Novel business models : an empirical study of antecedents and consequences

Abstract

This research addresses three questions: (1) What are the key antecedent drivers of novel business model design? (2) What effect does a novel business model have on business performance? (3) Does the linkage between novel business model and business performance depend on the environmental context and in/dependence of the strategic business unit? Drawing on the broad strategic orientation literature, the study derives three antecedents of novel business model design: market, entrepreneurial, and technological orientations. Accordingly, and building on the resource-based view of the firm, the study develops hypotheses that link the three strategic orientations to novel business model design. The study also hypothesizes that a novel business model is crucial for business performance; however, this effect is moderated by technological turbulence and by the (in)dependence of the business unit. To test the research model, a cross-sectional design was employed to collect data by means of a web-based survey from a random national sample of UK firms across various sectors and sizes. Following well established procedures for scale development and purification as recommended in the methodology literature, the measurement scales were critically evaluated and reviewed for their psychometric properties. The conceptual model was tested with a structural equation model. The empirical results indicate significant positive effects of market, entrepreneurial, and technological orientations with novel BM design. The variance in business performance was also found to be partly explained by a firm’s ability to design a novel business model, more specifically in an environment characterized by high technological turbulence. Furthermore, the results indicate that starting a new business venture for the new BM can have better performance consequences compared to accommodating it within the borders of the existing structure of the firm. A key implication of the research is that exploiting internal firm capabilities is important not only for product innovation but also for business model innovation. This study contributes to business model literature by examining the business model performance in the new business context, as well as by identifying key antecedent factors that can potentially help firms’ managers in their business model innovation efforts. This gap has been strongly emphasized in previous BM research.