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such as know-how, culture, reputation etc. as a potential source of competitive
advantage [
1
]. The net prescription of this school of research is to develop strate-
gic IT applications to sustain competitive advantage over time; and to align IT with
business strategy, structure and processes [
12
].
While these streams of research provide insights on how IT can be leveraged to
gain competitive advantage, these frameworks are not sufficient to explain the role
of IT differentiation in contemporary business environments [
24
]. Businesses today
operate in a
hypercompetitive
environment [
5
], which is characterized by competi-
tion occurring in the form of a series of market disruptions aimed at nullifying any
supernormal returns enjoyed by the incumbent leader [
4
]. In such environments, ad-
vantages from specific competitive moves are temporary and superior performance
is derived from continuously recreating competitive advantages through innovative
actions [
24
]. A firm's ability to rapidly generate these competitive moves thus be-
comes a key strategic imperative [
5
]. The strategic requirements for firms in a hy-
percompetitive environment include agility, continuous innovation, time-to-market
and the timing of the competitive moves [
24
].
In sum, the underlying theory of how and why IT innovations provide a strategic
advantage has changed with the changing landscape of the business environment
[
24
]. The traditional view of IT differentiation was aimed at overcoming Porter's
competitive forces [
18
] and to leverage a firm's heterogeneous resources. With
business environments becoming hypercompetitive, the logic of IT differentiation
shifted towards enhancing competitive agility [
24
]. Consequently, the source of IT
differentiation shifts from strategic applications to enterprise IT capability and from
alignment to embeddedness of IT in business strategy [
24
]. Sambamurthy et al. [
25
]
examine the strategic role of IT on firm performance and suggest the influence of
IT capabilities on firm performance through organizational capabilities and strate-
gic processes. They stress the importance of developing capabilities that allow the
firm to dynamically combine IT and business resources; and processes that allow
them to combine knowledge, assets and resources to craft innovations. Thus, to
leverage IT for strategic differentiation, mere access to strategic applications is no
longer sufficient. To achieve sustainable competitive advantage, firms need to have a
combination of entrepreneurial alertness that enables them to sense strategic oppor-
tunities and IT capabilities that enables them to develop innovative solutions. This
co-evolution of strategic processes needs the constant assembling of IT capability
in iterative loops, as firms evolve their competitive position [
25
].
Thus, in today's hypercompetitive environment, firms not only need to possess
superior IT capability, they also need to possess the agility that enables them to con-
stantly discover and develop new knowledge, assets and resources. We argue that
free and open source software lends itself well to this iterative process of capabil-
ity development. The reuse of the open source repository rich in ideas, knowledge,
techniques and solutions provides firms the ability to constantly evolve their IT ca-
pabilities in tune with their strategic processes.
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