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r Academy of Management Annals2017, Vol. 11, No. 1, 73–104.https://doi.org/10.5465/annals.2014.0072

ACRITICAL ASSESSMENTOF BUSINESSMODEL RESEARCH

LORENZO MASSAEcole Polytechnique Federale de Lausanne

Vienna University of Economics and Business

CHRISTOPHER L. TUCCIEcole Polytechnique Federale de Lausanne

ALLAN AFUAHUniversity of Michigan

Ever since the Internet boom of the mid-1990s, firms have been experimenting with newways of doing business and achieving their goals, which has led to a branching of thescholarly literature on business models. Three interpretations of the meaning andfunction of “business models” have emerged from the management literature: (1) busi-ness models as attributes of real firms, (2) business models as cognitive/linguisticschemas, and (3) business models as formal conceptual representations of how a busi-ness functions. Relatedly, a provocative debate about the relationship between businessmodels and strategy has fascinated many scholars. We offer a critical review of this nowvast business model literature with the goal of organizing the literature and achievinggreater understanding of the larger picture in this increasingly important research area.In addition to complementing and extending prior reviews, we also aim at a second andmore important contribution: We aim at identifying the reasons behind the apparentlack of agreement in the interpretation of business models, and the relationship betweenbusiness models and strategy. Whether strategy scholars consider business model re-search a new field may be due to the fact that the business model perspective may bechallenging the assumptions of traditional theories of value creation and capture byfocusing on value creation on the demand side and supply side, rather than focusing onvalue creation on the supply side only as these theories have done. We conclude bydiscussing how the business model perspective can contribute to research in differentfields, offering future research directions.

INTRODUCTION

Over the last 5 years of Strategic Management So-ciety conferences, Academy of Management AnnualMeetings, and DRUID conferences, business modelresearch has been an area of lively discussion andinquiry, with panels and symposia witnessing theshift and progress of dozens of research paradigms.Yet at each of these large conferences, at least onepanel, symposium, or debate has centered, not onthese developing research streams, but on the verydefinition of the business model itself. In rooms fil-led to capacity with some of the most recognized

scholars in the field, participants debate endlessly onwhat a business model actually “is,” rehashing thesame arguments year after year while still disagree-ing on whether the term stands alone or is simplysynonymous with “strategy.” Surely, research intocomplex management and strategic topics cannotachieve meaningful progress until scholars agree onhow to position and interpret their own individualworks in the field. Toward that end, we criticallyreview the last two decades of business model liter-ature. We argue that terminology has not kept pacewith new ways of doing business and with how todescribe business models, allowing the field to branchinto different camps.

So what is a business model? At a very general andintuitive level, a businessmodel is a description of anorganization and how that organization functions inachieving its goals (e.g., profitability, growth, socialimpact, . . .). However, beyond this intuitive level,

The authors would like to thank Laura Cardinal, SimSitkin, Susan Bergman, and an anonymous referee forguidance, advice, andconstructive comments.Theauthorsgratefully acknowledge support from the University ofMichigan, EPFL, and the Swiss National Fund Sinergiagrant #147666 (“Business Model Dynamics”).

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https://doi.org/10.5465/annals.2014.0072

there is a lack of agreement among scholars on moreoperational definitions of a business model (Klang,Wallnofer, & Hacklin, 2014; Wirtz, Pistoia, Ullrich, &Gottel, 2016; Zott, Amilt, & Massa, 2011), which wewill discuss extensively in the following sections.

Indeed, over the last two decades, the businessmodel has become an increasingly important con-cept, particularly in the fields of technology and in-novation management (TIM) (Massa & Tucci, 2014;Tripsas & Gavetti, 2000), strategy (e.g., Casadesus-Masanell & Zhu, 2013; Teece, 2010), and, morerecently, environmental sustainability (London&Hart,2004; Schaltegger, Ludeke-Freund, & Hansen, 2012)and social entrepreneurship (e.g., Seelos & Mair,2007). Somewhat reflective of this diversity of fields,the definitions of a business model have rangedfrom “stories that explain how enterprises work”(Magretta, 2002: 4) to “a system of interdependentactivities that transcends the focal firm and spans itsboundaries” (Zott & Amit, 2010: 216) and to “a busi-ness model articulates the logic, the data and otherevidence that support a value proposition for thecustomer, and a viable structure of revenues and costsfor the enterprise delivering that value” (Teece, 2010:179). The concept has helped scholars and managersarticulate and explore intellectually interesting ques-tions in diverse fields.

There have been some criticisms of the businessmodel as a concept by some scholars (e.g., Doganova& Eyquem-Renault, 2009; Porter, 2001; Shafer,Smith, & Linder, 2005). For example, according toPorter (2001), “the definition of a business model ismurky at best. Most often, it seems to refer to a looseconception of how a company does business andgenerates revenue, [. . .]” (p. 73) serving as “an in-vitation for faulty thinking and self delusion” (Porter,2001: 73). Despite such passionate criticisms, theexistence of which we explain in the following sec-tions, a consensus has been emerging on the impor-tance of business models for management practice,theory, andpolicy (e.g., Demil, Lecocq,Ricart, &Zott,2015; Klang et al., 2014;Wirtz et al., 2016). There areseveral arguments scholars and practitioners havegiven to defend the business model as a concept.

First, business models appear to have becomeimportant for competitiveness, constituting a strategicpriority formanagers in diverse industries, andmay bea source of above normal returns (Chesbrough, 2007a,2007b; IBM, 2006; Ireland,Hitt, Camp, & Sexton, 2001;Johnson, Christensen, & Kagermann, 2008). Addition-ally, anecdotal examples of extraordinarily profitablebusiness models are not uncommon. Witness Google,which rode a paid-listing advertising business model

to prosperity (Afuah, 2014) and Xerox, which chose tolease its Xerox 914 copier rather than sell it, enablingthe firm to become one of the most profitable compa-nies at the time (Chesbrough & Rosenbloom, 2002).These successful ways that certain organizationsachieved their goals attracted managerial and schol-arly attention.

Second, business models may represent a newdimension of innovation that complements tradi-tional ones such as product, process, and organiza-tional innovation, thus broadening the boundaries ofinnovation-related phenomena and, accordingly,theories of innovation (Casadesus-Masanell & Zhu,2013; Massa & Tucci, 2014). For example, platformbusinesses and related business models often donot necessarily focus on the creation of a tangibleproduct sold through a traditional sales channel (i.e.,a more “traditional” business model) (Cennamo &Santalo, 2013). Rather they enable value, by curatingand governing social and economic interactions(Choudary, 2015). This additional way of thinkingabout what can be innovated has also raised practi-tioner and scholarly interest.

Third, larger forces at the macro level, such as In-ternet technology and globalization, are blurring thedistinction between industries, lowering barriers toentry, and potentially leading to more intensive ri-valry (Gambardella & Torrisi, 1998; Gambardella &McGahan, 2010; Hacklin, Marxt, & Fahrni, 2009),forcing companies to rethink and redesign how theyare achieving their goals (profitability, growth, socialimpact. . . .). This convergence phenomenon addsurgency to managers in incumbent firms under-standing business model reconfiguration in theirfirms, in addition to entrepreneurs understandingthe design of new business models to take advantageof new opportunities (Kim & Min, 2015; Massa &Tucci, 2014; Osiyevskyy & Dewald, 2015).

Fourth, scholars andmanagers interested in socialand environmental value creation—in addition toeconomic value creation—are increasingly utilizingthe businessmodel concept (e.g., Dohrmann, Raith,& Siebold, 2015; Jenkins, Ishikawa, Geaneotes,Baptista, &Masuoka, 2011;Michelini &Fiorentino,2012). Opportunities exist to design businessmodelsable to realign organizations’ search for profits withinnovations that also benefit the environment andsociety, including initiatives in contexts of deeppoverty and low-income markets (Lovins, Lovins, &Hawken, 1999; Seelos &Mair, 2007; Ludeke-Freund,Massa, Bocken, Brent, & Musango, 2016).

The above arguments have attracted the attentionof many scholars. Zott et al. (2011) examined the

74 JanuaryAcademy of Management Annals

evolutionof theuseof the term “businessmodel” andfound that, starting from the mid-1990s, there wasan explosion of articles about business models, in-cluding scientific works published in peer-reviewedjournals. Our longitudinal analysis of the number ofarticles published that include the term “businessmodel” reveals that such a trend continued through2015 and beyond (Figure 1). As a consequence thereis a vast—albeit fragmented—body of literature nowpublished on business models.

We critically review this body ofworkwith the goalsof organizing the literature and achieving greater un-derstanding of the larger picture in this increasinglyimportant research area. In addition to complementingand extending prior reviews (e.g., Klang et al., 2014;Wirtz et al., 2016; Zott et al., 2011), we also aim ata second and more important contribution: We aim atidentifying the reasons behind the apparent lack ofagreement in the interpretationofbusinessmodels, andthe relationshipbetweenbusinessmodels andstrategy.Our assessment of the literature suggests that the fourarguments outlined earlier have led to aproliferationofexperimentation by organizations in how they achievetheir goals. These experiments have been studied froma variety of angles while the basic terminology has notkept up with these experiments. The branching of theliterature over the years canbedivided into three basicinterpretations of what a business model is (1) as anattribute of a firm, (2) as a cognitive or linguisticschema, and (3) as a formal conceptual representationdescribing the activities of a firm.

In addition, the business model concept may bechallenging assumptions of traditional theories ofvalue creation and value capture, two terms that are

often used to describe business models. Traditionaltheories—which were developed well before theabove four arguments/trends became evident—assumeaway (ordidnot acknowledge) value creationin the demand side of the demand and supply equa-tion, focusing on the supply side and limiting com-petitive advantage to a single source.That is, accordingto traditional theories of strategy, such as the resource-based view (RBV) of the firm or the positioningview, value creation is a supply-side phenomenon inwhich value is created exclusively by producers, notby customers; and competitive advantage is singlesourced—resource based only or activities based only(Barney, 1991; Peteraf, 1993; Porter, 1980, 1985, 1996).Contrast this with the perspective building on thebusinessmodel conceptwhere value creation is both asupply- anddemand-side phenomenon—where valueis created not only byproducers, but also by customersand othermembers of their value-creation ecosystems.Additionally, in this perspective, competitive advantagecanbemultisourced—that is, competitiveadvantagecanbe resourcebasedandactivities based, in the supply sideand/or demand side.

Thus, in this article, we not only propose reasonswhy cumulative knowledge in the field is difficult,we also take the provocative position that businessmodel research does have some unique characteris-tics that distinguish it from traditional perspectivesin strategy research. In that sense, we both comple-ment and extend prior reviews. Zott et al. (2011)document the historical emergence of the construct,walking the reader through its emergence and diffu-sion. Indoing so, they identify research“silos”or linesof inquiry based on the phenomena of interest to the

FIGURE 1Growth in Business Model Research (Number of Articles Published Per Year).

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various researchers, for example, e-business, strategicissues, and innovation/technologymanagements.They identify—despite the conceptual differencesamong researchers in different silos—some emerg-ing themes that they suggest might constitute a com-mon ground across various conceptualizations onthe business model, notably the business model asa new unit of analysis, centered on activities, em-phasizing value creation, and offering a systemicview on organizations. Our review complementsZott et al. by explicitly bringing theconstruct validityproblem related to different understandings of theword“model” to the surface.Wealso shed light on therelation between business model and strategy re-search by pointing to the value creation and capturedimensions and by more explicitly linking the busi-ness model to the emergent literature on the demandside of strategy. These aspects also help understandhowthis reviewcomplementsother recent reviewsonthe businessmodel.Wirtz et al. (2016) is verymuch inthe spirit of Zott et al. (2011), emphasizing the his-torical development of the field in different literaturestreams and looking for classification methods alongthe lines of the most popular research topics andmethods, for example, 79 percent conceptual articles.Klanget al. emphasizes semiotics (“signsandsymbolsused in social life”) and syntactics (“the relationsamong multiple signs”) in trying to explain whyscholars criticize the concept of a business model.They point out sources of criticism, such as armchairtheorizing, which they call “Temptation of not leav-ing the drawing board,” or adapting business modelsto local contexts, which they call “pride of observa-tion.” In contrast, we are focusing in the first part ofour article on the construct validity issue of in-terpretations of the term, and the second part on thebusiness model/strategy debate.

We begin this article with an assessment of thedifferent interpretations of business models based onthree main groups of works based on the definitionand function of a business model that have evolvedsimultaneously over the decades. We then examinethe fundamental question: What relationship, if any,is there between business models and strategy? Itis our contention that the business model conceptadds value to the “traditional” strategy literature byexpanding the meaning of “value creation” (to in-clude entirely new markets for/with users and mem-bers of their ecosystems) and “value capture” (toinclude monetization), and by relaxing assumptionsthat often went unchallenged when those theorieswere developed. Finally, we examine the use of theconcept of business models in research in fields as

diverse as strategic management and environmentalsustainability, and suggest future research directions.

INTERPRETATIONS OF BUSINESS MODELS

A sampling of some of the most cited and mostfrequently used definitions of business modelsis shown in Table 1. The diversity of definitionsreflects—in part—the fact that scholars have studiedbusiness models employing different subject-matterlenses and, in doing that, they have offered different,sometimes conflicting, interpretations of what theterm “business model” means and is used for. To ar-rive at the conclusions of Table 1, as discussed in ouronline methodological Appendix, we started with2,754 articles about businessmodels and analyzed indetail 216 articles published between 1995 and2016 in leadingmanagement andpractitioneroutlets inwhich the term “businessmodel” appeared in the title,abstract, or keywords, and that treated the businessmodel in a nontrivial way. With two coders, we ex-amined the definitions adopted by them and how theydescribed the function of the businessmodel. By doingthat,wewereable togroup the literature into threemaingroups, which we are calling interpretations of thefunction of the business model, or interpretations forshort. In Tables 1–3, we emphasize the most recentlypublished 40 articles, plus three “classics” (see onlinemethodological Appendix for more details).

Our three major interpretations are (1) businessmodels as attributes of real firms having a direct realimpact on business operations, (2) businessmodels ascognitive/linguistic schema, and (3) business modelsas formal conceptual representations/descriptions ofhow an organization functions. Arguably, these areconceptually distinct interpretations of the role of thebusiness model, which point to different phenomena:(1) how firms do business, (2) how the way firms dobusiness is interpreted by organizational members,and (3) how (1) and (2) could be represented bymeansof formal conceptualizations, such as symbolic, mathe-matical, or graphical depictions, respectively. We nowexplore each interpretation.

Business Models Are Attributes of Real Firms

In this interpretation, a business model is seenas an empirical phenomenon or attribute of realfirms (Table 1). These attributes are determinedbyempirically—asopposed toconceptually—classifyingreal-world manifestations of organizations asa function of their measured similarity on observedvariables. This classification effort has frequently


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TABLE 1Recent Exemplar Works Interpreting Business Models as Attributes of Real Firmsa,b

Authors (Year) Definition Function

Birkinshaw and Goddard (2009) “[refers to] how a company makes money”(p. 81)

Making money

Bocken, Rana, and Short (2015) “The framework of a “business model” mightprovide a structured way for sustainablebusiness thinking by mapping the purpose,opportunities for value creation across thenetwork, and value capture (how to generaterevenue) in companies.” (p. 67)

Maps the purpose of a companyMaps the opportunities for value creationacross the network

Maps value creation in companies

Bocken et al. (2014) “Sustainable business models (SBM)incorporate a triple bottom line approachandconsider a wide range of stakeholderinterests, including environment andsociety.” (p. 42)

Shows the value propositionAllows for value creation and deliveryAllows value capture

Casadesus-Masanell & Zhu, 2010 “The business model is a set of committedchoices that lays the groundwork for thecompetitive interactions that will occurbetween the incumbent and the ad-sponsored entrant down the line.” (p. 3) “Thechoice of the particular business model withwhich to compete corresponds, in ourdevelopment, to the choice of a particularprofit function.” (p. 5)

Lays the groundwork for the competitiveinteractions that will occur between theincumbent and the ad-sponsored entrant

Reveals the firm strategy

Chesbrough, 2010 Business model defined by function (see nextcolumn)

Articulates the value propositionIdentifies a market segmentSpecifies the revenue generation mechanismDefines the structure of the value chainEstimates the cost structure and profit potentialDescribes the position of the firm within thevalue network linking suppliers andcustomers

Formulates the competitive strategyDahan et al., 2010 “. . . a representation of a firm’s underlying core

logic and strategic choices for creating andcapturing value within a value network.”(p. 328)

Generates and delivers economic value, (aswell as) social value

Illustrates the mechanisms whereby the firmintends to deliver value to the target public

Illustrates how the necessary costs andrevenues will be structured

Gambardella and McGahan (2010) “A business model is an organization’sapproach to generating revenue ata reasonable cost, and incorporatesassumptions about how it will both createand capture value.” (p. 263)

Generates profit (if) the firm has developedactivities and accumulated resources thatdrive a wedge between operating costs andrevenues

Hienerth, Keinz, and Lettl (2011) “A business model describes the logic of howa business creates and delivers value to usersand converts payments received intoprofits.” (p. 346)

Describes the logicDescribes how firms make money

Markides and Oyon (2010) “A business model distinguishes a company/unit according to its strategy, culture andprocesses.” (p. 7)

Established corporations (respond to newdisruptive BMs) by adopting new BMs alongtheir established ones.

Nielsen and Lund (2014) “The businessmodel is [. . .] the platformwhichconnects resources, processes and the supplyof a service which results in the fact that thecompany is profitable in the long term. Thisdefinition emphasizes the need to focus onunderstanding the connections and theinterrelations of the business and itsoperations so that the core of a business

Articulates the value propositionIdentifies a market segmentDefines the structure of the value chain withinthe firm required to create and distribute theoffering

Estimates the cost structure and profit potentialof producing the offering, given the valueproposition andvalue chain structure chosen


supported the identification of business model ar-chetypes, and the introduction of terms such as razorand blade, advertising, subscription, freemium, bar-ter, brokerage, disintermediation, platform, crowd-sourcing,payasyougo, andsoon todescribebusinessmodels (Casadesus-Masanell & Zhu, 2010; Johnson,2010; McGrath, 2010; Rappa, 2001).

In trying to understand and articulate these attri-butes of real firms, some scholars have suggested that

there are two major parts to each business model:The set of activities that the firm performs and theoutcomes of performing these activities (Casadesus-Masanell & Ricart, 2010; Casadesus-Masanell &Zhu, 2010). The set of activities that a firm choosesto perform, when it performs them, how it per-forms them, who performs them, and the resources/capabilities that it chooses to use determine theoutcome (e.g., Afuah, 2004; Amit & Zott, 2001).

TABLE 1(Continued)

Authors (Year) Definition Function

model description is the connections thatcreate value.” (p. 9)

Describes the position of the firm within thevalue network linking suppliers andcustomers, including identification ofpotential complementors and competitors

Formulates the competitive strategy by whichthe innovating firm will gain and holdadvantage over rivals

Roome and Louche (2016) “Business models refer to the way firms dobusiness, creating and capturing valuewithin a value network (Shafer et al., 2005)”(p. 126)

The business model links the working insidethe firm to outside elements including thecustomer side and how value is thencaptured and monetized

San Roman, Momber, Abbad, andMiralles (2011)

“A business model describes how a product orservice is provided, including perceivedvalue creation of a certain product for a finalcustomer.” (p. 6,364)

Inform regulatory frameworks by taking firmbusiness models into consideration.

Sinfield, Calder, McConnell, andColson (2012)

“. . . . A business model includes all aspects ofa company’s approach to developinga profitable offering and delivering it to itstarget customers.” (p. 87)

Includes all aspects of a company’s approach todeveloping a profitable offering anddelivering it to its target customers.

Smith, Binns, and Tushman (2010) “. . . The design by which an organizationconverts a given set of strategicchoices—about markets, customers, valuepropositions—into value, and usesa particular organizational architecture—ofpeople, competencies, processes, culture andmeasurement systems—in order to createand capture this value.” (p. 450)

It allows an organization to create and capturethis value.

Weill, Malone, and Apel (2011) “The types of assets a company sells and therights it grants customers to use those assets.”(p. 17)

A fundamental tool for analyzing manyimportant strategic decisions, . . . foranalyzing how a company is managed andthe resulting firm performance

Zott and Amit (2010) “Abusinessmodel [is a] set of activities, aswellas the resources and capabilities to performthem—either within the firm, or beyond itthrough cooperationwith partners, suppliersor customers.” (p. 217) “[It depicts] thecontent, structure, and governance oftransactions designed so as to create valuethrough the exploitation of businessopportunities.” (p. 219)

Depicts the content, structure, and governanceof transactions designed so as to create value

Fulfills customers’ needs and creates customersurplus while generating a profit for the focalfirm and its partners

Lays the foundations for the focal firm’s valuecapture

Codetermines the focal firm’s bargaining power

Notes: Some sample publications may illustrate more than one interpretation of business models. Where that is the case, we have listed thepublication under the most relevant interpretation. For example, we listed Chesbrough and Rosenbloom (2002) under the business model ascognitive/linguistic schema interpretation even though the paper illustrates the two other interpretations.

a Unit of analysis: firm and/or ecosystem/network of a firm.b Sample keywords: description, firm level, firm performance, firm’s logic, how a firm makes money.


That outcome is usually the value created and/orcaptured (Casadesus-Masanell & Ricart, 2010;Casadesus-Masanell & Zhu, 2010; Markides, 2013).As shown in Table 1, definitions of business modelsin the “business model as attribute of real firm” in-terpretation range from a “set of activities, as well asthe resources and capabilities to perform them—

either within the firm, or beyond it through co-operation with partners, suppliers or customers,”(Zott &Amit, 2010: 217) to the “firm’s underlying corelogic and strategic choices for creating and capturingvaluewithinavaluenetwork,” [Dahan,Doh,Oetzel, &Yaziji, 2010: 328 building on Shafer et al. (2005)].

In the research that subscribes to this inter-pretation of business models, large-sample em-pirical studies typically ascribe to a positivisticstance and test hypotheses related to business modelvariables that are measured at the level of firms(primarily), markets, or even society. Research hasincluded efforts to empirically test hypotheses aboutthe role of business models in explaining differencesin firm performance as well as inductive approachesto understand the sources of value creation inherentin innovative business models. For example, in aninductive study, Amit and Zott (2001) identify fourpotential sources of value creation in e-business: ef-ficiency, complementarities, lock in, and novelty.Focusing on electronic markets as a research context,Zott and Amit (2007) find that business models thatembed novelty elements in their configurations(sets of activities) perform better than those that didnot. This relationship was stable across differentenvironmental regimes. Weill, Malone, and Apel(2011) analyze the performance of different businessmodels in U.S. markets over a 12-year period from1997 to 2009, and find that that business modelsbased on innovation and intellectual property tendto outperform other business models. Qualitativeempirical studies also subscribe to a view of the busi-ness model as a real attribute of firms. For example,Sosna, Trevinyo-Rodrıguez, and Velamuri (2010)studied Kiluva Group, a Spanish family–owned di-etary products’ business. They conducted interviewswith both internal and external stakeholders, collectedcompanydocuments, records, andnewspaper articles,and documented the role of experimentation and trial-and-error learning in changing an existing businessmodel, which was conceptualized as changing an at-tribute of the organization. Aversa, Furnari &Haefliger(2015) apply qualitative comparative analysis to studythe performance implications of different businessmodel configurations—the simultaneous adoption ofdifferent business models. They study the Formula 1

industry and find that configurations of two businessmodels—one focused on selling technology to com-petitors, the other one on developing and trading hu-man resources with competitors—are associated withhigh performance. They explain this relationship bypointing to capability-enhancing complementarities,organizational learning and rapid development of fo-cused capabilities.

Other studies havebeen concernedwith the impactof novel ways of organizing business activities on thedynamics of industries, and built on the early notionof disruptive technologies/innovation (Christensen,1997). For example, Johnson (2010)—also quoted byMartins and colleagues—notes that “of the 26 com-panies thathavebeen founded since1984andenteredthe Fortune 500 list from 1997 to 2007, a majorityowed their success to business model innovationsthat either transformed existing industries or creatednew ones” (Martins, Rindova, & Greenbaum, 2015:99). Demil and colleagues (2015) add that in addi-tion to changing industry dynamics, novel businessmodels may have a profound impact on and, indeed,change “the way people live, work, consume, inter-act with each other” (p. 2) and refer to examples suchas Airbnb, Apple, eBay, Facebook, Google, or theGrameen Bank. In other words, the business model isassociated with the organization (e.g., attribute ofAirbnb), which then has an impact on society.

The literature that subscribes to the “businessmodels as attributes of real firms” interpretation hasalso sought to shed light on the role of businessmodels in competitive dynamics and (superior)performance. For example, Casadesus-Masanell andZhu (2010) analyze the competitive interactions be-tween a high-quality incumbent facing a low-qualityad-sponsored competitor, and show that the optimalresponse to an ad-sponsored (free or cheap for users,charge advertisers) rival often entails business modelreconfiguration. They suggest that when there is anad-sponsoredentrant, the incumbent should considercompeting through a subscription-based (pay for un-limited service) or ad-sponsored model rather thana mixed or dual model due to cannibalization andendogenous vertical differentiation concerns. Re-latedly, Brea-Solis, Casadesus-Masanell, and Grifell-Tatje’ (2015) develop an analytical framework basedon the economics of business performance to providequantitative insights into the link between a firm’sbusiness model choices and the building of competi-tive advantage. Their key insight is that, while thechoice of a particular business model is important toexplain competitive advantage, it is the particularimplementation of a business model (i.e., the degree


of key choices such as relative emphasis on customerservice or new technology even keeping the samebusiness model) that explains performance. Aspara,Hietanen,andTikkanen(2010)empiricallyanalyze thedifferences in average profitable growth across firmsthat differ in their strategic orientations and find thatfirms that have a strong strategic emphasis on busi-ness model innovation, as well as a strong emphasison replication, exhibit a higher average value ofprofitable growth than firms that do not strategicallyemphasize either dimensions. In all of these cases,the business model is considered to be an attribute ofthe firm itself.

Scholars who subscribe to this interpretation ofa business model as an attribute of a real firm havealso devoted considerable attention to the issueofcompetingwith twobusinessmodels simultaneously(e.g., Markides, 2013). They note that many incumbentfirms respond to the emergence of a disruptive businessmodel by adding anewbusinessmodel to their existingbusiness model rather than completely replacing theirold one. For example, most airline companies respon-ded to entrants in the low-cost, point-to-point segmentof the airlinemarket by adopting such techniques, oftenunder a new brand name. Companies in fast-movingconsumer goods did the same in response to the en-trance of low-cost private label competitors.

While the idea of competing with dual businessmodels seemsattractive tobothmanagers and scholars,it raises several strategic issues and challenges. Forexample, a fundamental strategy challenge related tomanaging two business models in the same market isthat the two models (and underlying value chains)could conflict with one another (Markides & Charitou,2004; Porter, 1996). Conflicts could be of various types,themost obvious one being the risk of jeopardizing theexisting business (Velu&Stiles, 2013). For example, bytrying to sell on the Internet, a brokerage firm mayalienate its existing distributors (e.g., brokers), creatingchannel conflict. This was one of the earliest observa-tions about e-commerce channels and was used to ex-plain the difference between Dell’s and Compaq’sbusiness models (Afuah & Tucci, 2002).

The presence of conflicts of different types meansthat managers within the existing organization willoften find that the new business model will grow atthose same managers’ expense. As a function oftwo fundamental contingencies, namely the natureof the conflicts between the established business andthe innovation (the new business model) on onehand, and the similarity between the two businessmodels on the other, Markides and Charitou (2004)have suggested four possible strategies: Separation,

Integration, Phased Separation, and Phased In-tegration. Markides and Oyon (2010) take theanalysis one step further by analyzingwhether theincumbent should attempt to copy the businessmodel of the “disruptor” and suggest that on averagethat is not a successful strategy; rather, the secondbusiness model should attempt to “disrupt thedisruptor” (p. 27). We will discuss the relationshipbetween business models and strategy in a separatesection further belowas it is a highly important topic.For now, it is enough to know that in the abovework,the dual business models are both considered to beattributes of the companies in question.

Continuing with this theme, Kim and Min (2015)analyze the performance of store-based retailers thatadded online retailing as a new business model, andfind that the presence of complementary assets be-tween the existing and the new business modelmay lead to increased performance when the newbusiness model is added early as part of the mainbusiness; however, if there are conflicting assets,incumbents should add the new business model asa separate, autonomous business.

Overall, in this interpretation, there is generalagreement that business models—as attributes of realfirms—involve performing value-adding activities tocreate and/or capture value. However, there is littleagreement on which activities are important in busi-ness models and therefore should be performed, whoperforms the activities, how they are performed, whenthey are performed, where (at what level), and whatresources are needed to perform them. Then there isthe inconsistency about the outcome of performingthese activities. While some scholars see the outcomeof performing business model activities as being valuecreated and captured, others see it as value creationonly or value captured only. Then there is the issue ofhow different scholars define value created and cap-tured (Lepak, Smith, & Taylor, 2007). Finally, and im-portantly, there is the issueofwhetherbusinessmodelsas attributes of real firms are any different from thestrategies of these firms. Asmentioned earlier, we willdiscuss this in a separate section below. First, let uscontinue with the second of the three interpretations.

The Business Model as a Cognitive/LinguisticSchema

The idea behind the interpretation of businessmodels as cognitive/linguistic schemas (Table 2) isthat managers do not hold real systems—for exam-ple, real activities for creating and capturing value,organizational structures, potential outcomes, and


TABLE 2Recent Exemplar Works Interpreting Business Models as Cognitive/Linguistic Schemasa,b

Author (Year) Definition Function

Aspara, Lamberg, Laukia,and Tikkanen (2013)

“We view the business unit-level business model asthe business unitmanagers’perceived logic of howthe unit in question functions and creates value, inconnection with both its market environment, andwithin the corporation (i.e., with its other businessunits).” (p. 460)

It specifies the logic of how the unit in questionfunctions and creates value

Connects both its market environment and thecorporation

Specifies how the machine worksProduces revenue and/or costs to the corporation or

to other business unitsBaden-Fuller and Morgan

(2010)“Business Models as models” (p. 156) Provides means to describe and classify businesses

Operate as sites for scientific investigationAct as recipes for creative managers

Chesbrough and Rosenbloom(2002)

“Theheuristic logic that connects technical potentialwith the realization of economic value.” (p. 529)

Articulate the value propositionIdentify a market segmentDefine the structure of the value chainEstimate the cost structure and profit potentialDescribe the position of the firm within the value

networkFormulate the competitive strategy

Doganova and Eyquem-Renault (2009)

Some of them define the business model broadly asadescriptionof a company’s logic of value creation(Ghaziani & Ventresca, 2005). It “spells out howcompany makes money by specifying where it ispositioned in the value chain” (Chesbrough &Rosenbloom, 2002: 533) and “depicts the design oftransaction content, structure and governance soas to create value through the exploitation ofbusiness opportunities” (Amit & Zott, 2001:494–495; 1,560)

The business model works as both a calculative anda narrative device. It allows entrepreneurs toexplore a market and to bring their innovation—anew product, a new venture, and the network thatsupports it—into existence.

Doz and Kosonen (2010) Objectively [business models] are sets of structuredand interdependent operational relationshipsbetween a firm and its customers, suppliers,complementors, partners and other stakeholders,and among its internal units and departments(functions, staff, operating units, etc.). . . . But, forthe firm’s management, business models alsofunction as a subjective representation of thesemechanisms, delineating how it believes the firmrelates to its environment.” (p. 370)

“Business models stand as cognitive structuresproviding a theory of how to set boundaries to thefirm of how to create value, and how to organize itsinternal structure and governance.” (p. 371)

Magretta (2002) “Stories that explain how enterprises work. A goodbusiness model answers Peter Drucker’s age-oldquestions: Who is the customer? And what doesthe customer value? It also answers thefundamental questions every manager must ask:How do we make money in this business? What isthe underlying economic logic that explains howwecandelivervalue to customersat anappropriatecost?” (p. 4)

Narratives to help understand who the customer is,what the customer values, how money is made,and the underlying economic logic for valuedelivery.

Martins et al. (2015) “The designed system of activities through whicha firm creates and captures value.” (p. 99)

A reflection ofmanagerialmentalmodels or schemasconcerning interdependent organizationalactivities.

Velu and Stiles (2013) “A business model summarizes the architecture andlogic of a business.” (p. 443)

Aid for top management decision-makingEnables change in both the cognitive and economic

aspects of a business


a Unit of analysis: individual and collective minds and discourse.b Sample keywords: heuristic, cognitive, mental model, dominant logic, story, narrative.


so on—in their minds whenmaking decisions. Rather,managers hold images of real systems—such as realbusiness models—that are shaped by managers’own cognitive frames (Chesbrough & Rosenbloom,2002; March & Simon, 1958; Tripsas & Gavetti,2000). Thus, much of the research that sees thebusiness model as a cognitive/linguistic schema isconcerned with how business models are inter-preted by organizational members, and their roleand manifestation in social (inter)action, includingorganization-level sensemaking (Ring & Rands,1989), environmental scanning and sensing oppor-tunities (Teece, 2007), and the cognitive antecedentsof business model design and innovation (Amit &Zott, 2015; Martins et al., 2015; Normann & Ramirez,1993; Tikkanen, Lamberg, Parvinen, & Kallunki,2005). In this sense, the business model can be con-sidered a dominant logic—a current thinking patternor established belief or cognitive schema held bymanagers in organizations (Bettis & Prahalad, 1995;Prahalad & Bettis, 1986).

Martins et al. (2015) provide a comprehensivedefinition of business models as cognitive schema,and conceptualized them as “cognitive structuresthat consists of concepts and relations among themthat organize managerial understanding about thedesign of activities and exchanges that reflect thecritical interdependencies and value-creation re-lations in their firms’ exchangenetworks” (p. 105). Intheir interpretation, business models are schemasthat organize managerial understanding of the de-sign of firms’ value creating activity systems.

This definition is highly consistent with the ac-count of the properties by Zott et al. (2011), whichconstitute the common ground of the various con-ceptualizations of business models that have beenprovided, and characterizes the construct “as a newunit of analysis, as a system-level concept, centeredon activities, and focusing on value” (p. 19). Othershave suggested that cognitive representations of thebusiness models are used by managers to solvechallenges related to making sense of, as well as ex-plore, opportunities for value creation and capture(Baden-Fuller & Haefliger, 2013; Baden-Fuller &Mangematin, 2013; Loock & Hacklin, 2015).

Two classic examples illustrate this interpretationof business models as cognitive/linguistic schema.The first is the account by Tripsas and Gavetti(2000) of why Polaroid—a successful chemical-basedphotography firm—failed in the face of digital pho-tography. They argue that because Polaroid manage-ment’s cognitive frames were embedded in the firm’svery profitable razor-and-blade business model for

creating and capturing value in the chemical photog-raphy era (cheap cameras, expensive film), the firm’smanagers had a very difficult time making decisionsthat were favorable to the newer business modelsdictated by the newer and disruptive digital pho-tography technologies (expensive cameras, no needfor film). Images of the razor-and-blade businessmodel in managers’ heads contributed to their fail-ure to adopt new and more relevant businessmodels (Benner & Tripsas, 2012; Tripsas, 2009;Tripsas & Gavetti, 2000).

The second example of business models as cogni-tive linguistic schema is the study of Xerox Corpora-tion and its Palo Alto Research Center (PARC) byChesbrough andRosenbloom (2002). They studied 35technology spin-offs that commercialized technologyemanating from PARC over a period of 20 years,and noted that Xerox’s management consistently andimplicitly evaluated the technical and economic po-tential of spin-off companies from PARC through itswell-established business models that had workedwell for mechanical copiers. Technical inventionsfrom PARC that did not fit Xerox’s core logic of doingbusiness tended to be perceived as less promising,andwereeventually rejectedorunderfunded. Inmanycases, however, these same inventions became suc-cess stories when their relative inventors and con-tributors attempted to exploit their market potentialindependentlyofXerox.ChesbroughandRosenbloom(2002)—like Tripsas and Gavetti (2000)—suggestedthat, over time, organizational members develop cogni-tive representations or images of their business modelsand adopt them, for example, in evaluating new busi-ness opportunities.

The idea that managers hold images of realsystems—not the real systems themselves—has along tradition in management research, spanning the-ories of organizations (Eggers & Kaplan, 2009, 2013;March & Simon, 1958; Morgan, 1986), organizationsas “interpretation systems” (Daft & Weick, 1984),organizational learning (Senge, 1990), strategy (Bettis &Prahalad, 1995; Prahalad & Bettis, 1986), as well asmore general theories concerning cognition and in-dustrybelief systems (e.g., Porac,Ventresca,&Mishina,2002). Organizations are extraordinarily complexsystems—in the sense of sharing characteristics typicalof Level Eight on Boulding’s (1956) nine-level scale ofcomplexity (Anderson, 1999)—operating in similarlycomplex environments (e.g., see Daft & Weick, 1984).As a result, managers are confronted with the strategicimperative of understanding both their environment aswell as theirorganizationand its identity inrelationshipto the external world (Gioia, Schultz, & Corley, 2000).


Building on the rich tradition of students of cog-nition in organizations (see Eggers & Kaplan, 2013,for a review), and the early business model insightsfrom Tripsas and Gavetti (2000) and Chesbrough andRosenbloom (2002), other scholars have suggested thatorganizationalmembers (also) creatementalmodels oftheir and others’ businessmodels (e.g., Baden-Fuller &Morgan,2010;Baden-Fuller&Haefliger, 2013;Loock&Hacklin, 2015; Martins et al., 2015).

Overall, according to the proponents of the cog-nitive schema interpretation, the business model isseen as an implicit mental schema (rather than hav-ing a material manifestation as a property of firmsor a formal conceptual representation), a cognitivestructure that operates as a focusing device, makingdecision-making of boundedly rational decision-makers facing conditions of imperfect informationand cognitive complexity more efficient (e.g., seeDoz & Kosonen, 2010; Prahalad & Bettis, 1986;Walsh, 1995). Thus one function of schemas is toimprove decision-making efficiency by simplifyingand filtering information and stimuli. Loock andHacklin (2015) have proposed that this is achievedby configuring “simple rules” into a coherent struc-ture that would inform value creation and capture.

However, the same schema could become a sourceof inertia, an aspect that has been variously empha-sized by cognition research in strategy (e.g., seeOcasio, 2011; Porac & Tschang, 2013) as well as bybusiness models scholars (e.g., see Chesbrough,2010; Tripsas & Gavetti, 2000). Schemas tend to beself-reinforcing because the simplification they al-low occurs automatically, guiding decision-makersto ignore discrepant (but perhaps relevant) in-formation and data gaps (which tend to be filledwithtypical information) in favor of more familiar orreadily available information (e.g., see Gioia, 1986).More recently, Martins et al. (2015) suggest thatbusinessmodel schemas could be used to also createimages of future businessmodels. They offer a theoryof firm level cognitive processes for business modeldesign and reconfiguration, and emphasize the roleof two mechanisms—analogical reasoning and con-ceptual combination—which individualsuse tomakesense of novelty and design new artifacts.

This insight suggests that schemas are, to someextent, malleable cognitive devices that could berecombined and used as instruments in imaginativeand generative thinking supporting the proactivedepiction of new, novel, and innovative businessmodels. In other words, mental modeling could alsorefer to “this capacity [. . .] rooted in the ability toimagine—to depict in themind—both realworld and

imaginary situations, and to make inferences aboutfuture states of these situations based on currentunderstandings, with and in the absence of physicalinstantiations of the things being reasoned about”(Nersessian, 2008: 91). In other words, businessmodels in this interpretation are not fixed attributesof the firm, but instead reside in managers’ heads.Without knowing or grasping all of the activities thefirm itself is engaged in, what is in the head of man-agers can be changed first and foremost through anideation or imagination process.

A challenge in the research that interprets busi-nessmodels as cognitive schema is the choice of howto approach the unit of analysis. Reducing businessmodels to mental models only held by an individualcan be misleading. Although individuals hold men-tal models, these models are often rooted in thecollective—in the shared beliefs andmodels of othermembers of their organizations (Kaplan, 2011; Martin,1992; Martin, Feldman, Hatch, & Sitkin, 1983; Walsh,1995; Weick, Sutcliffe, & Obstfeld, 2005). How doorganizational members, collectively, create a shared,albeit implicit, understanding of their business modeland how do they communicate it internally as well asexternally?Theanswermay lie in consideringnot onlythe cognitive dimension (collective and individual)but also the linguistic one (communicating withinthe organization). A surface manifestation of cognitiveschema (what others see) is represented by narrativesand linguistic schema of the business models, as wewill discuss next.

Organizations arepermeatedwithnarratives, someof which are business model-related (e.g., Magretta,2002). According to Magretta (2002), businessmodels “are, at heart, stories—stories that explainhow enterprises work. A good business model an-swers Peter Drucker’s age-old questions: Who is thecustomer?Andwhat does the customer value? It alsoanswers the fundamental questions every managermust ask: How do we make money in this business?What is the underlying economic logic that explainshow we can deliver value to customers at an appro-priate cost?” (Magretta, 2002: 4). Narratives and lin-guistic schemas—likementalmodels andmetaphors(e.g., see Morgan, 1986)—are used by individuals toinfuse ambiguous situations with meaning (Brown,2000). However, they also have an important role incoordinating and facilitating social action within andoutside the organization. Narratives create sharedunderstanding and allow organizational members tocommunicate their business models both inside andoutside the organization. Internally, narrative dy-namics operate to drive the development of the firm’s


social order, rules, organizational structure, hierar-chy, andmeaning making. Downing (2005) discussesthe role of narratives in the coproduction of organi-zations and identities. George and Bock (2011) offeran excellent discussion of the role of narratives of thebusiness models in entrepreneurial action and pro-vide empirical evidence of their use and value.

Perkmann and Spicer (2010) suggest that becauseof their forward-looking character, business modelnarratives play an important role in inducing ex-pectations among interested constituents about howa business’ future might play out. Narratives of thebusiness model can be constructed by managers andentrepreneurs and used not only to simplify cogni-tion, but also as a communication device that couldallow achieving various goals, such as persuadingexternal audiences, creating a sense of legitimacyaround the venture (e.g., by drawing analogies be-tween a venture’s business model and the businessmodel of a successful firm: “We want to be the Uberof . . .”) or guiding social action (e.g., by focusingattention on what to consider in decision-makingand instructing on how to operate). Doganova andEyquem-Renault (2009) suggest that business modelnarratives can work as boundary objects capable ofproviding a solution to the coordination challengesof innovation, in particular when agency is distrib-uted across heterogeneous actors, such as in inno-vation projects that are more open.

Business Models as Formal ConceptualRepresentations/Descriptions

Situated in between the two anchor points of the in-terpretation of business models as attributes of realentities and the interpretation of business models ascognitive and linguistic schemas (i.e., narratives) is theinterpretation of businessmodels as formal conceptualrepresentations (Table 3). Here, we explicitly use theadjective formal to stress theirdifference fromcognitiveand linguistic schema. While they are both models, inthe sense of simplifications of a real system (see fol-lowing sections), they differ in that the former are im-plicit, not detailed, often unspoken, or transmitted ata high level, while the latter are explicit, written downin pictorial, mathematical, or symbolic form.

The interpretation of business models as formalconceptual representations could be traced back tosome of the early writings on business models. Forexample, Osterwalder, Pigneur, and Tucci (2005), inreferring to the place for business models withinthe information systems literature, suggest thata business model is a “blueprint of how a company

does business. It is the translation of strategic issues,such as strategic positioning and strategic goals intoa conceptual model that explicitly states how thebusiness functions” (p. 3, emphasis added). Con-ceptualmodels, in turn, are the result of the “activityof formally describing some aspects of the physicaland social world around us for the purposes of un-derstanding and communication’’ (Mylopoulos, 1992:2, emphasis added). When a research study attemptsto describe a model using detailed descriptions ofsomeaspectsof theorganization’s activities,wewouldclassify that as a formal conceptual representation.Several definitions of the business model in Table 3indeed point to the descriptive nature of businessmodels, implicitly stressing their manifestation asformal conceptual representations of how the firm isproposing to achieve its goals.

Why would scholars or even managers use formalconceptualizations (models) to represent businessmodels? One of themain reasons is the complexity ofthe phenomenon. While the complexity of repre-senting how firms do business may be a factor thatinfluences all three interpretations of businessmodels and inability to come to a common un-derstanding of the literature, the use of formal con-ceptual representations is especially conducive fortrying to make sense of the complexity of businessmodels by highlighting themost important elementsfor use by managers and scholars (Burton & Obel,1995; Sterman, 2000). Formal conceptual represen-tations can be used to articulate, challenge, transfer,and recombine the tacit knowledge at the back-ground of implicitly understood cognitive schema,heuristics, narratives, and other organizationallyembeddedmanifestations of businessmodels. In thissense, Chesbrough (2010) has suggested that formaland conceptual models may allow escaping domi-nant logic traps by raising awareness of one’s ownassumptions and/or challenging them.

One way to understand formal conceptual repre-sentations (models) is as simplifications of some-thing. Generally speaking, formal conceptualrepresentations are used because doing so makesdealing with real systems and phenomena simpler.In general terms, to create a conceptual representa-tion (model) is to abstract and simplify what is(considered to be) “unnecessary” and “minor” infavor of what is (considered to be) core, with the goalof improving tractability, understanding, as well asour ability to measure, predict, and communicate.This view of conceptual representations (models) assimplifications suggests that, at least in theory, therecould be different possible representations of the


TABLE 3Recent Exemplar Works Interpreting Business Models as Formal Conceptual Representationsa,b


Abdelkafi and Tauscher (2016) A reinforcing feedback loop between the createdvalue to thecustomers, thevaluecapturedby thefirm, and the value to the natural environment.

Represents the firm’s money-earning logic ina transition to sustainability.

Baden-Fuller and Haefliger (2013) “We define the business model as a system thatsolves the problem of identifying who is (orare) the customer(s), engaging with theirneeds, delivering satisfaction, and monetizingthe value. The framework depicts the businessmodel systemas amodel containing cause andeffect relationships, and it provides a basis forclassification.” (p. 419)

Represents a tool for managementIt solves theproblemof identifyingwho is (or are)

the customer(s), engaging with their needs,delivering satisfaction, and monetizing thevalue;

Provides the basis for classification;Mediates the link between technology and firm

performance.Boons and Ludeke-Freund (2013) The BM is defined by its components:“We

distinguish the following elements of a genericbusiness model concept:a. Value proposition: what value is embeddedin the product/service offered by the firmb.Supplychain:howareupstreamrelationshipswith suppliers structured andmanagedc. Customer interface: how are downstreamrelationships with customers structured andmanagedd.Financialmodel: costs andbenefits froma), b)and c) and their distribution across businessmodel stakeholders. In this context, a businessmodel is used as a plan, which specifies howa new venture can become profitable.” (p. 10)

Specifies how a new venture can becomeprofitable

Shows what value is embedded in the product/service offered by the firm

Explains how are upstream relationships withsuppliers structured and managed

Describes how are downstream relationshipswith customers structured and managed

Provides costs and benefits froma), b), and c) andtheir distribution across business modelstakeholders.

Casadesus-Masanell andRicart (2010) “BusinessModel refers to the logic of the firm, theway it operates and how it creates value for itsstakeholders.” (p.196)“Afirm’sbusinessmodelis a reflection of its realized strategy.” (p. 205)

Articulates the value propositionIdentifies a market segmentDefines the structure of the value chainEstimates the cost structure and profit potentialDescribes the position of the firm within the

value networkFormulates the competitive strategy

Demil and Lecocq (2010) “The concept refers to the description of thearticulation between different business modelcomponents or ‘building blocks’ to producea proposition that can generate value forconsumers and thus for the organization.”(p. 227)

Enables description and classificationSynthesizes awayof creating value in a business:

it helps to describe how an organizationfunctions and generates revenues

Is a tool to address change and focus oninnovation, either in the organization or in thebusiness model itself

Itami and Nishino (2010) “Abusinessmodel is composed of two elements,a business system and a profit model.” (p. 364)

Illustrates the production/delivery system (howto deliver products or services to the targetcustomers)

Reflects the firm’s intention about how it willmake a profit in its given business

McGrath (2010) “Two core components constitute a businessmodel. The first is the basic ‘unit of business’,which is the building block of any strategy,because it refers to what customers pay for.The second are process or operationaladvantages, which yield performance benefitswhen more adroit deployment of resourcesleads a firm to enjoy superior efficiency oreffectiveness on the key variables thatinfluence its profitability.” (p. 249)

Offers strategists a fresh way to consider theiroptions in uncertain, fast-moving andunpredictable environments.

Osterwalder et al. (2005) “A business model is a conceptual tool thatcontains a set of elements and their

Helps identify-customer value


TABLE 3(Continued)


relationships and allows expressing thebusiness logic of a specific firm. It isa description of the value a company offers toone or several segments of customers and ofthe architecture of the firm and its network ofpartners for creating, marketing, anddelivering this value and relationship capital,in order to generate profitable and sustainablerevenue streams.” (p. 10)

-financial consequences-revenue stream-customer segment(s)-value creation-partners network

Provance, Donnelly, and Carayannis(2011)

“Business models have traditionally beenviewed as constructions of the internal values,strategies, and resources of organizations.”(p. 5,630)

Provides a framework for management toallocate resources in order to gain competitiveadvantage and appropriate rents

Ensures a logical and internally consistentapproach to the growth of an entrepreneurialventure

Defines the architecture through which keyvariables—or resources and capabilities—willbe combined

Demonstrates the economic appeal of anentrepreneurial venture

Guides ongoing operationsReim, Parida, and Ortqvist, (2015) “Business models describe the design or

architecture of the value creation, delivery andcapture mechanisms.” (p. 65)

Explains the design or architecture of thecompany’s mechanisms to create, deliver, andcapture value.

Sainio and Marjakoski (2009) Not applicable (N/A) Describes how the firm works as a systemSchaltegger, Hansen, and

Ludeke-Freund, (2016)“A business model for sustainability helpsdescribing, analyzing, managing andcommunicating (i) a company’s sustainablevalue proposition to its customers, and allother stakeholders, (ii) how it creates anddelivers this value, (iii) and how it captureseconomic value while maintaining orregenerating natural, social, and economiccapital beyond its organizational boundaries.”(p. 6)

The business model describes the design orarchitecture of the value creation, delivery,and capture mechanisms used.

Teece (2010) “Abusinessmodel articulates the logic, the data,and other evidence that support a valueproposition for the customer, and a viablestructure of revenues and costs for theenterprise delivering that value. . . It’s aboutthe benefit the enterprise will deliver tocustomers, how it will organize to do so, andhow itwill capture a portion of the value that itdelivers.” (p. 179)

Outlines the business logic required to earna profit

Defines the way the enterprise “goes to market”Reflects management’s hypothesis about what

customers want, how they want it and whatthey will pay, and how an enterprise canorganize to best meet customer needs, and getpaid well for doing so.

Upward and Jones (2015) “A description of how a business defines andachieves success over time” (p. 98)

It provides a description of the logic for anorganization’s existence: who does it for, toand with; what does it now and in the future;how, where, and with what does it do it; andhow it defines and measures its success

Wells (2016) “A business model can be defined as havingthree constituting elements: the value networkand product/service offering that defines howthe business is articulated with otherbusinesses and internally (i.e. how value iscreated); the value proposition that defineshow products and/or services are presented toconsumers in exchange for money (i.e. how

Description of how a firm interacts with itsecosystem.


same thing, depending on aspects such as what isassumed away, what is formally described, and howit is described (e.g., visually vs. verbally).

Consider the example of a geographical map (aslightlymore complex examplewould be amodel of,say, theweather or a cell). A geographical map coulditself be considered a simplified representation ofsomething, in this case, a given geographical region.However, maps of the same region exist at differentscales (e.g., 1:10,000 vs. 1:50,000), report differentinformation (e.g., political borders, fire risks), andwithdifferent styles of communication (e.g., adoptingdifferent color codes or symbolswhosemeaning iscaptured in the legend). A similar situation maytranspire with formal conceptual representationsof the business model: there could be differencesin level of abstraction (the “scale” of the repre-sentation), in content (i.e., what is formallydescribed/represented and what is omitted), and,theoretically, in semantics (the signs, symbols, text,as well as other codes that are adopted and theirmeaning, although in our review we did not findmuch evidence of this distinction). Let us examineeach of these in turn.

First, the way a firm does business could berepresented at varying degrees of depth dependingon the level of abstraction or scale chosen (Massa& Tucci, 2014). Closer to the level of the firm isa description of the business model as a system ofinterdependent activities (Amit & Zott, 2001), asa system of interdependent choices and their con-sequences (Casadesus-Masanell & Ricart, 2010), or

the fundamental processes run in a business [e.g.,the “business process viewpoint” as described inGordijn andAkkermans (2003), and in general in thefields of requirements engineering or informationsystems].

At higher levels of abstraction are situated so-called meta-models of business models, which arerepresentations of the business model obtainedby enumerating and clarifying its essential com-ponents. A popular example among managersand practitioners is the business model canvas(Osterwalder, 2004; Osterwalder & Pigneur, 2010).The business model canvas offers a scaled-downrepresentation of a “generic” business model as-sumed to be valid for describing many firms, whichenumerates and illustrates what Osterwalder &Pigneur (2010) consider to be the critical compo-nents of a business model. Earlier work alsomodelsbusiness models by focusing on the critical com-ponents of a business model (Afuah & Tucci, 2002;Afuah, 2004). Johnson et al. (2008) later proposeda representation of the business model based onfour components, and more recently, Gassmann,Frankenberger, and Csik (2014) proposed four di-mensions to represent a business model: Who,referring to the targeted customer group, What, re-ferring to the value proposition, How, referring tothe activities and capabilities used to create thevalue proposition, and, finally,Value, or an explicitexplanation of how money is made in the business,including how revenues are collected and howcosts are generated.

TABLE 3(Continued)


value is captured); and the context ofregulations, incentives, prices, governmentpolicy and so on (i.e. how value is situatedwithin thewider socioeconomic framework).”(p. 37)

Wirtz, Schilke, and Ullrich (2010) “A business model reflects the operational andoutput system of a company, and as suchcaptures the way the firm functions andcreates value.” (p. 274)

Reflects the operational and output system ofa company

Captures the way the firm functions and createsvalue

Yunus et al. (2010) “We suggest that a business model has threecomponents: a value proposition, a valueconstellation, a profit equation.” (p. 311)

Offers a consistent and integrated picture ofa company and the way it generates revenuesand profits.


a Unit of analysis: the conceptual representation itself, which may or may not focus on a firm.b Sample keywords: components, elements, architecture, system, business logic.


Second, content may also vary. For example, re-searchers interested in sustainability have tended toinclude in their formal representations of the busi-ness model information relative to environmentalvalue creation and seen the environment and localcommunities as key stakeholders (e.g., Bocken,Short, Rana, & Evans, 2014). These componentshave typically been ignored by scholars asking dif-ferent research questions for which modeling envi-ronmental impact is not critical. It is not true scholarsin different fields were only studying firms not hav-ing any environmental impact (or impact on localcommunities). Every firm has environmental impactwhether it is explicitly acknowledged or not. Rather,environmental impact may be omitted in a repre-sentation of the businessmodel if it is believed that itdoes not represent a core element.

Morris, Schindehutte, and Allen (2005) have cross-compared 19 perspectives on business model compo-nents, including early work focusing on electroniccommerce (e.g., Mahadevan 2000) and work in re-quirements engineering (e.g., Gordijn & Akkermans,2003) noticing that “the perspectives are notableboth for their similarities and differences” (p. 727).They further highlight that “the number of compo-nents mentioned varies from four to eight. A total of24 different items are mentioned as possible com-ponents, with 15 receiving multiple mentions. Themost frequently cited are the firm’s value offering(11), economic model (10), customer interface/relationship (8), partner network/ roles (7), internalinfrastructure/connected activities (6), and target mar-kets (5). Some items overlap, such as customer re-lationships and the firm’s partner network or the firm’srevenue sources, products, andvalue offering” (p. 727).

Wirtz et al. (2016) reviewed 681 articles mentioningthe business model and—consistent with, for example,Morris et al. (2005), Osterwalder et al. (2005), Shaferet al. (2005), Zott et al. (2011), and Klang et al.(2014)—stress the heterogeneity of the content of busi-ness models across the literature as manifested by dis-agreement on its constituent elements. For example,Wirtz et al. (2016: 42) write that “The most agreementamong the authors regarding the components is foundwith market offerings and resources. There seems to bea strong consensus about the importance of those com-ponents. There is little or no agreement with regards tothe areas of strategy, revenue and procurement.” De-scriptions of different components represent formalconceptual representationsof firms’businessmodels, asdiscussed more extensively in the online appendix.

For the third category, semantics, in this case,the set of constructs, symbols, and the rules for

combining them (see Wand &Weber, 2002), Gordijnand Akkermans (2003) provide a modeling languagethat they refer to as the “e3-value ontology.” Thislanguage helps model how economic value is cre-ated and exchanged within a network of actors. The“e3-value ontology” andmore broadly the domain ofconceptual modeling techniques suggests that for-mal modeling should also be concerned with se-mantics, even if to date, there has been less work inthe area related to business models.

Overall, the literature in businessmodels as formalconceptual representations suggests the following:(1) there have beenmany attempts to offer simplifiedrepresentations of the business model by pointing toits fundamental components and (2) there is a lack ofagreement onwhat the critical components are. Evenwhen scholars mention conceptually similar com-ponents, they do not employ the same terminology.

Summary and Implications of the ThreeInterpretations

These three interpretations of the role and func-tion of the business model point to the importanceof construct validity in business model research(cf. Bagozzi, Yi, & Phillips, 1991). As noted earlier,scholars have adopted the same term, the businessmodel, in referring to (1) attributes of real firms var-iously influencing their performance in markets, (2)cognitive schemas (and linguistic schemas as ob-servable manifestations), and (3) formal (scaled-down) conceptual representations of organizationalactivities. In our view, this fact represents a majorsource of confusion. These interpretations of thebusiness model are rarely discussed, and possiblynot even completely recognized. Few papers ex-plicitly mention the issue, and fewer still set clearboundaries for their study by explicitly stating whichinterpretation(s) is assumed. The three interpreta-tions point to phenomena that are distinct from eachother in terms of units of analysis and presumedfunction of the business model. As Tables 1–3 show,the appropriate units of analysis are (1) the organi-zations themselves and their network of exchangepartners, (2) individual and collective minds anddiscourse, and (3) the model itself and the subjectof modeling, respectively. Functions range from (1)having an impact on organizational performance,to (2) shaping opportunity recognition and sharedidentity, to (3) isolating focal elements of an organi-zation’s activities and possibly their dynamics.Thus, more explicitly considering the differencesacross the three interpretations also has the potential



to inform scholars how to start building appropriatetheoretical foundations business model research asa function of which interpretation is assumed.

One way of solving the construct validity issuewould simply be tomore explicitly acknowledge theexistence of the three interpretations and make theeffort of explaining which view of the businessmodel is assumed in each study, perhaps adoptingdifferent terms that would support disambiguation,such as business models as attributes, businessmodels as cognitive schema, and businessmodels asformal conceptual representations. This could alsorepresent an opportunity for starting to investigatethe nature of the relationship between the three in-terpretations and the different meanings of the word“model” (e.g., a model being understood as (1) thecore logic with which an organization achieves itsgoals, (2) the dominant logic capturing how a firm isbelieved to operate, and (3) as a scaled-down simpli-fied formal conceptual representation, respectively).

To conclude this section, not only do scholarsnot always share the same interpretation of theterm “business models” (as seen earlier), but eventhose attempting to create formal conceptualiza-tions (models) disagree on how to represent themwhen it comes to business models. This lack ofagreement andunderstanding is an essential part ofthe relationship between business models andstrategy, to which we now turn.

THE RELATIONSHIP BETWEEN BUSINESSMODELS AND STRATEGY: THE DEBATE

The fascinating debate about the relationship be-tween business models and strategy has been char-acterized by two main positions. On the one hand,skeptics suggest that business model research isjust “old wine in a new bottle,” fundamentallymoving under a new umbrella term, questions andconcerns—and perhaps even insights—that havehistorically been the cornerstones of research instrategy, thus adding very little to our knowledge(e.g., see Porter, 2001). Businessmodel research addsnothing to our understanding of strategy, and nonewtheories, beyond established ones such as the posi-tioning view or the RBV need to be developed toexplore business model questions. The general con-clusion by those sharing this perspective is thatbusiness model research should be abandoned, or atthe very least, that researchers should stop referringto it as a separate literature stream.

On the other hand, supporters of the businessmodel as a separate field do acknowledge an overlap

with strategy but also suggest that business modelsand strategy are distinct constructs, warranting at-tention both in isolation as well as jointly (Zott &Amit, 2008). Their general position is that the busi-ness model allows asking (and hopefully answering)new research questions that have historically beenoverlooked by what many would consider “morenormal theorizing in strategy” (Priem, 2007).According to this view, research on the businessmodel has the potential to shed light on importantissues that have remained relatively unexplored,adding to existing knowledge (Amit & Zott, 2015;McGrath, 2010; Teece, 2010).Who is right?Whilewewill eventually come down on the side of businessmodel research adding value across multiple fields,including strategy, let us explore both sides (whichwe call “perspectives” below) in this debate.

Business Models Are Strategy in “New Bottles”

Our first line of inquiry is the research streamsupporting the argument that business models arenew bottles used to peddle strategy concepts. Thisresearch stream has been characterized by effortsto shed light on the role of business models inexplainingvaluecaptured relative to competition—astaple of strategy research. For example, Casadesus-Masanell and Ricart (2007, 2010), who see the busi-nessmodel through a strategy lens, suggest that firmscompete through business models. Other studiessharing a paradigmatically similar perspective onvalue capture have focused on the role of the busi-ness models in explaining the sustainability of first-mover advantages in relationship to the businessmodels adopted by late entrants (Markides & Sosa,2013; Casadesus-Masanell & Zhu, 2013), the dy-namics associated with competing through businessmodels (Casadesus-Masanell & Ricart, 2007) orthose related to adopting more than one businessmodel simultaneously (Markides, 2013; Markides &Charitou, 2004).

What is common among these studies is the em-phasis on the businessmodel as ameans to compete,whether in existing markets or in emerging ones.This perspective tends to ignore themechanismsanddynamics through which value is created in the firstplace. Value is often assumed to be exogenous(e.g., the size of the market is given). The managerialtask, and the role of the business model, is reducedto a focus on capturing a part of that value relative tothe competition. McGrath (2010) suggests that thisperspective may resonate well with traditional strat-egy ideas—in particular those influenced by the


positioning school or the capability view—for anadditional reason: a static perspective on strategyand markets.

The positioning school has long proposed that whatfirms need to do to succeed is to find a truly differ-entiated and defensible position within an industryand execute relentlessly against that position. Thecapability school argues instead that advantage stemsfrom having difficult-to-copy resources that are oftenbuilt up over longperiodsof time.Thedilemma is thatneither of these perspectives give management muchlatitude for action. Having selected a position in anindustry, it is hard to pluck a firm out and move it tosome other position; similarly, after a firm has spenttime and effort assembling a compelling resourceendowment, order of magnitude shifts are quite dif-ficult. (McGrath, 2010: 248)

That is, even when there is some focus on valuecreated for the customer, in this perspective, all thatcompanies have to do is to create incrementally morevalue than the competition (e.g., see Normann &Ramirez, 1993, 1994). The essence of capturing valuerelative to rivals is to have a competitive advantage.Competitive advantage rests on uniqueness. Accord-ing to Porter (1996), “a company can outperform itsrivals only if it can establish a difference that it canpreserve. Itmust deliver greater value to the customeror create comparable value at lower cost, or do both”(p. 62). According to Teece (2010), this perspectivefurther assumes that “if value is delivered, customerswill always pay for it” (p. 172). There is no need toworry about the creation of radically new, paradig-matically different value (value is already existent inmarkets, as aggregate demand), nor about convincingcustomers to pay for it. The fundamental problem isthat of defending against competitors and crafting theright business model is one way to do that.

The conceptual overlap with the mainstreamstrategic management field is evident not only in thefocus on competition but also in the convergence onembracing activity systems (Porter, 1996; Zott &Amit, 2010) and the use of activity systems to ex-plain the foundations of competitive advantage.Casadesus-Masanell and Ricart (2010) have pointedto the set of interdependent choices to explain busi-ness models, while Zott and Amit (2010) have moreexplicitly advocated activity systems. The relation-ship between managerial choices and bundles ofactivities is clear in that, to be implemented, choicesrequire the firm to perform certain activities. Thisview is conceptually similarwith the activity-systemview in strategy. In the words of Porter,

ultimately, all the differences between companies incost or price derive from the hundreds of activitiesrequired to create, produce, sell, and deliver theirproducts and services. [. . .] Cost is generated in per-forming activities. Similarly, differentiation arisesfrom both the choice of activities and how they areperformed. Activities, then, are the basic unit ofcompetitive advantage. Overall companies’ advan-tage or disadvantage results from all a company’s ac-tivities, not only a few. (1996: 62)

The activity system view suggests that in the sameway in which activities can be configured to achievecost leadership or differentiation, a business model—or more specifically, the architectural logic of itsactivity system (Zott & Amit, 2010)—can be de-signed around efficiency or novelty design themes(Zott & Amit, 2007, 2008). These considerationshighlight the possibility of the existence of a strongconceptual overlap between cost leadership and ef-ficiency on one hand, and differentiation and noveltyon the other; both pairs represent value capturemechanisms and both point to activity systems. Inthis sense, business models—or at least this partic-ular perspective on it—and strategy—or at leasta theory of it—may share a similar perspective onvalue capture, so similar that the business modelmay appear to be superfluous.

And yet, even in this case, things may not be thatstraightforward. As an example, compare the low-cost carriers Southwest Airlines and Ryanair. Whilethey appear to manifest similar activity systemarchitectures—both of them revolving around ef-ficiency design (cost leadership)—many peoplewould note that there are considerable differences intheir sources of revenues (e.g., Ryanair’s revenuesharing agreements with concessions at minor air-ports if the number of passengers exceed a target).This, and similar considerations, raise some impor-tant questions: how and where are revenues col-lected?Would asking (and answering) questions suchas these help better understand how companies do orcould capture value above their costs? Our reviewreveals that questions such as these have been at thecenter of a second perspective on business models—one that sees business models as a separate field.

Business Models as a Separate Field from Strategy

This second perspective has progressivelyemerged out of two related considerations. First,scholars have slowly started to accept that it is farfrom clear that if value is delivered to customers,customers will pay for it. According to Teece (2010),


this is evident if one looks at “Internet companies,where the creation of revenue streams is often mostperplexing because of customer expectations thatbasic services should be free. Figuring out how toearn revenues (i.e., capture value) from the provisionof information to users/customers is a key (but notthe only) element of business model design in theinformation sector” (p. 172). And yet, traditionalstrategy research has not tackled these issues in aserious way.

In contrast, business model scholars have lookedto the business model in trying to answer questionsabout how to capture value from customers (i.e.,“monetize” value), which is how to craft one ormultiple revenue streams. For example, Chesbroughand Rosenbloom (2002) have suggested that in-novative technologies and ideas, per se, have noeconomic value, but only latent value. It is thefunction of the business model to realize part of thatvalue by connecting these technologies and ideas tothe realization of economic output in markets. Insome instances, earning revenues remains complex.The online news industry, for example, has not yetfound a dominant business model to earn revenues(Cozzolino & Giarratana, 2014). In 2015, Whatsapp,the provider of a very successful messenger servicefor smartphones, declared that it would pivot itsbusiness model and move away from trying tomonetize by means of micropayments (0.89 USDa year). While during the old industrial economy,the essence of having a business model may wellhave been “finding a customer,” today getting paidfor creating value—even in the absence of marketexternalities—seems to be less than trivial.

Second, scholars realized that companies such asNespresso, Ikea, and Southwest Airlines—just tomention some recurrent iconic and very successfulcases—did not simply focus on capturing a part ofsomeexogenously givenvalue.They rather reinventedvalue (Normann & Ramirez, 1993), often beyond tra-ditional market boundaries, creating new marketswhere none existed before (Kim & Mauborgne, 2005).These phenomena raise questions that are difficult toanswer within the boundaries of mainstream strategyideas and theories. How is value reinvented—that is,what do firms do when they reinvent value? Morebroadly, how is value created in the first place (Priem,2007)?

In essence, in this second perspective, businessmodels and strategy are different in at least threefundamental ways. First, in business model re-search, value creation comes first—the businessmodel starts by creating value for the customer or

user, or even multiple exchange partners or stake-holders (e.g., see Tantalo & Priem, 2014), and “con-structs the model around delivering that value”(Chesbrough & Rosenbloom, 2002: 535). Capturingvalue is typically understood as finding out how toearn revenues (monetization), or perhaps profits orwhat Lepak et al. (2007) referred to as exchangevalue. There may be some attention to competition,but emphasis upon value captured and economicsustainability is much stronger in the realm of strat-egy (Demil et al., 2015).

A second difference between businessmodels andstrategy according to this perspective lies in thecentrality of value created for the customer or evenall the firm’s exchange partners (Amit & Zott, 2001)versus creation of value for shareholders. Customersand complementors can create value themselves—afact often ignored in supply-side-oriented strategytheories. For one thing, customers and comple-mentors can create value simply by participating, asin multisided networks or platforms (Cennamo &Santalo, 2013; Parker & Van Alstyne, 2005). Themore members that there are on each side, the morevaluable that the network becomes to the memberson the other side(s). For the other, customers andcomplementors can also create value when they,rather than manufacturers or platform owners, in-novate (Bogers, Afuah, & Bastian, 2010; von Hippel,2005).

A third difference between business models andstrategy in this perspective lies in the state ofknowledge held by the firm, its customers, and thirdparties. The business model construct consciouslyassumes that this knowledge is cognitively limitedand biased. “The initial business model is more ofa proto-strategy, an initial hypothesis for how to de-liver value to the customer, than it is a fully elabo-rated and defined plan of action. It results lessfrom carefully calculated choices from a diversemenu of well understood alternatives and more froma process of sequential adaptation to new informationand possibilities” (Chesbrough & Rosenbloom,2002: 550). Experimentation, rather than position-ing or controlling critical resources becomes critical(McGrath, 2010).

In this case, proponents of the business modelperspective argue that studying business modelsmay introducenuances that have escaped traditionalstrategy analysis. For example, Zott and Amit (2007,2008) have suggested that by virtue of its unit ofanalysis, which is nested between the firm andthe network, comprising both (Zott et al., 2011),the business model may broaden the traditional


boundaries of mainstream theories of value creationand capture (Dyer & Singh, 1998; Gulati, Nohria, &Zaheer, 2000; Normann, 2001). The business modelemphasizes the importance of network plays andmechanisms such as complementarity and lock-ineffects in fully explaining superior performance.However, these arguments are not usually convinc-ing enough for strategy purists.

We think this is a potentially fruitful line of inquirythat has the potential to enrich traditional theorizingin strategy, which, we argue, has been characterizedby an overemphasis on value capture that may havecome at the expense of theorizing on value creation.This sentiment is shared by other scholars who donot necessarily focus on the business model even ifthey often refer to it. For example, Adner andKapoor(2010), working on business ecosystems, have sug-gested that strategy research “has tended to assumeaway the question of how value is created in the firstplace” (p. 309). Similarly,Nickerson, Silverman, andZenger (2007) note that “the vast majority of strategyresearch had focused on value capture and under-emphasized the challenges of crafting organiza-tions and strategies that continuously create value”(p. 211).

Priem and colleagues (Priem, 2007; Priem &Butler, 2001; Priem, Butler, & Li, 2013) have pub-lished a number of influential papers introducingand, subsequently, elaborating a demand-side per-spective on strategy and the notion of consumerbenefit experienced (CBE) view of strategy. Whetherthese sub-streams—for example, research in eco-systems, the demand-side perspective in strategy,and the business model—will progressively con-verge and give birth to a new line of inquiry in and ofitself andwhether the latter, the businessmodel, willplay a central or a peripheral role in helping theo-rizing onvalue creation is difficult to predict.At leastfor the moment, employing the business modelconstruct may represent a fruitful avenue to betterunderstand value creation over and above what isnormally studied in the mainstream of strategicmanagement.

WHY THE DISAGREEMENTS ABOUT THERELATIONSHIP BETWEEN BUSINESS MODELS

AND STRATEGY?

These disagreements about the relationship be-tween business models and strategy raise aninteresting question: What is behind these in-consistencies? In what follows, we argue that thesedisagreements and differences are rooted in the fact

that business models may be challenging the as-sumptions of traditional theories of value creationand value capture. These theories assume awayvalue creation in the demand side, seeing valuecreation as a supply-side phenomenon in whichvalue is created solely byproducers (Priem, 2007)—apoint of view that contrasts with the business modelperspective inwhich value can also be created on thedemand side by customers and other members oftheir ecosystems. Thus, value creation and capturearguments that are rooted in these traditional theo-ries are not always going to be consistent with thoserooted in the business model perspective. What arethese assumptions that assume away demand-sidevalue creation? How do they underpin the dis-agreements in the relationship between businessmodels and strategy?

Assumptions Being Challenged by Business Models

The research that theorizes about value creationand capture has been dominated by two theoreticalperspectives: the positioning view and the RBV.These two traditional theories of value creation andcapture make four assumptions—often implicitly—that are being challenged by business models re-search: (1) firms and their customers have perfectinformation, (2) firms and their customers have un-limited cognitive abilities and act independently, (3)there are no externalities, and (4) competitive ad-vantage is single sourced, either position based onlyor resource based only, but not both (Table 4). Let usbriefly discuss each.

Firms and customers have perfect information.In contrast to the positioning view and RBV theo-rizing (e.g., Barney, 1991; Foss & Knudsen, 2003;Peteraf, 1993; Porter, 1980, 1996), business modelresearch often recognizes the fact that firms and theircustomers do not have perfect information. This isconsistent with the idea that firms and their cus-tomers often have information gaps that they wouldlike to fill, or work around, when making decisionsabout products and their needs (Simon, 1955, 1987).For example, during the dot.com boom, it was notalways clear what customers wanted, how to deliverit, or which groups of customers, if any, would payfor the value delivered. Thus, many businessmodelsare designed to deal with these information gaps andtheir ramifications (Pauwels & Weiss, 2008). For ex-ample, customers often do not have enough in-formation about products and the trustworthinessof the firms that offer the products, and vice versa.Thus,onlineauctionbusinessmodelsmayincorporate


http://dot.com

rating systems in which sellers and buyers rate eachother to build ratings that can serve as signals oftrustworthiness (Johnson, 2010). Customers are ef-fectively creating value by contributing to buildingthe rating systems that reduce information asym-metries, thereby increasing the value that customersperceive. Or a smartphone company may decide touse a platform crowdsourcing business model todevelop the apps that customers want (Johnson,2010). That is, rather than develop the apps in-ternally or contract their development to designateddevelopers, the smartphone companymay decide tooutsource app development—in the form of an opencall—to anyone anywhere in the world that wants toself-select and develop the apps with no ex antecontract (Afuah & Tucci, 2012; Jeppesen & Lakhani,2010; Poetz & Schreier, 2012; Saebi & Foss, 2015).Again, value is being created by someone other thanthe producer.

Firms and their customers have unlimited cog-nitive abilities. In contrast to the positioning viewand RBV (Barney, 1991; Foss & Foss, 2005; Peteraf,1993; Porter, 1985, 1996), business model researchoften assumes that firms and their customers arecognitively limited. When buying a product, a cus-tomer with unlimited cognitive ability can, for ex-ample, determine the net present value of all futurebenefits that will accrue to the customer from buyingthe product (Priem, 2007). Thus,whether a customerpurchases or leases a product should not mattersince the customer is cognitively endowed enough todetermine, ex ante, what future benefits will be andhow to discount them to the present. However, whencustomers are cognitively limited, they simply donot have the foresight to, for example, accuratelydetermine the net present value of future benefitsfrom buying a product today (Simon, 1955, 1987).

That means cognitively limited customers may pre-fer leasing a product rather than purchasing it,making a lease business model more profitable forthe producer than a purchase one. That was the casewith Xerox when it decided to lease its Xerox 914copier rather than offer it for purchase.

No externalities. The third assumption made bytraditional theories (RBV and the positioning view)that is being challenged by business model researchis that there are no externalities—that is, these the-ories assume that interactions between a focal firmand a customer do not impose any benefits or costson a third party. This assumption does not holdwithproducts or services that exhibit network effects.When a user buys a product that exhibits networkeffects, it is increasing the value that other usersperceive in the product—it is creating value on thedemand side. Many business models in the digitalera are rooted in products/services or technologiesthat exhibit network effects. For example, in a plat-form business model, the owner of the platformcharges the price-sensitive but important side littleor nothing while charging the less price-sensitiveside a higher price (Cennamo&Santalo, 2013; Parker& Van Alstyne, 2005). The so-called advertisingbusiness model used by Google, Facebook, and nu-merous others exploits network effects.

Competitive advantage is single sourced andsupply side only. The fourth assumption that ismade in traditional theories of value creation andcapture is that competitive advantage is rooted ina single source—in resources only, or a system ofactivities only, but not both. The positioning viewhypothesizes that a firm’s competitive advantagecomes from having a system of activities that is dif-ficult to imitate, and not from a single core compe-tence or resource (Porter, 1996; Rivkin, 2000; Rivkin

TABLE 4Traditional Theories versus Business Models

Traditional Theories(RBV and Positioning View) Business Models

Behavioral assumptionsPerfect information Assumed Not necessarily assumedUnlimited cognitive abilities Assumed Not necessarily assumedNo externalities Assumed Not necessarily assumedSingle source of competitive advantage Assumed Not necessarily assumed

Value creation and capture assumptionsValue creation Supply side only Can be demand side and/or supply sideValue capture Supply side Can be demand side and/or supply side

(monetization)Sources of competitive advantage Resource based or activities based

on the supply side onlyCan be resource based and/or activitiesbased on the demand and/or supply sides


& Siggelkow, 2003). RBV, in turn, hypothesizes thatcompetitive advantage comes from having valuable,rare, inimitable, and nonsubstitutable resources(Amit & Schoemaker, 1993; Barney, 1991; Mahoney& Pandian, 1992; Peteraf, 1993; Sirmon, Hitt, &Ireland, 2007). In business model research, compet-itive advantage can be from both resources and sys-tems of activities, on both the demand side andsupply side. The business model perspective wouldsuggest that Google’s competitive advantage lies notjust in its intellectual property (including the lookand feel of its web pages), but also in the system ofactivities that it performs to deliver value to its largenetworks of searchers, advertisers, and app de-velopers (Afuah, 2014).

Overall, the assumptions of traditional theorieshave restricted value creation to the supply sidewhere value is created exclusively by producers. Incontrast, business model research often implicitlyrelaxes these assumptions so that value is creatednot only by producers, but also by customers andother members of their value-creation ecosystems.Additionally, competitive advantage in the busi-ness model perspective can rest not only in thedemand and supply sides, but it can also be re-source based and position based within each ofthese sides.

So how does the fact that business models chal-lenge the assumptions of traditional theories of valuecreation and capture explain scholarly disagreementabout the relationship between strategy andbusinessmodels? On the one hand, because many value-creation activities in the business model perspectivecan be derived from traditional strategy theories ofvalue creation and capture by relaxing their ratherrestrictive assumptions, some scholarsmay see busi-ness models as a natural extension of strategy. Afterall, Barney (1991) and Peteraf (1993) relaxed thehomogeneity of resources assumption of perfectcompetition to weave the logic for their RBV theory,whileMichael Porter’s positioning view—especiallythe five forces part of it—was rooted in relaxing se-lect assumptions of the perfect competitionmodel ofeconomics, including the no entry or exit barriers,large number of firms and buyers, firms and buyersbeing price takers, and product homogeneity as-sumptions. Witness also the relaxation of perfectcompetition’s ultra-rationality assumption as afoundation for transaction cost economics (TCE)(Williamson, 1985, 2002), and the emergence of the in-formation economics field from relaxing the perfect in-formation assumption of perfect competition (Akerlof,1970; Spence, 1973; Stigler, 1961).

On the other hand, business model scholars whofocus their research primarily on value creation andcapture on the demand side, and neglect the researchthat theorized about value creation before the dot.comboomand the popularity of businessmodels, are likelyto miss out on the link between the assumptions oftraditional theories of value creation and businessmodels. They are likely to miss out on the fact thatthe business model perspective can be obtained byrelaxing the assumptions of traditional strategytheories of value creation and capture. Effectively,business model scholars who neglect earlier valuecreation and capture research are likely to think ofbusiness models as a new field, rather than an ex-tension of strategy.

FUTURE RESEARCH DIRECTIONS

In this section, we examine how the core businessmodel idea has helped or could help scholars ex-plore meaningful questions in four fields: Strategicmanagement, TIM, strategic corporate entrepre-neurship, and sustainability. In each case, we ex-amine some of the central research questions aboutvalue creation and capture in the field before theconcept of business models was introduced to thefield, how the concept has helped scholars to explorethese questions in an effort tomove the field forward,and future research directions.

Strategic Management

A central question in strategic management hasbeen: What determines performance differences be-tween firms—that is, what makes some firms moreprofitable than others, and how sustainable is suchan advantage (e.g., Besanko, Dranove, Shanley, &Schaefer, 2009; Miller & Cardinal, 1994; Rumelt &Teece, 1994)? Some of the earliest research that ex-plored this question focused on the role of valuecapture, not value creation, and featured both thepositioning view and RBV in explaining perfor-mance differences (Barney, 1991; Porter, 1980).Following criticism by other scholars (e.g., Nickersonet al., 2007; Priem & Butler, 2001; Teece, Pisano, &Shuen, 1997), proponents of the positioning viewand RBV added more value-creation elements totheir earlier models (Barney, 2001; Peteraf &Barney, 2003; Porter, 1980, 1985, 1996). Impor-tantly, as we saw earlier, the value-creation effortsthat led to superior performance in these modelswere supply side—that is, the producer with thesystem of activities or resources was the sole


creator of the value that enabled it to outperformits rivals.

Effectively, competitive advantage from networkeffects and other demand-side factors was assumedaway by these theories. That was until the advent ofbusiness models that emphasized value creation onthe demand side and multi sources of competitiveadvantage.Adopting the businessmodel perspectivemeant performance differences could be explainednot only by value creation and capture in the supplyside but also value creation and capture in the de-mand side. It also meant that competitive advantagecould have multiple sources—it could be both re-source based and/or activities based, in both thedemand and supply slides.

Future strategic management research questionscould now include How much more does the busi-ness model perspective explain performance differ-ences than traditional theories of value creation andcapture? How much more does a firm’s ecosystemmatter in explaining why some firms perform betterthan others? For example, it has been argued thatfirm performance depends on both firm-specificfactors—such as valuable rare resources and difficult-to-imitate systems of activities—and industry-specificfactors (Besanko et al., 2009; McGahan & Porter,1997). Does industry matter even more (or less) inthe business model perspective, now that valuecreation is both supply side and demand side?Which competitive advantages are more sustain-able: Those that are rooted in the supply side or thosein the demand side?

Technology and Innovation Management

A central question in TIM has been: Why are somefirms more successful at technological innovationthan others? Some of the earliest influential researchtoexplore thisquestion focusedonhowtheuseofnewknowledge—especially technological knowledge—tooffer customers new products that they want, couldinfluence the success of a firm in meeting its goals(see Brown & Eisenhardt, 1995 for a review; Allen,1984; Cardinal, 2001; Henderson & Clark, 1990;King & Tucci, 2002; Tushman & Anderson, 1986).That research also demonstrated that customers andsuppliers, not just producers, could also innovate—invent new products or services that producerscould not (Bogers et al., 2010; von Hippel, 2005). Inany case, these early research endeavors were silentabout the role of value capture in the face of tech-nological innovation. That was until Teece’s (1986)argument that valuable tightly held complementary

assets can be critical to capturing value from tech-nological innovation, and therefore to competitiveadvantage.

The advent of business model research addeda new dimension to capturing value from techno-logical innovation, beyond the use of complemen-tary assets. Witness Netflix’s use of a subscriptionbusiness model to capture value from its Internet-based video rental services (Afuah, 2014). The ideathat a simple business model innovation—such asusing a subscription model rather than a pay andtake along model—could be the difference betweena thriving movie rental business and a languishingone is fascinating. As this example illustrates, thebusiness model perspective opens up opportunitiesfor exploring interesting questions in TIM. Ratherthan focusing on the impact of technological in-novation on the producer alone, in consonance withtraditional theories of value creation and capture,scholars cannowexplore the impact of technologicalinnovation on the whole value creation and captureecosystem. For example, rather than focusing onwhether a technological innovation is radical, in-cremental, architectural, or competence destroyingto the producer (Henderson & Clark, 1990; Tushman& Anderson, 1986), scholars can also explore theimpact of the technological innovation on the eco-system that includes both the demand- and supply-side actors (Afuah, 2000; Afuah & Bahram, 1995).

This approach can enable scholars to more effec-tively explore basic questions such asWhenandwhyare business model innovations likely to be moreprofitable than the technological innovations thatthey complement (IBM, 2006, 2015)? For example,does the profitability advantage of a business modelinnovation over a complementary technological in-novation depend on the type of technologicalinnovation—on whether the technological in-novation is incremental, architectural, modular,radical, competence enhancing, or competencedestroying (Henderson & Clark, 1990; Tushman &Anderson, 1986)? Relating to the three interpreta-tions, are certain cognitive/linguistic schema morelikely to allow managers to overcome radical tech-nological change? How can formal modeling be usedto inform technological decisions leading to businessmodel reconfiguration?

Strategic Corporate Entrepreneurship

Strategic entrepreneurship can be broadly definedas the domain of studies emerging from the conflu-ence of strategic management and entrepreneurship


research, in which the focus is on creating new de-mandwhere none exists—in so-called “blue oceans”(Demil et al., 2015; Kim &Mauborgne, 2005)—ratherthan battling for existing demand in the same exist-ing industries (Hitt & Ireland, 2000; McGrath &MacMillan, 2000; Thompson & MacMillan, 2010).This newdemand is generated through thediscoveryof new opportunities, the creation of the opportuni-ties, or the exploitation of existing ones in newways(e.g., Alvarez & Barney, 2007; Ireland et al., 2001;Shah&Tripsas, 2007; Shane&Venkataraman, 2000).Thus, a core research question in the area is Howdoes one create new demand where none exists yet,and attain one’s goals?

Scholars interested in strategic entrepreneurshiphave pointed to the business model to explain howcompanies create value in the first place (Priem,2007). Research that draws on traditional theories ofvalue creationwould suggest that the entrepreneur isthe sole creator of this new demand where none ex-ists. However, as discussed earlier, the businessmodel perspective suggests that new demand canalso be created by customers and members of theirecosystems. The reasons why scholars have pointedto the business model is that to reinvent value forcustomers (a more radical and potentially promisingact than incrementally adding to the value alreadyoffered to customers under existing offerings, cf.Normann and Ramirez, 1993; Hamel, 2000) firmsshould rethink their business models and/or createnew ones.

This raises even more interesting questions.Which opportunities are more likely to create newdemand where none presently exists: Those whereonly the entrepreneur is the sole creator of value orthose where customers and members of their eco-systems are cocreators? When is an entrepreneur orincumbent more likely to exploit opportunities inthe demand side compared to those in the supplyside? How do cognitive schema and narratives ofentrepreneurs versus intrapreneurs help them craftdemand-side business models? When are incum-bents more likely to be a problem for entrepreneurs:When the opportunities being exploited are in thedemand side or supply side? What are the dynamicsof entrepreneurs’ business model reactions to in-cumbent countermoves?

Sustainability

A central question in sustainability research hasbeen: How can organizations create value in environ-mental, social, AND economic terms? Sustainability

does not necessarily refer to sustainable competitiveadvantage or similar concepts from the strategy lex-icon. Rather it broadly refers to the integration ofsocial andenvironmental concerns in firms’ strategy,operations, and business models, and the in-corporation of a balance among economic, social,and environmental value creation so as to con-tribute to sustainable development (seeNidumolu,Prahalad, & Rangaswami, 2009; United NationsIndustrial Development Organization, 2013; WorldBusiness Council for Sustainable Development,2012). At the organizational level, the vision ofsustainable development has led to concepts suchas sustainability management, corporate sustain-ability (Dyllick & Hockerts, 2002; Schaltegger &Burritt, 2005), sustainability innovation and sustain-able entrepreneurship (Schaltegger & Wagner, 2011),socialbusiness (Yunus,Moingeon,&Lehmann-Ortega,2010) and, more recently, the notion of shared value(Porter & Kramer, 2011).

In a recent extensive report based on a system-atic review of business models for sustainability,Ludeke-Freund et al. (2016) note that businessmodels for sustainability differ from traditional onesin at least three fundamental ways. First, they as-sume a view of business as an engine of societalprogress. In other words, the concept of sustainabil-ity recognizes that societal contributions of com-panies are not limited to paying taxes, creatingemployment, or devising useful products (all ofwhich fall within the paradigm of neoclassical eco-nomic theory and related lines of inquiry). Businessalso has the potential, resources, and capabilities todevelop innovative solutions that turn environ-mental and social issues (read: problems) into mar-ket opportunities. Second, they include a broadernotion of value—from primarily economic to alsosocial and environmental. The general idea is thatthe sustainability paradigm offers an extended in-terpretation of value creation resembling a triplebottom line approach integrating people, planet, andprofit (Elkington, 1998). Third, they undertake andoffer amultistakeholder, system-level perspective onvalue creation—from one predominantly centeredon customers and shareholders extended to embracemore of the firm’s stakeholders.

Future research in business models for sustain-ability may revolve around challenging some of theassumptions behind the more classical discussionsof business models, such as measuring value crea-tion for all stakeholders, and distribution of benefits(value capture) from the organization’s work, in-cluding demand-side value creation/capture and


shared value (e.g., Upward & Jones, 2015). Otherquestionsmay include the following:Howare formalmodels/components different when modeling busi-ness with a sustainability lens? What narratives areused to communicate sustainable business modelsthroughout large organizations and which compo-nents of a business model are reinforced by sustain-able business model narratives? How can formalmodels be used to model the dynamics of industrytransformation toward higher levels of sustainabilitywhen instigated by new business models in one firmor one sector?

SUMMARY AND CONCLUSIONS

In this article, we have argued that technologicaland other trends have led to organizations exper-imenting with new ways of achieving their goals.New business models that were unheard of, or veryrare, decades ago are a great source of wealth andopportunity in today’s economy, but keeping a con-sistent understanding among scholars studying thistopic has proved challenging. The very term “busi-ness model” itself along with its often-used de-scriptors “value creation” and “value capture” havemorphed in meaning over the years, causing confu-sion in the literature. One confusion is based on es-sentially three major interpretations of the term“business model”: as an attribute of a real organi-zation, a cognitive/linguistic schema, or a formalconceptual representation of an organization’sactivities.Another disagreement is basedonwhetherscholars recognize that “value creation” and “valuecapture” have also broadened, which would recog-nize the validity or importance of the businessmodelperspective.

As discussed earlier, one way of solving the con-struct validity problem associated with the threeinterpretations is tomore explicitly acknowledge theexistence of these interpretations and explain whichinterpretation is assumed in each study. Assump-tions should also be made more explicit: Formallyrepresenting, a business model involves several de-cisions related to the scale, content, and semanticsadopted, and evaluating and comparing differentformal representations requires that the assumptionsand the rationale behind those decisions be ex-plicitly stated. This is rarely the case in businessmodel papers. Almost no paper among the ones wereviewed (with rare exceptions such as Casadesus-Masanell &Ricart, 2010) proposes a clear elucidationof the assumptions and rationale behind the simpli-fications made. Conceptualization of the business

model appears to be similar (the subject matter re-mains the firm and its ways of doing business in-dependentlyof thechoicesmade inrepresenting it) andyet different, but the sources of difference are not for-mally discussed (and, perhaps, very difficult to recog-nize). Even readers of the businessmodel literature thataccept the existence of several possible ways of repre-senting business models are left without the informa-tion necessary to understand the relativemerits of eachformal model and/or to “agree to disagree.”

Continuing onwith the broadening of themeaningof value creation and capture, until the dot.comboom of the mid-1990s, when many scholars wereintroduced to business models, many theoreticallyinteresting questions about value creation and cap-ture were rooted—often implicitly—in RBV or thepositioning view of strategic management (Barney &Arikan, 2001). These two dominant theoretical per-spectives assumedawaydemand-side value creationwhile insisting that competitive advantage was sin-gle sourced—that is, competitive advantage was ei-ther resource based only (Amit & Schoemaker, 1993;Barney, 1991; Mahoney & Pandian, 1992; Peteraf,1993) or activities based only (Porter, 1996; Rivkin,2000) but not both, and largely supply side driven.

In the real world of business models, the assump-tions of these traditional theories often do not hold.For example, in the Internet boom, network effectswere critical to doing business, and delivering valueto customers was no guarantee that one would getpaid for it. That is, value creation and capture on thedemand side were critical to doing business in theface of the Internet, and monetization of value couldnot be taken for granted. Effectively, in businessmodel research, the assumptions of these traditionaltheories are often relaxed to accommodate the re-alities of business that have changed. One resultof these differences in assumptions has been thedifferent opinions about the relationship betweenbusiness models and strategy, as we explored abovein the heated debate about the relationship betweenbusiness models and strategy.

We conclude this article with a simple questionfrom that debate. Are business models a new fielddistinct from strategy? We have argued that in thebusinessmodel perspective, exploring questions thatinvolve value creation has meant relaxing—oftenimplicitly—some of the assumptions of traditionalstrategic management theories, much the same asdifferent theoretical perspectives have been obtainedby relaxing the perfect competition model of neo-classical economics. Thus, to the extent that, inrelaxing the assumptions of a theoretical perspective,


http://dot.com

one can create a new field, the business model per-spective is a new field because it can be derived fromtraditional theoretical perspectives. And to the extentthat such relaxation only extends the breadth of thestrategy field, business models research is an exten-sion of strategy, not a new field. In any case, there isa lot tobegainedbypursuingvaluecreationandcapturefrombotha supply side anddemandside, andpursuingcompetitive advantage as both resource based and ac-tivities based from both the demand and supply sides.

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A CRITICAL ASSESSMENT OF BUSINESS MODEL RESEARCH1

LORENZO MASSA Ecole Polytechnique Fédérale de Lausanne

Vienna University of Economics and Business

CHRISTOPHER L. TUCCI Ecole Polytechnique Fédérale de Lausanne

ALLAN AFUAH

University of Michigan

APPENDIX: METHODOLOGY This appendix discusses the methods adopted at various stages in preparing this manuscript, i.e.,

the methods used in identifying and analyzing the relevant papers, in preparing tables and, in

general, in making sense of the literature.

Identification of relevant literature

In conducting this review, we first of all looked to collect the relevant papers and created

a large database of articles to consider. Using the Scopus2 database as a starting point, we

searched for articles in the social sciences subject areas containing the term “business model” in

their title, abstract or keywords, focusing on the years 2010-2015, thus extending Zott et al.’s

(2011) review of the literature published between 1975 and 2010. Our first search yielded 2754

results, of which 390 for 2010, 375 for 2011, 440 for 2012, 520 for 2013, 535 for 2014, and 492

for 2015, plus two articles already online but yet to be published in 2016. Because the business

model construct is still an emerging one, interesting insights could be found in outlets other than

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1

Massa, L. Tucci, C. & Afuah, A. 2017. A critical assessment of business model research. Academy of Management Annals. 11:73-104 doi:10.5465/annals.2014.0072 2 Scopus, a bibliographic database a covering nearly 22,000 titles from over 5,000 publishers, of which 20,000 are

peer-reviewed journals, has broad coverage of the social sciences.

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those traditionally considered by a management readership. Therefore, we decided to read all the

abstracts to identify potentially interesting outlets to include in our list of “leading” academic and

practitioner journals. On the basis of this initial scan, we decided to restrict our research to the

following leading academic and practitioner-oriented management journals in the area of

management. Our list includes: Academy of Management Journal (AMJ), Academy of

Management Review (AMR), Administrative Science Quarterly (ASQ), Journal of Management

(JOM), Journal of Management Studies (JMS), Management Science (MS), MIS Quarterly,

Organization Science (OS), Strategic Entrepreneurship Journal (SEJ), Strategic Management

Journal (SMJ), Industrial and Corporate Change (ICC), Research Policy, Long Range Planning

(LRP), Technovation, Journal of Business Ethics (JOBE), Journal of Cleaner Production,

Business and Society, Energy Policy, California Management Review (CMR), Harvard Business

Review (HBR), and MIT Sloan Management Review (MSM). Our query on Scopus with this

restriction resulted in 131 papers published between January 2010 and December 2015.

We included the following two criteria for conducting the search. First, to be included in

our review, an article must deal with the business model concept in a nontrivial and non-

marginal way. Second, an article also must refer to the business model as related to organizations

(as opposed to, e.g., economic cycles). As a result, we obtained 83 papers to be added to those

already considered by Zott et al. (2011), leading to a final sample of 216 business model papers.

How the papers were analyzed

To analyze the articles, in addition to reading them, we created a database in which we

organized important information we extracted from them:

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• Complete Reference

• Title

• Authors 1 to 5 (5 columns)

• Year of publication (from 1995 to 2016)

• Type of publication, differentiating between academic and practitioner journals

• Type of definition/conceptualizations of the business model (we divided between

Direct definition, Indirect definition (conceptualizations), definition provided by

Other and No Definition as further explained in Table M1).

• Definition / conceptualization (we report the original text in these cells)

• Functions (what a business model does – examples: “is source of disruptive

innovation”, “simplifies cognition”, “connects a technology to the realization of an

economic output in a market”).

• Research Question / Research objective

• Method. We differentiate among empirical (1.1 single case study, 1.2 multiple case

studies, 1.3 regression and large samples, 1.4 simulation, 1.5 other) and conceptual

(2.1 general conceptual, 2.2 theoretical work / theory development) (see M2)

• Empirical setting

• Notes (general comments / observations)

• And a number of additional columns (notably, Antecedents, mechanisms and

outcomes of business model design/innovation).

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TABLE M1 – Definition / conceptualization instructions

Definitions/ conceptualizations

Direct Indirect (conceptualization)

Other No Definition - conceptualization

Description

These are proper definitions of the business model that point to what a business model is This category includes definitions that are the result of significant elaboration of definitions provided by others.

This category comprises instances in which (i) there is no direct definition of what a business model is, and yet (ii) a conceptualization of the business is still offered, often referring to what a business model does or by pointing to the components it comprises.

This category comprises instances in which scholars employ a definition offered by somebody else. It includes definitions that only marginally modify other’s definitions, without elaboration.

This category comprises instances in which the term business model is employed in the paper without defining it.

Example(s)

Dubosson-Torbay, Osterwalder & Pigneur, 2002 “A business model is nothing else than the architecture of a firm and its network of partners for creating, marketing…”(p.7). Chesbrough & Rosenbloom, 2002 “The business model is the heuristic logic that connects technical potential with the realization of economic value” (p. 529). Morris, Schindehutte & Allen, 2005 “A business model is a concise representation of how an interrelated set of decision variables in the areas of…” (p.727)

Viscio & Pasternak, 1996. “A firm’s business model comprises five elements. A global core…” Alt & Zimmerman, 2001. “ […] we will distinguish six generic elements of the business model:” (p.5)” Mahadevan 2002. “A business model comprises three components:” Van Der Vorst, Van Dongen, Nouguier & Hilhorst, 2002 “The Business model provides a framework based on six elements:…”

e.g. Chesborugh, Ahern, Finn & Guerraz, 2006 and Björkdahl, 2009 adopt the definition by Chesbrough & Rosenbloom, 2002. Calia, Guerrini & Moura, 2007 and Andersen, Mathews & Rask, 2009 adopt the definition by Morris, Schindehutte & Allen, 2005

e.g. see Markides & Charitou, 2004. Thompson & MacMillan, 2010. McGrath, 2010

!

!

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TABLE M2 – METHODS adopted in papers

Method Type Notes

Empirical 1.1 single case study 1.2 multiple case studies 1.3 regression and large samples 1.4 simulation (computer) when combines with empirical data 1.5 other

Empirical papers may also include theory development (not vice-versa, a conceptual theory development paper does not include empirical work).

Conceptual 2.1 general conceptual 2.2 theoretical work

Theoretical work generally refers to work concerned with theory development and includes identifying propositions, developing hypothesis (which are not tested) or offering some type of causal explanation for a phenomenon, or computer simulation used for theory development.

!

Identification of the three interpretations of the term “business model”

We combined two complementary approaches and analyzed two types of data gathered

from the papers we reviewed. First, we focused on definitions / conceptualizations of the

business model and prepared Table M3, included at the end of this appendix, based on 216

articles, 89 of which provided 71 original definitions.

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Sometimes scholars state clearly how they understand a business model. For example,

definitions exist stating that the business model is a concise representation (Morris et al., 2005)

or a conceptual tool that allows expressing the business logic of a firm (Osterwalder et al., 2005),

clearly pointing to the perspective of a business model as a formal representation/model. In other

cases, the business model is defined as a heuristic, as in Chesbrough and Rosenbloom (2002)

(pointing to a cognitive schema).

Second, we also focused on analyzing the data relative to the functions of the business

model. In conducting this exercise, we understood the term “function(s)” as referring to

statements and verbs explaining what a business model does. The papers we review are rich in

terms of sentences of this type. Thus, focusing on functions complements the analysis of

definitions and can support revealing a scholar’s perspective on the business model. For

example, many scholars state that business models can be a source of disruptive innovation

(Hamel, 2000; Linder and Cantrell, 2000; Johnson et al., 2008), can influence firm performance

(Amit and Zott, 2001; Zott and Amit, 2007; 2008), their ability to react to new entrants

(Markides and Charitou, 2004), or to commercialize their technologies (Chesbrough and

Rosenbloom 2002; Chesbrough, 2010), just to mention some. These studies suggest an

interpretation of the business model as an attribute of real firms having material impact in

markets (in a few cases, as for example in Weill et al, 2011 or Zott and Amit, 2007, 2008

scholars have also attempted to measure that impact, another argument in support of a view of

the business model as an attribute of a real organization). In other cases, scholars say that the

business model “shapes” (decision making/opportunity recognition), “articulates,” “formulates”

(the intended strategy), overall pointing to the view of the business model as a cognitive /

linguistic schema (in other cases, e.g., as in Chesbrough and Rosenbloom, 2002, this is explicit).

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Yet, in other cases, scholars state that a business model “describes” or “formally represents”

something (typically how a firm operates, or is believed to operate), suggesting a view of the

business model as a formal representation (in many cases also offering a framework for the

business model, frequently obtained by pointing to the fundamental components as in

Osterwalder et al., 2005 or in Alt and Zimmerman, 2001).

These interpretations are not necessarily mutually exclusive. Many nested cases exist in

which an analysis of the function of the business model provides evidence of two or even three

interpretations simultaneously. For example, Chesbrough, 2010 states that the same technology,

combined with two different business models, will yield two different commercial results, thus

pointing to the business model as a vehicle for commercializing technologies (a view consistent

with the business model as an attribute of a real firm having material impact). However, he also

defines the business model as a “heuristic logic” (and discusses cognitive barriers related to the

business model as a cognitive representation). Clearly a heuristic logic (a cognitive schema or

mental model) cannot, alone, unlock the economic value potential of a technology and allow

execution of a market transaction; to do that, a firm needs something more than a cognitive

schema (e.g., activities, processes, delivery channels, etc.).

By working on functions and definitions of the business model we first identified

differences in the extent to which a business model has been understood as an attribute of a real

firm (what we originally called a “BUSINESS model”) or more as a model (what we originally

called a “business MODEL”). Progressive analysis led us to identify a difference in how the

business MODEL as a model has been understood (cognitive / linguistic schema vs. formal

conceptual representation). The fact that to bring to the surface the different interpretations of

the business model as a BUSINESS or as a MODEL (whether mental or formal) we needed to

! 8

analyze functions and the fact that within the same paper scholars have proposed functions

pointing to conceptually distinct interpretations of the term business model (as in Chesbrough,

2010), suggests that the sources of confusion on the term business model are not immediately

apparent and that, in many cases, they have not been recognized.

Using these three interpretations, we returned to our database of articles and selected the 40

most recent articles published in major journals through autumn 2016, plus three “classics,” all

of which are shown in the main manuscript in Tables 1-3. Tables 1-3 also provide a summary of

the unit of analysis of each of the three interpretations as well as some sample keywords, which

for the sake of brevity, are in a shorter list than what we describe above.

Definitions and components

Table M3 also includes the fundamental components (e.g., “a business model comprises

the following components…”) proposed by authors in 71 articles. In preparing these tables, we

did not include studies that merely adopt definitions / conceptualizations provided by others or

modified them marginally. We excluded studies that: (1) do not include definitions of the

business model and/or (2) for which is it not possible to identify any component or theme (e.g.,

“business models are models”). A list of such studies is available upon request.

Column three reports first order components or themes (to adopt the terminology employed

by Zott et al., 2011; Zott and Amit, 2010). These (first order components or themes) are

components of the business model that were either explicitly mentioned as components by the

respective authors, or have been inferred by us from the definitions/conceptualizations offered.

Table M3 shows 180 unique denominations for first order components we encountered

corresponding to the definitions and conceptualizations.

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TABLE M3 – Business model definitions / conceptualizations and first order components

The Table reports business model definitions and conceptualization, organized chronologically in ascending order. Definitions are statements that explain what a business model is. Conceptualizations are statements that indirectly define a business model by explaining what it does. Authors using prior definitions are reported between parentheses below the authors they directly refer to in column one. Column three reports first order components and themes. This table includes a total of 89 articles developing 71 definitions / conceptualizations of the business model.

Author(s) Definitions/conceptualizations First order components/themes

Viscio & Pasternack, 1996

A firm business model comprises five elements. A global core (responsible for key missions across the corporation and meant to add value to all of the other elements of the model); Business units; Service; Governance and Linkages (which tie the corporation together and cover issues such as organization, management processes and communications).

- Global core; - business units; - service; - governance and linkages.

Timmers, 1998

"An architecture of the product, service and information flows, including a description of the various business actors and their roles; A description of the potential benefits for the various business actors; A description of the sources of revenues” (p.4).

- Product; - service; - information flows; - business actors; - roles; - potential benefits (business actors); - sources of revenues.

Applegate, 2000

A business model comprises 3 components. A concept, which describes an opportunity; Capabilities, which define the resources needed to turn concept into reality; and value, which measures the return to investors and other stakeholders.

- Concept (an opportunity); - capabilities (resources); - value (return to investors and stakeholders).

! ! !

Hamel, 2000

“A Business Concept is a radical innovation that can lead to new customer value and change the rules of the industry”(p.66). The business concept is directly related to the business model since the latter is “nothing else that the business concept implemented in practice” (p.66).

- (New) customer value

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Linder and Cantrell, 2000 A business model […] “is the organization’s core logic for creating value” (p. 1).

- Value Creation

Mahadevan, 2000

The business model is a “unique blend of three streams that are critical to the business. These includes the value stream for the business partners and the buyers, the revenue stream and the logistical stream” (p.59)

- Value stream; - revenue stream; - logistical stream.

Stewart and Zhao, 2000 “A statement of how a firm will make money and sustain its profit stream over time” (p.290). - Profits

Alt & Zimmerman, 2001

“ […] we will distinguish six generic elements of the business model:” (p.5) - Mission (Goals, Vision, Value Proposition) - Structure (Actors and governance, Focus) - Processes (customer orientation, coordination mechanism) - Revenues (source of revenues, business logic) - Legal issues - Technology (both an enabler and constraint for IT-based business models)."

- Mission (goals, vision, value Proposition); - structure (Actors and governance, Focus); - processes (customer orientation, coordination mechanism); - revenues (source of revenues, business logic); - legal issues; - technology.

Amit & Zott, 2001 (Zott and Amit, 2007; 2008)

The business model depicts “the design of transaction content, structure, and governance so as to create value through the exploitation of business opportunities.” (p. 511).

- Transaction content - Transaction structure - Transaction governance - Value creation

Rayport & Jaworsky, 2001

The business model comprises four components: Value proposition or a value cluster for target customer; A market-space offering – which could be a product, service, information, or all three; A unique, defendable resource system; A financial model.

- Value proposition; - product, service, information (or all three); - resource system; - financial model.

11


Weill & Vitale, 2001

“A description of the roles and relationships among a firm’s consumers, customers, allies, and suppliers that identifies the major flows of product, information, and money, and the major benefits for participants” (p. 34 )

- Roles and relationships among stakeholders (consumers, customers, allies, suppliers); - flows of product; - flows of information; - flows of money; - major benefits for participants.

Dubosson-Torbay, Osterwalder & Pigneur, 2002

"A business model is nothing else than the architecture of a firm and its network of partners for creating, marketing and delivering value and relationship capital to one or several segments of customers in order to generate profitable and sustainable revenue streams” (p.7).

- Exchange partners; - value creation; - value delivery; - relationship capital; - customer segments; - revenue streams.

Van Der Vorst, Van Dongen, Nouguier & Hilhorst, 2002

Provide a framework based on six elements: Value proposition (underlying purpose for which the participants in the business web are working together to create competitive advantage) Roles of participants that are interacting with each other, exchanging information Processes supported by the e-business initiative) Functionalities that support processes Applications that enables functionalities Specific characteristics.

- Value proposition; - roles of participants; - information exchange; - processes; - functionalities; - applications; - specific characteristics.

Chesbrough & Rosenbloom, 2002 (Chesborugh, Ahern, Finn & Guerraz, 2006; Björkdahl, 2009)

The business model is “the heuristic logic that connects technical potential with the realization of economic value” (p. 529). An operational definition is offered by describing the functions of the business model." (p. 533-534)

- Value proposition; - market segment; - structure of the value chain; - cost structure and profit potential; - position of the firm within the value network; - competitive strategy.

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Magretta, 2002 (Ojala & Tyrväinene, 2006)

Business models are “stories that explain how enterprises work. A good business model answer Peter Drucker’s age-old questions: Who is the customer? And what does the customer value? It also answers the fundamental questions every manager must ask: How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost?” (p. 4).

- Customer; - value propositions; - how money are made; - value delivery; - costs.

Hedman & Kalling, 2003 (Eriksson, Kalling, Akesson & Fredberg, 2008)

"A business model includes the following causally related components: 1) customers, 2) competitors, 3) offering, 4) activities and organization, 5) resources, and 6) supply of factors and production inputs. To this it is added a longitudinal process component 7), to cover the dynamics of the business model over time and the cognitive and cultural constrains that managers have to cope with. ... We refer to it as the scope of management". (p. 52-53)

- Customers; - competitors; - offering; - activities and organization; - resources; - supply of factors and production inputs; - scope of management.

Mitchell & Coles, 2003

"A business model comprises the combined elements of "who", "what", "when", "why", "where", "how" and "how much" involved in providing customers and end users with products and services". (p. 16)

- "Who"; - "what"; - "when"; - "why"; - "where"; - "how"; - "how much"; - customers.

Osterwalder, 2004 (Abdelkafi, Täuscher, 2016; Gauthier and Gilomen, 2016)

"The business model is a representation of how a company buys and sells goods and services and earns money". (p. 9) "The business model is an abstract representation of the business logic of a company, an abstract comprehension of the way a company makes money, what it offers, to whom it offers this and how it can accomplish this". (p. 14)

- Business logic of a company; - the way the company makes money; - what the company offers; - to whom the company offers this; - how the company can accomplish this.

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Afuah, 2004

"A business model is a framework for making money. It is the set of activities which a firm performs, how it performs them, and when it performs them so as to offer its customers benefits they want and to earn a profit". (p.2)

- Activities (what, how, when); - customer benefits; - profit.

Bigliardi, Nosella & Verbano, 2005

The business model is operationalized by measuring the following components (variables): geographical location, age, size, level of newness of the biotechnologies used, level of R&D integration and level of industrialization/services of the sector.

- Geographical location; - age; - size; - level of newness of the biotechnologies used; - level of R&D integration; - level of industrialization/services of the sector.

Morris, Schindehutte & Allen, 2005 (Calia, Guerrini & Moura, 2007; Andersen, Mathews, Rask, 2009)

“A business model is a concise representation of how an interrelated set of decision variables in the areas of venture strategy, architecture, and economics are addressed to create sustainable competitive advantage in defined markets” (p. 727).

- Venture strategy; - architecture; - business economics; - competitive advantage; - markets.

Osterwalder, Pigneur & Tucci, 2005 (Pousttchi et al., 2009)

“A business model is a conceptual tool that contains a set of elements and their relationships and allows expressing the business logic of a specific firm. It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, in order to generate profitable and sustainable revenue streams.” (p. 10)

- Customer value; - financial consequences; - revenue stream; - customer segment(s); - value creation; - partners network.

Shafer, Smith & Linder, 2005 (Ammar, 2006; Dahan, et al., 2010; Roome and Louche, 2016)

"A business model is a representation of the underlining core logic and strategic choices for creating and capturing value within a value network ” (p. 202)

- Core logic; - strategic choices; - value capture; - value creation.

Govindarajan & Trimble, 2005

The business model defines "Who is the customer, What value is it offered to her, How is that value delivered?"

- Customer; - value proposition; - value delivery.

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Bonaccorsi, Giannangeli & Rossi, 2006 “The way product/services are sold to customers, cost is generated and income is produced” (p.1086).

- Product; - service; - cost; - income.

Brousseau & Penard, 2006

“A pattern of organizing exchanges and allocating various costs and revenue streams so that the production and exchange of goods and services becomes viable, in the sense of being self-sustainable on the basis of the income it generates.” (p. 82)

- Exchanges of goods and services; - cost streams; - revenue streams; - production.

Chesbrough, (a) 2007

“The functions of a business model are: 1. Articulate the value proposition, i.e. the value created for users by the offering. 2. Identify a market segment, i.e. the users to whom the offerings is useful and for what purpose. 3. Define the structure of the value chain required by the firm to create and distribute the offering, and determine the complementary assets needed to support the firm’s position in this chain. 4. Specify the revenue generation mechanism for the firm, and estimate the cost structure and potential of producing the offering, given the value proposition and value chain structure. 5. Describe the position of the firm within the value network, linking suppliers and customer, including identification of potential complementors and competitors. 6. Formulate the competitive strategy, by which the innovating firm will gain and hold advantage over rivals.” (Exhibit 1, p.13).

- Value proposition; - market segment; - structure of the value chain; - complementary assets; - revenue generation mechanism; - cost structure and potential of producing the offering; - position of the firm in the value network (suppliers, customers, complementors, competitors); - competitive strategy.

Chesbrough, (b) 2007

“In essence, a business model performs two important functions: it creates value, and it captures a portion of that value.” (p.22)

- Value Creation - Value Capture (competitive advantage).

Seelos & Mair, 2007 “A set of capabilities that is configured to enable value creation consistent with either economic or social strategic objectives.” (p. 53)

- Capabilities; - value creation; - social value creation.

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Al-Debei, El-Haddadeh & Avison, 2008 (Panagiotopoulos et al., 2012)

"This paper defines the BM as an abstract representation of an organization, be it conceptual, textual, and/or graphical, of all core interrelated architectural, co-operational and financial arrangements designed and developed by an organization presently and in the future, as well as all core products and/or services the organization offers, or will offer, based on these arrangements that are needed to achieve its strategic goals and objectives." (p. 372)

- Architectural arrangements (value architecture); - co-operational arrangements (value network); - financial arrangements (value finance).

Hurt, 2008 A business model is "the total architecture of the firm made up of a set of components and linkages, reflecting the firm’s choices.” (p. 1)

- The way of doing business; - the set of choices; - the set of consequences derived from those choices.

Richardson, 2008

"Business model can be seen as the conceptual and architectural implementation of a business strategy and as the foundation for the implementation of business processes. The business model framework is organized around the concept of value." (p. 136)

- Value proposition; - value creation and delivery system; - value capture.

Fiet & Patel, 2008

“A business model explains how a venture is expected to create a profit”. (p.751)

- Profit

Johnson, Christensen & Kagermann, 2008 (Hwang & Christensen, 2008; Johnson & Suskewicz, 2009)

“A business model consist of four interlocking elements, that, taken together, create and deliver value” (p. 52). These are: Customer Value Proposition, Profit Formula, Key resources and Key processes.

- Customer value proposition; - profit formula; - key resources; - key processes.

Andersson, Johannesson & Zdravkovic, 2009

"A business model gives a high level view of the activities taking place in and between organizations by identifying agents, resources, and the exchange of resources between the agents." (p. 144)

- Activities; - agents/actors; - resources; - exchange of resources between the agents.

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De Reuver & Haaker, 2009

Define the business model by mean of the following components -Service component: a description of the value proposition (added value of a service offering) and the market segment at which the offering is aimed; -Technological component: a description of the technical functionality required to realize the service offering; -Organizational component: a description of the structure of the multi-actor value network required to create and distribute the service offering and to describe the focal firm’s position within the value network; -Financial component: a description of the way a value network intends to generate revenues from a particular service offering and of the way risks, investments and revenues are divided among the various actors in a value network.

- Value proposition; - market segment at which the offering is aimed; - technology (technical functionality); - (structure of the multi-actor) value network; - focal firm’s position within the value network; - (value network) revenues; - (value network) risks; - (value network) investments; - (value network) revenues.

Froud, Johal, Leaver, Phillips & Williams, 2009

Use a two dimensional conceptualization of the business model. Dimensions are cost recovery (i.e. the need to recover costs incurred) and stakeholder expectations (the need to secure credibility in the eyes of stakeholders meeting stakeholder expectation and demands).

- Cost recovery; - stakeholder.

Konde, 2009 "A typical business model consists of three components - value proposition, value-chain structure and revenue generation." (p. 215)

- Value proposition; - value-chain structure; - revenue generation.

Sabatier, Mangematin & Rousselle, 2010

"We define business model portfolio as the range of different ways a firm delivers value to its customers to ensure both its medium term viability and future development." (p. 431) "Business Model Portfolio describes the firm's strategy to balance time-to-market, revenue stream, risk and interdependencies".

- Value delivery; - strategy; - time-to-market; - revenue stream; - risk; - interdependencies.

17


Wirtz, Schilke & Ullrich, 2010 “A business model reflects the operational and output system of a company, and as such captures the way the firm functions and creates value”. (p. 274)

- Sourcing (resources); - Value generation; - Value offering (product and services); - Distribution; - Revenues.

Zott & Amit, 2010 “A business model [is a] set of activities, as well as the resources and capabilities to perform them - either within the firm, or beyond it through cooperation with partners, suppliers or customers”. (p. 217)

- Activity system content: the selection of activities; - activity system structure: how the activities are linked; - activity system governance: who performs the activities; - exchange partners (partners, suppliers, customers) - resources and capabilities (to perform the activities); - value creation.

Chesbrough, 2010

“A business model articulates the value proposition (i.e., the value created for users by an offering based on technology), identifies a market segment and specify the revenue generation mechanism (i.e., users to whom technology is useful and for what purpose), defines the structure of the value chain required to create and distribute the offering and complementary assets needed to support position in the chain, details the revenue mechanism(s) by which the firm will be paid for the offering, estimates the cost structure and profit potential (given value proposition and value chain structure), describes the position of the firm within the value network linking suppliers and customers (incl. identifying potential complementors and competitors), and formulates the competitive strategy by which the innovating firm will gain and hold advantage over rivals”. (p. 355)

- Key activities; - partner network; - key resources; - cost structure; - value proposition; - client relationships; - client segments; - distribution channels; - revenue flows.

18


Gambardella & McGahan, 2010 "A business model is an organization's approach to generating revenue at a reasonable cost, and incorporates assumptions about how it will both create and capture value." (p. 263)

- Revenue generation; - cost; - value creation; - value capture.

Teece, 2010

“A business model articulates the logic, the data, and other evidence that support a value proposition for the customer, and a viable structure of revenues and costs for the enterprise delivering that value. [...] It’s about the benefit the enterprise will deliver to customers, how it will organize to do so, and how it will capture a portion of the value that it delivers”. (p.179) "It reflects management's hypothesis about what customers want, how they want it, and how an enterprise can best meet those needs and get paid for doing so".

- Value proposition (logic, data, other evidence that support it); - revenue and cost structure (value capture).

Casadesus-Masanell & Ricart, 2010 “Business Model refers to the logic of the firm, the way it operates and how it creates value for its stakeholders”. (p. 196) “A firm’s business model is a reflection of its realized strategy”. (p. 205)

- Logic of the firm; - the concrete choices made by management about how the organization must operate; - the consequences of these choices; - value creation for the customers.

Itami & Nishino, 2010 “A business model is composed of two elements, a business system and a profit model.” (p.364)

- Business system; - profit model.

Markides & Oyon, 2010 “A business model distinguishes a company/unit according to its strategy, culture and processes”. (p. 7)

- Strategy; - culture; - processes.

Demil & Lecocq, 2010

“Generally speaking, the concept refers to the description of the articulation between different BM components or "building blocks" (resources and competences, organization, value propositions) to produce a proposition that can generate value for consumers and thus for the organization". (p. 227)

- Resources and competences; - organizational structure; - value propositions.

19


Doz & Kosonen, 2010

"Business models can be defined both objectively and subjectively. Objectively they are sets of structures and interdependent operational relationships between a firm and its customers, suppliers, complementors, partners and other stakeholders, and among its internal units and departments (functions, staff, operating units, etc). These "actual" relationships are articulated in procedures or contracts and embedded in (often) tacit action routines. But, for the firm's management, business models also function as a subjective representation of these mechanisms, delineating how it believes the firm relates to its environment. So business models stand as a cognitive structures providing a theory of how to set boundaries to the firm, of how to create value, and how to organise its internal structure and governance". (p. 370-371)

- Set of interdependent operational relationships; - customers; - stakeholders (suppliers, complementors, partners, internal departments); - departments; - subjective representation.

McGrath, 2010

“Two core components constitute a business model. The first is the basic ‘unit of business’, which is the building block of any strategy, because it refers to what customers pay for. The second are process or operational advantages, which yield performance benefits when more adroit deployment of resources leads a firm to enjoy superior efficiency or effectiveness on the key variables that influence its profitability”. (pag.249)

- Business units; - process or operational advantages.

Smith, Binns & Tushman, 2010

"By business model, we mean the design by which an organization converts a given set of strategic choices - about markets, customers, value propositions - into value, and uses a particular organizational architecture - of people, competencies, processes, culture and measurement systems - in order to create and capture this value." (p. 450)

- Markets; - customers; - value propositions; - people; - competencies; - processes; - culture; - measurement systems; - value creation; - value capture.

20


Yunus, Moingeon & Lehmann-Ortega, 2010

“We suggest that a business model has three components: a value proposition, a value constellation, a profit equation.” (p. 311)

- Value proposition; - value constellation; - profit equation.

Hienerth, Keinz & Lettl, 2011 “A business model describes the logic of how a business creates and delivers value to users and converts payments received into profits”. (p. 346)

- Customer value proposition; - profit formula; - key resources; - key processes.

Sorescu, Frambach, Singh, Rangaswamy & Bridges, 2011

"A business model is a well-specified system of interdependent structures, activities, and processes that serves as a firm’s organizing logic for value creation (for its customers) and value appropriation (for itself and its partners)." (p. S4)

- Firm's organizing logic (structures, activities, processes); - value creation for the customers; - value appropriation (for the company and its partners).

Provance, Donnelly & Carayannis, 2011 “Business models have traditionally been viewed as constructions of the internal values, strategies, and resources of organizations”. (p. 5630)

- Internal values; - strategies; - resources of an organization.

Mason & Spring, 2011 "Business models can be understood as a framing device for influencing and shaping collective and individual action". (p. 1038)

- Technology; - market offering; - network architecture.

San Román, Momber, Abbad & Miralles, 2011

“A business model describes how a product or service is provided, including perceived value creation of a certain product for a final customer”. (p. 6364)

- Product or service; - Value creation for a final customer.

Weill, Malone & Apel, 2011

“The concept of business model provides a fundamental tool for analyzing many important strategic decisions, […] for analyzing how a company is managed and the resulting stock market total return”. (p. 19)

- Strategic decisions; - how a company is managed; - stock market total return.

21


Sinfield, Calder, McConnell & Colson, 2012

“[…] A business model includes all aspects of a company’s approach to developing a profitable offering and delivering it to its target customers”. (p.87)

Describe more than 40 components, such as: - target customer; - type of offering; - pricing approach.

Baden-Fuller & Haefliger, 2013

“We define the business model as a system that solves the problem of identifying who is (or are) the customer(s), engaging with their needs, delivering satisfaction, and monetizing the value. The framework depicts the business model system as a model containing cause and effect relationships, and it provides a basis for classification. We formulate the business model relationship with technology in a two-way manner. First, business models mediate the link between technology and firm performance. Secondly, developing the right technology is a matter of a business model decision regarding openness and user engagement”. (p.419)

- Customer identification; - customer engagement (value proposition); - value delivery and linkages; - monetization (value capture).

Aspara, Lamberg, Laukia, Tikkanen, 2013

“We view the business unit-level business model as the business unit managers’ perceived logic of how the unit in question functions and creates value, in connection with both its market environment, and within the corporation (i.e., with its other business units).” (p. 460)

- Business units; - value creation; - market environment; - revenue and/or costs production.

Baden-Fuller & Mangematin, 2013

"The business model in this agenda is not a complete description of what the firm does, but rather it should be stripped down characterization, that captures the essence of the cause-effect relationships between customers, the organisation and money. Hence, a business model is a special example of a configuration (as defined by Fiss, 2011)." (p. 2)

- Customers; - customer engagement (value proposition); - monetization; - value chain and linkages (sometimes called architecture or governance systems).

22


Boons & Lüdeke-Freund, 2013

“Our definition of a business model - the value proposition, organization of supply chain and customer interface, and financial model.” (p. 16) "[…] a business model is used as a plan which specifies how a new venture can become profitable." (p. 10)

- Value proposition; - supply chain; - customer interface; - financial model.

Nielsen & Lund, 2014 “The business model is the platform which connects resources, processes and the supply of a service which results in the fact that the company is profitable in the long term.” (p.9)

- Resources; - processes; - supply of a service; - connections and interrelations of the business; - value creation.

Bohnsack, Pinkse & Kolk, 2014

"Business model in a broad sense is as a ‘scale model’ that describes a business as such as well as the general way in which firms create and capture value". (p. 285) “…[We] structured it by distinguishing between three main components – i.e. value proposition, value network, and revenue/cost model derived from existing frameworks". (p. 288).

- Value proposition; - value network; - revenue & cost model.

Bocken, Short, Rana & Evans, 2014

“Sustainable business models (SBM) incorporate a triple bottom line approach and consider a wide range of stakeholder interests, including environment and society.” (p. 42)

- Stakeholder interests (including environment and society); - Triple Bottom line.

Reim, Parida & Ortqvist, 2015

“Business models describe the design or architecture of the value creation, delivery and capture mechanisms”. (p. 65)

- Value creation; - value delivery; - value-capture mechanisms.

23


Bocken, Rana & Short, 2015

“[…] a “business model” might provide a structured way for sustainable business thinking by mapping the purpose, opportunities for value creation across the network, and value capture (how to generate revenue) in companies.” (p. 67). This requires that “a wider [than done for traditional business models] range of stakeholders, including environment and society, and value creation, needs to be considered.” (p.78)

- Purpose; - opportunities (for value creation); - network; - stakeholders; - Environment; - Society; - value capture.

Schaltegger, Hansen, Ludeke-Freunde, 2016

"A business model for sustainability helps describing, analyzing, managing and communicating (i) a company's sustainable value proposition to its customers, and all other stakeholders, (ii) how it creates and delivers this value, (iii) and how it captures economic value while maintaining or regenerating natural, social, and economic capital beyond its organizational boundaries". (p.6)

- Sustainable value proposition; - how value is created and delivered; - how economic value is captured.

Upward, Jones, 2016 "A description of how a business defines and achieves success over time". (p. 98)

- Definition of success; - how success is achieved over time.

Wells, 2016

"In broad terms, a business model can be defined as having three constituting elements: the value network and product/service offering that defines how the business is articulated with other businesses and internally (i.e. how value is created); the value proposition that defines how products and/or services are presented to consumers in exchange for money (i.e. how value is captured); and the context of regulations, incentives, prices, government policy and so on (i.e. how value is situated within the wider socioeconomic framework)". (p. 37)

- The value network and product/service; - the value proposition; - socioeconomic framework.

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