Dynamic capabilities for sustainability and performance maturity levels: evidence from the construction industry

This study refines dynamic capabilities theory by showing that the development of sustainability-oriented capabilities is shaped by a firm’s organizational design as well as its level of sustainability performance maturity, which influences how and when different microfoundations emerge. Drawing on a multi-case study of 8 Canadian construction firms recognized as sustainability leaders, the research explores how dynamic capabilities—sensing, seizing, and transforming—are operationalized through certain microfoundations. The findings suggest that firms which achieve higher levels of sustainability performance seem to systematically develop localized innovation initiatives, early stakeholder engagement practices, performance measurement mechanisms, and organizational change routines. These dynamic capabilities are enabled by decentralized organizational structures, cross-functional learning systems, and purpose-driven leadership. By linking organizational design to the evolution of dynamic capabilities for sustainability, this study offers theoretical insights into the role of internal configurations in capability development. Practical implications are provided for firms in project-based and hard-to-abate sectors seeking to embed sustainability into their core operations and pursue long-term environmental and social objectives.