Modelling the Determinants and Consequences of Business Model Innovation in Small Firms

Abstract

Through addressing gaps in the business model literature, we examine why small firms vary in their emphasis on business model innovation, (BMI); and how this affects their competitive growth. A theoretical model encompassing managerial, firm, and environmental level determinants of BMI was tested and related to the sales and employment growth of the firm. We analyzed data from 120 small firms using a partial least square (PLS) approach and found that an integrative approach provides a richer explanation of these associations because determinants at each level (managerial, firm, and environmental) explained some variance in a firms’ pursuit of BMI. Emphasis on BMI also positively influences both sales and employment growth in small firms. The paper concludes with a discussion of the theoretical and managerial implications resulting from the findings of the study and we offer several suggestions for future research on business modelling for small firms.