Institute of Management andOrganizational Behavior

The Influence of Business Model

Designs on the Performance of

Entrepreneurial Firms

Christopher Kulins

Hannes Leonardy

Christiana Weber

To be presented at the 2015 Babson Conference in Natick, USA

06-11-2015

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

2

Definition: Business Model

Amit & Zott, 2001: 511

„A business model depicts the content, structure, andgovernance of transactions designed so as to create valuethrough the exploitation of business opportunities.“

Complementarities

Novelty

Lock-InEfficiency Value

General Topic –Business Models

Research Question

Data Collectionand Methodology

Results

Contribution

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

3

Literature Review

Zott & Amit (2007): Novelty- and efficiency centered business model designs matter to the performance of entrepreneurial firms.

Zott & Amit (2008): Novelty-centered business models – coupled with product market strategies that emphasize differentiation, cost leadership, or early market entry – can enhance firm performance.

Brettel, Strese & Flatten (2012): Entrepreneurial venture’s performance of efficiency-centered business models increase with larger relationship marketing efforts. The performance of novelty-centered business models increases with a lower degree of such marketing efforts.

Wei et al. (2014): Efficiency-centered business model design enhances the negative effect of exploitative innovation and weakens the positive effect of exploratory innovation. Novelty-centered business model design weakens the negative effect of exploitative innovation.

General Topic –Business Models

Research Question

Data Collectionand Methodology

Results

Contribution

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

4

A Configurational Approach to

Business Model Design

Complementarities

Novelty

Lock-InEfficiency

“the presence of each value driver can enhance the effectiveness of any other driver” (Amit & Zott, 2001: 509)

General Topic –Business Models

Research Question

Data Collectionand Methodology

Results

Contribution

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

5

Research Purpose

I. Testing the interdependencies of the NICE-framework suggested by Amit & Zott (2001).

II. Identification of the underlying mechanisms between certain business model configurations and market value.

General Topic –Business Models

Research Question

Data Collectionand Methodology

Results

Contribution

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

6

Method – What is Qualitative

Comparative Analysis (QCA)?

Set-theoretic approach (certain sets, or configurations, of variables have a distinct impact on an outcome).

Thereby, several conditions can lead to the same outcome.

Leaves room for conditions to lead to either the outcome or the negation of the outcome – dependent on the context.

Strength relies in the combination of qualitative work (intense knowledge of the cases) with quantitative work (minimization of configurations).

General Topic –Business Models

Research Question

Data Collectionand Methodology

Results

Contribution

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

7

Example: What makes a good soccer

player?

Tall and strong and with quick reactions

small and fast and high dribbling skills

Does body height matter in soccer?

General Topic –Business Models

Research Question

Data Collectionand Methodology

Results

Contribution

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

8

Brief Overview on the Study

Sample: 41 e-businesses that went public between 2009 and 2012 on the NASDAQ or the NYSE.

Method: Fuzzy-set qualitative comparative analysis (fsQCA)

Conditions (independent variables): - Complementarities- Efficiency- Novelty- Lock-in

(scales provided by Amit & Zott, 2001, 2002 - items get rated on Likert Scales)

Outcome (dependent variable): Market Value (shares outstanding x share price)

General Topic –Business Models

Research Question

Data Collectionand Methodology

Results

Contribution

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

9

Truth Table

Efficiency Novelty Complementarities Lock-in Incl.

1 1 0 0 .894

0 1 0 1 .873

1 1 0 1 .866

1 1 1 0 .854

1 0 1 1 .832

0 1 1 1 .814

1 1 1 1 .802

0 0 1 1 .769

1 0 0 0 .759

1 0 1 0 .754

0 0 0 0 .735

0 0 0 1 .734

General Topic –Business Models

Research Question

Data Collectionand Methodology

Results

Contribution

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

10

Results: Solution Terms

Complementarities

Novelty

Lock-InEfficiency Value

General Topic –Business Models

Research Question

Data Collectionand Methodology

Contribution

Results

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

11

Results: Solution Terms

Novelty

Lock-InValue

Consistency: 0.797 – Coverage: 0.363

General Topic –Business Models

Research Question

Data Collectionand Methodology

Contribution

Results

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

12

Results: Solution Terms

Novelty

Efficiency Value

Consistency: 0.817 – Coverage: 0.398

General Topic –Business Models

Research Question

Data Collectionand Methodology

Contribution

Results

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

13

Results: Solution Terms

Complementarities

Lock-InEfficiency Value

Consistency: 0.774 – Coverage: 0.363

General Topic –Business Models

Research Question

Data Collectionand Methodology

Contribution

Results

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

15

Results: Solution Terms

Additionally, we find no consistent solution for low performance!

Thus, the concept only explains success, but not failure

General Topic –Business Models

Research Question

Data Collectionand Methodology

Contribution

Results

06-11-2015Kulins, Leonardy & Weber – Institute of Management and Organizational Behavior

Institute of Management and OrganizationalBehavior

16

Contribution

I. We advance theory on business model design, highlighting the importance of all FOUR business model design themes and equifinality in business model design, bringing back complementarity and lock-in into the academic discourse.

II. Demonstrate that the commonly accepted theory about the four designs themes and their implication on firm performance can only explain success but not failure.

III. Shed light on the underlying mechanisms between certain business model configurations and market value.

IV. Successfully introduce qualitative comparative analysis to the business model discourse, hopefully inspiring more complex research designs.

V. We complement literature on configurational approach by empirically demonstrating its applicability in the context of business model design .

General Topic –Business Models

Research Question

Data Collectionand Methodology

Results

Contribution

Institute of Management andOrganizational Behavior

Thank you very much for your

attention

Christopher Kulins

Hannes Leonardy

Christiana Weber