Linking absorptive capacity and project performance in environmental uncertainty: A perspective on implementation arrangements

Abstract This study utilizes the concept of absorptive capacity as a unique way to view implementations arrangements in resource‐scarce public sector organizations. It introduces absorptive capacity as a policy implementation capacity and explains the relationship between potential and Realized Absorptive Capacity and project performance, primarily, in the higher education, primary and secondary health and social welfare departments in the Government of the Punjab, Pakistan. The main research question ascertains the effect of absorptive capacity on project performance and how environmental uncertainty intervenes in the relationship between different aspects of absorptive capacity (potential absorptive capacity, PACAP and realized absorptive capacity, RACAP) and project performance. In order to do so five hypotheses are developed. In order to explore the assumptions, the relationships among variables are ascertained based on 167 responses from ongoing public sector projects/schemes (2020) using bivariate correlations, and linear and multiple linear regression analyses. The results of this study support findings suggested by prior research, confirming a positive influence of absorptive capacity on project performance in terms of knowledge acquisition and assimilation. The same is true for a direct relationship of public sector projects. The public sector projects have used the existing experience and knowledge resources to further enhance their capabilities and exploited knowledge. Further, the actionable knowledge has been transformed into performance goals of the projects. The unstable external environment, unable to predict future environmental conditions and changing project requirements did not seem to affect the existing transferability and utilization of knowledge for achieving social sector projects' performance.