Abstract
What is a business model? In its essence, a firm’s business model is a routine for (i) creating economic value for the firm’s stakeholders and (ii) appropriating part of this value for the firm itself and its shareholders (Osiyevskyy, 2014; Osiyevskyy & Dewald, 2015; Zott et al., 2011). In this definition, the term “routine” is used in a sense of the evolutionary theory of the firm (Nelson & Winter, 1982), as a regular behavioral pattern within an organization. In other words, a business model is a regular sequence of activities performed by the firm that serves two purposes. On the one hand, a business model must create economic value for all of a firm’s stakeholders (most importantly, customers, partners in the value chain, and employees), sufficient enough to motivate them to interact (participate in economic transactions) with the firm. This value creation implies that the benefits that each stakeholder receives from the firm exceed the costs incurred. On the other hand, the business model must ensure that a sufficient portion of the created economic value is retained for the firm’s shareholders in the form of profit; therefore, the total revenue received by the firm from all economic transactions with other stakeholders must exceed the costs incurred by the firm.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call