This paper investigates the forces that influence creativity in the video games industry. We adopt a qualitative approach to guide the development of grounded theory across multiple levels of analysis, including the industry (consisting of multiple actors), organizational, and individual creator levels. Our study shows that business and production interests currently drive the rationalization of video game production. There is a maturing trend, with product designs becoming well established as genres, and consumers and publishers desiring incrementally innovative games. This leads publishers to focus on acquiring intellectual property, and publishers and studios alike to make incrementally innovative sequels. The increasing complexity of products leads to further rationalization in their development. However, the need to satisfy consumers' continually evolving tastes and game developers' inclinations to be creative also creates tensions with these rational forces. Different actors balance these tensions differently. Studios may seek to balance these by shifting between more and less innovative products, by creating original intellectual property to increase their bargaining power with publishers, and by iterating and repositioning products during development to adapt them to the market. Publishers may enhance their portfolio by hiring highly creative designers into their stable. New products are created through combinative creativity, that is, the recombination of existing ideas from different sources into new products. The connection of combinative mechanisms with the balancing behavior at the firm level provides a means for understanding the evolution of innovative products and, therefore, industries.

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.

China and India are emerging as major entrants into the international software industry. Both are rapidly learning through outsourcing with multinational enterprises (MNEs) from advanced nations, yet their paths to this dynamic sector are very different. Chinese software firms have focused on their domestic market by working with foreign MNEs, while they move cautiously abroad. Indian firms, which are already large, continue to expand overseas as well as to climb the value chain. Different approaches to MNEs provide useful perspectives. At the same time, the innovation systems approach is necessary to explain the foundations of the industry. The article provides hypotheses and tests them. It concludes that learning internationalization processes are different in Chinese and Indian MNEs, and provides explanations for the different patterns.

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