape the institu-
tional context, become project champions, and provide the project team
with an environment promoting project success (Ragu-Nathan et al.,
2004; Rodríguez et al., 2008; Sharma & Yetton, 2003; Young & Poon,
2013). We therefore offer the following hypothesis:
H1. The higher the level of top management involvement is, the higher
the level of project performance is.
3.2. Top management involvement and portfolio performance
Project portfolios, defined as collections of projects managed under
the same organization that compete for scarce resources (Archer &
Ghasemzadeh, 1999), are increasingly being implemented in compa-
nies. Project portfolios represent an organizational investment strategy,
and thus they are an important building block for achieving organiza-
tional goals (Meskendahl, 2010; Unger et al., 2012).Therefore, project
portfolio management, defined as the simultaneous management of
the whole collection of projects as one large entity, is gaining more im-
portance both in theory and practice and is getting attention from top
managers (Dietrich & Lehtonen, 2005).
The interest of top managers in project portfolios is represented in
the ever-growing literature on top managers' influence over portfolio
management and success. Specifically, the theoretical literature has
established (Cooper et al., 2000) and the empirical literature supports
(De Brentani & Kleinschmidt, 2004) the positive influence of top man-
agement involvement over portfolio performance. To understand better
the role played by top managers in enhancing portfolio performance,
we break down portfolio management into three different activities: re-
source allocation, project selection, and strategy (Cooper et al., 2000).
All companies have a finite resource endowment; thus, projects' re-
source demand regularly exceeds their supply. Top managers have two
main roles in allocating resources among the different projects within a
portfolio. First, they must establish the initial resource allocation, so
they initially determine which projects to give priority to achieve orga-
nizational goals (Beringer et al., 2013). Second, top managers continual-
ly scan portfolio performance to determine whether a reallocation of
resources is necessary (Beringer et al., 2013). Project managers have
been characterized as selfish, with a narrow focus on their own project
goals (Pemsel & Wiewiora, 2013). Thus, each project manager demands
as many resources as possible to ensure project completion. Both the
initial and contingent allocations of resources need the involvement of
top management because, first, top managers have the clearest vision
of the overall organizational goals and second, because they have the
legitimate authority to reallocate resources from one project to another.
The second activity of portfolio management relates to project selec-
tion. Most project selection tools rely on financial methods such as the
net present value. The problem with these tools is that they acknowl-
edge just one dimension of projects (i.e., financial result) but forget
about many others such as strategic fit or the availability of resources.
The result is that many projects pass the hurdles and the portfolio
goes out of balance (Cooper et al., 2000). Top management involvement
introduces strategic fit and resource availability as factors in the project
selection process. When top managers are involved, “go decisions” do
not rely solely on financial aspects but also depend on how the project
output contributes to the strategy achievement and the relation that
the new project has with the others in the portfolio (Cooper et al.,
2000; Meskendahl, 2010; Unger et al., 2012).
Finally, project portfolio management involves monitoring and con-
trolling activities. Portfolio steering is defined as all the activities de-
ployed for a continuous coordination of portfolios (Müller, Martinsuo,
& Blomquist, 2008). Project portfolio management requires gathering
information about project performance for the continuous monitoring
of strategic alignment (Beringer et al., 2013). If deviations from the tar-
get portfolio are detected, correcting actions such as resource with-
drawal or project cancellation should be put in place. Again, top
managers are the most suitable organizational actors to assess the stra-
tegic fit of projects, and they are the only ones with the authority to can-
cel a project even if its performance is acceptable.
Recent papers have researched how different environmental condi-
tions influence the management of portfolios. Specifically, flexibility in
decision making, and structural alignment, are environmental factors
that influence the management of portfolios and could be reshaped by
involved top managers. Since different projects imply different chal-
lenges for top managers, they would benefit from flexible decision-
making processes that combine rational behavior with other ap-
proaches (Gutiérrez & Magnusson, 2014). Lacking flexibility might
lead to a deficient balance between projects and so to a poor portfolio
performance (Gutiérrez & Magnusson, 2014). However, a flexible
decision-making process implies that top managers develop approaches
that are less accepted than the rational ones (Gutiérrez & Magnusson,
2014). By positioning themselves as highly involved managers, top
managers might gain the legitimacy needed to apply non-rational
decision-making processes and to achieve better portfolio performance.
Scholars have recently proposed that in order to achieve high portfo-
lio performance, top managers must define adequate project selection
routines, but also, achieve an organizational structure that meets the
needs of project portfolio management (Kaiser, El Arbi, & Ahlemann,
2015). Organizational alignment and information gathering from differ-
ent organizational units are a critical factor for the performance of port-
folios (Kerzner, 2004). Drawing on the organizational information
processing perspective, researchers (Gutiérrez & Magnusson, 2014)
have shown that an appropriate structure enhances a firm's ability to
adequately procure information to portfolio and project managers
influencing the performance of projects and portfolios. An involved
top management team might shape the organizational structure in a
way that eases the management of portfolios and fosters the collection
of information from all organizational units.
Despite the previous argumentation, few authors argue that top man-
agement involvement does not necessarily lead to a higher portfolio per-
formance. Instead, they propose an inverted u-shaped relation that
suggests that an optimal level of top management involvement enhances
portfolio performance (Jonas, 2010; Unger et al., 2012). These authors
argue that an overinvolved top management team may mentor their
pet projects excessively, falling into the “escalation of commitment” mis-
take (He & Mittal, 2007). However, no empirical evidence supports an
inverted u-shape relation between top management involvement and
portfolio performance, which shows that the positive effects of top man-
agement involvement overcompensate for the negative effects (Unger
et al., 2012: 681). Therefore, we offer the following hypothesis:
H2. The higher the level of top management involvement is, the higher
the level of portfolio performance is.
3.3. Mediating role of project operational capabilities and portfolio dynamic
capabilities
Although the literature has begun to examine the influence of top
management involvement over project (Ragu-Nathan et al., 2004;
Sharma & Yetton, 2003; Staehr, 2010; Young & Poon, 2013) and portfo-
lio performance (Beringer et al., 2013; Meskendahl, 2010), this issue re-
quires further in-depth study (Boonstra, 2013). Recent research has
underlined the role of people, knowledge and experience in the success-
ful management of projects and portfolios (Morris, 2013); hence, the
study of organizational capabilities3 is gaining a central role. Thus,
3
Organizational capabilities are the firm-specific knowledge and skills developed by
learning (Chandler, 1990, 1992).
 V. Hermano, N. Martín-Cruz / Journal of Business Research 69 (2016) 3447–3458
there is a growing literature in project management focusing on the
study of building and maintaining project capabilities as the necessary
condition to manage multiple projects successfully (Davies & Brady,
2015). Lin and Wu (2014), and Wu (2007) show that project capabili-
ties convert organizational resources into organizational performance.
Petit (2012) finds that dynamic capabilities help both project and port-
folio managers to deal with uncertainty, hence enhancing project and
portfolio performance. Biedenbach and Müller (2012) show that
dynamic capabilities, decomposed in absorptive, innovative, and adap-
tive capabilities, enhance short- and long-term project performance
and portfolio performance in pharmaceutical and biotechnology R&D
organizations.
Developed in 2004, project capabilities were broadly defined as the
internal ability of an organization to create lasting performance based
on multiple short-term projects (Davies & Brady, 2000) and were relat-
ed with the organizational ability to transfer learning from project to
project to avoid repeating the same mistakes (Boh, 2007). In an attempt
to “revisit, reformulate and extend” (Davies & Brady, 2015, p.2) the con-
cept of project capabilities, Davies and Brady (2015) have recently pub-
lished a paper that provides a more refined definition of project
capabilities and strengthen the theoretical framework by building on
the dual-routine view (Chandler, 1992). Thus, project capabilities are
defined as distinctive managerial knowledge, experience and skills, lo-
cated within a firm and required to manage multiple projects (Davies
& Brady, 2015). Moreover, the dual-routine view states that firms hold
two types of capabilities. On the one hand, operational capabilities
refer to day-to-day operations performed by a firm's functional depart-
ments (Davies & Brady, 2015). On the other hand, strategic capabilities
are the top management skills and routines through which strategic
planning and coordination of functions occur (Davies & Brady, 2015;
Teece, 2014).
For the purpose of this paper, we draw on the dual-routine view and
examine project capabilities at two different domains: the project and
the portfolio. Project [operational] capabilities are similar to operational
capabilities (Helfat & Peteraf, 2003) and they enable firms to improve
existing products and processes and develop new ones (Davies &
Brady, 2015). The building of project operational capabilities starts
with the implementation of a “first-of-its-kind” project that forces the
firm to create and develop original procedures and assets. Then, firms
provide repeatable solutions by recycling the learning of that “first-of-
its-kind” project to the next; hence, they ultimately obtain economies
of repetition through the establishment of standardized project routines
that allow the firm to develop a growing number of projects at a lower
cost (Davies & Brady, 2015). Therefore, we suggest that individual pro-
ject routines such as bidding, planning, scheduling, team building, etc.
are the building blocks of project operational capabilities and the central
source of firm's efficiency in managing multiple projects (Davies &
Brady, 2015). Project operational capabilities allow firms to get into
new markets and perform unique projects and also exploit current
routines when environmental conditions become more predictable
and stable. Given this discussion, we offer the following hypothesis:
H3. Project operational capabilities act as a mediator variable between
top management involvement and project performance.
Project operational capabilities allow firms to manage projects
under conditions of uncertainty and when the environment is more sta-
ble. However, what still remains unclear is how firms decide the alloca-
tion of resources between “first-of-its-kind” and more routinized
projects. The dual-routine view states that strategic capabilities allow
top managers to coordinate and decide what has to be done at the oper-
ational levels. Thus, consistent with the dual-routine view, we posit that
portfolio dynamic capabilities guide top managers when deciding the
allocation of firm resources to “first-of-its-kind” and routinized projects.
Portfolio dynamic capabilities help top managers to perceive and
respond to deviations in the portfolio's strategic fit by allowing for
3451
reallocation of resources and reprioritization of projects in time (Jonas,
2010). In addition, portfolio dynamic capabilities allow firms to consol-
idate project learning and spread it throughout the business unit and
the entire firm (Brady & Davies, 2004). The ultimate objective of portfo-
lio dynamic capabilities is to reconfigure and extend firm-level capabil-
ities so the firm can fully exploit its project dynamic capabilities and
achieve better portfolio performance. We therefore offer the following
hypothesis:
H4. Portfolio dynamic capabilities act as a mediator variable between
top management involvement and portfolio performance.
4. Research method
4.1. Sample and data collection
Table 1 depicts the survey design that we use to test the research
model. The questionnaire developed for the study was first subjected
to a pretest that involved interviews with 23 participants of the 27th
International Project Management Association world congress, held
from September 30 to October 3, 2013 in Dubrovnik, Croatia. A pilot
test of the final questionnaire was developed prior to its usage.
The target population for the study is formed by CEOs and project
managers of firms from all industries all over the world that are familiar
to project execution and project management techniques. To identify
that population, we search for firms listed in the Thomson One database
that use the keyword “project” in their business description. After mak-
ing an initial e-mail contact with a presentation of the study, we then
sent out a paper-based questionnaire with an option for filling out an
online questionnaire. Follow-up phone calls were made at 1, 2, and
3 months after the initial contact (July 2013).
The response rate was 3.7%, corresponding to a sample size of 62
cases out of the 1686 paper-based questionnaires successfully sent
out.4 Our low response rate is consistent with previous findings that
top managers are “notoriously unwilling to submit themselves to schol-
arly poking” (Hambrick, 2007: 337). However, in terms of sample qual-
ity, diversity is more important than response rate (Blair & Zinkhan,
2006). Our sample firms represent 22 different countries with 56%
from Europe, 25% from North America, and 19% from the rest of the
world. The industry profile of firms in the sample is very diverse. The
sample includes 21 sectors with metal mining, oil and gas extraction
and business, management, and engineering services as the more prom-
inent ones. Eighteen percent of the sample firms have been in operation
for more than 50 years whereas 32% were born within the last decade.
Fifteen percent of the firms are characterized as very small (less than
10 employees) companies, 45% can be considered medium companies
(employees ranging between 10 and 250), and 40% are large companies
(more than 250 employees). Finally, 66% of respondents claim that their
firm is a project-based firm, and a 34% claim that it is not.
To check for a nonresponse bias, we split the sample into three
groups and compared the early responses to the late responses. The un-
derlying assumption is that the group of late respondents is similar to
the group of nonrespondents (Armstrong & Overton, 1977). The mean
comparison test shows no statistically significant differences among
early and late respondents at the 99% level of significance. Furthermore,
following Blair and Zinkhan (2006), we compare the respondents with
the nonrespondents on some key attributes. Based on the information
contained in the Thomson One database, we performed three additional
mean comparisons; the results show no statistically significant differ-
ences among the respondents and the nonrespondents in terms of net
income, industry, number of employees, and earnings before interests
and taxes. Therefore, we find no problems regarding a nonresponse
4
Even though we checked each of the postal addresses contained in the Thomson one
database, 148 paper-based questionnaires were returned as unknown or incomplete
address.
3452 V. Hermano, N. Martín-Cruz / Journal of Business Research 69 (2016) 3447–3458

Table 1
Operationalization of the constructs.

Construct: Operational question Sources

Top management involvement (reflective index) Developed ad-hoc for this study
Top managers of the company are aware of the methodology used for managing projects.
Top managers of the company decide the projects that have to be developed.
Top managers of the company have an active role when defining success criteria of projects.
Top managers of the company are responsible for establishing the project management methodology.
Top managers of the company are frequently informed about the progress of projects.
Top managers of the company are involved in the monitoring and controlling phase of programs and portfolios.
Project operational and portfolio dynamic capabilities (reflective index) Developed ad-hoc for this study based on
All company projects are managed using the same methodology. PMBOK® 4th edition
Project managers are requested to adapt the project management methodology to individual project features and
environmental conditions.
All projects are using a project management plan.
All projects are using a project management information system.
Information from project activities is routinely collected as the project progresses.
Project plan and documents are updated frequently as projects' progress.
Project managers are requested to document the impact of change requests.
Organizational culture, structure and processes have a strong influence on the project management plan.
Project managers are requested to follow the organizational processes and procedures such as standardized guidelines, templates, etc.
Project managers are requested to document lessons learned and apply them to future projects.
Project managers are requested to identify, define, combine and coordinate the various processes within projects taking into Developed ad-hoc for this study based on
account the characteristics of project environment. ICB® 3.1 version
Project managers are requested to maintain, update and change the project organization during the project life cycle if needed.
Project managers are requested to define a change management policy.
Project managers have to ensure compliance with the company's policies and any regulatory requirements.
Project managers have to consider specific structure, culture, and processes of their company.
Project performance (reflective index)
Projects meet their operational performance goals. Developed ad-hoc based on Biedenbach &
Projects meet their technical performance goals. Müller (2012)
Projects meet their schedule objectives.
Projects stay within budget limits.
Project results meet stakeholders' expectations.
Stakeholders are satisfied with project results.
Portfolio performance (formative index) (Biedenbach & Müller, 2012)
Company has the right number of projects for the resources available.
Company's portfolio contains high-value projects.
Company's portfolio has an excellent balance of projects.
Company's projects are aligned with the business strategy.
The budget allocation between projects in the portfolio reflects the business strategy.
Portfolio performance (reflective index)
Company's portfolio leads to a high stakeholder satisfaction. (Biedenbach & Müller, 2012)
Company's portfolio achieves time, cost and quality objectives.
Company's portfolio achieves financial objectives.
Company's portfolio fulfills stakeholders' requirements.
Company's project purpose is achieved.

bias and, despite the low response rate, confirm the quality of our sam-
ple and its representativeness.
As a possible limitation, we note that our data are based on the sub-
jective assessment of key informants, which may lead to common
method bias (Doty & Glick, 1998). We conduct the Harman's single-
factor test and find no general factor to account for a significant propor-
tion of the variance, which suggests that common method variance is
not a problem. In addition, given the unwillingness of top managers to
collaborate in research projects, we have just one respondent for each
organization. To avoid reductions in construct validity due to the pres-
ence of a single respondent, we follow Podsakoff, MacKenzie, Lee, and
Podsakoff's (2003) suggestion to keep the questions as simple as possi-
ble and clearly separate dependent and independent variables in the
questionnaire.
4.2. Measurement items
We measure all scale items with a five-point Likert scale ranging
from strongly disagree/never to strongly agree/always. Table 1 provides
the construction of the operational questions. The selection of the items
is based on the literature review and discussion with interviewees dur-
ing the pretest and pilot tests. When available, we used established scale
items. However, for some of the constructs, no established scales are
available. In these cases, we develop ad-hoc new scales.
Top management involvement is operationalized in six items devel-
oped ad hoc that explore the role played by top managers during the
whole life cycle of a project and the influence of top managers over
the project management methodology based on the work of Unger
et al. (2012).
Project operational capabilities and portfolio dynamic capabilities
are operationalized in nine and six items, respectively. To capture the
essence of project operational capabilities and portfolio dynamic capa-
bilities, we turn to the processes and routines included in two of the
most widely used project management bodies of knowledge, the Project
Management Body of Knowledge-PMBOK®, and the IPMA Competence
Baseline-ICB®. Thus, we consider the processes described in project
management standards as the micro-foundations of both project opera-
tional capabilities and portfolio dynamic capabilities. The logic of using
processes and routines for measuring project operational capabilities
and portfolio dynamic capabilities lies in Winter's (2003)5 definition
of capabilities as collections or routines. In fact, we find numerous em-
pirical studies measuring dynamic capabilities through the processes
5
Winter (2003: 991) states: “An organizational capability is a high-level routine (or col-
lection of routines) that, together with its implementing input flows, confers upon an or-
ganization's management set of decision options for producing significant outputs of a
particular type.”
 V. Hermano, N. Martín-Cruz / Journal of Business Research 69 (2016) 3447–3458 3453

Table 2 techniques, and it does not require normality of the data (Wittmann
Latent variable, measurement item, composite reliability, average variance extracted et al., 2009). Moreover, PLS analysis is most suitable during early stages
(AVE) and Cronbach's alpha.
of theory development, supporting both exploratory and confirmatory
Construct and Factor Composite Cronbach's research (Byrd, Thrasher, Lang, & Davidson, 2006; Premkumar &
indicator loading t-statistic reliability AVE alpha Bhattacherjee, 2008). When covariance-based SEM restrictions are vio-
Top management lated (e.g., minimum sample size, presence of both reflective and forma-
0.909 0.626 0.880
involvement tive constructs), PLS analysis is the most suitable methodological
TMI_1 0.815 16.124
alternative for theory testing (Henseler, Ringle, & Sinkovics, 2009).
TMI_2 0.739 8.027
TMI_3 0.850 16.675 To conduct PLS, the sample size should be at least equal to the larger
TMI_4 0.745 10.103 of (i) 10 times the largest number of structural paths directed at any one
TMI_5 0.788 13.708 of the constructs in the model or (ii) 10 times the number of items in the
TMI_6 0.802 14.007 scale with the largest number of formative indicators (Chin, 1998). Be-
Project operational
capabilities
0.938 0.629 0.926 cause the only formative construct (portfolio performance) possesses
Proj_Cap1 0.749 11.581 five items and, at most, two paths are directed at any one construct,
Proj_Cap2 0.790 13.770 the minimum allowable sample size for this study is 50. Thus, our sam-
Proj_Cap3 0.708 6.928 ple size of 62 is adequate.
Proj_Cap4 0.793 13.519
Proj_Cap5 0.824 17.082
Proj_Cap6 0.824 21.595 5.1. Measurement model
Proj_Cap7 0.879 28.786
Proj_Cap8 0.732 8.897
Proj_Cap9 0.822 16.345
Prior to estimating the structural model, we conduct a confirmatory
Portfolio dynamic factor analysis to verify the measurement model. The CFA verifies our
0.869 0.529 0.818
capabilities measurement model by clearly identifying representative factors of pro-
Portf_Cap1 0.617 5.266 ject performance, top management involvement, and portfolio perfor-
Portf_Cap2 0.762 10.519
mance. The most remarkable result is the division of project
Portf_Cap3 0.586 4.846
Portf_Cap4 0.821 18.024 management processes and routines into two different factors. Contrary
Portf_Cap5 0.838 16.272 to our expectations, the division is not due to the source of the process-
Portf_Cap6 0.701 8.543 es, PMBOK® versus IPMA®; rather, it is due to the essence of the routines
Project performance 0.927 0.681 0.905 and the level to which they belong. Our interpretation, which is sup-
ProjectPe_1 0.850 20.737
ProjectPe_2 0.836 18.697
ported by recent literature in project capabilities,6 is that while the
ProjectPe_3 0.777 13.478 first factor encompasses routines confined to operational project level
ProjectPe_4 0.713 6.906 (e.g., creation of a project plan, updating the project plan and docu-
ProjectPe_5 0.871 19.183 ments, collection of project information, scanning of project environ-
ProjectPe_6 0.890 29.988
ment, etc.), the second factor encompasses routines that link projects
Portfolio performance 0.930 0.728 0.907
PortfPe_1 0.852 20.593 to portfolios and even the whole organization (e.g., influence of organi-
PortfPe_2 0.861 27.141 zational culture over project management, documentation and further
PortfPe_3 0.815 14.009 application of lessons learned, the creation of a general methodology
PortfPe_4 0.871 19.821 that must be applied to all projects, etc.). Therefore, the CFA confirms
PortfPe_5 0.866 22.083
our claim that firms can build operational capabilities at the project
level that will lead to project success and also dynamic capabilities at
the portfolio level or firm level that will lead to the achievement of port-
underlying them (Adner & Helfat, 2003; Biedenbach & Müller, 2012;
folio and even organizational goals.
Prieto, Revilla, & Rodríguez-Prado, 2009).
We create each construct of the measurement model to be
Project and portfolio performance are measured at firm level, i.e., we
reflective.7 We test the measurement model by examining individual
do not measure individual project or portfolio performance but an aver-
item reliability, internal consistency, and convergent and discriminant
age value from all projects and portfolios within each firm. Specifically,
validity. Individual item reliability is determined by the item loadings,
project and portfolio performance are operationalized in six and five
and it expresses the percentage of item variance related to the con-
items, respectively, following the approach of Biedenbach and Müller
struct. For good item reliability, all item loadings should be greater
(2012). The contributions of their scale are twofold. First, project perfor-
than 0.7 (Carmines & Zeller, 1979). All item loadings exceeded the 0.7
mance is measured from a double perspective. Aspects of the project
limit except for two of the portfolio dynamic capabilities constructs,
management process (schedule and budget objectives) and the project
which had an item loading around 0.6, which is considered acceptable
output (operational and technical performance goals) are measured,
when scales are in the early stages of development (Chin, 1998).
and aspects of project outcome and its relation to business objectives
We evaluate the constructs' internal consistency by examining
(stakeholders' expectations and satisfaction) are also measured. Second,
Cronbach's alpha and composite reliability. Table 1 shows that both
portfolio performance is also divided into two different components.
Cronbach's alpha and composite reliability exceed the boundary of 0.8,
The first one concerns balance of resources and business strategy align-
which is the strictest threshold suggested by Nunnally (2010). The con-
ment, and the second one covers technical aspects such as time, cost,
structs' convergent validity expresses the extent to which all items in a
and quality objectives as well as stakeholders' satisfaction.
construct measure the same concept; it is evaluated by examining the

5. Results
We use SmartPLS 2.0M3 to conduct a statistical analysis. As a
variance-based structural SEM PLS, it does not provide model fit indices
that allow for the validation of the model such as the χ2 provided by
covariance-based SEM (Wetzels, Odekerken-Schroder, & Van Oppen,
2009). However, as a nonparametric SEM technique PLS does not suffer
from indeterminacy problems associated with other modeling
6
Recent literature suggests that the key point for achieving competitive advantages in
project-based firms lies in the reconciliation of both project and organizational goals
(Davies & Brady, 2000). In addition, scholars suggest that only project-based firms able
to develop project operational capabilities and portfolio dynamic capabilities are able to
overcome that dichotomy (Davies & Brady, 2000).
7
We measure portfolio performance with both reflective and formative items. We test
the model presented in Section 5 with the portfolio performance reflective construct. The
results of the model tested with the portfolio performance formative construct are provid-
ed in Appendix A.
3454 V. Hermano, N. Martín-Cruz / Journal of Business Research 69 (2016) 3447–3458

Table 3 influence on project performance (t = 2.450) and portfolio perfor-

Inter-construct correlations and average variance extracted (AVE).
1 2 3 4
1. Portfolio performance 0.853
2. Portfolio dynamic capabilities 0.503 0.727
3. Project operational capabilities 0.607 0.869 0.793
4. Project performance 0.775 0.543 0.612 0.825
5. TMI 0.631 0.581 0.681 0.635
Notes: The diagonal elements are the square root of AVE. TMI = Top management
involvement.
average variance extracted (AVE). Table 2 shows that for all constructs
AVE exceed the recommended threshold of 0.5 (Fornell & Larcker,
1981).
Finally, we evaluate discriminant validity by examining (i) the
extent to which the root square of AVE is larger than inter-construct cor-
relations and (ii) the extent to which each item loads more highly on its
intended construct that on others. The results show that all items load
more highly on their intended construct. Table 2 provides the results.
Table 3 shows that the square root of AVE is larger than any inter-
construct correlation with the exception of the portfolio dynamic
capabilities and project operational capabilities, which as previously
discussed has been split into two different constructs based on the re-
sults of the CFA and for theoretical reasons. Taking these results
together, we can assert that all indicators possess good measurement
properties.
5.2. Structural model
Fig. 2 shows the results for the research model, including the path
coefficients and the explained variances of endogenous variables (R2).
The structural model explains 46.3% of the variance for project perfor-
mance and 42.7% of the variance for portfolio performance. The results
also show that top management involvement explains 46.4% of the var-
iance of project operational capabilities and 33.8% of the variance of
portfolio dynamic capabilities.
As for the results related to the testing of the hypotheses, top man-
agement involvement positively influences both project performance
(H1, t = 2.929) and portfolio performance (H2H2, t = 5.048). Thus,
top management involvement can be considered a critical success factor
in achieving both project performance and portfolio performance. In ad-
dition, top management involvement appears as a source of project
operational capabilities (t = 10.386) and portfolio dynamic capabil-
ities (t = 6.818), which can also be considered to have a positive
mance (t = 1.666), respectively. Table 4 summarizes the results of
5 hypothesis testing.
To properly test the mediating role of project operational capabilities
(H3) and portfolio dynamic capabilities (H4), we conduct eight addi-
tional analyses (i.e., four for the project operational capabilities' mediat-
ing role and another four for the portfolio dynamic capabilities'
0.791
mediating role; Frazier, Tix, & Barron, 2004). Table 5 presents the
results.
First, in model 1, a direct positive relation exists between top
management involvement (the independent variable) and project
performance (the dependent variable), with a coefficient of 0.645
(t = 9.456). Second, in model 2, a direct link exists between top man-
agement involvement and project operational capabilities (the mediat-
ing variable), with a coefficient of 0.590 (t = 11.345). Third, in model 3,
a direct link exists between project operational capabilities and project
performance, with a coefficient of 0.618 (t = 5.084). Finally, model 4
considers the links between top management involvement and project
operational capabilities, between top management involvement and
project performance, and between project operational capabilities and
project performance simultaneously.
The relation between top management involvement and project
performance suffers from a dramatic reduction in statistical significance
when project operational capabilities are included in the model. Thus,
project operational capabilities partially mediate the effect of top
management involvement on project performance. Therefore, H3 is
supported.
The same situation occurs when we examine the mediating role of
portfolio dynamic capabilities: in model 8, the relation between top
management involvement and portfolio performance suffers a dramatic
reduction in its statistical significance when portfolio dynamic capabil-
ities are included. Thus, portfolio dynamic capabilities partially mediate
the effect of top management involvement on portfolio performance.
Therefore, H4 is supported.
To test the robustness of the results, we replicate the PLS analysis of
the structural model with portfolio performance measured by a forma-
tive scale rather than a reflective scale. The results of the model are
shown in the appendix, Tables A1–A3, and perfectly match the previous
findings. All the relations keep their significance level, and even some
problems of the measurement model such as the discriminant validity
of project operational capabilities are solved. In addition, we test the
structural model including three control variables (industry, measured
through two-digit SIC Code; firm size, measured by the number of
employees; and firm age, measured by the years of activity of the

Project
0.335***
Project
Operational
Performance
Capabilities
R2 = 0.463
R2=0.464
**
1*
68
0.

6***
0.40
Top
Management
Involvement 0.51
2***
0.
58
1*
**

Portfolio Portfolio
Dynamic Cap 0.206**
Performance
R2 = 0.338 R2 = 0.427

Fig. 2. Hypothesized top management model with path coefficients. ⁎⁎p b 0.05. ⁎⁎⁎p b 0.01.
 V. Hermano, N. Martín-Cruz / Journal of Business Research 69 (2016) 3447–3458 3455

Table 4
Results of hypothesis testing.**

Hypotheses Path coefficient t-value Outcome

H1 Top management involvement ➔ project performance 0.406 2.929⁎⁎⁎ Supported

H2 Top management involvement ➔ portfolio performance 0.512 5.048⁎⁎⁎ Supported
Top management involvement ➔ project operational capabilities 0.681 10.386⁎⁎⁎
H3 Supported
Project operational capabilities ➔ project performance 0.335 2.450⁎⁎⁎
H4 Top management involvement ➔ portfolio dynamic capabilities 0.581 6.818⁎⁎⁎ Supported
Portfolio dynamic capabilities ➔ portfolio performance 0.206 1.666⁎⁎
⁎⁎ p b 0.05.
⁎⁎⁎ p b 0.01.

Table 5
Mediating effect of project and portfolio dynamic capabilities.

Structural path Model 1 Model 2 Model 3 Model 4

TMI ➔ Project performance 0.645 (9.456⁎⁎⁎) 0.412 (2.830⁎⁎⁎)

TMI ➔ Project operational capabilities 0.684 (11.345⁎⁎⁎) 0.683 (10.804⁎⁎⁎)
Project operational capabilities ➔ project performance 0.618 (8.604⁎⁎⁎) 0.331 (2.340⁎⁎⁎)

Structural path Model5 Model6 Model7 Model8

TMI ➔ Portfolio performance 0.635 (10.363⁎⁎⁎) 0.512 (5.384⁎⁎⁎)

TMI ➔ Portfolio dynamic capabilities 0.590 (7.771⁎⁎⁎) 0.580 (6.91⁎⁎⁎)
Portfolio dynamic capabilities ➔ portfolio performance 0.511 (5.084⁎⁎⁎) 0.207 (1.731⁎⁎)

Note: Table provides path coefficients with t-statistic in parentheses.

⁎⁎ p b 0.05.
⁎⁎⁎ p b 0.01.

company). The results in the appendix (Table A4) show no statistical model addresses project capabilities' functioning or explains what
significance for any of the control variables and no significant variation their micro-foundations are.8 Our study suggests the existence of two
in the model results. different project capabilities: one situated at the operational project
level whose objective is to secure project performance under conditions
of uncertainty and the other situated at the portfolio level (i.e., portfolio
6. Discussion and conclusions
dynamic capabilities) whose objective is to achieve portfolio goals
through individual project performance and knowledge. Furthermore,
6.1. Discussion
following the approach of Winter (2003), our study suggests that the
micro-foundations of both project operational capabilities and portfolio
This study makes two important contributions both to the dynamic
dynamic capabilities are the routines and processes established by top
capabilities literature and to the management literature, including pro-
managers and implemented by project managers, project team, and
ject management. First, this study sheds light on the nature and essence
portfolio managers, and we give specific examples of these routines.
of top management involvement as a critical success factor for projects
Therefore, we posit that as the head of the organization, top managers
and portfolios. Instead of looking at the specific actions that top man-
must establish routines that contribute to project performance
agers undertake to create a supportive context for project performance,
(so building project operational capabilities) and other routines that
this study presents the generative mechanism through which top man-
consolidate project learning and contribute to portfolio performance
agement involvement enhances project and portfolio performance. Our
(so building portfolio dynamic capabilities).
results show that project operational capabilities and portfolio dynamic
Scholars recently suggest that project management literature should
capabilities mediate the influence of top management involvement over
shift its focus from achieving individual project success to achieving or-
project and portfolio performance, respectively. Therefore, our results
ganizational goals through multiple projects and portfolio performance
show that project operational capabilities and portfolio dynamic capa-
(Thiry & Deguire, 2007; Voss, 2012). Fig. 3 depicts an extension of
bilities explain how top management involvement influences project
the dynamic capabilities' model for top management involvement that
and portfolio performance. Specifically, we posit that by establishing
introduces firm performance9 as the final dependent variable. The ex-
routines, workflow patterns, and work procedures top managers build
tended model, which explains 45.7% of the variance of firm perfor-
operational and dynamic capabilities that help project managers to
mance, confirms top management involvement as a source of both
face unexpected changes and to make difficult decisions. Moreover,
project operational capabilities and portfolio dynamic capabilities and
the dynamic capabilities built by top managers allow the consolidation
also project operational capabilities and portfolio dynamic capabilities
of project learning and its dissemination throughout the entire firm to
as the mechanism through which top managers enhance project and
avoid the repetition of old mistakes and the achievement of successive
portfolio performance. In addition, the model shows that both project
project performance and portfolio goals. Thus, project operational capa-
and portfolio performance contribute to the achievement of firm perfor-
bilities and portfolio dynamic capabilities explain the influence of top
mance. Thus, the results suggest that by building project operational ca-
management involvement over projects and portfolio performance.
pabilities and portfolio dynamic capabilities top managers are not only
Second, it deepens the understanding of the role played by project
enhancing both project and portfolio performance but also achieving
operational capabilities and portfolio dynamic capabilities in the
achievement of project performance and portfolio and organizational
8
goals. Prior research has posited the building of project capabilities as Micro-foundations are defined as the distinct skills, processes, procedures, organiza-
tional structures, decision rules, and disciplines that undergird capabilities (Teece, 2007:
a necessary condition to transfer project performance to the portfolio 1319).
level (Davies & Brady, 2000). However, despite recent efforts 9
Based on the work of Pleshko and Nickerson (2008), we operationalize firm perfor-
(Biedenbach & Müller, 2012; Killen & Hunt, 2010; Petit, 2012), no mance in five items that cover both perceived share and profits and perceived adaptability.
3456 V. Hermano, N. Martín-Cruz / Journal of Business Research 69 (2016) 3447–3458

Project 0.610*** Project

Operational
Performance
Capabilities

**
2
R = 0.372

3*
2

0.1
R = 0.466

68

81
0.

*
Top Firm
Management Performance
2
Involvement R = 0.457

***
0 .5

26
83
Portfolio Portfolio

0 .5
***
Dynamic Cap Performance
2 0.501*** 2
R = 0.340 R = 0.251

Fig. 3. A dynamic capabilities model for TMI, project, portfolio and firm performance. ⁎p b 0.1. ⁎⁎⁎p b 0.01.

the firm's long-term goals. Project operational capabilities and portfolio
dynamic capabilities can thus be considered sources of long-term firm
competitive advantages (Teece, 2007).
Although our study identifies the mediating role of both project oper-
ational capabilities and portfolio dynamic capabilities, it suffers from the
following limitations. The snapshot nature of cross-sectional studies,
while convenient, does have its downsides in the establishment of causal-
ity and in capturing the dynamism of dynamic capabilities. Therefore, fu-
ture research should be developed through longitudinal studies so we can
strongly assert that top management involvement causes the building of
dynamic capabilities and that those dynamic capabilities cause project
and portfolio performance. Longitudinal studies would also help us to un-
derstand whether the nature of firm performance achievement is indeed
long term. In addition, this study relies on a relatively small sample size,
which may be related to an increasing probability of type II error and
low sample quality. However, the wide coverage of industries and coun-
promotion; it must be reflected in the establishment of work procedures
and decision-making protocols that will ultimately lead to the achieve-
ment of project and portfolio dynamic capabilities. Furthermore, top man-
agers must realize that projects are not isolating instruments that are
implemented to provide a unique and rare output, but they are an impor-
tant part of firm activities with the potential to influence both successive
projects and organizational capabilities (Engwall, 2003). Projects are no
longer operational concerns but important strategic tools that can lead
to the achievement of firm goals.
Appendix A
Table A1
Latent variable, measurement item, composite reliability, average variance extracted
(AVE) and Cronbach's alpha.

tries contained in the sample suggests a high sample quality and reliable Construct and Factor t-statistic Composite AVE Cronbach's
findings (Blair & Zinkhan, 2006). Regarding data collection and variable indicator loading/weight reliability alpha
measurement, we have collected all variables at the firm level defining Top management involvement 0.909 0.626 0.880
project and portfolio performance through their mean values. Using the TMI_1 0.817 16.378
mean of a lower-level variable as an explanatory variable at a higher TMI_2 0.745 8.436
TMI_3 0.851 17.295
level is a customary procedure (Hox, 2010). The liability of using the
TMI_4 0.747 10.466
mean for lower-level variables is that some information may be lost and TMI_5 0.782 13.179
statistical analysis loses power. Finally, our extended model includes a TMI_6 0.800 13.290
subjective measure for firm performance as the final dependent variable. Project operational capabilities 0.938 0.629 0.926
Although some empirical studies advocate for the relevance of a subjec- Proj_Cap1 0.750 10.909
Proj_Cap2 0.790 12.562
tive firm performance, future research might compete our findings by in-
Proj_Cap3 0.708 6.293
cluding a quantitative firm performance variable in the model. Proj_Cap4 0.793 12.454
Proj_Cap5 0.824 16.581
6.2. Conclusions and implications Proj_Cap6 0.824 23.682
Proj_Cap7 0.879 28.554
Proj_Cap8 0.732 8.546
Prior literature identifies the building of both project operational ca- Proj_Cap9 0.822 15.816
pabilities and portfolio dynamic capabilities as the generative mecha- Portfolio dynamic capabilities 0.869 0.530 0.818
nism through which top management involvement influences project Portf_Cap1 0.647 6.286
and portfolio performance, respectively. Research on project capabilities Portf_Cap2 0.770 10.941
Portf_Cap3 0.565 4.415
may be helpful in providing theoretical lens to understand how firms Portf_Cap4 0.817 15.350
implement strategies and learn through projects. Drawing on the dy- Portf_Cap5 0.835 15.493
namic capabilities framework, this article provides a model for under- Portf_Cap6 0.697 8.077
standing how to achieve project and portfolio performance and how Project performance 0.927 0.681 0.905
ProjectPe_1 0.850 20.576
to translate project and portfolio into long-term firm success.
ProjectPe_2 0.836 19.171
This study offers important implications for top and project managers. ProjectPe_3 0.777 13.906
First, we encourage project managers to assume that their technical ex- ProjectPe_4 0.712 7.104
pertise is not as critical for achieving project and portfolio performance ProjectPe_5 0.871 19.711
as was previously believed (Young & Poon, 2013). Conversely, they ProjectPe_6 0.890 30.980
Portfolio performance(formative) – – –
should place the achievement of top managers' involvement as a priority PortfPer_7 0.001 0.011
to ensure project and portfolio performance (Boonstra, 2013). Second, we PortfPer_8 0.275 1.773
encourage top managers to assume that their involvement is a critical PortfPer_9 0.148 1.026
success factor both for projects and portfolios. Furthermore, top manage- PortfPer_10 0.164 1.137
PortfPer_11 0.608 2.669
ment involvement must be more than resource allocation and project
 V. Hermano, N. Martín-Cruz / Journal of Business Research 69 (2016) 3447–3458 3457

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Top management involvement ➔ project performance 0.400 2.818⁎⁎⁎ doi.org/10.1016/S0048-7333(00)00113-X.
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