In epitaxially grown alloy thin films, spinodal decomposition may be promoted or suppressed depending on the sign of the epitaxial strain. We study this asymmetry by extending Cahns linear theory of spinodal decomposition to systems with a composition dependent lattice parameter and modulus (represented by Vegards law coefficients, and y, respectively), and an imposed (epitaxial) strain (e). We show analytically (and confirm using simulations) that the asymmetric effect of epitaxial strains arises only in elastically inhomogeneous systems. Specifically, we find good agreement between analytical and simulation results for the wave number of the fastest growing composition fluctuation. The asymmetric effect due to epitaxial strain also extends to microstructure formation: our simulations show islands of elastically softer (harder) phase with (without) a favourable imposed strain. We discuss the implications of these results to GeSi thin films on Si and Ge substrates, as well as InGaAs films on GaAs substrates. © 2014 Taylor & Francis.