The business model in practice and Its implications for entrepreneurship research

A. J. Bock, Gerard George

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

While the term “business model” has gained widespread use in the practice community, the academic literature on this topic is fragmented and confounded by inconsistent definitions and construct boundaries. In this study, we review prior research and reframe the business model with an entrepreneurial lens. We report on a discourse analysis of 151 surveys of practicing managers to better understand their conceptualization of a business model. We find that the underlying dimensions of the business model are resource structure, transactive structure, and value structure, and discuss the nature and implications of dimensional dominance for firm characteristics and behavior. These findings provide new directions for theory development and empirical studies in entrepreneurship by linking the business model to entrepreneurial cognition, opportunity co-creation, and organizational outcomes.

What are business models and how do practitioners use them? These broad questions combine organizational design and strategy perspectives (Chandler, 1962; Zott & Amit, 2007) with a view toward implications for entrepreneurship studies. The formation, growth potential, and success of new organizational forms is often credited to the development of novel business models, especially in turbulent industries (Franke, Gruber, Harhoff, & Henkel, 2008; Venkatraman & Henderson, 1998). Researchers have suggested that business models are critical constructs for understanding value creation (e.g., Amit & Zott, 2001; Chesbrough & Rosenbloom, 2002; Mahadevan, 2000), while others note the lack of construct clarity and commingling with business strategy (Porter, 2001). This article presents a systematic review and presents findings from an inductive study of practitioner perspectives to reconstruct the business model and identify its underlying structures using an entrepreneurship lens. We integrate the scholarly dialogue on business models to emphasize the link between business models and opportunity enactment.

Definitions for business models vary widely, incorporating organizational narrative (Magretta, 2002), processes that convert innovation into value (Chesbrough & Rosenbloom, 2002), recipes for firm activities that incorporate organizational design and strategy (Slywotzky & Wise, 2003), “flows” of information and resources (Timmers, 1998), and designed structures such as the firm's set of boundary-spanning transactions (Amit & Zott, 2001). Most studies, however, fail to clearly distinguish the business model from received organizational constructs such as strategy, in part because the construct emerged as a term of convenience in the popular press and practice community (Osterwalder & Pigneur, 2005). The lack of a convergent, well-defined theoretical construct has led to inconsistent empirical findings in its effect on firm performance and organizational change. Disparate definitions suggest that business models for growing firms could be inherently uncertain (Andries & Debackere, 2007; Heirman & Clarysse, 2004) or, alternately, path dependent and predictable (Willemstein, van der Valk, & Meeus, 2007).

The study of business models is pertinent to entrepreneurship research as often studies tend to examine new ventures or innovation-driven industries. Business models may represent a form of entrepreneurial opportunity creation (Downing, 2005; Franke et al., 2008; Markides, 2008) explicitly initiated by market imperfections (Cohen & Winn, 2007). But the lack of a consistent framework has resulted in fragmented research questions and findings, especially within an entrepreneurial context. Studies ask whether a business model should be focused and formalized (Tracey & Jarvis, 2007), adapted to environmental circumstances (Hurt & Hurt, 2005), or specific to the entrepreneurial mode (Morris, Schindehutte, & Allen, 2005). Developing a convergent construct could significantly reduce confusion and help reconcile conflicting empirical results. Theory development should progress toward a necessarily artificial construct that best approximates “the hypothesized course of [observed] events” (Weber, 1949, p. 44) in the service of encouraging rigorous theory building, well-characterized descriptive research, and high-impact normative predictions. Our goal then is to provide a bridge from the literature to observation of the phenomenon in managerial practice.
Original languageEnglish
Pages (from-to)83-111
Number of pages29
JournalEntrepreneurship Theory and Practice
Volume35
Issue number1
Early online date17 Jan 2011
DOIs
Publication statusPublished - Jan 2011

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