Business model innovation and firm performance: Exploring causal mechanisms in SMEs

Mohammad-Ali Latifi, Shahrokh Nikou and Harry Bouwman

Technovation, 2021, vol. 107, issue C

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.

Keywords: Business model innovation; Firm performance; Firm strategy; Organisational capabilities; SME (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0166497221000559
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:techno:v:107:y:2021:i:c:s0166497221000559

DOI: 10.1016/j.technovation.2021.102274

Access Statistics for this article

Technovation is currently edited by Jonathan Linton

More articles in Technovation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().