Digital options theory explains how investments in digital technology enable competitive responses. While prior research on digital options focuses on exogenous changes, such as environmental dynamism, it largely neglects endogenous changes within organizations. This study introduces organizational dynamism as a concept to capture endogenous change, distinguishing it from environmental dynamism and examining its impact on the relationship between digital options and market performance. Using a 15-year panel dataset from 103 geographically dispersed organizations, we find that organizational and environmental dynamism act as critical boundary conditions for digital options' performance implications. Specifically, organizational dynamism generally diminishes the performance benefits of digital options, though this negative impact is reduced for digital reach options under high environmental dynamism. These findings highlight the complex interplay between endogenous and exogenous change in shaping digital options' outcomes. We make three contributions. First, we expand digital options theory by introducing organizational dynamism as a lens to differentiate endogenous and exogenous change. Second, we explain how organizational dynamism influences digital options through mechanisms of digital debt and attrition. Third, we reconcile conflicting findings by demonstrating the combined effects of organizational and environmental dynamism on digital options' performance implications. These insights offer valuable guidance for managing digital investments in dynamic environments.
