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Business model design and the performance of entrepreneurial firms

Author: Zott, Christoph ; Amit, RaphaelINSEAD Area: Entrepreneurship and Family EnterpriseIn: Organization Science, vol. 18, no. 2, March/April 2007 Language: EnglishDescription: p. 181-199.Type of document: INSEAD ArticleNote: Please ask us for this itemAbstract: We focus on a particular organization design issue - namely, the design of an organization's set of boundary-spanning transactions - to which we refer as business model design, and ask how business model design affects the performance of entrepreneurial firms. Specifically, by extending and integrating theoretical perspectives that inform the study of boundary-spanning organization design, we propose hypotheses about the impact of efficiency-centered and novelty-centered business model design on the performance of entrepreneurial firms. To test these hypotheses, we developed and analyzed a unique dataset of 190 entrepreneurial firms that were publicly listed on US and European stock exchanges. The empirical results show that novelty-centered business model design matters to the performance of entrepreneurial firms. Our analysis also shows that this positive relationship is remarkably stable across time, even under varying environmental regimes. As well, we find indications of potential diseconomies of scope in design; that is, entrepreneurs' attempts to incorporate both efficiency- and novelty-centered design elements into their business models may be counterproductive.
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We focus on a particular organization design issue - namely, the design of an organization's set of boundary-spanning transactions - to which we refer as business model design, and ask how business model design affects the performance of entrepreneurial firms. Specifically, by extending and integrating theoretical perspectives that inform the study of boundary-spanning organization design, we propose hypotheses about the impact of efficiency-centered and novelty-centered business model design on the performance of entrepreneurial firms. To test these hypotheses, we developed and analyzed a unique dataset of 190 entrepreneurial firms that were publicly listed on US and European stock exchanges. The empirical results show that novelty-centered business model design matters to the performance of entrepreneurial firms. Our analysis also shows that this positive relationship is remarkably stable across time, even under varying environmental regimes. As well, we find indications of potential diseconomies of scope in design; that is, entrepreneurs' attempts to incorporate both efficiency- and novelty-centered design elements into their business models may be counterproductive.

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