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The Business of Being Kevin Hart: How He Built a Comedy Empire
Kevin Hart is one of the most successful comedians in the world, and for good reason. He’s funny, relatable, and has built an impressive comedy empire that includes stand-up specials, movies, TV shows, and even a production company. In this article, we’ll take a closer look at how Kevin Hart built his comedy empire and what we can learn from his success.
The Early Years
Kevin Hart was born in Philadelphia in 1979. He grew up in a tough neighborhood and used humor as a way to cope with difficult situations. As a teenager, he began performing stand-up comedy at local clubs and quickly gained a following. However, it wasn’t until he moved to New York City in the early 2000s that his career really took off.
The Rise to Fame
In New York City, Kevin Hart quickly established himself as one of the top comedians on the scene. He appeared on popular TV shows like “Def Comedy Jam” and “ComicView” and released his first stand-up special in 2009. From there, his career skyrocketed. He released multiple successful specials on platforms like Netflix and HBO and starred in hit movies like “Ride Along” and “Central Intelligence.” In addition to his work as a comedian and actor, he also launched his own production company called HartBeat Productions.
The Business of Being Kevin Hart
One thing that sets Kevin Hart apart from other comedians is his business savvy. He’s not just a performer; he’s also an entrepreneur who knows how to build a brand. In addition to his production company, he’s launched successful partnerships with brands like Nike and Tommy John underwear. He’s also written several books about his life experiences that have become bestsellers.
Lessons Learned from Kevin Hart
There are several lessons we can learn from Kevin Hart’s success. First, it’s important to find your niche and hone your craft. Kevin Hart knew he was funny and worked hard to perfect his stand-up comedy skills. Second, it’s important to be persistent and never give up on your dreams. Kevin Hart faced a lot of rejection early in his career but didn’t let that stop him from pursuing his goals. Finally, it’s important to think like an entrepreneur and look for opportunities to expand your brand beyond just performing.
In conclusion, Kevin Hart is a true success story who has built an impressive comedy empire through hard work, persistence, and business savvy. By studying his career path and applying the lessons he’s learned, we can all strive for similar success in our own careers.
This text was generated using a large language model, and select text has been reviewed and moderated for purposes such as readability.
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Successful business models for service centres: an empirical analysis
International Journal of Productivity and Performance Management
ISSN : 1741-0401
Article publication date: 29 June 2020
Issue publication date: 2 June 2021
The purpose of this paper is to analyse the fit between the strategy of service centres and their business model (BM) and to identify the BM components' characteristics and links that allow it to stand out in terms of service delivery and business performance.
This study applies an inductive qualitative multiple case study approach through the empirical analysis of top-performing Italian service centres operating in the Medium–Heavy Commercial Vehicle sector.
Research findings underline that the BM components of top performers are consistent amongst each other and with the adopted strategy and make a positive impact on the firm's performance. In particular, top performers are characterised by a solid financial structure based on equity, formalised and flexible organisational structures and processes, clarity in strategic direction and long-term orientation, grounded capabilities, competences and skills, trustful relationships with main service partners and a comprehensive set of managerial mechanisms.
This paper presents some limitations, typical of qualitative research based on case studies. Future works may include other dimensions of performance for identifying top performers, and extend the empirical analysis to different sectors and national contexts.
This paper supports the relevance of contingency theory – particularly the strategy-structure-performance paradigm – in the analysis of the role of a BM in successful servitization strategies of service centres. It highlights that the BMs of the top-performing companies are characterised by some common elements. From a practical perspective, the authors provide insights that can be useful for designing successful service-based BMs for service networks.
- Business model
- Service centres
- Top performer
- Medium–heavy commercial vehicle industry
Gaiardelli, P. and Songini, L. (2021), "Successful business models for service centres: an empirical analysis", International Journal of Productivity and Performance Management , Vol. 70 No. 5, pp. 1187-1212. https://doi.org/10.1108/IJPPM-05-2019-0230
Emerald Publishing Limited
Copyright © 2020, Paolo Gaiardelli and Lucrezia Songini
Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
The last years of the recent industrial history have been marked by an ever-changing business environment ( Dimache and Roches, 2013 ), characterised by emerging environment-, market-, economy- and technology-related issues ( Westkamper et al. , 2001 ). In response to these changes, many industries have evolved their business models (BMs) by shifting from a pure product orientation to integrated product-service systems (PSSs) ( Lay et al. , 2009 ). This phenomenon – known as the servitization of manufacturing ( Baines et al. , 2009 ) – has emerged as necessary to enhance competitiveness of modern manufacturing enterprises ( Bikfalvi et al. , 2013 ). Many examples have shown that successful servitization strategies require adaptation of BM configuration and management ( Adrodegari and Saccani, 2017 ) and push companies to go beyond their boundaries to express a business ecosystem ( Zott and Amit., 2010 ). In particular, literature underlines that servitization transformation requires manufacturers to reorganise towards integrated and extended networks ( Oliva and Kallenberg, 2003 ; Chesbrough, 2007 ) to get the necessary service knowledge, capabilities and capacity demanded by the market ( Martinez et al. , 2010 ). This characteristic is confirmed by several industrial cases showing that service delivery generally adopts a service triad logic ( Siltaloppi and Vargo, 2017 ), according to which some external service partners act as suppliers of services in place of the manufacturers to satisfy customer needs. Therefore, service partners' decisions and actions can affect significantly the effectiveness of the service delivery and contribute to the value proposition of manufacturers who are intended to become servitised ( Finne and Holmström, 2013 ).
Among others, a service centre, defined by the Cambridge Dictionary as a “place where a company provides help for customers who use its products or services” is a typical service partner that contributes to enhancing customer loyalty and retention through efficient and effective activities ( Saccani et al. , 2007 ). Though they may provide effective services, service centres have been generally neglected by researchers, as these organisations have always been considered as mere executors of manufacturer servitization strategies. Instead, service centres are often independent organisations which, despite being bound by partnership contracts, are characterised by their own decision-making autonomy and distinctive BMs that can considerably influence the service delivery success. Therefore, understanding the dynamics behind BMs of these organisations emerges as an important aspect to explore to understand how manufacturers can transfer their servitization strategies into operational excellence. Indeed, only through running efficient and effective service centres do manufacturers have the opportunity to implement a winning servitization strategy and maintain stable and lasting relationships with their customers.
According to Zott and Amit (2007) , the best way to understand the dynamics behind successful BMs is to analyse the behaviour of those companies that have been able to achieve optimal results from a wide point of view, including financial, organisational and strategic performances ( Kaplan and Norton, 1992 ). This statement follows the contingency theory ( Chandler, 1962 ; Child, 1975 ; Luthans and Stewart, 1977 ) which argues that a firm can achieve high performance only if it can translate its strategy into a coherent BM.
For these reasons, the objective of this paper is to analyse the fit between service centres' strategies and their BM and to identify the characteristics of BM components and linkages that allow firms to lead in terms of service delivery and overall performance. These research questions (RQs) are pursued: What are the most relevant BM components consistent with the peculiarities of service centres? How do BM characteristics fit with firm strategy? How should BM components be characterised and interconnected with each other to achieve a high level of firm performance?
By responding to these RQs, we aim to fill a gap in the academic knowledge by theorising the components of service-based BM, their characteristics and relations, and their consistency with firm strategy and their role in firm performance. In particular, the perspective of service centres is considered to provide practical insights for designing successful service-based BMs for manufacturing firms and service centres.
To address the research aims and questions, this study applies an inductive qualitative multiple case study approach ( Yin, 2009 ), through the empirical analysis of 19 top-performing Italian service centres operating in the Medium–Heavy Commercial Vehicle (MHCV) sector. The choice to study only one industrial sector is consistent with Zott and Amit ( 2008 , p. 20) who highlighted the need to “investigate competition among various business models within an industry.” The MHCV sector – i.e. any companies producing and/or distributing goods and services for trucks with a gross combination mass of over 3.5 tonnes ( www.acea.be ) – has been selected because of the high contribution of services to the strategic, competitive and financial results. This sector is configured as several complex and fragmented service networks ( Gaiardelli et al. , 2007 ) where both manufacturers and their service centres, the so-called official service channel, have to develop new forms of services and new operational capabilities to maintain their competitive position.
This paper is structured as follows. First, we review relevant literature on strategy, BM definition and characteristics and their relationships. Next, we introduce the research methodology. After that, we present the findings emerging from the analysis and discuss their implications. Finally, we present the conclusions along with the identification of limitations and possible further developments of the study.
2. Literature review
The literature review is structured in three main parts. The first presents the main studies on the relationships between strategy, BM and performance. Then, the most relevant components of BM found in the literature are discussed. Finally, the main studies on service-based BM are outlined.
2.1 The relationships between strategy, business model and performance
A company's strategy consists of a set of decisions and actions aimed at a defined goal. Aiming at lasting success, the strategy has as its goal what to produce, for whom, how and with what logic. Many definitions of strategy have been proposed in the management literature ( Chandler, 1962 ; Porter, 1980 ). Mintzberg (1994) recognises that strategy may have several meanings and proposes five definitions. He also provides a distinction between intended and realised strategies, and he emphasises the importance of emergent strategy as an alternative or complement to deliberate strategy. If a deliberate strategy is defined by management, an emergent strategy consists of patterns that realise despite – or in the absence of – intentions. Emergent strategy arises informally at any level in the organisation. Since the 1970s, the literature has analysed the relationship between strategy, structure and firm performance. According to the contingency theory ( Galbraith, 1977 ; Miles and Snow, 1978 ) the fit, or coherence, between contingency factors such as strategy and structure, represents the main determinant of higher performance. In line with the research approach adopted by Nadler and Tushman (1997) and Yin and Zajac (2004) , a BM can be viewed as “a structural template of how a focal firm transacts with customers, partners, and vendors” ( Zott and Amit, 2008 , p. 1). It identifies a “conceptual framework containing a set of objects and concepts together with their relations with the goal, aimed to express the underlying logic of business” ( Osterwalder et al. , 2005 , p. 3), thus representing the “design or architecture of the value creation, delivery and capture mechanisms” ( Teece, 2010 , p. 172). Some authors propose that BMs are sources of competitive advantage as they allow effective strategy change ( Magretta, 2002 ).
Definitions of BM available in the literature can be generalised into three main views: (1) A BM is an overarching concept that can describe all real-world business; (2) it addresses a set of businesses with common characteristics and (3) it describes different aspects – or conceptualisations – of a particular real-world business ( Orellano et al. , 2017 ). Although researchers have expressed different views about the notion, structure and evolution of BMs, all such contributions have converged on the fact that a BM explains how a business creates and delivers value to customers ( Al-Debei and Avison, 2010 ). Thus, we may propose that a BM is substantial to any organisation as it provides a concrete avenue to understand, analyse, communicate and manage strategic, operational and economic decisions ( Osterwalder et al. , 2005 ; Shafer et al. , 2005 ).
The majority of scholars argue that BM and strategy are distinct concepts even though they are linked. According to Zott and Amit (2008) , BM and product market strategy complement each other and are not substitutes as the first can be conceived as an abstraction of the second ( Seddon et al. , 2004 ). Casadesus-Masanell and Ricart (2010) suggest that a BM results directly from strategy but it is not a strategy itself. Magretta (2002 , p. 94) highlights that “… a business model isn’t the same thing as strategy […]. Business models describe, as a system, how the pieces of a business fit together. But they do not factor in one critical dimension of performance: competition. […] Dealing with that reality is strategy's job.”
Most authors see a role for the BM in implementing the strategy. Adopting the contingent strategy-structure-performance perspective, these authors consider the BM as an indispensable structure aspect of strategy execution success ( Kaplan and Norton, 2000 ), as it is used to design or check on how the firm is executing its strategy and doing business (Richardson, 2005). Finally, “business models are reflections of the realized strategy” ( Casadesus-Masanell and Ricart, 2010 , p. 204).
2.2 The main components of a business model
Existing studies about BMs generally provide a narrow perspective on a few specific BM components, while studies with a comprehensive vision are still a minority ( Wirtz et al. , 2016 ). However, summarising the different contributions of literature, it can be stated that a BM is composed of more than 54 different elements ( Abd Aziz et al. , 2008 ). According to Shafer et al. (2005) , these elements can be categorised into four major categories: strategic choices, creating value, capturing value and the value network. An analysis of proposals from Morris et al. (2006) , however, identify six key decision areas at the heart of every BM: factors related to offering (How do we create value?), market factors (Who do we create value for?), internal capability factors (What is our source of competence/advantage?), competitive strategy factors (How do we differentiate ourselves?), economic factors (How we can make money?) and personal/investor factors (What are our time, scope and size ambitions?).
A recent study carried out to prioritise the components of a BM suggested that value proposition, customers, internal competencies and revenue models are considered the most common elements included in a BM framework ( Adrodegari and Saccani, 2017 ). A value proposition is a central element fuelled by key partners, key activities and resources to solve the customer segment through appropriate relationship and channels. These activities are supported by cost structure to generate revenues ( Orellano et al. , 2017 ). Nevertheless, the variety of BM elements show that different structures can be used to create a BM ( Barquet et al. , 2013 ).
2.3 Service-based business models
Different research communities have highlighted the need to investigate how to integrate the viewpoint of service into a BM to assist service adoption in the context of PSSs ( Richter et al. , 2010 ). In this context, a service-based BM can be seen as a tool that managers can use “to visualise changes which should increase internal transparency, understanding and awareness of service opportunities and necessary changes” ( Kindström and Kowalkowski, 2014 , p. 96). Within the PSS literature, BMs are frequently mentioned or discussed. According to Reim et al. (2015) , although 67 articles explicitly or implicitly address PSS BMs, these models receive little attention from researchers ( Boons and Lüdeke-Freund, 2013 ).
The adoption of a canvas structure and its nine components proposed by Osterwalder and Pigneur (2010) has been identified in the literature as the most suitable approach to guarantee a comprehensive characterisation of service-based BMs ( Adrodegari et al. , 2017 ; Orellano et al. , 2017 ; Barquet et al. , 2013 ). Some studies provide different service-based BM frameworks with generic and relevant elements regarding both product-centric firms and pure service players ( Storbacka et al. , 2013 ; Kindström, 2010 ; Nenonen and Storbacka, 2010 ). In addition, some authors believe that a PSS is a BM that supports servitization and comprises the four traditional components of a BM, i.e. offering, market segment, value chain and finance ( Fitzroy and Hulbert, 2005 ; Kaplan and Warren, 2009 ), plus two additional elements. These elements are the business strategy as the driving force for all the other elements along with sustainability as an important measure of the business' success ( Dimache and Roche, 2013 ).
Recently, Adrodegari and Saccani (2017) proposed a BM reference framework for servitised firms, which is comprised of typical BM components: strategy, finances, value proposition, revenue model, resources, service provision, customer and network. However, it is worth noting that literature on service-based BMs generally focusses on the manufacturers, while the analysis of BM adopted by service centres has been mostly neglected.
3. Research methodology
Considering the interplay between theory and empirical phenomena ( Dubois and Gibbert, 2010 ), this paper follows an inductive approach, looking at specific cases to underpin further development in BM from the perspective of service centres. Due to the early stage of research on the topic, we applied an inductive qualitative multiple case study approach ( Yin, 2009 ). A case study methodology is appropriate when little is known about a phenomenon as it allows the researcher to go deeper into an issue and to gain knowledge based on evidence surfacing through the cases ( Yin, 2009 ; Eisenhardt, 1989 ).
An empirical analysis was carried out of the 19 best Italian service centres operating in the MHCV sector. This sector was selected to partially isolate the effects of the strategic context from other potentially confounding factors. As argued by others ( Rishi et al. , 2009 ), there are several current and historical examples of service solutions in the MHCV sector, making it an appropriate and interesting empirical field to investigate. Services may constitute an answer to the complex forces shaping this industry ( Porter, 2008 ). In addition, the high contribution of services to the strategic, competitive and financial results of the MHCV industry has boosted the development and diffusion of new players in this arena ( Gaiardelli et al. , 2007 ). In this context, manufacturers and their service centres have been forced to develop new services and operational capabilities, favouring a radical change of their strategic, organisational and managerial approaches ( Gaiardelli et al. , 2014 ).
This analysis was carried out in the Italian context due to the relevance of the MHCV industry and the features of the service network. Furthermore, Italy has many service centres throughout the country ( Gaiardelli and Songini, 2018 ). This market has undergone a period of deep crisis from 2008 to 2014, progressively reducing the service activities. This affected all major medium–heavy truck brands and had negative consequences on the revenues and margins of the service network. But data on the industry macro-dynamics pointed out that, contrary to the general trend, a few service centres that grasped the opportunities offered by the crisis consolidated their lead and achieved successful performances ( Gaiardelli and Songini, 2018 ). Thus, it could be interesting to understand the characteristics of service-based BMs of such high performing service centres. We analysed in depth some cases of service centres which can be considered top performers.
The selection of case studies was done based on the results of preliminary meetings held with top senior service managers of the seven most relevant companies operating in the Italian MHCV market. To identify the criteria for top performer selection, a wide definition of performance was adopted. As suggested by studies on performance ( Lynch and Cross, 1991 ; Fitzgerald et al. , 1991 ; Kaplan and Norton, 1992 ), the selection criteria would include financial data, market and customer data, as well as process and innovation. Then, according to a shared definition of performance, a list of key performance indicators (KPIs) was identified around competitive position (market share), financial performance (profitability), customer satisfaction and process efficiency. The same KPIs were selected and measured for all service centres belonging to the seven brands to allow consistent comparison of data. The four best service centres for each of the seven manufacturers were identified (i.e. 28 workshops). The selection was based on the following: (1) first, the service centres were ranked according to the results achieved in each performance area, (2) rankings were weighted, using a 5:3:1 approach with the best centre receiving five points, the second three points and the third one point, (3) an overall score was calculated summing up the evaluations achieved in each performance area and (4) for each brand, the four service centres characterised by the highest overall score were considered.
The 28 workshops constituting the initial sample were contacted and asked to join the research, and 19 companies agreed to be interviewed. All of them were SMEs operating throughout Italy: 14 were located in the north, three in the centre and two in the south. Under the methodological approach adopted by Lockamy (1998) , two documents were used to obtain consistent and complete information from the interviews while avoiding the respondent being influenced by the questions. The first document – covering general information about the topics to be covered in the interview – was delivered one week before the meeting to help the interviewee prepare. The second document – containing the questions in detail – was used by the interviewers to conduct their interview. Then, face-to-face interviews were conducted by three researchers. These lasted between one to three hours. Twenty-nine people were interviewed: 10 CEOs, five managing directors, five after-sales service managers, five sales managers and four administrative managers. Of these, 17 were company owners or members of the family who owned the business. The interviews included semi-structured and open-ended questions, allowing interviewees to talk freely about their company. This way, additional relevant factors would emerge.
Questions were designed to explore the two following aspects: (1) general questions on the characteristics and strategy of the firm and (2) questions to analyse the service-based BM components, their features and links. The latter included general questions in terms of processes and networks, organisation, product and service portfolio configuration, customer relationship management and performance measurement and control. This part of the interview provided as a substantial amount of qualitative data.
All interviews were recorded. Next, the conversations were transcribed, and the responses were grouped into themes and sub-themes to generate a thematic map, which was used to develop a coding frame. Each of the three researchers independently performed the coding, and the results were then compared. We used a process from Voss et al. (2016) , who suggested a three-step coding method adopted from the one originally proposed by Strauss and Corbin (1990) . This process included regrouping and linking categories in a rational manner allowing a chain of evidence.
Following Pettigrew's approach ( 1990 ), a within-case analysis was then carried out to be familiar with each top performer's strategy and BM. Each case was summarised in a table and a relationship map was developed specifying the main characteristics of each BM component and its relationship with the adopted strategy and other BM elements. Subsequently, the within-case analysis was combined with a cross-sectional study to build a pattern of similarities between cases, which was then summarised in a general relationship map. Although there are dissimilarities amongst cases, the strong congruence of BM components and the adopted strategy highlighted by cross-sectional analysis allows for the generalisability of the proposed model underlying a low level of dependency on individual companies' characteristics.
4. Research findings and discussion
In this section, we present the main findings of the case study analysis, which highlights the top performers' strategy BMs commonalities and relationships. The first part of the empirical analysis describes the main characteristics of the analysed companies. The second part presents the distinct traits of service centres' strategy and BM configuration. The last part introduces a discussion on the link between strategy and BM and the mutual relationship amongst BM components.
4.1 Main characteristics of service centres
According to the industry trend, all the interviewed companies are SMEs. In particular, 32% of the sample consists of medium-sized companies, 52% of small-sized and 16% of micro-sized companies operating throughout Italy. Of the 19 interviewed, 17 firms were family-owned businesses. Table 1 shows the companies participating in this research with their geographical position, size and reference brand.
4.2 Strategy and business model characteristics
Overall, research findings highlight that top performers' BMs are characterised by some commonalities in their servitization strategies and BM. These can be grouped into eight main components: value proposition, customer, network, service provision, finances, organisation, revenue model and resources and capabilities. The number and the identified BM components follow Adrodegari and Saccani (2017) , except for the concept of strategy , which we considered a determinant of BM in the strategy-structure-performance paradigm ( Galbraith, 1977 ). We also added resources – which our research findings highlighted as strictly integrated with capabilities – and organisation , which emerged as an additional component. Common elements of top performers' BMs are summarised and briefly described in Table 2 .
In the data that follow, statements from the interviews are listed in support of the findings.
Consolidating is not sufficient anymore. Today, we have to pursue progress through growth … (Company 14).
Differentiation in terms of services proved to be a winning strategy … (Company 15).
You need to work on complementary businesses and new services using the installed capacity and available resources (Company 3).
Our group owes its success both to the territorial expansion and to the internal change pursued over years (Company 18).
We are trying to invest in the most profitable workshops to control the market (Company 2).
The network has been fundamental for the growth of our business … We rely on insurance and leasing companies, on tyre specialists and spare parts retailers (Company 1).
We decided not to focus solely on the medium-heavy truck market, but also light commercial vehicles, buses and cars (Company 6).
Territorial distribution is an element that diversifies us and helps us fight the competition (Company 15).
Top performers also differentiate their offerings via multibrand and in selling optional components, merchandise and spare parts aimed at a highly profitable niche market.
Diversification on parallel businesses can be considered a further chance to deal with the crisis (Company 19).
4.2.2 Value proposition
Top performers enhance the value for customers by adopting two perspectives: the provision of a service portfolio based on a wide range of standard services offered to all customers, on the one hand, and integrated and bundled solutions of products and services customised and tailored according to the specific needs of specific customers, on the other hand.
The secret is to offer a complete service in one act to reduce the vehicle downtime […] tailored solutions according to the vehicle characteristics and the needs of our customers (Company 7).
[…] sharing with the customer resources and information in terms of sales and after-sales (Company 1).
Only by establishing mutual trust relationships based on the transparency of both the service provider and the customer we can both get winning results! (Company 9).
Many actions are implemented in daily activities to increase customer loyalty and establish transparent relationships. For example, top performers adopt technological arrangements that make work processes more visible and controllable. For instance, the use of cameras inside the workshop allows the customer to have an overview of the workshop and the activities that take place. For the same reason, the acceptance processes were redesigned to avoid an incorrect estimate. To foster a win–win approach, the customer is required to severely respect contract terms and conditions (such as payment deadlines). Otherwise, the name of the transgressor will be communicated to the entire network and excluded from all those promotions and exclusive commercial advantages dedicated to virtuous and trusted customers. On the other hand, the service provider has to be transparent and respectful in terms of deadlines and prices negotiated with the customer.
Among the different market analyses, we leverage also on geo-marketing, which is very important for understanding both manned and unmanned areas (Company 15).
The channels used to promote promotional campaigns depend on the target they are targeted to (Company 6).
We have created custom postcards to inform customers of various promotions (Company 9).
We use information coming from the channels to improve the next promotional campaigns (Company 13).
We are launching a business application for the sale of spares via smartphones (Company 8).
We have formal agreements with our partners and suppliers based on mutual trust. In such agreements, our partners must guarantee quality standards at fixed prices for different types of service (Company 1).
We had to merge some facilities and share some activities with our partners to ensure a more sustainable business (Company 17).
Collaboration with the other workshops and, if necessary, with the leaner competitors are essential to ensure the best service for our customers (Company 9).
We are integrated with the operating system of some partners to facilitate our planning and the integrate control of the process (Company 5).
4.2.5 Service provision
…we are flexible in our tasks but structured in the method used. […] the method can be discussed, but once it has been approved by all, it should be recognised as a standard (Company 18).
Through long- and short-term decisions, top performers aim at increasing and saturating the production capacity as well as simplifying their operative activities. Indeed, as stated by Davies et al. (2007) , formalising, specifying and standardising services are critical for taking advantage of economies of repetition to deliver services at a lower cost and more effectively ( Kindström and Kowalkowski, 2014 ).
We need to aim for proactive customer acceptance to reduce downtime (Company 5).
We have mapped our processes to find the optimal solution for vehicle repair (Company 5).
… the control of time with barcodes has allowed us to improve control and facilitate operational improvement (Company 3).
The reduction in the average waiting time not only allows efficiency improvements but it also stimulates demand for services and customer satisfaction.
The market is mature, and no new entrepreneurs enter the industry. Only companies who have been consolidated over time and have a stable capital and financial structure can resist (Company 12).
Each one has its role within the organisation […] roles, tasks and responsibilities are well defined (Company 2).
Objectives are formalised to involve all employees and create a sense of group identity (Company 7).
We have tried to create the conditions to generate a strong interaction between sales and after-sales that is necessary to have an overall view of the customer's needs (Company 1).
Although there are vendors and mechanics dedicated to the type of vehicle, let's make sure that all the figures are interchangeable (Company 12).
We lose efficiency, but we gain more effectiveness (Company 10).
There is no formal incentive policy on the individual, as the owner provides incentives ad personam (Company 10).
Our mechanics are divided into homogeneous teams and the after-sales manager defines different criteria by which teams are evaluated (Company 8).
[…] including budget analysis, monitoring of economic and financial ratios as well as several different KPIs that are easy to control and communicate (Company 7).
It is essential to monitor company performances. We measure them at least weekly (Company 19).
4.2.8 Revenue model
We use different channels to profile different customers categories […] prices are different according to the type of customer served (Company 11).
We adopt different discount rates depending on the level of loyalty of our customers (Company 16).
On these premises, we can affirm that top performers understand how different categories of customers perceive each component of customer value. Consistently, they are able to define personalised pricing policies based on customer value elements.
4.2.9 Resources and capabilities
It is important to have sophisticated computer systems, software for business analysis and customer relationship management for customer profiling and product configuration. (Company 5).
We mainly look for people with relational and management skills. Technical competencies developed while working (Company 4).
The constant personnel training has always been one of the reasons for our success. It is essential to offer quality services (Company 7).
First, it is necessary to strengthen the internal structures of the company […] by developing new competencies and knowledge. Then new services can be developed and offered (Company 14).
On the one hand, the empirical analysis allows us to highlight the main characteristics of strategy and each BM component, while on the other hand, it evidences that BM components are connected. Figure 1 provides an overall summary of all connections between strategy and BM and amongst BM components. Relationships of each component with the others are presented, together with a discussion on to what extent each relationship is influenced by distinctive characteristics of the industrial sector under observation.
Our findings show that top performers pursue differentiation and growth strategies as a way to develop a strong and distinctive competitive advantage. The latter is mainly based on a wide, customised and integrated value proposition in terms of service solutions. Moreover, the results suggest that competitive advantage is also related to high-efficient operations and saturation of installed capacity. Therefore, we can affirm that successful BMs imply a joint adoption of cost leadership and differentiation strategies, consistent with the so-called confrontation strategy proposed by Cooper (1995) . The adopted strategic choice emerges as the best amongst those that can be implemented, as also suggested by Adler (2011) who underlined how in highly complex market contexts, such as MHCV, competitive advantage can be pursued only by developing mixed strategies.
Moreover, we observed that to sustain their competitive advantage, top performers reinvested their profits to develop and attract strategic resources (human and technological resources) through the use of appropriate managerial mechanisms. Finally, from the analysis, it emerged that top performers adopt both emergent strategies, driven mostly by the focal manufacturer and deliberate strategies, which stem from the owner's entrepreneurship.
4.3.2 Value proposition
The increase of critical mass of business emerges as essential to prosper in a mature market characterised by fragmented and customised demand. In this context, top performers propose an innovative value proposition based on the provision of customised, integrated and bundled solutions of products and services. This choice makes it possible to attract customers with very different characteristics, ranging from large fleets carrying out integrated logistics services to small companies with a single vehicle where the owner is very often also the driver. Therefore, customer segmentation and profiling emerge as prerequisites for developing a value proposition that can meet customers' needs. In addition, the direct involvement of the customer in the service delivery process throughout the product and service lifecycle, thanks to long-term contracts, enables a better understanding of customer needs, thus allowing the design of tailored service solutions built upon value-based pricing policies. The relationships between the value proposition and other BM components are summarised in Figure 2 .
Customer perception has been changed, which instead of being focussed on the product itself, it is more focussed on the service experience and human values, as commitment and trust ( Vargo and Lusch, 2008 ). Thus, successful companies have to maintain a customer-oriented mindset and increase customer relationships as their priority ( Adrodegari et al. , 2017 ). Given the characteristics of their customers – logistics and transport operators primarily interested in the timeliness and reliability of the service – top performers use a wide range of advanced managerial mechanisms and marketing mix solutions to increase customer loyalty and establish long-term win–win relationships ( Verstrepen et al. , 1999 ).
A mix of sales, marketing and communication tools along with planning and control mechanisms help in profiling and segmenting customers' needs, creating transparent and long-term relationship, generating customer involvement in service delivery as well as setting the conditions for value-based pricing schemes development. In particular, top performers have been able to take advantage of integrating the use of managerial tools and techniques provided by focal firms to support their partners with direct feedback from their customers during service interventions. The adoption of lean processes and a flat and streamlined organisation – along with the use of appropriate ICT resources – promote transparent relationship management and the integration between the different functions involved and between the customer and the front-line employees. Figure 3 highlights the relationship between the customer and other BM components.
Together with the manufacturer's network, our research findings show that top performers develop and manage their own extensive and independent collaborative networks to achieve long-term partnerships. This approach is the natural consequence of the offer expansion that top performers have undertaken to capture different business needs of their customers. However, the absence of necessary skills rather than inadequate economies of scale necessary to justify investment in new resources has stimulated top performers to create collaborative models. This has allowed them to leverage their technical excellence, delegate operational tasks to partners while taking on a more strategic and coordinating role in the service delivery process. In particular, centralised strategic coordination in a co-opetitive context – developed on formal agreements and supported by network performance monitoring and sophisticated ICT systems – allow for the generation of mutual trust and the exploitation of synergies amongst partners ( Windhal and Lakemond, 2006 ). Adequate technological and human resources ensure the effective and efficient operation of the network. Figure 4 summarises the main linkages that the network BM component has with the other BM elements.
4.3.5 Service provision
In addition to the joint adoption of cost leadership and differentiation strategies, top performers pay close attention to the efficiency of activities and processes, not only to reduce lead times, waste and costs but also to improve effectiveness and customer satisfaction through their involvement in service delivery. Lean management techniques and tools are the most diffused approaches adopted to improve efficiency and effectiveness. This implies clear and formal roles and responsibilities together with a flat organisation, based on cross-functional working groups ( Liker, 2004 ) and trained and skilled personnel. From this point of view, companies have enjoyed the experience of their sector, as the automotive industry is one where the principles of lean thinking were first introduced. Planning and control mechanisms are needed, though, to ensure the efficiency of service delivery processes. In some cases, competitors and/or other network players can be involved in the service provision, highlighting that successful service centres adopt co-opetitive models, characterised by cooperation rather than competition ( Becker et al. , 2018 ). Figure 5 reports the main connections of service provision.
The reinvested profits constitute the main source of funding used by top performers ( Donaldson, 1984 ). This method of self-financing through reinvested profits is consistent with the nature of top performers that are mainly family businesses, interested more in the long-term survival and growth of the family firm than in short-term financial returns ( Caspar et al. , 2010 ). The reinvestment of profits in the company may be considered a point of strength of top performer, as it allows for profitable growth in a context of economic crisis, like the one that has characterised the MHCV industry since 2008. Figure 6 reports the main relationships of this BM component with the others.
The organisational structure and mechanisms are adopted by top performers to assure timely and effective communication and information sharing as well as internal and external coordination. With reference to the organisational structure, centralisation is adopted to ensure clarity of roles and responsibilities. Meanwhile, decentralisation – based on lean and flat organisations and cross-functional working groups – promotes the effectiveness of front-office activities and improves customer satisfaction. The decentralisation of key front-office activities can also be delegated to strategic partners in some cases so that each client can be connected on several fronts. Furthermore, these kinds of organisational structures and roles can provide a balance between exploitation (using existing capabilities) and exploration (creating possibilities to stretch capabilities), thus leading to an organisation being ambidextrous, if you will ( Duncan, 1976 ).
Thanks to what has been learnt from the companies that have stimulated managerial skills through the imposition of rigorous monitoring standards, the top performers do not simply draw up a business plan or annual budget and report; they periodically prepare various types of analyses and forecasts for future business plans. Nevertheless, the use of formal mechanisms is coupled with the adoption of informal tools, typical of social and cultural control ( Ouchi, 1979 ). The mix of both informal and formal managerial mechanisms demonstrates the capability of top performers to combine both entrepreneurial and managerial approaches. This attitude is consistent with the characteristics of family businesses and SMEs ( Moores and Mula, 2000 ). As shown in Figure 7 , consistently with previous studies ( Kowalkowski et al. , 2011 ; He et al. , 2015 ), organisation emerges as a relevant BM component due to its linkages with most of the other BM components.
4.3.8 Revenue model
The adoption of appropriate market analysis, combined with the customer segmentation and profiling, allows a company to identify different components of customer value consistent with customer needs. This allows for the development of appropriate value-based and tailored pricing policies. The adoption of these new forms of pricing is consistent with the product-service solutions centred on use- and result-oriented perspectives ( Pistoni et al. , 2018 ), even if top performers still adopt pricing based on a mark-up for traditional maintenance services and spare parts sales. The relationships between the revenue model and the other BM components are summarised in Figure 8 .
4.3.9 Resource and capabilities
Top performers develop with appropriate mechanisms the strategic resources – human and technological – to implement their strategies through both internal and network coordination and control. In particular, human resource management plays a significant role in the acquisition and development of human resources' capabilities, competences and skills. Meanwhile, planning and control mechanisms and financial resources also enhance the acquisition, implementation and adoption of technological resources. This approach is in line with the study by Davies' ( 2004 ) suggesting that the adoption of specialised tools to manage and control workers' activities and behaviours enables the development of integrated product-service offerings and, at the same time, employees' commitment and awareness towards service offering a promotion, management and control. Figure 9 reports the main relationships of this BM component with the others.
5. Conclusions, limitations and future developments
Often, research on the servisation phenomenon and related BMs focusses on manufacturers and their relationships with customers and partners to understand the logic behind profitability and winning in servitised BMs. Even when the focus has shifted to the network, the point of view always concerns the perspective of the manufacturer, while the role of service centres has been generally neglected. Instead, focussing on the BMs of these organisations emerges as an extremely important aspect to explore for a comprehensive understanding of servitization. As a result, this paper aimed to analyse the BM configuration of top-performing service centres, leading us to assume that a study on effective BMs of these kinds of organisations could provide some interesting insights to improve knowledge of the dynamics underlying successful servitization strategies.
Using a strategy-structure-performance perspective, our research findings highlight a fit between top performers' strategies and their BMs. Specifically, the study shows that the best service centres adopt a confrontational strategy ( Cooper, 1995 ) based on growth and a mix of cost leadership and differentiation goals. Moreover, they leverage both emergent and deliberate strategies ( Mintzberg, 1994 ). Their BMs present characteristics consistent with the adopted strategy. Indeed, all the BM components are distinguished by a mix of managerial and entrepreneurial approaches as well as formal and informal elements. These features make it possible to combine standardisation and formalisation with flexibility and innovation and highlight a context typical of an ambidextrous organisation – one that can balance exploitation and exploration. All these characteristics allow for the realisation of the confrontation strategy through emergent and deliberate strategies. Furthermore, distinctive characteristics of the service centres' BM components are consistent with each other, having a positive impact on the firm performance.
Our paper has some theoretical implications. First, our research findings support the relevance of contingency theory – particularly of the the strategy-structure-performance paradigm – in the analysis of the role of the BM in successful servitization strategies of service centres. It also allows for the distilling of the multiplicity of BM components provided in the literature into a simple and parsimonious model, while assisting to overcome the extant lack in the literature with regard to the service centres' BM. Third, it confirms the BM configuration proposed by Adrodegari and Saccani (2017) , except for the concept of resources that emerged as integrated with capabilities . In particular, we underpin the relevant role of tangible assets and intangible resources such as people's capabilities, competencies and skills ( Zott and Amit, 2010 ). These resources are proposed in the literature as key elements for value creation ( Abd Aziz et al. , 2008 ).
In addition, our research findings highlight the organisation as an additional component of BM configuration, which is in line with the findings of Kowalkowski et al. (2011) and He et al. (2015) . These authors addressed the impact of several organisational issues on the provision of services, outlining how an inadequate organisational structure inhibits the success of firms, while an appropriate structure facilitates it ( Kindström and Kowalkowski, 2014 ). Despite that, they stated that it is critical to adopt organisational structures that can balance exploitation and exploration ( Duncan, 1976 ).
Our research also contributes to a deeper understanding of the characteristics of each BM component. In particular, we found that top-performing service centres adopt a confrontational strategy as proposed by Cooper (1995) , as well co-opetition models, based on cooperation rather than competition ( Becker et al. , 2018 ). Moreover, they develop and offer an integrated and bundled value proposition proposed by value-based pricing schemes, consistent with advanced approaches suggested by the literature on servitization and PSS ( Pistoni and Songini, 2018 ).
Equity, in the way of reinvested profits, represents the main source of funding and plays a relevant role in firm growth and performance ( Donaldson, 1984 ), along with two other main resources: ICT and human capital. Our research findings also confirm that successful BMs are characterised by organisational ambidexterity ( Duncan, 1976 : March, 1991 ) and use lean management approaches to cope efficiently and effectively with service provisions ( Liker, 2004 ). Finally, our study highlights the relation amongst all BM components and explains how some characteristics of a firm – such as size and family ownership – may impact on BM configuration.
From a practical point of view, our research findings can give relevant insights to entrepreneurs, managers and practitioners. In particular, research outcomes suggest that successful service centres have to implement a solid financial structure based on equity, formalised and flexible organisational structures and processes, clarity in strategic direction, long-term orientation as well as develop grounded competences, capabilities and skills. Moreover, trustful relationships with main service partners and a comprehensive set of managerial mechanisms have to sustain the achievement of effective and efficient BMs.
Our research findings may help service providers that operate in the downstream channels of different industries to overcome their weaknesses and develop a more consistent and profitable service-based BM. Moreover, we believe that this study can help manufacturers advance effective actions for BM improvement of their partner service centres.
Finally, our research confirms the relationship between the BM characteristics and firm strategy and firm performance – including financial and non-financial results, such as competitiveness and customer satisfaction. However, the question of how each BM component affects the different areas of performance remains.
Our paper presents some limitations typical of qualitative research based on case studies. First, though supported by methodological rigour, the evaluation of research findings presents a certain degree of subjectivity, depending on the researchers' characteristics and school of thought as well as the variables taken into account. For instance, the sample selection followed a definition of “top performer” based on a wide definition of firm performance, which considered different perspectives ( Kaplan and Norton, 1992 ). The selection of sample companies was made following the indications given by a team of experts involved in the research. However, a different definition of what is a top performer is and other people in the group of experts could have led to a different selection of the sample companies. As a consequence, further qualitative research is essential, including a wider panel of experts with different research perspective and taking into account other firms' demographic factors such as firm age, location, ownership strategy and the involvement of the family in the management of the firm.
Moreover, our results have been derived from the analysis of a small sample of service centres. Future quantitative research based on a survey of a wider sample could be useful to test and generalise our findings. In addition, as we analysed a specific context in terms of both industry and country, it could be of interest to extend the empirical analysis to different sectors and national contexts, allowing a generalisation of our results. Again, our analysis involved SMEs, and larger companies may show different needs and different components in their BM. Finally, entrepreneurial and managerial practices could be an interesting starting point to deepen the analysis of top performers, as well as extend the discussion concerning characteristi6cs of family-owned firms.
The main relationships between strategy and the BM components of top performers
The relationships between the value proposition and the other BM components of top performers
The relationships between the customer and the other BM components of top performers
The relationships between the network and the other BM components of top performers
The relationship between service provision and the other BM components of top performers
The relationship between finances and the other BM components of top performers
The relationship between organisation and the other BM components of top performers
The relationships between the revenue model and the other BM components of top performers
The relationships between resources and capabilities and the other BM components of top performers
List of companies participating in the research
Top performers' strategy and BM configuration
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About the authors.
Chair Europe of IFIP Working Group 5.7 | Advances in Production Management Systems and coordinator of its Special Interest Group (SIG) in Service Engineering, he is also associate editor Production Planning and Control.
National Representative for Italy in the Board of the European Academy of Management (EURAM). She is member of the editorial and review board of Journal of Management and Governance.
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Business Model Innovation Through the Lens of Time: An Empirical Study of Performance Implications Across Venture Life Cycles
- Original Article
- Open access
- Published: 28 October 2021
- volume 73 , pages 339–380 ( 2021 )
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- Elena Freisinger 1 ,
- Sven Heidenreich ORCID: orcid.org/0000-0003-2278-0610 2 ,
- Christian Landau 3 &
- Patrick Spieth 4
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Current literature suggests that the innovation of a business model is among the most important success factors for organizations and has a positive influence on their performance. What is not yet clear, however, is how this relationship unfolds during an organization’s life cycle. We posit that business model innovation strongly contributes to firm performance in earlier phases, but ultimately gets less important. We therefore collected data on 250 organizations in Germany and used structural equation modeling for analytical purposes. We make the following two main contributions to the literature: (1) We confirm recent findings about the positive impact of business model innovation on performance; (2) we provide first empirical evidence for the important role of life cycle stages as moderator with regard to this relationship. With respect to the latter, our findings show that business model innovation is an important pathway of organizations, especially in their early years of existence, yet somewhat diminishing over time. In conclusion, this study opens new research avenues by extending and incorporating explanations for the life cycle theory and business model innovation.
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Novel business models appear to play an important role in disrupting entire industry dynamics and changing “the way people live, work, consume, and interact with each other” (Demil et al. 2015 , p. 2). Uber, for example, a new venture founded in 2009, bypassed the traditional licensing system of taxi companies by offering a location-based app that allows individuals to hire a private on-demand driver (de Jong and van Dijk 2015 ). Similarly, bitcoin-based business models successfully disrupted the way traditional banking institutes made business for decades (de Jong and van Dijk 2015 ). Anecdotal evidence shows that profitable business models do not necessarily entail a better or more innovative product, but change the game of the industry (Afuah 2014 ). Hence, it is not surprising that design of successful novel business models have turned into a key strategic priority for managers in multiple industries (Chesbrough 2007 ; Johnson et al. 2008 ; Massa et al. 2017 ). Managers of incumbent firms and entrepreneurs are increasingly using the business model concept in order to understand and to rethink novel ways on how to achieve their company’s goals (Laudien and Daxböck 2017 ; Massa et al. 2017 ). Yet, not only in practice but also in academia, business models are a largely discussed topic spanning almost all disciplines of economics, e.g., technology and innovation management (e.g. Tripsas and Gavetti 2000 ; Tucci and Massa 2013 ), strategy (e.g. Casadesus-Masanell and Zhu 2013 ; Suh et al. 2020; Teece 2010 ), and sustainability (e.g. França et al. 2016 ; Klein et al. 2021; Snihur 2016 ). Ever since the concept has firstly been brought to academia, business model innovation (BMI) is considered as a source of competitive advantage (Casadesus-Masanell and Zhu 2013 ; Demil and Lecocq 2010 ; Teece 2010 ) that ultimately leads to financial performance (Foss and Saebi 2017 ). This prominent link is somewhat the crux, but also the cornerstone of business model research.
Up until 2021, research on BMI is still very much on the rise fueled through recent empirical studies showing that BMIs are a source of competitiveness and competitive advantage (Clauss et al. 2019 a; Teece 2010 ; Wirtz et al. 2010 ), with “the potential to improve enterprise performance” (Lambert and Davidson 2013 , p. 676) or even change the market equilibrium (Trabucchi et al. 2019 ). As a result, in the last twenty years, a growing body of literature is showing a strong interest in BMI denoted as a “new subject of innovation, which complements the traditional subjects of process, product, and organizational innovation” (Zott et al. 2011 , p. 1032). However, besides many others, especially the effect-side of BMI has been paid considerable attention to, but a systematic understanding on how BMI contributes to firm success is still lacking (Foss and Saebi 2017 ). So far, only a handful studies were able to describe this widely-stated association but mainly in a correlational way and without considering the dimension of time (Foss and Saebi 2017 , 2018 ). Yet, almost twenty years after the advent of business model research, it is still not clear, whether BMI is beneficial to the firm at all (Foss and Saebi 2017 , 2018 ). What we know so far is largely based upon empirical studies that investigate how different business model designs contribute to performance effects (e.g., Wei et al. 2014 ; Zott and Amit 2007 , 2008 ). Current studies have shown that environmental factors, e.g., environmental dynamism (Pati et al. 2018 ), environmental turbulence (Schrauder et al. 2018 ), and environmental resource munificence (Zott and Amit 2007 ) influence the relationship. Yet, besides a handful studies, effect-side BMI research has failed to examine contextual factors, such as firm age, firm size, firm characteristics as well as a firm’s focal value proposition. First empirical studies acknowledge that performance implications differ across firms in their early or late life cycle stages in case of a more efficiency-centered business model design (Brettel et al. 2012 ), a paucity of studies, however, remains investigating the impact of the innovativeness of the business model on performance implications for new ventures and more established firms. In a similar vein, research has so far lacked to account for different firm-types, i.e., product- or service-oriented firms, and how their engagement in BMI and the resulting performance implications varies for new and more mature ventures.
In order to improve our understanding, this paper explores the prominent relationship between BMI and firm performance by (1) providing a systematic literature review of empirical studies investigating this relationship, (2) presenting further empirical evidence on the beneficial character of BMI, (3) examining the moderating influence of early and late life cycle stages, and (4) comparing the findings for product- and service-oriented BMIs. We therefore collected data on 250 new and more mature ventures in Germany and used structural equation modeling for analytical purposes. We make the following two main contributions to the literature: (1) we add further evidence to the body of knowledge of effect-side research of BMI, and (2) we bring new contingency factors into the discussion. The paper first gives a systematic literature review, followed by hypotheses derivation. The next section emphasizes the study’s research design and methodology, afterwards we present our results. The last section draws these findings together, discusses its implications for theory, as well as for practice, and concludes with limitations and avenues for further research.
2 Systematic Literature Review
2.1 systematic literature review of the effect-side of bmi research.
In order to grasp the amount of current knowledge on the relationship between BMI and firm performance, we conducted a systematic literature review using the procedure suggested by Denyer and Tranfield ( 2009 ). By executing a systematic search in three scientific databases, namely in EBSCO Business Source Complete, Elsevier-Science Direct, and Scopus, we not only focused on the search term “business model innovation”, but also included the expression(s) “business model design”, “business model development”, “business model renewal” or “business model change” which are used interchangeably for the same phenomenon (Foss and Saebi 2017 ). The search terms had to be included either in the title, the abstract, or in the keywords of peer-reviewed articles between 2000 and December 2020 and by that we identified 1676 articles after removing duplicates. In a next step, we applied an objective criterion (Denyer and Tranfield 2009 ) to assess the relevance of each study. More specifically, we excluded articles which were not ranked A+, A, or B in the VHB-JOURQUAL Footnote 1 ranking to ensure quality as well as theory-focused work. However, we included all articles from the Journal of Business Models, a journal devoted to establishing the discipline of business models as a separately recognized core discipline to get a thorough picture of the literature. This resulted in a total of 397 articles. Furthermore, we reviewed and coded the remaining articles using the MAXQDA software and eliminated publications without a primary focus on BMI; 260 articles were eventually deemed as a fit for our research purpose. We again reviewed and assigned these articles into the categories of antecedents, process, construct, and effects. We found a large volume of published studies describing the role of organizational and individual antecedents ( n = 85), research investigating the act of designing and implementing BMIs ( n = 75), and investigations into the construct itself ( n = 75). However, only a small proportion of studies has devoted its attention to the effect-side of BMI ( n = 40), yet with a certain increase in recent years (for an overview see Table 1 ).
What we know about BMI performance relationship is largely based upon four types of empirical studies that investigate how BMI impacts performance. The first type encompasses the activity system view (Zott and Amit 2010 ) and investigates how different design themes (Zott and Amit 2007 ) impact performance variables such as firm performance (Brettel et al. 2012 ; Wei et al. 2017 ), technological innovation performance (Hu 2014 ), start-up’s growth performance (Balboni et al. 2019 ), or small and medium-sized enterprise (SME) performance (Pati et al. 2018 ). Another stream of effect-side research, the element-based view (Clauss et al. 2019 b) connects the innovativeness of the business model with different outcomes, such as strategic flexibility (Spieth and Schneider 2016 ), internal corporate venturing performance (Futterer et al. 2018 ), and again firm performance (Clauss et al. 2019 a). A third type of studies examines the effects of different aspects that come along with BMI, such as different types of revenue models (Konya-Baumbach et al. 2019 ), product- and service-orientation (Visnjic et al. 2016 ), or technology and consumer orientation in BMIs (Guo et al. 2020 ), as well as business model adoption (Karimi and Walter 2016 ) and business model imitation behavior (Frankenberger and Stam 2020 ). While these study entail an inside-firm perspective, the fourth type and more recent research shift to a customer-oriented view and examine the effects of BMI on customer satisfaction (Clauss et al. 2019 b), adoption intention (Futterer et al. 2020 ), and brand loyalty (Spieth et al. 2019 ).
With respect to potential benefits, these studies point to the fact that BMI is a powerful predictor for firm performance (Cucculelli and Bettinelli 2015 ; Karimi and Walter 2016 ; Visnjic et al. 2016 ). However, many questions remain in this young field of study. First, while the majority of the studies connects different business model designs with firm performance, more research is needed examining the impact of the innovativeness of business models within the element-based view. There are relatively few current studies that indeed present first evidence for the beneficial character but replicating these studies in different contexts might shed new light on the most prominent statement in the BMI literature. Second, while few studies have integrated contingency and moderating variables in their research, there are many factors that may influence the strength of that effect. Current studies have shown that environmental factors, e.g., environmental dynamism (Pati et al. 2018 ), environmental turbulence (Schrauder et al. 2018 ), and environmental resource munificence (Zott and Amit 2007 ), influence the relationship. Yet, besides a handful studies, effect-side BMI research has failed to examine contextual factors, such as firm age, firm size, firm characteristics as well as a firm focal value proposition. Yet, in combination with an element-based approach, the exploration of contextual factors holds the potential to deepen our understanding of the BMI performance relationship. Previous studies have indicated that BMI performance relationship is especially contingent on the factor time (Balboni et al. 2019 ; Foss and Saebi 2017 ; Pati et al. 2018 ), but a clear understanding of the impact on the effect strength is still missing. In the following, we will first discuss the core assumptions of BMI research and subsequently develop an understanding on how different life cycle stages affect this relationship and discuss how this relationship might further vary for product- and service-oriented BMIs.
2.2 Business Model and Business Model Innovation
For a long time, business models have mainly been used as a template or narrative device to understand and communicate a firm’s current activities by managers (Massa et al. 2017 ). In 2003, Mitchell and Coles moved the idea of managers having the ability to purposefully change a business model into the spotlight (Foss and Saebi 2017 ). By adding the additional dimension of innovation (Foss and Saebi 2017 ), business models have eventually become a potential unit of innovation that “complements the traditional subjects of process, product, and organizational innovation” (Zott et al. 2011 , p. 1032). A business model is a formal conceptual representation of a company (Massa et al. 2017 ) and thereby reflects the “design or architecture of the value creation, delivery, and capture mechanisms” of a firm (Teece 2010 , p. 172). In terms of conceptualization, two dominant views have emerged (Clauss et al. 2019 b): the activity system perspective (Casadesus-Masanell and Ricart 2010 ; Zott and Amit 2010 ) views business models as holistic systemic structures that encompass all activities of a company as well as how and when these activities are carried out (Zott and Amit 2010 ); the element-based perspective approaches the business model construct as a modular set of elements consisting of three (Bocken et al. 2013 ; Clauss 2017 ; Spieth and Schneider 2016 ) or of four elements (Baden-Fuller and Haefliger 2013 ; Futterer et al. 2018 ; Johnson et al. 2008 ; Osterwalder et al. 2010 ). This understanding is rooted in the dynamic perspective on business models (e.g., Casadesus-Masanell and Ricart 2010 ; Demil and Lecocq 2010 ; Martins et al. 2015 ), which refers to dynamic interactions among various business model elements (Casadesus-Masanell and Ricart 2010 ; Demil and Lecocq 2010 ). In the following, we will draw on latter one as the element-based view is generally considered as the cornerstone for BMI research (Clauss 2017 ; Futterer et al. 2018 ; Spieth and Schneider 2016 ). According to the element-based view, business models consists of four interrelated elements, namely (1) value offering, (2) internal value creation, (3) external value creation, and (4) financial architecture (Futterer et al. 2018 ) that capture a firm’s foundational processes (Foss and Saebi 2017 , 2018 ; Saebi et al. 2017 ). The first element, which reflects the value offering of a company, comprises the products and services offered to the target market (Demil and Lecocq 2010 ; Yunus et al. 2010 ), the internal value creation element integrates the methods, processes, structures, and competencies within the company’s value chain (Demil and Lecocq 2010 ; Dubosson-Torbay et al. 2002 ; Osterwalder et al. 2005 ), the third element—the external value creation—describes the relationships with external partners, stakeholders, and distribution channels (Kindström 2010 ; Yunus et al. 2010 ) and the financial architecture element constitutes the company’s revenue mechanisms and cost structure (Chesbrough 2007 ; Osterwalder et al. 2005 ; Yunus et al. 2010 ).
BMI itself is a transformation process that purposely alters the key elements of a business model (Bucherer et al. 2012 ; Clauss et al. 2019 a; Tucci and Massa 2013 ) and nontrivial changes to these key elements of a firm’s business model eventually result in a BMI (Foss and Saebi 2017 ). Firms can either innovate single elements or introduce a whole new business model (Foss and Saebi, 2017 ). While changing “of at least one core element is the necessary condition for BMI to be given, the sufficient condition is represented by a subsequent change of the BM’s underlying logic” (Futterer et al. 2018 , p. 2). Since even the change of one core element induces (minor) changes in other elements as well (Demil and Lecocq 2010 ; Johnson et al. 2008 ), innovating only one element often requires reconfigurations of the business logic and thus may constitute BMI (Foss and Saebi 2017 ). In case of established firms, BMI is deemed either the change of an established business model (Amit and Zott 2012 ; Zott and Amit 2013 ) or the creation of a new innovative business model that is added to their portfolio (Snihur and Tarzijan 2018 ). For new ventures, BMI is typically the creation of a new innovative business model (Foss and Saebi 2018 , 2017 ). Eventually, the reference point for the innovation is either its newness to the firm or its newness to the industry (Foss and Saebi 2017 ).
3 Conceptual Development
3.1 business model innovation and firm performance.
Innovation means “doing something new”, e.g., developing new products, new processes, new markets (Schumpeter 1934 ), and now new business models (Taran et al. 2015 ). In new product contexts, innovation is considered as the extent a new product differs from already existing ones (e.g., Cillo et al. 2010 ; Cooper and Kleinschmidt 1987 ; Danneels and Kleinschmidtb 2001 ), meaning innovativeness is the difference between old and new (Garcia and Calantone 2002 ). More precisely, innovativeness covers the amount of newness relative to a certain base, such as the world, the industry, the firm, or the perception of the customer (Calantone et al. 2006 ; Garcia and Calantone 2002 ). In case of business models, innovativeness captures the relative amount of newness to the focal firm (e.g., Osterwalder et al. 2005 ; Spieth and Schneider 2016 ) or to the industry (Amit and Zott 2012 ; Snihur and Tarzijan 2018 ) depending on the perspective. Hence, following the interpretation that business models are attributes of real firms, being innovative in doing business means executing value-adding activities such as value creation and/or value capture (Massa et al. 2017 ) in the core elements of a business model, namely value offering, internal value creation, external value creation, and financial architecture.
According to Lepak et al. “value creation depends on the relative amount of value that is subjectively realized by a target user (or buyer) who is the focus of value creation—whether individual, organization, or society—and that this subjective value realization must at least translate into the user’s willingness to exchange a monetary amount for the value received” (Lepak et al. 2007 , p. 182). The value creation is typically described in the most integral part of a business model in the value offering element that comprises the products and services offered to the target market (Futterer et al. 2018 ). Such changes optimize the resources and competencies employed more toward customers’ preferences and are more tailored toward customers’ needs, enhancing customer satisfaction (Futterer et al. 2020 ). By innovating the value creation in a way that it delivers greater value to the target market a company is able to outperform its competitors (Normann and Ramirez 1994 , 1993 ; Porter 1985 ). Furthermore, business models also describe the value capture domain: “value may be captured by the use of resources with attributes that make them difficult to imitate, through the source’s own use of creative destruction before competitors can use the innovation, and through methods of resource management” (Lepak et al. 2007 , p. 189). Value creation in business models is reflected in the internal value chain, relationships with external partners, and the financial architecture of a company; i.e., all activities necessary to monetize the value created (Massa et al. 2017 ). Hence, being more innovative in the respective business models elements, leads to cost reduction, process optimization, accessing new markets, and eventually to financial performance improvements (Foss and Saebi 2017 ). This indicates a positive link between business model innovativeness and financial performance improvements.
Therefore, we assume the following—
BMI has a positive effect on firm performance.
3.2 Business Model Innovation and Life Cycle Stages
While prior research often emphasizes BMI as the holy grail for achieving firm performance, more recent research indicates that innovated business models are not always necessarily better than existing business models, such that positive performance implications often strongly depend on contingency factors (Casadesus-Masanell and Ricart 2010 ; Futterer et al. 2020 ; Kranich and Wald 2018 ). Understanding the contingency mechanisms that unfold BMI into positive firm performance implications is of utmost importance for many firms. Yet, effect-side BMI research neglected to thoroughly discuss contingency factors of this valuable relationship. So far, recent research acknowledges that the performance implications of firms might differ across early and late life cycle stages depending on the business model design, i.e., either novelty- or efficiency-based, they have chosen (Brettel et al. 2012 ). Yet a more in-depth understanding is still missing. Both, young ventures and more established firms possess a unique bundle of resources and capabilities depending on their individual life stage that provide benefits and weaknesses (Carr et al. 2010 ). These benefits and weaknesses have an influence on the ventures capability to create and capture value from its BMI (Pati et al. 2018 ). Organizations grow in a predictable pattern (Hanks et al. 1993 ) and move through different life cycle stages (e.g., Gaibraith 1982 ; Kazanjian 1988 ; Laudien and Daxböck 2017 ; Quinn and Cameron 1983 ; Smith et al. 1985 ). Every venture’s life begins with a startup or birth stage, moves through certain growth stages, and ends with a form of maturity or with the decline of an organization (Hanks et al. 1993 ). Due to conceptual vagueness and a lack of distinctness concerning the individual stages (Hanks et al. 1993 ), scholars typically differentiate the early and late life cycle stages of ventures (e.g., Brettel et al. 2012 ; Dodge et al. 1994 ; Engelen et al. 2010 ).
More established firms have typically gained some form of stability and execute a viable and working business model. These firms typically capture more value from their experiences, well-functioning processes, established routines and long-term partnerships (Kotha et al. 2011 ). In case of more established SMEs—or firms in their later life cycle stages—BMI means either the change of an existing business model (Amit and Zott 2012 ; Zott and Amit 2013 ) or the creation of a new innovative business model that is added to its portfolio (Snihur and Tarzijan 2018 ). This may happen due to several reasons, e.g., new entrants in the market (Dewald and Bowen 2010 ), disrupting power of new technologies (Sabatier et al. 2012 ) or a general emphasis on innovation in a company (Sorescu et al. 2011 ). Firms in their later life cycle stages have already gained a good sense of their environment, such as their market, customers, and partners (Zahra and George 2002 ). However, changing an existing business model, like Xerox did when switching from selling copiers to leasing them (Chesbrough and Rosenbloom 2002 ), comes also with idiosyncratic challenges for the innovating firm, such as path dependencies, organizational inertia, new management processes, and types of organizational learning (Tucci and Massa 2013 ). The performance effects realized through a BMI might get mitigated by the transition process the company undergoes.
In contrast, new ventures, or firms in their early life cycles stages, are typically created to pursue unexploited opportunities (Dahlqvist and Wiklund 2012 ), are characterized by smaller firm size, lower age, a more uncertain environment and a different structure (Brettel et al. 2012 ), and have to take on a long journey before overcoming their liability of newness (Stinchcombe 1965 ). In new ventures, business models are an important device to narrow down the initial entrepreneurial idea into a describable opportunity (George and Bock 2011 ). In case of new ventures, BMI means the deployment of an innovative business model right from their inception (Foss and Saebi 2017 ). The reference point for innovation in this case is the industry. Uber, for example, outperformed established taxi companies, that offered the traditional licensing system, by providing a location-based app and a taxi service via private drivers (de Jong and van Dijk 2015 ). By being more innovative with their business models than their competitors, they are doing better in creating and capturing value, which ultimately leads to greater firm performance. We argue that this effect is stronger for young ventures in their early life stages for several reasons. First, new ventures tend to have a stronger business sense with less complex decision-making mechanisms, less inefficiencies in their processes, and less rigid structures (Thornhill and Amit 2003 ). Furthermore, younger ventures deploy an atmosphere of creativity and have clearer information channels (Zaheer and Bell 2005 ). New ventures have not yet built formalized processes and standardized work procedures (Engelen et al. 2010 ), since they have to constantly adapt to new and unknown situations (Roure and Keeley 1990 ). These characteristics of ventures in their early years of existence suggest that they are in a more favorable position to benefit from innovation-related opportunities (Rosenbusch et al. 2011 ), BMI being one of them. While many new business models fail, before a new one becomes viable, these new ventures with their innovative business models are sources of abnormal returns (Tucci and Massa 2013 ).
Hence, we conclude that early stage firms might create and capture greater value from BMI and transform it into performance.
In early stages, BMI has stronger effects on firm performance than in later stages.
3.3 Business Model Innovation and Product- and Service-oriented Firm Types
Previous studies have already identified that BMI has a different impact on performance implications, depending on whether BMIs are product- or service-oriented (e.g., Visnjic et al. 2016 ; Visnjic Kastalli et al. 2013 ). However, previous studies have not yet determined how these effects unfold in early and late stages of a venture’s life.
Service-oriented firms are characterized by intangible products and focus on a more people-oriented business (Masurel and Van Montfort 2006 ). In their early life cycle stages their diversification of object types, clients, and activities is typically rather small (Masurel and Van Montfort 2006 ) and it is crucially important to implement and market their innovative business model. In the later stages, service-oriented firms have typically gained broader diversification, more stable relationships with their customers, and deal with a larger variety of markets, clients, as well as sectors (Masurel and Van Montfort 2006 ). Hence, BMI becomes less important for service-oriented firms, due to other value drivers with greater impact in later stages. In contrast to service-oriented firms, ventures with a greater focus on more tangible assets engage more in product innovation, which is considered as one of the main drivers of value creation (Visnjic et al. 2016 ). However, sole product innovation is deemed less profitable than product innovation embedded in the appropriate business model (Chesbrough and Rosenbloom 2002 ; Teece 2010 ). Product-oriented firms in their early stages normally focus on prototyping, thereby enhancing the design of products and establishing a first production process (Gaibraith 1982 ). However, the main introduction of the product into a market happens at a later stage of the life cycle where the venture is more mature and established (Lumpkin and Dess 1995 ).
The relationship between BMI and firm performance in early and late life cycle stages differs for product- and service-oriented firm types, namely
In case of product-oriented ventures, the performance effect of BMI is significantly higher in later than in earlier stages
In case of service-oriented ventures, the performance effect of BMI is significantly higher in earlier than in the later stages
The proposed research model is depicted in Fig. 1 .
4 Data and Analysis
4.1 data and sample.
In order to answer our research question, we collected data from ventures in German-speaking countries via a cross-sectional research design. With this research design we respond to a former call of Foss and Saebi ( 2017 ) who have suggested “to collect cross-sectional data on business model changes and regress those data against business or corporate performance” (p. 212). Cross-sectional designs have been proven to be a valid approach when investigating the link between BMI and venture performance (e.g., Futterer et al. 2020 ). Yet, cross-sectional designs always have some limitations with regard to establishing causality. In order to alleviate confounding effects surrounding causality that may arise due to a delay of BMI effects on performance outcomes, we assessed the independent variable of BMI at the time of business formation, and the respective dependent variable “firm performance” at the time of the survey. Our sample needs to consist of the key decision makers within their respective ventures, which are considered to be the top management team or the founder(s) of the venture. This is necessary since the key decision makers are those who shape a firm’s strategic orientation (Talke et al. 2011 ) and, hence, the business model. We, therefore, invited entrepreneurs from the most prominent entrepreneurship directories in Germany (e.g., Bundesverband Deutsche Startups, Gründerszene.de, deutsche-startups.de), Switzerland, Austria, and Lichtenstein (Angellist) to participate in our study in 2017. We collected data via a self-administered survey in the months from April to June, including the first approach and one reminder email. We sent an Email to 3884 individual entrepreneurs containing the link to our online-survey or, when no direct contact information was available, to the venture’s e‑mail address and included the information that had to be forwarded to the key decision maker. We advised the respondents to think about their focal venture when answering the question—bearing in mind that entrepreneurs might have more than one venture. Thereby, 268 questionnaires were returned to us. In sum, eighteen returned questionnaires had significant missing values and straight-liners that we deleted, thereby resulting in 250 respondents and an overall response rate of 6.9%. On average, the 250 ventures were founded in 2014 (3 years old) and conducted mostly business in the IT or service industry, which we assessed by the NACE ( N omenclature statistique des a ctivités économiques dans la C ommunauté e uropéenne) scale. NACE is a four-digit classification of economic activities in the European Community and the participants were asked to self-categorize their venture. Since the service industry has proven to be an adequate research context for studies in the BMI context (Laudien and Pesch 2019 ), we also consider our sample as appropriate for our investigation. 61.60% of all ventures had less than 5 employees, 19.60% had 6–10 employees, 9.60% had 11–15 employees and 9.20% had more than 16 employees. The average founder in our study is thirty-four years old, male (84%), obtained a university degree, has about 5 years of start-up experience, funded about 2.40 prior start-ups of which 0.55 failed. Concerns about survival bias are mitigated by the fact that every company can be listed in the public entrepreneurship database. Consequently, immature and young companies are also included. Table 2 presents descriptive statistics and zero-order correlations among all variables used in the analyses.
4.2 Variables and Method
We drew on established measures (see the Appendix for the main constructs and items) and applied seven-point Likert-type scales except where otherwise stated. We also pre-tested the questionnaire with a group of twelve experts, namely PhD researchers working in the economics department at university, thereby ensuring face validity and clarity (Churchill 1979 ).
Business model innovation Business Model Innovation
is operationalized as a molar third-order hierarchical construct adapted from Futterer et al. ( 2018 ) with four formative second-order elements (Chin 2010 ): (1) value offering, (2) internal value creation, (3) external value creation, and (4) financial architecture, enclosing thirty-two items that Futterer et al. ( 2018 ) derived from established scales. The first element, value offering architecture, builds on the following scales: the novelty-centered business model design by Zott and Amit ( 2007 , 2008 ), product superiority to the customer by Lee and Colarelli O’Connor ( 2003 ), and market newness by Dahlqvist and Wiklund ( 2012 ). The items for the second element, internal value creation architecture, are adapted from Gatignon et al. ( 2002 ), whereas the third item, external value creation architecture, was operationalized with items adapted by the market newness scales of Lee and Colarelli O’Connor ( 2003 ), as well as supplier involvement of Chen and Paulraj ( 2004 ). Finally, the fourth element, financial architecture, mainly builds on items adapted by Spieth and Schneider ( 2016 ), and supplemented by items from Chesbrough ( 2007 ), Dubosson-Torbay et al. ( 2002 ), as well as Yunus et al. ( 2010 ). We asked the founders to think about the moment of the foundation of the company and indicate how innovative their business model was. All items were measured according to a seven-point Likert scale anchored by “strongly disagree” and “strongly agree.”
In general, new ventures do not need to publicize their financial data in financial reports (Wang et al. 2017 ) and surveying the key informants of the new ventures is a common approach (Anderson and Eshima 2013 ; Kraus et al. 2012 ). In accordance with this, we assessed firm performance via the respondents’ subjective assessments; they were taken from a synthesis used by Vorhies and Morgan ( 2005 ) and comprise previous measures regarding their customer satisfaction (Fornell et al. 1996 ), profitability (Morgan et al. 2002 ), and market effectiveness (Vorhies and Morgan 2003 ) and are commonly used in effect-side research of BMI (e.g., Balboni et al. 2019 ; Nunes and Do Val Pereira 2020 ). In studies that are based on the key-informant approach due to the absence of mandatory financial reports this scale entails all components a key informant, such as the founder of the venture, is able to assess. All scales were designed as seven-point scales and we estimated overall firm performance as a reflective second-order construct, comprising the three first-order latent performance factors, thereby building a type I hierarchical component model (Hair et al. 2018 ).
Organizational Life Cycle Stage
The moderating variable in our research model, organizational life cycle stage, was operationalized by using the scale of Brettel et al. ( 2012 ) who adapted a five-stage classification scheme from Lumpkin and Dess ( 1995 ). In accordance with this, we followed the approach of Brettel et al. ( 2012 ) and provided an explanatory sentence for each stage. The five stages included (1) startup/conception and development, (2) commercialization/market entry, (3) growth, (4) consolidation, and (5) maturity/diversification. Similar to Brettel et al. ( 2012 ), as well as Engelen et al. ( 2010 ), we built two groups, namely early and later stages. The first one included the stages (1) startup/conception and development, as well as (2) commercialization/market entry. The latter one incorporated the last three stages (3) growth, (4) consolidation, and (5) maturity/diversification. Table 3 gives an overview of the stage classifications.
The relationship between BMI and performance depends on several variables for which we included control variables: age, sex, and education of the key respondents as well as firm size measured according to the number of employees. Although all the firms included in our study were relatively young ventures, the firm size might still influence the relationship between BMI and firm performance.
Common Method Bias
In order to control for common method bias, procedural and statistical remedies were combined (Podsakoff et al. 2012 ). We applied proximal and psychological separation between our independent and dependent variable to reduce the respondents’ ability to use a similar response pattern (Podsakoff et al. 2003 ). Statistical remedies included Harman’s single factor test (Podsakoff et al. 2003 ), the Lindell-Whitney marker variable test (Lindell and Whitney 2001 ), and Kock’s collinearity test (Kock 2015 ). All the independent and dependent variables were included in an exploratory factor analysis, resulting in a total variance of 35.55%, that is below the common threshold of 50% (Podsakoff et al. 2003 ). Next, we applied the Lindell-Whitney marker variable test by integrating the measurement inventory of team trust (Bansal et al. 2004 ) in the model as a theoretically unrelated latent variable (Lindell and Whitney 2001 ). The highest path coefficient turned out to be 0.15, which is below the common threshold of 0.30. In addition, we applied a full collinearity test and found that all the variance inflation factors (VIFs) of the latent constructs in our model were not higher than 3.30 (Kock 2015 ). This indicates that common method variance should not be a concern in our model.
We used structural equation modeling (SEM) to test our research model as this statistical technique allows assessing complex models with different relationships simultaneously (Reinartz et al. 2009 ). More specifically, we applied partial least squares (PLS) SEM that combines indicators to build composite variables (Lohmöller 1989 ), which are designed to be the proxies for the constructs under investigation (Rigdon 2016 ). We have chosen PLS-SEM over covariance-based techniques for several reasons. First, since our study focuses on prediction rather than exploration, indeterminacy is less suitable in a covariance-based approach and more suitable in a PLS approach (e.g. Dijkstra 2014 ). Second and most important, contrary to CB-SEM approaches, PLS-SEM is capable of modeling type IV higher-order constructs (Chin 2010 ), which are present in our research model. PLS-SEM has recently been applied to entrepreneurship studies (e.g. Radosevic and Yoruk 2013 ), in BMI research (Futterer et al. 2018 ), innovation research (Heidenreich et al. 2016 ), and to other management topics (for an overview, see Hair et al. 2011 ). For statistical analyses, SmartPLS 3 (Ringle et al. 2015 ) was used to estimate the inner and outer model parameters by applying a path weighting scheme (Chin 1998 ). We also employed non-parametric bootstrapping (Chin 1998 ; Tenenhaus et al. 2005 ) with 5000 replications and mean replacement as missing value-algorithm, as well as individual-level change pre-processing, to obtain the standard errors of the estimates.
The higher-order latent variable BMI was set up by using the hierarchical component model approach (Lohmöller 1989 ; Tenenhaus et al. 2005 ). In order to handle the measurement issues of higher-order models in PLS-SEM, researchers can apply the repeated indicators approach, the two-stage approach, or the hybrid approach (Becker et al. 2012 ). In a simulation study, Becker et al. ( 2012 ) found that the repeated indicators approach provides better results when it comes to parameter estimates and lower-order construct scores than the other two techniques. Only in certain cases, the approach is particularly problematic: For example, when assessing reflective-formative and formative-formative hierarchical component models (HCM) or when the higher-order construct (HOC) has one or more antecedent latent variables (Becker et al. 2012 ). Similar to our research model, the reflective-formative-formative BMI construct is exogenous and the dependent variable—firm performance—is a reflective-reflective HCM; we draw in both cases on the repeated indicators approach. It assigns all indicators of the lower-order constructs to the measurement model of the HOC (Lohmöller 1989 ; Wold 1982 ) and can also be applied to third-order HCM (e.g., Wetzels et al. 2009 ). Nevertheless, additional technical considerations need to be considered. First, the indicators at the lower level should not vary strongly when it comes to their number (Becker et al. 2012 ); second, the measurement models of the HOCs needs to be evaluated in terms of the relationship with their lower-order components (LOC); third, this necessitates additional attention to the collinearity, significance, and relevance of the relationships between the HOCs and LOCs (Hair et al. 2018 ). We now proceed to evaluate the structural and the measurement models.
5.1 Evaluation of the Measurement Model
In a first step, we evaluated the hierarchical measurement models of the constructs under investigation, thereby following the criteria and procedure pointed out by Hair et al. ( 2017 ). The eight first-order constructs of the molar higher-order construct BMI, as well as the three first-order constructs of the dependent variable firm performance, all have a reflective nature, which means that internal consistency reliability, convergent validity, and discriminant validity need to be evaluated (Hair et al. 2017 ). In terms of internal consistency and reliability, composite reliability values all exceed the threshold of 0.70 (Henseler et al. 2009 ) and the same applies for the Cronbach’s alpha values, which are all above 0.70. When it comes to convergent validity, all the indicator loadings of the reflective constructs are well above the threshold value of 0.70 and further analysis shows that the indicator loadings squared are above 0.50 (Hair et al. 2017 ). The average variance extracted values are all above the required minimum level of 0.50 (Fornell and Larcker 1981 ). In terms of discriminant validity, the values of the heterotrait-monotrait ratio of correlations (HTMT)—with the highest one turning out to be 0.862—are also below the threshold of 0.9 (Gold et al. 2001 ; Teo et al. 2008 ). As stated above, in terms of HOCs, the measurement models are evaluated according to their relationship with its lower-order components, thereby accounting for the same evaluation criteria and thresholds. Consequently, the HOC firm performance, which is likewise a reflective construct, was assessed and the above stated measurement criteria were all met. However, in reflective-reflective or formative-reflective HCMs conceptual and empirical redundancies are expected and, hence, discriminant validity between HOCs and LOCs is of no relevance (Hair et al. 2018 ). In a next step, the measurement criteria of the second-level constructs—that is, the four business model elements, as well as the first-level construct BMI itself, which are all operationalized as formative constructs—are assessed in terms of their relationships with their corresponding LOCs. Consequently, the measurements models are evaluated with regards to potential collinearity issues, as well as the significance and relevance of formative indicators (Chin 2010 ). In terms of collinearity, the VIFs were assessed (Cassel et al. 1999 ; Diamantopoulos and Winklhofer 2001 ) and found to be uniformly below the threshold value of 5 (Hair et al. 2013 ). We, therefore, conclude that collinearity is not an issue in this model. Next we analyzed the outer weights for their significance and relevance by applying a complete bootstrapping procedure using 5000 bootstraps (Hair et al. 2017 ). In terms of significance levels, we found that all the formative constructs’ relationships with their LOCs are significant at a 1% level. All criteria in terms of formative measurement models are therefore met. Appendices 1–4 and Fig. 2 give an overview of the measurement models and their indicators. Considering the results of all the reflective and formative constructs, we found that they exhibit satisfactory levels of quality. Therefore, we could proceed with the evaluation of the structural model.
Results of PLS-SEM
5.2 Evaluation of the Structural Model
The main research goal of this study was to empirically examine the relationship between BMI and firm performance. We, therefore, collected primary data and used SmartPLS 3 (Ringle et al. 2015 ) to test the hypotheses by examining the path coefficients and significances of the structural model. Fig. 2 illustrates the results of the structural model. Again, we followed the procedure outlined by Hair et al. ( 2017 ). With respect to the inner model, no VIF value exceeded the threshold of 5—in fact, the highest value turned out to be 2.441, thereby indicating that multicollinearity should not be a concern. The R‑squared value in the structural model for the relationship between BMI and firm performance turned out to be 0.247 with an effect size f 2 of 0.159. The blindfolding procedure resulted in Q‑squared values above 0 for all endogenous constructs, thereby indicating predictive relevance. BMI has a positive effect on firm performance ( β = 0.336, p < 0.001), thereby confirming Hypothesis 1. Furthermore, the life cycle stage of a firm negatively moderates the positive relationship of BMI with firm performance ( β = −0.154, p < 0.01), thereby supporting Hypothesis 2. We also studied the moderating relationship by using a separate interaction analysis. Thereby, we used latent variable scores and standardized the predictors prior to the analysis to account for multicollinearity (Aiken and West 1991 ). Table 4 and Fig. 3 show the results of the analysis. The two-way interaction of BMI and life cycle stage is significant and negative ( β = −0.483, p = 0.019).
Illustration of the Moderating Effect of Life Cycle Stages
In a next step, we tested for differences between product- and service-oriented BMIs and we again conducted two separate interaction analyses, one for product-oriented and another for service-oriented firms. The interaction analysis shows that product- and service-oriented ventures exhibit different performance implications across life cycle stages. However, as Table 5 and Fig. 4 indicate, the difference between early and late stages is not statistically significant in product-oriented ventures ( β = −0.435, n. s.) and therefore, Hypotheses 3a is not supported. On the contrary, in the case of service-oriented ventures, the performance effect of BMI is significantly higher in the earlier than in the later stages ( β = −0.529, p = 0.025), thereby providing support for Hypotheses 3b.
Illustration of Moderating Effects of Life Cycle Stages in Different Firm Types. a Product-oriented firms. b Service-oriented firms
5.3 Additional Analysis
In addition to our research framework, we have calculated an additional analysis as we wanted to determine the relative importance of each element of BMI in early and late life cycle stages. It has been noted that the often stated, yet vaguely described relationship between BMI and performance relationship is difficult to study, due to its complexity (Foss and Saebi 2017 ). This complexity stems from the “multiple complex links” (p. 212) between the business model elements and the performance implications that are not only intertwined, but also unfold differently over time. In addition, previous studies have also identified that elements of BMI have a different impact on performance (Schneider et al. 2013 ). In order to determine the innovation contribution of each business model element in each life cycle stage, we conducted four separate interaction analyses. Table 6 and Fig. 5 show the empirical results and graphic illustration of how each BMI element takes effect on performance in different life cycle stages.
Illustration of Moderating Effects of Life Cycle Stages in Elements. a Value Offering Innovation. b Internal Value Creation Innovation. c External Value Creation Innovation. d Financial Architecture Innovation
6.1 theoretical implications.
Academic research has, thus far, claimed that BMI is a strong driver of firm performance (Foss and Saebi 2017 ). However, an important, but largely overlooked research issue is if and to which extent BMI differs in firm performance across different life cycle stages, namely the early and late stages of a venture’s life. Hence, this study strives to add to BMI and life cycle theory by making the following contributions: (1) Our research confirms recent findings on the positive impact of BMI on firm performance, (2) it provides first empirical evidence about the moderating role of life cycle stages on the relationship between positive BMI and performance, and (3) it investigates for the first time how this relationship differs for product- and service-oriented firms.
First, this study found evidence for the hypothesized positive relationship between BMI and firm performance. This finding is in line with previous research in the academic realm (Brettel et al. 2012 ; Cucculelli and Bettinelli 2015 ; Futterer et al. 2018 ; Kim and Min 2015 ; Zott and Amit 2007 ). We contribute to current literature by confirming that more innovation in business models will, indeed, result in higher performance (Foss and Saebi 2017 ).
Second, the life cycle stage’s moderation of a venture brings an important factor into the discussion about the performance advantages of BMI. We thereby extend and challenge extant literature on the outcomes of BMI (Cucculelli and Bettinelli 2015 ; Zott and Amit 2007 ) by providing—for the first time, to the best of our knowledge—empirical evidence for the impact of BMI on firm performance in early and late life cycle stages. More specifically, the more innovative a business model becomes, the higher are the performance implications for ventures in their earlier stages. In accordance with these results, previous studies have demonstrated that BMI leads to firm performance in the earlier stages of entrepreneurial firms (Brettel et al. 2012 ; Cucculelli and Bettinelli 2015 ; Zott and Amit 2007 ). Perhaps the most striking finding is that in the cases of more established ventures; an increase in BMI does not automatically lead to higher rates of performance. This result has not yet been previously described and extends current research on the outcomes of BMI that assumes a positive relationship (Foss and Saebi 2017 ). Although anecdotal evidence shows that established companies like Xerox, Gilette, or Apple successfully innovated their business model and were rewarded with higher performance rates than before. Our findings suggests that the performance implications are not tied to the innovativeness of the business model. An explanation for this phenomenon might be that BMI in firms in their later life cycle phases is a positive trigger in the beginning, but that the value creation and capture mechanisms do stem from their existing assets rather from the innovativeness of the BMI itself. In contrast to more established firms, newly founded ventures often operate in niche markets, serve other customers than incumbents, employ novel resources, and are in a situation where they can play actively with their new business models (Tucci and Massa 2013 ). Further, firms in their early stages are highly centralized in their founder (Chandler and Hanks 1994 ), who is able to monitor and steer the BMI process. A comparison of these results with those of other studies confirms that companies with a high level of control have a higher innovation-input-output ratio (e.g., Duran et al. 2016 ). In similar vein, compared to their later stages, new ventures are less formalized and departmentalized in their earlier stages (Hanks et al. 1993 ) and are, therefore, much more flexible (Jaworski and Kohli 1993 ). After surviving the liability of newness, the business model of firms in their early stages is the central asset for creating and capturing value, and ultimately to generate performance implications. By providing empirical evidence, we extend the life cycle theory with the phenomenon of BMI and conclude that relying only on the innovativeness of the implemented business model in the later stage of a venture’s life, will not enhance organizational performance.
Third, our results deliver first empirical evidence on how the interaction effect of life cycle stages differs in the case of product- and service-oriented firms. We found contradictory results. In the case of service-oriented ventures, a more innovative business model especially pays off in early stages, but performance declines during the later stages like we expected. However, in the case of product-oriented ventures, our results show that BMI is important in both stages with no statistical difference between early and late stages. A possible explanation might be that in the event of market acceptance, a venture’s main goal is to establish itself in the market (Abernathy and Utterback 1982 ; Moore and Tushman 1982 ) and in later stages, ventures aim to maintain their market position by developing a second generation of their product (Kazanjian 1988 ; Moore and Tushman 1982 ). In both cases, an innovative business model designed around their focal products might help leverage their customer adoption. Besides being the first study to investigate how the relationship between BMI and firm performance differs for product- and service-oriented firms, we also extend existing knowledge with regards to the life cycle theory.
Fourth, when it comes to the individual contribution of business model elements in each life cycle, our findings of the additional analysis are mostly in line with the main analysis. More specifically, the innovation of all business model elements pays off more in a venture’s early life than in its later stages; this means that ventures in their early stages need to have greater pressure for BMI, ultimately leading to firm performance. However, in the event of value offering, as well as internal and external value creation, the innovation of the elements in later stages leads to smaller performance implications. A possible explanation might be that firms in their later stages have already gained market acceptance of their offering (Kazanjian 1988 ; Moore and Tushman 1982 ), they have gained a status of formalization with efficient and implemented processes (Churchill and Lewis 1983 ; Gaibraith 1982 ), and they have established stable relationships with their partners and customers (Masurel and Van Montfort 2006 ). After gaining stability and reducing uncertainty for the first time, a change in these offerings, processes, and relationships might lead to confusion and inefficiencies, and ultimately to decreased performance. However, an innovation of the financial architecture element contributes to venture performance in both stages. This is in accordance with current research. In the BMI domain, prior research has shown that efficiency-centered business models, that is, business models designed to reduce transaction costs, enhance firm performance (Zott and Amit 2007 , 2008 ), especially in later stages of organizational life (Brettel et al. 2012 ). By first investigating how business model elements impact on firm performance in different life cycle stages, we extend existing knowledge by adding a more fine-grained analysis, which has only been marginally investigated thus far (Schneider and Spieth 2014 ). Thereby, we laid the groundwork for disentangling the business model construct into its sub-elements with a certain emphasis on the different life cycle stages of ventures.
6.2 Managerial Implications
These findings may help managers and entrepreneurs to understand how to leverage a new business model to success. In line with earlier studies (Cucculelli and Bettinelli 2015 ; Zott and Amit 2007 ), research has found that BMI is an important predictor of performance implications in organizations. Our findings show that a more innovative business model makes a stronger contribution toward organizational performance than a less innovative one. A key policy priority for managers should, therefore, be to design and implement an innovative business model. Second, our results show that especially in the early stages of an organization’s life cycle, an innovative business model entails a unique selling point and is a key asset in a successful growth process. The more a venture grows, the less important an innovative business model becomes as other factors gain in importance. Within this context, this study shows that the individual life cycle stage of an organization has an important impact on the performance outcomes of BMI and should, therefore, be carefully assessed. Third, our results point out that managers of organizations have to take their firm type—either a product-oriented or a service-oriented venture—into account. According to our findings, especially in the earlier stages, a service-oriented venture has, to a certain extent, emphasize the design and development of a rather innovative business model. In later stages, however, a very innovative business model might lead to decreased performance. In case of product-oriented ventures, an innovative business model is highly important in both stages. In sum: We advise managers and entrepreneurs to not only carefully assess the innovativeness of their ventures’ business models, as well as its elements, by, for example, using the measurement inventory of Futterer et al. ( 2018 ), but to also assess, respectively, each life cycle stage the venture is currently passing through by using the framework of Kazanjian ( 1988 ). Furthermore, the venture’s main offering, which is either a service or a product, must be taken into account for the best possible organizational performance outcome.
7 Limitations and Avenues for Future Research
The findings derived from this study make several contributions to the current literature. However, as with any study, this one also has its limitations. First, we conducted a cross-sectional investigation of the relationship between BMI and performance in the new ventures domain to empirically examine the positive implications. Although using cross-sectional data is a common approach in BMI research (Futterer et al. 2018 ), such approach might suffer from several limitations. The most important one for our investigation might be tied to a potential delay of performance effects of BMI. While we did account for potential confounding effects due to such delay within our measurements, future research might replicate our findings employing a longitudinal sample to completely rule out any confounding effect in this regard by establishing true causality. Second, both the independent and dependent variable were assessed by the same instrument, i.e., survey, and respondent. To minimize potential problems due to common method bias, we applied procedural and statistical measures to rule out common method variance as effectively as possible. However, again replicating our findings by a longitudinal study with secondary data might provide additional support for our results. Furthermore, in terms of the moderating role of a firm’s life cycle stage, a longitudinal design might provide additional insights and a more fine-grained analysis of the complex mechanisms of BMI and the growth process of a firm. Third, in similar vein, we split our dataset into two stages of a venture’s life, namely early and late stages. Although it has provided initial insights into the moderating role of lifecycle stages on firm performance during BMI, it also comes with a lack of information. We therefore encourage scholars to examine the growth process of a new venture in each stage to link their individual growth pattern with the relationship between BMI and performance. A more fine-grained analysis might shed more light on the prominent relationship and produces viable insights in the underlying mechanism on how performance effects unfold over time. Forth, our study was not able to account for the amount of structural change brought about by the innovation of a business model in an established company. Although we split our dataset into early and late stages, the latter stage does not resemble established companies, since our dataset entails only young and older new ventures, but not established companies. When it comes to directions for future research, further studies might explore the relationship investigated in established companies with a special emphasis on the stages of maturity, diversification, and decline. This might result in worthwhile contributions to research on the life cycle theory and BMI. Fifth, an arguable weakness of this study is the founders’ self-evaluation of performance as a dependent variable, which makes these findings less generalizable. Although new ventures do not need to publicize their financial data (Wang et al. 2017 ) and surveying the key informants of the new ventures is a common approach (Anderson and Eshima 2013 ; Kraus et al. 2012 ), future research might work with secondary data, such as the amount of investments a venture receives during its growth process as an indicator for third-party’s trust in its potential to validate and strengthen our findings.
The VHB-JOURQUAL Rating is a journal ranking of the German scientific community. The scientific quality of a journal is defined as the extent to which the journal in question advances business administration as a scientific discipline. The categories A and B in this ranking do largely correspond with the categories 4 and 3 in the ABS journal ranking.
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Freisinger, E., Heidenreich, S., Landau, C. et al. Business Model Innovation Through the Lens of Time: An Empirical Study of Performance Implications Across Venture Life Cycles. Schmalenbach J Bus Res 73 , 339–380 (2021). https://doi.org/10.1007/s41471-021-00116-6
Accepted : 02 September 2021
Published : 28 October 2021
Issue Date : December 2021
DOI : https://doi.org/10.1007/s41471-021-00116-6
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Proceedings of the 2022 International Conference on mathematical statistics and economic analysis (MSEA 2022)
Digital innovation and business models empirical research based on text mining of annual reports of 280 listed companies.
The era of the digital economy has promoted a new round of globalization driven by digital technology, and digital innovation will affect the business model of enterprises in all aspects. This paper uses computer language technology to mine the annual report texts of 280 listed companies in the information transmission, software and information technology service industries in Shenzhen and Shanghai, and conducts an empirical analysis of the association rule Apriori algorithm for digital innovation and business models. Two indicators, descriptive digital innovation and true digital innovation, are used to comprehensively evaluate the level of digital innovation of enterprises. It also portrays the business model of the enterprise from three dimensions: value creation, value transmission and value realization. The empirical results show that: digital innovation is an important factor of the business model; the value creation of the business model is significantly negatively correlated with the digital innovation; the value transmission and value realization of the business model is significantly positively correlated with the digital innovation.
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Understanding the concept of business model is a very important factor for a firm’s performance . This study examines the relationship between business model and performance of SMEs in Nigeria. In spite of increased interest of citizens going into small business, it has indicated that most of business es end up with poor performance which is as a result of varied attitudes towards business model. Business model was conceptualized using efficiency centered business model design and novelty centered business model design, while performance for the dependent variable was conceptualized using sales growth , return on sales and total factor productivity. With the use of questionnaire survey, business owners of small and medium enterprises operating in Abuja Nigeria were administrated. The aim of this research is to find out to what extent and how SMEs use frameworks for creating and innovating their business models and what the effectiveness of this process is. The relevant issues discussed are, how do SMEs make use of business models and who are involved in the business model process in improving performance. This paper aims to give the state of the art of the business model innovation researches on SMEs. Overall, this article makes three contributions: 1) to enrich the current research on the topic of business model on small medium enterprises, 2) to analyze the researches on the field of the information on the methodology used and the unit analysis of the researches, and 3) to provide future research directions of the business model research, especially in the context of the small medium enterprises.
Business Model , Performance , Growth , Small Medium Enterprises , Growth Sales , Abuja , Innovation , Efficiency Centered Business Model Design and Novelty Centered Business Model Design
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Small businesses are engine of growth Nigeria’s economy. SMEs perform a major role in encouraging the growth of jobs and wealth creation in the country’s economic system. They play a significant role in linking the development of the country’s growth in manufacturing, agriculture, services, and so much more. Sustainable growth increases SMEs performance, competitiveness while opening numerous opportunities like job employment, tangible and intangible assets and foreign investments in the country. The objective for this study is to explore the impact of how business models can improve the performance of small medium enterprises in Nigeria. In Nigeria, the Small and Medium Scale Enterprises (SMEs) are the driving force and establish an important mainstay of the Nigerian economy. A few years ago, SMEs represented about 90 percent of the industrial sector in terms of the number of business. This sector economically, holds the key to sustainable development of the country and its importance can be put in proper aspect in relation to the structure of the Nigerian economy with many performance contributions as the source of technology innovation and new products. The primary importance therefore is this question “does business model improve business performance?” The answer to this question has important implications for SME managers and entrepreneurs, who make strategic decisions regarding investing scarce resources based on their experiences and beliefs about the contributions of business model and activities to business growth and success. Despite dozens of prior studies, employing a variety of conceptual frames, approaches and performance, scholars remain divided in their findings. Empirical evidence has supported positive non-significant (Honig & Samuelsson, 2012) and negative associations between business model and performance. Researchers face considerable challenges when attempting to link model and performance, including time delays, for result, and the considerable complexities of both constructs. It also suggests that the differing results may reflect the distinct impact of unique components of the business planning process. The past decade has been a period of dynamic change in the Nigerian business environment. At the micro and macro levels, the Nigeria economy has witnessed and felt the impacts of the evolution of new investment opportunities, increased competition, technological innovation and advancement, liberalization and deregulation of the economy, globalization, changing barriers to entry into established markets. My study would explore the relationship between business model practices and the performance of SMEs in Nigeria with the purpose of establishing the effect of business planning improving business profitability performance in SMEs.
1.1. Statement of Problems
The Nigerian economy is currently facing a turbulence situation, because the oil sector used to be the main source of the Nigeria economy but it only contributes about 10% of the national GDP. Meanwhile in previous research, SMEs contribute significantly to the economy of most emerging nations. Generally, most SMEs face different problems, such as their performance in terms of growth, profitability, innovation and their ability to contribute sustainable development. Business modelling for small business affects the financial performance and success or failure of the business. The present literature studies have failed in showing concrete relationship between business planning and performance of small medium enterprises which indicates a gap in the literature that would help in understanding the steps of managing the transition of small medium enterprises performance growth. The study of Brinckmann, Grichnik and Kapsa (2010) indicated that there is need to develop a frame work that will help in improving the understanding of business model and performance with effects it has on business growth most importantly at the developing stage. Thus this study focuses on filling the gap stated above.
1.2. Objective of Study
An extensive review of the existing literature was performed. Consequently, the relationships between Business model drivers, Business model practices and outcomes of Business model were developed as a conceptual framework. Most SMEs companies start with single or small number of owners with usually no plans or guidelines for the business operations, the business owners start with lack of skills or knowledge on the business and usually get to the critical growth stage when the business needs clear long term vision and mission for the success of the business. The focus of this study is to clearly identify the importance of business model for growth and performance of the business’s long term goals. The study would answer the main research question of how impactful of business model is to SMEs performance at the early stage of one to five years. By answering the supporting questions below, it will help SMEs companies understand how business model is essential in performance of their business. Researchers will understand the importance business model to SMEs growth with the empirical study was carried out.
1.3. Considering the Importance of Business Model, this Study Will Focus on the Objectives
This research contributes in two aspects to the current literature on business models: 1) it addresses the above mentioned research gap by developing and empirically testing a theoretical model that integrates relationship marketing into the theory on business model design; and 2) it accounts for the particularities of firms in the early stages of the organizational life cycle. Analyzing the performance effects of two business model design themes, both novelty-centered and efficiency-centered business model designs are well-suited for an empirical view.
● What is the overall impact of business model on performance of SMEs in Nigeria?
● To construct a relationship between firm performance predictors with Business Model
● Effects of efficiency- and novelty-centered business model design themes, and differences between firms in the early and later stages of the organizational life cycle,
1.4. Research Question
The following Research questions question was raised and answered:
● Do business owners adjust their business model in order to meet the business performance?
● Is a firm performance highly positive when its more efficiency centered business model design?
● Is a firm performance highly positive when its more novelty centered business model design?
1.5. Research Hypothesis
The hypotheses of these studies are set in a null form below:
● H 01 : There is no significant correlation in a firm’s business model when change positively affects its performance.
● H 02 : Is it a positive effect on a firm when its efficiency centered business model design. Is firm performance being stronger for firms in their later stages than for firms in their early stages?
● H 03 : Is it a positive effect on a firm when its novelty centered business model design. Is firm performance being stronger for firms in their early stages than for firms in their later stages?
2. Literature View
The study focuses on understanding the impact of business model on performance of small businesses in Nigeria. The results of this study might apply to different nations, particularly developing economies like Nigeria. Business models and performance of small business success, small business failure, and small business growth will be explored in this literature review. Exploring existing literature of the concepts enabled their thorough understanding. The widespread use of the business model construct was evident in the early 1990s, with the advent of the Internet and the development of IT, which enables companies to fundamentally change the way they do their business and indicates that business model innovation is a vast area of research. Other areas reviewed included SMEs, growth & performance of small businesses, and the methodological approach of the study: 1) the qualitative research method. By analyzing the existing literature, this work summarizes the impact of technological innovation, business model design, and the interaction between the two on enterprise innovation performance, and clarifies whether these conclusions are applicable to SMEs, which needs to be further tested. 2) This paper collects data with questionnaires, uses empirical analysis to study the impact of technological innovation, business model design, and the interaction of the two on the innovation performance of SMEs, and considers the impact of enterprise scale. 3) Based on the results of the empirical analysis, the article puts forward theoretical guidelines for the implementation of technological innovation and business model design activities for SMEs.
2.1. Conceptual Framework
This research paper follows the next structure of work which is the conceptual framework. The Existing quantitative studies also use various instruments to measure Business model. Through an extensive case study, Sosna, Trevinyo-Rodriguez and Velamuri (2021) found that the exploration phase of Business model consists of initial designs and trial-and-error improvements, which may last for several years before leading to sustained changes. André Cavalcante (2013) distinguishes experimentation from learning, defining Business Model experimentation as researching technical challenges and performing new practices, and Business Model learning as acquiring new knowledge, discussing new ideas, and contacting and interacting with others, for example, new business partners. Achtenhagen, Melin and Naldi (2021) concluded, through inductive research, that Business Model experimentation comprises three activities: 1) retrieving information about the environment, 2) encouraging new ideas, and 3) learning from mistakes. (André Cavalcante, 2013) defined four elements of Business model 1) conceptualizing new ideas, 2) creating new business model, 3) adapting the Business Model after it is in operation, and 4) experimenting to learn about and validate the model. While some of these conceptualizations are congruent, considerable differences emerge as well. While (André Cavalcante, 2013) define experimentation as learning from experience. Firm performance at time was measured as sales growth, return on sales and total factor productivity. Although several measures of firm’s performance exist, profitability, sales growth and TFP are arguably three of the measures most relevant to this previous studies based on similar contexts had adopted ROS and sales growth to measure firm performance.
Figure 1 below shows the relationship between independent (business model) and dependent (performance) variables and their proxy variables.
2.2. Theoretical Framework
In the previous chapter, there have been different definitions on the concept of business model. Most authors see business models as the way a company does its operational business guidelines, while other authors concentrate on the model aspect of business models. This model aspect is basically; how a business model can be created and innovated with the use of frameworks is the main aim of theoretical framework. First the concept of a business model will be explained, this is because definitions of a business model have been subject to much debate and there is not yet a general accepted definition (Visnjic et al., 2014) . According to this theory the conceptualization of business models will take place. Starting
Figure 1 . Conceptual framework.
with explaining what frameworks for business models are and highlighting some examples from theory, which means that different frameworks of several authors will be analyzed to get a better understanding of the current situation of the proposed theoretical business model frameworks. Then the process of using frameworks for business model will be explained and how these frameworks are used in practice. Finally, the last part will summarize all gathered insights from the business model theory and use it as a starting point for the methodology chapter.
2.3. Business Models
A lot of scientific articles and papers about business models contain the question: “what is a business model?”. Not because this is a very complex or difficult definition but because there are so many different opinions and insights concerning the term (DaSilva & Trkman, 2012) . So it seems that when authors write about the term “Business Model” they do not always mean the same thing (Linder & Cantrell, 2002) . Because of the different definitions that exist this section will describe definitions of several authors, and finally select the kind of definitions which will be the foundation of this study. A novelty-centered business model design enables a firm to create first-mover advantages since organizational innovations are difficult to imitate and their diffusion is slow, which leads to a durable advantage and Firms. There are several ways for a firm with an efficiency-centered business model to cut down transaction costs and thus to create substantial value.
2.4. Definition of a Business Model
The term business model can be defined in different ways. An abstraction of a business identifying how it profitability a company makes their cash. Business model can provide a holistic view of a company, which shows how a company’s internal structure is managed and how it connects with its external environment (Chesbrough, 2010) . According to Chesbrough (2010: p. 355) a business model fulfils several functions: it “articulates the value proposition, identifies a market segment and specifies the revenue generation mechanism, defines the structure of the value chain, details the revenue mechanisms, estimates the cost structure and profit potential, describes the position of the firm within the value network linking suppliers and customers and formulates the competitive strategy”. Visnjic et al., 2014 covers also the concept of value and defines business models as; A business model describes the value logic of an organization in terms of how it creates and captures customer value and can be concisely represented by an interrelated set of elements that address the customer, value proposition, organizational architecture and economics dimensions. An efficiency-centered business model creates value by reducing complexity, uncertainty, and information asymmetry among business model participants and by reducing coordination costs and transaction risks. Novelty-centered business models focus on the introduction of novel ways of transactions, more mature firms might become too rigid to perform such transactions.
Performance comprises the actual output or results of an organization as measured against its intended outputs. It differs from one organization to the other with each trying to outdo the other. Internally, performance is driven by the motivation to perform. Obasan, Shobayo, & Amaghionyeodiwe (2016) posited that current Business model literature suggests that there should be a strong linkage between business plans and performance measures. To achieve competitive advantage and high performance, strategic planning is viewed as a primary resource as supported by the resource-based theory. SME Performance can be measured with archive-based data and self-reported survey. Where financial data are available, the authors measure performance with proxies: ROE, ROI.
2.6. Empirical View
The Business model concept has been developing since the end of the1990s due to the need for new ventures in the internet industry to explain to investors how they will generate revenues but also due to various strategic innovations in terms of activities or sources of revenue from incumbent firms. This story or this representation of an ontology may be seen as a convention between partners concerning the generation and sharing of value among stakeholders are authors to have proposed a definition for BM. Business Model handles the simple question of How to make money in my industry. These choices encompass resources and competences to value, goods and/or services supplied and the internal and external organization of the business. As such, Business Model approach encompasses operational elements whereas traditionally strategic management and operations are distinguished or opposed. This integrative approach gives a crucial role to the implementation of and congruence between elements in the performance of an organization. A lot remains to be explored, and in particular, it does not appear to us that the various roles of the customer have been studied in great depth so far in the Business Model literature. This could seem all the more surprising as the level of so-called “user-generated content” has been growing very rapidly and customers have increasingly come to constitute a means of producing a good or service but also a value to generate revenues from other actors (for instance in the media industry) by valuing the size of the customers’ community or the specific characteristics of the clients. Business model helps firms to reduce cost, makes image, increases reputation and introduces unique delivery process that creates values for firms. This resulted that firms with better Business model gain sustainable competitive advantage.
The methodology used in this study is the qualitative approach. The Source of data collection is from questionnaire survey technique administered to owners of small and medium enterprises operating in Abuja, Nigeria. Eight small and medium scale enterprises (SMEs) in Abuja Nigeria were sampled using sampling technique with the Knowledge of business model. 8 mangers were selected from all the companies. Copies of the questionnaire were administered and one questionnaire was filled by each firm with the request to be filled by owners, managers, and regular staff that was a total 38 people for all companies. The experimental variables examined in this study are efficiency & novelty centered models, sales, diversification, retail, growth, sources of capital, numbers of employee, government policy, environment, competitors, technology and Social media that result from the application of business model by small and medium scale enterprises. Questions like does having a strategic location in places in your business matter? On return 8 usable questionnaires and 3 un-usable questionnaires form the whole total? A total of 8 usable questionnaires were analyzed with an effective response rate of 50.5%.
SME Performance can be measured with archive-based data and self-reported survey. Where financial data are available, the authors measure performance with proxies: ROE, ROI, etc. However, in this case of SMEs, it is difficult to obtain financial data from firms. Thus, scholars use self-reported approaches to measure SME performance. Prior studies have argued that there is a significant association between archive-based and self-reported-performance measures.
This study used self-reported approach to measure financial performance of the textile companies. Six items were used where respondents were asked to rate their firm’s performance on the basis of ROE, return on sales, ROI, ROA, sales growth and net profitability since last three years compared to major competitors.
Control variables in order to reduce spurious results, age and size of firms were controlled to test the impact of Business model on SME performance with competitive advantage as a mediator. The firm’s age and size are used in order to get a better result when the study was conducted in a specific industry.
The role of business model in SME performance is still remained elusive due to lack of empirical evidence. This study empirically examines the role of BMI towards competitive advantage and SME performance in an emerging market. In addition, this study extends the finding of prior studies which have argued that SMEs are more likely to adopt innovative approaches because of external pressure and competitive environment. First, the study examined the influence of Business model on SME performance and found significant positive results. Similar to prior studies, scrutinized that Business model makes significant contribution to firm’s profitability. The results showed that different kinds of business model frameworks are used by firms. Some firms see frameworks as guidelines but not as the main purpose of creating or innovating a business model. Others however some are completing a framework as a crucial step and describe it as very essential in the process of creating a business model. Regarding the effectiveness most firms were very satisfied with the use of their frameworks, and saw the process as very effective. Overall using frameworks seem to make the business model development process easier. There is no doubt that Business model is a significant driver to improve SMEs performance. Thus H1 of the study supported.
Based on the analysis of the business model’s academic literature, this paper introduces the concept of Business Model, then developing such a framework of a business model that takes both theoretical and empirical reasons. Indeed, more and more companies have been relying on their customers as co-producers of the product offering they release to the market. Yet, most of the studies about customer participation refer to the services marketing and management literature. To conclude, however, it is important to note that our paper can only be interpreted in the light of certain limitations that are as many opportunities for further research. We take into account the actual content of the interactions between business model and performance of SMEs in other words. Field research is needed to explore more precisely how to create and improve the relationship between business model and performance in order to increase the company growth.
This study empirically tested the impact of Business model on performance of SMEs from product business sector operating in the emerging markets of Abuja Nigeria. Data were collected through structured questionnaires using sample size of 8 firms. The results indicate that business model has a significant impact on competitive advantage and SME financial performance. Competitive advantage partially mediates the relationship between BMI and financial performance of SMEs. The results highlight that Business model plays a significant role in the success and survival of SMEs operating in the emerging market.
In the future, to expand and improve the results of this study, researchers should increase the number of interviews if possible, which will lead to higher outcome. For future research, researchers can try to investigate the positive relationship between business models to a firm’s performance.
Conflicts of Interest
The authors declare no conflicts of interest regarding the publication of this paper.
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