Financial Reconfiguration Capacity under Economic Uncertainty: Toward a Middle-Range Theory of Adaptive Capital Allocation
DOI:
https://doi.org/10.66203/econovia.01208Keywords:
financial reconfiguration capacity, adaptive capital allocation, economic uncertainty, financial flexibility, dynamic capabilities, resource orchestrationAbstract
Economic uncertainty can rapidly undermine the fit between firms’ existing financial commitments and emerging economic requirements, yet financial flexibility research primarily explains the value of preserving financial room rather than how firms actively reorganize that room when capital configurations become misaligned. This conceptual paper develops Financial Reconfiguration Capacity (FRC) as a middle-range theory of adaptive capital allocation. Integrating insights from financial flexibility, strategic flexibility and real-options logic, dynamic capabilities, and resource orchestration, the paper specifies FRC as a repeatable firm-level capability for detecting capital misalignment and deliberately reorganizing financial resources. The proposed framework identifies four interdependent mechanisms: capital reprioritization, funding recomposition, financial resource redeployment, and temporal resynchronization. Together, these mechanisms enable firms to restore alignment between capital configurations and changing economic conditions. The theory shifts attention from possessing financial flexibility to exercising financial adaptability and explains why firms with comparable financial resources may respond differently to similar uncertainty. It also establishes a research agenda for operationalizing FRC, testing its boundary conditions, and examining its effects on adaptive capital allocation and organizational resilience.
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