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Business model design and the performance of entrepreneurial firms (RV 2002/43/ENT/SM)

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In this article, the authors address both theoretically and empirically one of the main challenges of entrepreneurs' search for wealth creation, namely, the design of their business model, which depicts the ways in which the new business will transact with, interact, and relate to its external stakeholders including customers, suppliers, partners and others. In their multilevel analysis, they relate the total value created by the business model for its various stakeholders to the value appropriated by the focal firm. Anchored in transaction costs theory and in Schumpeter's theory of innovation, they develop hypotheses regarding the impact of various business models design themes - particularly of efficiency-centered and novelty-centered business model designs - on the financial performance of the focal firm. They find empirical support for their theory that both efficiency-centered and novelty-centered business model designs are positively related to firm performance. Moreover, they establish that the environment plays an important moderating role in determining which design theme has the most impact on performance: during a period of environmental munificence they find that a design focused on novelty has a greater performance impact, while during period of environmental scarcity, efficiency-centered design is perceived to be more valuable. Their analysis also reveals that there appear to be diseconomies of scope in design; accentuating novelty and efficiency as design themes simultaneously may adversely affect firm performance.

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/inseadwp2002/2002-128.pdf

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Copyright INSEAD. All rights reserved