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This doctoral thesis is based on a longitudinal single-case study conducted over five years within a product development context at a manufacturing company. In dynamic environments that demand flexibility and adaptability, it is essential to understand how organizations can improve dynamic capabilities to remain viable and competitive during periods of turbulence and change. This challenge is especially central to product development organizations offering customer-specific products as it tends to increase organizational complexity. An excessive focus on internal coordination and control to manage this complexity has led to inertia due to establishment of strict, rigid processes and hierarchical bureaucracies within organizational management and design.

This study aims to contribute with new knowledge on how organizations operating in dynamic contexts can develop adaptability to changing needs. Specifically, it seeks to understand how to design and manage organizations to increase their preparedness for and adaptability to change. Investigating the factors and mechanisms that influence an organization's dynamic capability can provide insights into the sources of inertia and support the transition toward a more dynamic structure. The longitudinal study is based on data collected through an initial interview study followed by a questionnaire study, and finally through a concluding interview study. The research has been phenomenon-driven; as the organization’s circumstances have evolved, the focus of the study has shifted accordingly. Emerging from the aggregated results of the longitudinal study, the overall scope of the research is the change process, transitioning from a rigid to a more dynamic organization. Research findings are presented in five appended papers.

Analysis from literature studies and the empirical study show that the primary focus on improving performance often centers on internal efficiency. However, within the case company, tension arose between the desire of strict control according to predefined processes and plans and the actual need for flexibility. Dynamic contexts require working processes that facilitate reactive problem-solving, creativity, and flexibility, as well as managers capable of going back and forth between management styles to benefit performance. Successful organizational reconfiguration depends on developing the conditions that enable the firm's dynamic capability in relation to its context. This involves identifying both the microfoundations that generate dynamic capability and the internal and external constraints to change.

Considering the external environment is crucial for developing an understanding of how to best organize and manage resources and capabilities, which places demands on managerial capabilities. Managers must possess the skills to monitor the external environment and formulate strategies to respond to changing conditions, as their interpretation of the external environment will influence their decisions, which will subsequently enable or hinder possible actions. The design of organizations will impact the ability to rearrange resources and capabilities. Processes and working procedures must allow for reconfigurations to respond swiftly to changing constraints or opportunities. The use of multiple theoretical perspectives has been imperative in the analysis of the data, and the theoretical contribution extends to exploration of various factors and mechanisms that influence an organization's dynamic capability.