Does virtualization capability maturity influence information systems development performance? Theorizing the non-linear payoffs

Firms are increasingly relying on digital transformation and virtualization of physical IT assets to develop information systems projects. However, the assessment of this virtualization on the performance of information systems development (ISD) projects is still unclear. Drawing upon the theory of process virtualization, we develop and empirically test a research model describing the relationships of virtualization capability maturity (VCM) with ISD project performance. Our findings show inverted U-shaped relationships of VCM with both ISD process and product performance. Interestingly, ISD projects achieve performance improvements as they progress incrementally from VCM levels of 0 to 2, but at VCM level 3 performance declines. Also, we observe that at higher levels of VCM, ISD process performance declines more rapidly than ISD product performance and the resources spent on ISD project execution increases non-linearly with increasing levels of VCM. Our post-hoc analysis indicates that VCM and CMM exhibit a substitutive relationship for process performance. Implications for research and practice are discussed.