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Digital Options Theory for IT Capability Investment
Umeå University, Faculty of Social Sciences, Department of Informatics. (Swedish Center for Digital Innovation)ORCID iD: 0000-0003-0602-5404
Center for Process Innovation, Computer Information Systems Georgia State University.
School of Science and Technology Georgia Gwinnett College.
2014 (English)In: Journal of the Association for Information Systems, ISSN 1536-9323, Vol. 15, no 7, 422-453 p.Article in journal (Refereed) Published
Abstract [en]

While research has shown that investments in IT capability may translate into improved firm performance, how and why they do is still a source of debate. Drawing on financial options thinking, recent research suggests that managers can support appropriate investment decisions by examining digital options. However, current research has not effectively translated the financial options construct into the IT domain, making it difficult to rigorously examine digital options. To address this void, we revisit general options theory and review current notions of digital options. To support understanding, we extend current theorizing by offering a rigorous conceptual foundation that defines the digital option life cycle and relationships to neighboring constructs. To support practice, we present principles for examining digital options for a specific business process. To illustrate the detailed workings of the theory, we examine a production planning process within the dairy industry to arrive at a set of desirable and feasible IT capability investments. The proposed theory supports managerial practice by offering a rigorous and actionable foundation for digital options thinking. It also sets an agenda for academic research by articulating theory-based constructs and principles that are subject to further empirical and theoretical investigation.

Place, publisher, year, edition, pages
2014. Vol. 15, no 7, 422-453 p.
Keyword [en]
Digital Options, IT Capability Investments, Information Requirements, Process Innovation
National Category
Information Systems
URN: urn:nbn:se:umu:diva-88702ISI: 000339386400003OAI: diva2:716830
Available from: 2014-05-13 Created: 2014-05-13 Last updated: 2015-05-07Bibliographically approved
In thesis
1. Digital Capability: Investigating Coevolution of IT and Business Strategies
Open this publication in new window or tab >>Digital Capability: Investigating Coevolution of IT and Business Strategies
2014 (English)Doctoral thesis, comprehensive summary (Other academic)
Alternative title[sv]
Digital abilitet : En undersökning av samevolution mellan IT- och affärsstrategier
Abstract [en]

This dissertation investigates the role of information technology (IT) in organizational strategy. Specifically, it examines how organizations can persist in turbulent competitive landscapes characterized by IT innovations. Underlying premises for this dissertation are that: (1) ubiquitous IT implies constant disruptions from digital innovation, (2) IT and practice are becoming fused, and (3) organizational strategies are dynamically linked with practice, i.e. they are reciprocally related through what organizations do rather than have. To investigate such IT strategizing processes, I outline a conceptual framework for analyzing how organizations can generate digital capability, i.e. a collection of routines for strategizing by leveraging digital assets to create differential value. Digital assets here refer to the complement of available resources and competencies for IT design and implementation. Based on the notion of dynamic capability and evolutionary theory, this framework emphasizes the importance of sensing, seizing and transforming abilities for generating digital capability.

As organizational practices are becoming fused with IT scholars have argued that attempting to disentangle them analytically is futile. In a similar vein, organizational strategy is increasingly reliant on available IT resources for both formulation and execution. In the IS field it is widely acknowledged that IT has both enabling and inhibiting consequences for organizations. Drawing on the resource-based view of the firm and theory on organizational capabilities, the notion of IT capability has been widely used as a conceptual tool for analyzing these dual strategic effects of IT. Considering the explosive advances in computing, network and interaction that have resulted in IT being ubiquitous and deeply embedded in contemporary practices, recent research argues for the need to move beyond the functional view of technology implicit in the IT capability notion. A key aspect to address for such broadening of the perspective is the coevolution of IT and business practices, i.e. who (or what) leads, who or what follows, and whether such a causal distinction is meaningful.

Grounded in the outlined conceptual framework, this dissertation examines how organizations can build digital capability to both enable large variation and complexity of feasible competitive actions, and reduce inhibiting effects of IT. The empirical investigation is situated in three distinct domains: boundary spanning IT innovation, transformation of existing IT resources, and hybridization of technology through digitalization of production equipment. These investigations are presented in five research papers.

The dissertation contribute to knowledge of IT strategy by: (1) explicating the construct of digital capability, (2) providing a framework for coevolutionary strategizing processes, (3) presenting an empirical illustration of the coevolution of IT and business strategies, and (4) offer specific insights on design and orchestration of processes for digital capability generation.

Place, publisher, year, edition, pages
Umeå: Umeå universitet, 2014. 98 p.
Research reports in informatics, ISSN 1401-4572 ; RR-14.01
, Dissertations from the Swedish Research School of Management and Information Technology, 64
Digital capability, IT strategy, coevolution, IT innovation, digital innovation, organizational evolution, practice research, strategy-as-practice, evolutionary theory
National Category
Information Systems, Social aspects
urn:nbn:se:umu:diva-88722 (URN)978-91-7601-065-5 (ISBN)
Public defence
2014-06-05, MA 121, Umeå Universitet, MIT-huset, Umeå, 10:00 (English)
Available from: 2014-05-15 Created: 2014-05-13 Last updated: 2014-05-15Bibliographically approved

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