A widely held view is that the growth of the ICT industry may provide an opportunity for developing countries to ‘leapfrog’ into the industrialized economy. For example, low-income economies that have a strong human capital base can take advantage of the rapid decline in the cost of computing power and telecommunication over the last decade that has made it possible to deliver IT service from a remote location. This has led to the emergence of offshore/outsourcing industry, the market of which is expected to reach US$252 billion in 2010. There is considerable potential for the development of ICT industries in Bangladesh because of the availability of trained personnel at relatively low wage rates. The present government of Bangladesh envisions creating a “Digital Bangladesh” by 2021, which critically depends on proper policies as well as infrastructure development for this sector. However, in order to capture significant gains from the growth of the ICT industry worldwide, policy makers and firms both require a clear understanding of its dynamics. While a cheap and abundant human capital base can explain the early stage of software industry development, improved productivity is required to take advantage of emerging opportunities and carve out a niche in the export of outsourced services. Where do Bangladeshi ICT firms stand? This study will use ICT firm-level data to examine export competitiveness and dynamic capabilities. Extant research on firm capabilities has focused primarily on the link between capabilities and performance-related outcomes. This study will explain differences in ICT firms’ competitive capabilities by viewing economic performance of firms embedded in their activities, size, labour productivity, skill intensity, collaboration with foreign firms, and innovation. Moreover, it will analyze variations in technical efficiencies of firms. The output of the study is expected to contribute to formulating appropriate policies for creating a knowledge-based economy. This project is funded from the IGC-Bangladesh programme.