Evolution of software business in industrial companies : resources, capabilities and strategy

Abstract

<div lang="en" class="abs"><p class="abs_header">Abstract</p><p>Research on software business has, so far, mainly concentrated on the software industry. However, software business has recently also been practised outside the software industry, in so-called industrial companies. This research aims at increasing empirical and theoretical understanding of the development of software business in industrial companies, shedding light on why a company not belonging to the software industry starts to do business involving software, how the company goes about starting such business, and how this in turn affects the company. </p><p>First, past research on the resource-based approach, capability approach, dynamic capability approach and the concept of strategy is reviewed. Based on this review, four processes that hold the potential to give a company (sustained) competitive advantage — picking resources, exploiting resources, applying capabilities and developing capabilities — and three important dimensions of strategy — the objective of strategy, the process of strategy formation, and the focus of strategy — are identified. A conceptual framework for studying the development of software business in industrial companies is developed which encompasses the processes holding the potential for (sustained) competitive advantage and the different dimensions of strategy, as well as the company’s resource, capability and dynamic capability base. Following that, empirical data collected in two internationally operating industrial companies is analyzed with the help of the conceptual framework. </p><p>As a result of the empirical data analysis, 23 capabilities and several resources important for software business in industrial companies could be identified. Capabilities are categorized according to their use in and applicability to different types of software business. Factors influencing the application, development and improvement of capabilities, as well as different ways of how industrial companies start to do software business, are identified. The conceptual framework is revised by adding the process of developing capabilities further to the processes which hold the potential for competitive advantage, and clarifying the role of dynamic capabilities in the development of software business in industrial companies. </p></div>