How does business model innovation influence firm performance: the effect of environmental dynamism

Abstract

Attention to business models has flourished over the last decade in the strategy literature. However, few scholars have investigated how existing firms are able to innovate their business model, either by replicating their existing model or renewal by creating a fundamental new business model. Moreover, there is lack of empirical research on the performance effects of these two types of business model innovation and the environmental contingencies that affect these relationships. This study fills these gaps in the literature by examining on the basis of a large scale survey the effect of business model replication and business model renewal on firm performance, and how environmental dynamism moderates these relationships. Our results indicate that both business model replication and business model renewal have a positive effect on firm performance. Furthermore, environmental dynamism weakens the positive relationship between business model replication and firm performance, but surprisingly it does not strengthen the performance effect of business model renewal. These findings contribute to a richer understanding of how two types of business model innovation, replication and renewal, influence firm performance under various levels of environmental dynamism.