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This study explores empirically the underlying mechanism through which organizational flexibility affects the performance of its project portfolio, using innovation capability as a mediator, and examines the moderating role of environmental uncertainty in the relationship between organizational flexibility and innovation capability. Data collected from 201 firms were analyzed using partial least squares structural equation modeling with SmartPLS software. The study shows that organizational flexibility positively affects innovation capability and that innovation capability has a positive impact on project portfolio performance. Further, innovation capability positively mediates the relationship between organizational flexibility and its project portfolio’s performance. The adverse moderating effect of environmental uncertainty on the relationship between flexibility and innovation capability also found. The study contributes to innovation theory by using quantitative data to address the role of flexibility in improving innovation capability and the performance of project portfolios and provides a framework that managers can use to enhance the performance.

Organizational Flexibility and Project Portfolio Performance: The Roles of Environmental Uncertainty and Innovation Capability