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As information technology becomes integral to the products and services in a growing range of industries, there has been a corresponding surge of interest in understanding how firms can effectively formulate and execute digital business strategies. This fusion of IT within the business environment gives rise to a strategic tension between investing in digital artifacts for long-term value creation and exploiting them for short-term value appropriation. Further, relentless innovation and competitive pressures dictate that firms continually adapt these artifacts to changing market and technological conditions, but sustained profitability requires scalable architectures that can serve a large customer base and stable interfaces that support integration across a diverse ecosystem of complementary offerings. The study of digital business strategy needs new concepts and methods to examine how these forces are managed in pursuit of competitive advantage. We conceptualize the logic of digital business strategy in terms of two constructs: design capital (i.e., the cumulative stock of designs owned or controlled by a firm), and design moves (i.e., the discrete strategic actions that enlarge, reduce, or modify a firm's stock of designs). We also identify two salient dimensions of design capital, namely option value and technical debt. Using embedded case studies of four firms, we develop a rich conceptual model and testable propositions to lay out a design-based logic of digital business strategy. This logic highlights the interplay between design moves and design capital in the context of digital business strategy and contributes to a growing body of insights that link the design of digital artifacts to competitive strategy and firm-level performance.

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In this paper we develop a learning-mediated model of offshore software project productivity and quality to examine whether widely adopted structured software processes are effective in mitigating the negative effects of work dispersion in offshore software development. We explicate how the key process areas of the capability maturity model (CMM) can be utilized as a platform to launch learning routines in offshore software development and thereby explain why some offshore software development process improvement initiatives are more effective than others. We validate our learningmediated model of offshore software project performance by utilizing data collected from 42 offshore software projects of a large firm that operates at the CMM level-5 process maturity. Our results indicate that investments in structured processes mitigate the negative effects of work dispersion in offshore software development. We also find that the effect of software process improvement initiatives is mediated through investments in process-based learning activities. These results imply that investments in structured processes and the corresponding process-based learning activities can be an economically viable way to counter the challenges of work dispersion and improve offshore project performance. We discuss the implication of these results for the adoption of normative process models by offshore software firms.

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