Business Model Innovation: Embracing Changes in a Dynamic Business Environment

Abstract

In today’s dynamic era, a firm must continuously innovate to adapt to the rapid changes in business environment. Information and Communication Technology firms do not always need to invest heavily in new capital expenditures to come out with new technology, products or services, but can consider adopting business model innovation, as a novel and efficient way, to gain competitive advantage. The dynamic nature of the Information and Communication Technology industry shortens the life cycles of services and products. Thus, in many cases heavy capital expenditures may not make financial return justifiable. Business model innovation, which initiates novel ways of performing activities, linking customers, suppliers and partners, and/or changing participants in the transactions, may become an alternate solution. Information and Communication Technology firms can maximize business model innovation to leapfrog ahead of competition as first mover in a of high growth opportunity zone. This study investigates the role of business model innovation in embracing changes in the dynamic business environment of the Information Communication Technology industry, leading to competitive sustainability and firm performance. Using Structural Equation Modeling, this study performs the Confirmatory Factor Analysis tests on the observed and latent variables of business model innovation and firm performance and examines the structural model defining the relationships between these two latent variables. The study concludes that business model innovation has positive and direct impact to firm performance, and attained its objectives of contributing a theory based on synthesis and empirical evidence to further understanding how business model innovation impacts firm performance.