Many believe that project complexity reduces project management performance. However, so far research has failed to establish this causal relationship conclusively. We extend research on project complexity by introducing the concept of team-level absorptive capacity and by studying its role as mediator between project complexity and project management success. Applying structural equation modelling to a sample of 285 respondents, we find an unequivocal, direct and positive statistical association between project complexity and delays and overspending. Further, we show that team-level absorptive capacity is critical for successful project management, but also that absorptive capacity can only partially offset the harmful impact of project complexity. Beyond adding to project management theory, the paper contributes to the wider management literature. We establish complexity as an antecedent of absorptive capacity and demonstrate how each dimension of absorptive capacity has unique determinants and outcomes.

Introduction

Berlin Brandenburg Airport in Germany was scheduled to open in 2011 at a price of 2 billion euro. Five years on, the facility had still not opened, and the final bill was estimated at 6 billion euro (The Economist, 2017). Every Olympic Game since 1960 has experienced cost overruns, at an average rate of 156%. The 2016 Summer Games in Rio saw a cost overrun of 51% and the 2014 Winter Games in Sochi an astounding 289% (Flyvbjerg et al., 2016). Delays and overspending are defining features of project management failure (Davis, 2014; Turner and Zolin, 2012). As the above examples illustrate, in particular complex projects are susceptible to delays and cost overruns (Hertogh and Westerveld, 2010; Lu et al., 2015). Whereas contextual factors may be beyond the control of the project team, a team’s internal capacities can influence the outcome. However, research on complexity’s effect on project management performance remains inconclusive. Scholars lack both theoretical knowledge and empirical validation of how complexity influences project success (Floricel et al., 2016). This is particularly disturbing as complexity is commonly regarded as a key characteristic of projects (Burke and Morley, 2016; Hanisch and Wald, 2014). Consequently, while projects have come to define the contemporary work place (Schoper et al., 2018), there are important gaps in our understanding of their defining features. In this paper, we argue that project complexity is potentially an important determinant of project management performance, as measured by delivery on schedule and on budget. Complexity diminishes project management performance because complexity entails the presence of “a large number of parts that interact in a non-simple way” (Simon, 1962). As a result, coordination requirements in the project are exacerbated. Nevertheless, any project team possesses capabilities that help in keeping the project on track. Notably, the team’s capacity to transfer knowledge effectively among its members is of critical consequence (Hanisch et al., 2009). In a highly influential paper, Cohen and Levinthal (1990) introduced the concept absorptive capacity, which refers to “the ability […] to recognize the value of new, external information, assimilate it, and apply it to commercial ends” (Cohen and Levinthal, 1990, p. 128). In a much-cited extension of the model, Zahra and George (2002) identify four dimensions of absorptive capacity. Acquisition capacity involves identifying and acquiring new knowledge. Assimilation capacity allows the knowledge to be analysed, processed, interpreted and understood. Transformation capacity refers to the ability to combine existing and new knowledge. Finally, exploitation capacity entails the organisational routines and competence to leverage and utilise the new knowledge. This paper focusses on the interplay between project complexity and the absorptive capacity of the project team. The authors argue that the relationship between these variables to a large extent determines project management performance. Based on the above, we set out to address the following two research questions: Does project complexity increase the risk of project management failure in terms of unscheduled delays and overspending? If so, does team-level absorptive capacity mitigate such risk?