Searching wide and deep for business model innovation

Abstract

ABSTRACT To remain competitive, firms must innovate their business models (BMs) to meet the demands of the external environment. Given the severity of external threats or opportunities, managers need to determine the scope of BM innovation (BMI) – how many elements of a BM need to be changed – and the degree of novelty required. However, internal firm knowledge may not be sufficient to conceive of and implement new BMIs. Seeking external knowledge can offer managers diverse perspectives and expertise that should foster BMI, a topic that has been insufficiently addressed in the literature. To address this gap, we investigate whether firms that engage in external knowledge search are more likely to engage in BMI and whether different external knowledge sourcing strategies are associated with different BMI types. Analysing Norwegian firm-level data, we find a close association between a firm’s choice of external knowledge search activity in terms of breadth and depth and the scope and novelty of a BMI. The wider a firm’s search, the wider its BMI scope, and the deeper that search, the more novel its BMI. Our findings contribute new, empirically supported insights on external knowledge search as an important antecedent to BMI. For practitioners, our findings illustrate how different search strategies help firms initiate and implement different types of BMI.