Digital Affordances and Digital Capabilities: Evidence from Six AI Startups

Many digital startups fail in their pursuit of niche business value for three reasons: underdeveloped digital affordances, inadequate digital capabilities, and perhaps most importantly, a misalignment between digital affordances and digital capabilities. Digital affordances depict the potential involvement of digital technologies by groups in value creation while digital capabilities represent the ability to leverage and make changes to digital resources to fulfil specific objectives (e.g., affordance actualization). Based on insights derived from a longitudinal in-depth case study of six AI startups, we propose a co-evolution framework that illustrates several iterative loops between digital capabilities and digital affordances. Our analysis also reveals key properties of digital affordances and digital capabilities. Specifically, we find that digital startups with mutually reinforcing digital affordances and digital capabilities are most likely to succeed. We also develop a typology of digital startups using a 2 by 2 affordance-capability matrix