F. Ted Tschang

Design capital and design moves: the logic of digital business strategy

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 firms 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.

Unbounding the Managerial Mind It’s Time to Abandon the Image of Managers As “Small Brains”

Management theory has been heavily influenced by Simon’s concept of bounded rationality, so much so that bounded rationality has become a first principle in many modern theories of management and organization. But this influence has come at a price. It has devolved into a view of managers as “small brains” myopically trapped in local environments. We take issue with small-brained management theory, and argue that the time is ripe to refashion the microfoundations of managerial cognition into a “big-brained” alternative.

A comparison of the industrialization paths for Asian services outsourcing industries, and implications for poverty alleviation

i»?This paper examines three software and/or information technology enabled services (ITES) industries—two in the early stages of development (in the People’s Republic of China [PRC] and the Philippines) and one mature one (in India). Being latecomers to offshoring work, the PRC and the Philippines have developed this industry in cooperation with multinational enterprises (MNEs). PRC firms have worked with and upgraded within MNEs’ value chains within the PRC market, while the Philippines has relied on MNEs to come in and set up facilities, with domestic firms setting up facilities where lower (knowledge) barriers to entry prevail. The paper also explores the ITES industries’ implications for economic growth and poverty reduction. ITES industries can contribute to overall economic growth and exports, but due to their small size, will generally tend to have more observable impacts on the cities in which they are located. From the limited case data available, it appears that the ITES industries impact on overall employment and other economic sectors to varying degrees, relative to other sectors. As these industries do not help the more impoverished or less educated, they cannot be said to be a solution for the less employable or impoverished, let alone to the problem of rural poverty.

New Blood as an Elixir of Youth: Effects of Human Capital Tenure on the Explorative Capability of Aging Firms

The relationship between firm age and innovation has been an enduring topic of interest. We contribute to this research by studying how the effect of firm age on the quality of explorative and exploitative innovations is affected by the firm-specific and industry tenure of the talent resources (employees) that the firm utilizes. We start with the baseline predictions that firm age is related to the development of better exploitative innovations and worse explorative innovations. However, the tenure of employees intervenes in these relationships, by way of bringing in new knowledge, mental models, and beliefs. We predict that longer firm-specific and industry tenure of employees enhances the positive effect of firm age on the quality of exploitative innovations, while amplifying the negative effect of firm age on the quality of explorative innovations. In addition, for both the baseline and the moderating effect, we also formulate a prediction comparing the quality of explorative innovations with those of exploitative innovations. We find support for the moderating effects of human capital tenure for the quality of explorative innovations, but not for the quality of exploitative innovations. We reason that the latter may be due to the need for some level of exploration even in exploitative innovations, at least in the setting we study—the video game industry. Our results suggest that the negative effects of firm age on the quality of explorative innovations can be mitigated by talent resources (employees) the firm uses who have lower firm-specific and industrywide tenure.

Hong Kong’s New Creative Industries: The Example of the Video Games Sector

Hong Kong has considerable creative and entrepreneurial resources, and the opportunity to build a vibrant set of creative industries, including in the new sectors such as video games, animation, and computer graphics. However, as it stands, some of these industries, especially that of the games industry, are fledgling in nature. Strong supporting institutions already exist, but it is essential to discover how industry can be better supported with existing and new resources — financial and otherwise. The opportunities are immense, but so is the competition. The new entertainment media sectors are growing at a faster pace than most economic sectors in many countries. At the same time, the expected global markets for new creative industries (especially games and animation) are considered to be huge.1 India’s NASSCOM estimated the global market for animation to be approaching US

Balancing the Tensions Between Rationalization and Creativity in the Video Games Industry

50 billion, while one consultancy, DFC Intelligence, reported that the total global games market (including PC, online, and console) would rise from US

The Strategies of Chinese and Indian Software Multinationals: Implications for Internationalization Theory

33 billion in 2007 to US

Assessing Value Creation and Value Capture in Digital Business Ecosystems

57 billion by 2009.2 At the same time, investments in virtual worlds, including associated technologies and social networking sites, in the US alone have been in the few hundred million dollars range per quarter over 2007.3