E-business Platforms' Digital Business Strategy And Its Value Creation:An Investigation Under Complexity Perspective

Digital business strategy is an organizational strategy formulated and executed by leveraging digital technologies.With the emergence of a series of information technology(IT)characterized by digitalization such as big data,cloud computing and deep learning,digital business strategy provides enormous strategic opportunities for e-commerce platforms to create value.However,the unique attributes of digital technology also pose new challenges for value creation.Internally,digital business strategy involves multiple interconnected dimensions such as technology design,platform governance and business innovation.These combinations amplify or diminish net effects of each individual dimension to make the value-creation of digital business strategy uncertain.Externally,the strategic value of these multi-dimensional combinations also depends on the response of competing platforms due to fierce competition.At the same time,the value creation is not only about how to combine multiple dimensions at a certain time point,but also involves the evolution of these strategic combinations over time.Therefore,it is imperative for e-business platforms to investigate how to simultaneously manage the internal multi-dimensional combinations and external competitive interaction,as well as the dynamic evolution of digital strategic business.Digital business strategy research is an emerging research topic from information systems(IS)strategy in the IS field.The literature review in IS strategy and digital business strategy showed that:(1)mostly IS strategic alignment research only focuses on the linear relationship between the alignment of IT elements with business elements and firm performance.Digital business strategy literature further considers the role of turbulent environment.But,these two literature streams pay little attention to the impact of complex combination of strategic choices on firm performance under external competitive interactions;(2)although both IS strategy literature and digital business strategy literature emphasize the importance of strategic evolution,how the strategy evolves remains a “black box”.Existing literature lacks of theoretical perspectives to open the black box,capture and identify the dynamics of digital business strategy evolution.Thus,extant studies cannot explain how digital business strategy evolution affects firm performance;(3)mostly IS scholars explore IT value from the perspective of business strategy by investigating how to leverage IT to position market,govern information asymmetry,acquire resources and build capabilities,sense and respond external environment.There is a dearth of research on the value creation of digital business strategy that is incurred by the unique characteristics of digital technology,and thus prior literature cannot reveal the new value-creation law of digital business strategy.To address research gaps,this paper starts with above three characteristics of digital business strategy triggered by digital technology.Under the perspective of complexity,this paper views digital business strategy as a multi-level structure,defines the complexity generated at different levels,and then designs three different research contents to explore how to effectively manage the complexity of digital business strategy for value-creation.Specifically,digital business strategy is deconstructed into a series of digital competitive actions at time dimension,and a digital competitive action is further decomposed into different multi-dimensional strategic choices.A digital competitive action emerges from the combination of multi-dimensional choices,and digital business strategy emerges from timely-ordered actions.Accordingly,this paper provides a holistic view of the internal multi-dimensional combination,external competitive interaction,and dynamic evolution of digital business strategy.By focusing on the strategic complexity caused by the interactions of elements at different levels of digital business strategy,this paper further design three research contents to conduct empirical analysis and explore how digital business strategy creates value.The first research content takes a digital competitive action as research object,focuses on combinative complexity of strategy choices and competitive complexity of “actionresponse”,and explores the correct combinative patterns of strategic choice in different competitive interaction contexts.The second research content takes a series of digital competitive actions as research object,focuses on evolutionary complexity,and explores the evolutionary patterns generated by different actions.Based on the first and second research contents,the third research content further explores the impact of combinative patterns of strategic choices in different competitive interaction contexts as well as evolutionary patterns on platform performance.This research content clarifies the role of managing combinative complexity,competitive complexity and evolutionary complexity of digital business strategy in value creation.This paper selects online traveling platforms in China as research samples and collects public data about 797 digital competitive actions undertaken by nine platforms from 2008 to 2014 for empirical studies.Firstly,this paper adopts fuzzy-set qualitative comparative analysis(fsQCA)method to identify the high-performing combinations of strategic choices,and explores interactive patterns of strategic choices with network analysis to quantitatively analyze the influence of different choices.Then,the paper uses sequence alignment analysis method to measure the strategic evolution rates of focal platform and the differential rates with competing platforms,and testify the impacts of the characteristics of platform firm and the industry environment on evolution rates and differential rates with panel analysis.Finally,the paper uses several econometric methods to empirically analyze the impact of combinative patterns and dynamic evolution of digital business strategy on platform performance.By exploring above three research contents,this paper draws the following three conclusions.First,the effective combination patterns of strategic choices in different competitive interaction context are identified: in the high competitive response,platform technology reconfiguration works as the core choice,while in the low competition response platform technology integration or partnership cooperation works as the core choice,and at the same time,the corresponding platform products and platform service options are required.Furthermore,the study reveals the “all-rounder” role and high influence status of platform technology in the nonlinear causal relationship between strategic choice combinations and action performance.Second,dynamic evolution of digital business strategy is achieved by adjusting internal choice combinations of different digital competitive actions in time dimension.The rate of strategic evolution and the differential rate with competitors increase with the age of the platform and decrease with Internet user penetration rate.This finding reveals that the digital business strategy of e-commerce platform firms is a complex dynamic process,rather than a static and constant concept.Third,with digital competitive actions as a carrier,the value creation of digital business strategy is achieved by expanding the number of correct strategic choices patterns and improving the internal consistency and external differences of strategic evolution.This finding presents how e-commerce platform create value by effectively managing combinative complexity,competitive complexity and evolutionary complexity of digital business strategy.With above research findings,this paper makes theory contributions from the following four aspects.First,this paper builds a multi-level structure of digital business strategy from the perspective of complexity,defines the complexity of three levels of strategic choice,digital competitive action,and digital business strategy.By doing this,this paper completely and systematically introduces of the concept of complexity into digital business strategy research,which response to the call for complexity research in IS field.Moreover,this study provides a theoretical basis to study the complexity of subsequent digital business strategy in the future.Second,this paper identifies the effective combinative patterns to configure multidimensional strategic choices such as platform technology,platform partnership governance and business innovation by studying digital competitive actions in different competitive interaction environment,and finds the nonlinear roles of platform technology as the “all-rounder” and high influential factors.By doing this,this paper breaks the linear research paradigms in existing IS strategy alignment research,adds new understanding of IT roles,and provides new evidence for constructing effective digital competitive actions for the platform firms under the context of digital competitive dynamics.Third,this paper proposes a theoretical model of the dynamic evolution of digital business strategy based on the complex logic of biogenetics evolution to open the “black box” of strategy.It is the first time in the strategic research topic of the IS field to introduce sequence alignment analysis method to effectively track the evolutionary dynamics.Through empirical studies,the paper found that the evolution of strategy is affected by the individual characteristics of the platform firms and the environmental characteristics of the industry.This finding reveals the dynamic evolution of the strategy.Thus,both of theoretical perspective and research methods contribute to the studies on digital business strategy evolution.Fourth,this paper empirically finds the effects of combinative complexity,competitive complexity and evolutionary complexity on the value creation of digital business strategy,and thus reveals the value-creation rules of digital business strategy from the complexity perspective.This perspective takes the unique attributes of digital technology as the starting point,and digital competitive actions as the carrier of value creation,and argues that the mechanism of profit generation is to manage the interaction between strategic choices and the evolution of strategy.By doing this,this paper provides a new research perspective for current IT value research that is primarily studied from the perspective of collusion,governance,capability,and flexibility.