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

This mixed-methods study investigates a dilemma that inter-organizational collectives formed to develop long-lived capital assets face when planning a new project: either invest in flexible designs that can cope economically with change in requirements, this is design to evolve—at risk the extra costs upfront will not pay off if the uncertainties fail to resolve favourably in the future. Or endorse cheaper but more rigid designs—at risk of higher adaptation costs if the uncertainties materialise later on. Through an empirical study grounded in the British railway sector, we reveal that collectives regularly engage in informal future-proofing discussions to address this dilemma. But faced with tight budgets, conflicting interests, and mutual ignorance, the different parties struggle to design in flexibility. Through lab experiments, and taking a flat governance structure as a given, we then unexpectedly find that a formal device to facilitate future-proofing discussions has limited impact on the outcomes. Hence, we argue, a collective action problem is central to the inter-organizational development of flexible capital designs. We conclude by discussing how inter-organizational collectives can better exploit the value of design flexibility at the project front-end.