Where absorptive capacity resides: a locus study across firm and project boundaries in the twin transition

Eleni Papadonikolaki, Ilias Krystallis and Bethan Morgan

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Absorptive capacity in construction is crucial for effectively managing change amidst the twin transition (digital and green transitions) that is significantly affecting existing practices in the sector. Concentrating on construction sector, this research examines how firms assimilate and use digital decarbonisation practices to improve their performance. Building on a multi-method qualitative dataset comprising interviews with 53 industry experts in the UK construction sector, archival data, and validation of our findings through focus group data, the study highlights the vital role of absorptive capacity in enabling firms to navigate and benefit from digitalisation and sustainability initiatives. The findings indicate that the potential absorptive capacity (acquisition and assimilation of knowledge) takes place mainly in firms whereas the realised absorptive capacity (transformation and exploitation) takes place mainly in the boundaries of projects they deliver. This offers a mutually reinforcing cycle of exploration and exploitation that can equip firms to meet contemporary challenges and institutional demands effectively to cope against the twin transition. Our study contributes with a four-phase process model for understanding the organisational change management processes required for the twin transition in project-based settings. Most existing research on absorptive capacity focuses on either organisational or industry-level dynamics, our study examines the loci of absorptive capacity (e.g., by examining firm and project boundaries) in a highly complex, project-driven industry such as construction.

Keywords: dynamic capabilities; green transitition; knowledge absorption; net zero; digitalisation; digital innovation (search for similar items in EconPapers)
JEL-codes: J01 R14 (search for similar items in EconPapers)
Date: 2026-03-02
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Published in Journal of Cleaner Production, 2, March, 2026, 549, pp. 147859. ISSN: 0959-6526

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