How Much Does Business Model Matter?

Abstract

Despite the recognition that business models identify how businesses create and capture value, little is known about how business model choices are linked to performance. Since business units employ business models to serve industries, we examine the relative importance of business model and industry effects in explaining performance variation, while controlling for year, home country, corporate parent, and business unit effects. Using a simultaneous variance decomposition approach on panel data of 2,993 business units (chains) in the retail- and wholesale-trade sectors (SIC 50-59) from 43 home countries (1996-2010), we find that business model effects matter most in explaining variance in chain efficiency. Surprisingly, our results also indicate that both business model and industry effects are less important in explaining variance in chain growth.