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Business model innovation and firm performance

Exploring causal mechanisms in SMEs

Journal Article (2021)
Author(s)

Mohammad Ali Latifi Rostami (TU Delft - Information and Communication Technology)

Shahrokh Nikou (Stockholm University, Åbo Akademi University)

W.A.G.A. Bouwman (TU Delft - Information and Communication Technology)

Research Group
Information and Communication Technology
Copyright
© 2021 S.M.A. Latifi Rostami, Shahrokh Nikou, W.A.G.A. Bouwman
DOI related publication
https://doi.org/10.1016/j.technovation.2021.102274
More Info
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Publication Year
2021
Language
English
Copyright
© 2021 S.M.A. Latifi Rostami, Shahrokh Nikou, W.A.G.A. Bouwman
Research Group
Information and Communication Technology
Volume number
107
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Abstract

Although research has shown that business model innovation (BMI) can create a firm's competitive advantage and enhance its performance, many small and medium-sized enterprises (SMEs) fail to obtain the expected outcomes when innovating their business model. Business Model Innovation (BMI) leads to irreversible fundamental changes in key components of a company's business model, which means it carries with it a high level of risk, ambiguity and uncertainty. Drawing on the data from a cross-industry sample of 563 European SMEs, we apply structural equation modelling to examine how a firm's performance is affected by innovating its business model. A conceptual model is developed to examine how organisational capabilities and implementation of a profit- or growth-oriented strategy, as materialised in BMI, affect a firm's overall performance. The results indicate that, while the direct link between BMI and firm performance is not significant, this path is fully mediated through efficiency growth, organisational capabilities and revenue growth. Furthermore, there are significant direct effects from efficiency growth, organisational capabilities and revenue growth on firm performance. These findings confirm the validity of the model and contribute to existing literature on BMI efforts in SMEs and provide guidelines to help company owners/managers implement informed decisions about the implementation of BMI based on their firm's strategies.