Theorising business model innovation: An integrated literature review

Abstract

The aim of this article is to theorise the business model innovation (BMI) phenomenon as we explore why and how BMI occurs, specifically to answer the question, What are the mechanisms involved? We evaluate extant research by adapting the context-intervention-mechanism-output framework, and adopting a mechanism-based theory building approach for synthesising our findings. This study makes three contributions: first, we enrich epistemology by adopting a process view as we show that BMI is a series of interdependent mechanisms. Second, we identify six mechanisms unique to the phenomenon. Third, we offer a prescient outlook of BMI change as a metatheory.

JEL Classifications: M10, O30, O31, O39

Keywords

Business model innovation mechanism-based theorising metatheory

1. Introduction

This article theorises business model innovation (BMI) to better reflect its advanced practice. Extant research on the pervasiveness and influence of BMI has elucidated the phenomenon’s endogenous antecedents (Osiyevskyy and Dewald, 2015b), its exogenous triggers (Tierney et al., 2013), the framing of its transformation as a process of experimentation and trial-and-error investigation (Andries et al., 2013; Sosna et al., 2010), the discovery-driven nature of its practice (McGrath, 2010), its manner as a form of effectuation (Chesbrough, 2010), its incremental capacity (Mezger, 2014) and radical or disruptive potential (Cucculelli and Bettinelli, 2015). Prior scholarship also indicates that BMI enables strategy (Cortimiglia et al., 2016), stimulates other innovations (Souto, 2015) and enhances overall firm performance (Gronum et al., 2016; Zott and Amit, 2007), while demonstrating the importance of internal efficiency and self-reinforcement (Amit and Zott, 2012; Brettel et al., 2012), as well as external robustness and inimitability (Casadesus-Masanell and Ricart, 2011; Casadesus-Masanell and Zhu, 2013; Desyllas and Sako, 2013) to discourage replication. And yet, despite this wealth of literature, including the work of Clauss (2017) who developed a measure for the construct, paucity in BMI theory remains (Foss and Saebi, 2017).

We address this deficit by assuming an emic approach by situating our study within BMI research, adopting a process-based ontology and undertaking an integrated literature review. BMI theorising must be indigenous, that is, developed from research on BMI. Whetten et al. (2009) contended that while theory-borrowing is a legitimate strategy to understand new phenomena, it should be limited; over-importing theories impedes original theoretical contributions, especially as borrowing tends to disregard the assumptions and contexts in which the borrowed theories were developed. In addition, scholars such as Shepherd and Suddaby (2017) argued that time, an innocuous but influential factor, complexifies theories to reflect reality (Tsoukas, 2017). A process-based ontology affords us the potential to consider why BMI occurs with specific attention to the mechanisms that make it possible. Changes in epistemology, such as shifting from an entity-based to a process-based ontological perspective, can enable revelatory contributions (Corley and Gioia, 2011; Thompson, 2011).

In developing a process-based ontology of BMI, and while consolidating knowledge in the field (Jones and Gatrell, 2014; Post et al., 2020), we adopt a robust approach to mechanism-based theorising that is parsimonious (Bacharach, 1989) but that still fosters variety (to be absorbed) (Ashby, 1956; Tsoukas, 2017) and richness (to be grasped) (Weick, 2007). The process of abstraction and complexification offered by mechanism-based theorising provides a sound foundation for new theories (Thompson, 2011). In doing so, we also advocate for a consolidated approach to synthesising original research in BMI by adopting an integrated literature review (Torraco, 2016) and by adapting the context-intervention-mechanism-output (CIMO) framework (Denyer et al., 2008) as an analytical lens for our inquiry. Our methodology builds on the plurality of extant research that has enriched our understanding of BMI, even as we deploy this research to argue that existing work in the field lacks a coherent trajectory.

This article responds to scholars such as Foss and Saebi (2017), who noted the challenges in BMI theorising even after more than 15 years of research in the field. In the same spirit, Casadesus-Masanell and Zhu (2013) described BMI as a ‘slippery construct’ (p. 480), a view supported by Baden-Fuller and Mangematin (2013), who stressed the need for BMI to enjoy a more comprehensive theoretical foundation. Spieth et al. (2014) conceded that existing research lacks sufficient synthesis, while DaSilva and Trkman (2014) asserted that BMI theorising is best described as ‘incomplete’(p. 386) and Velu et al. (2016) averred that such a shortcoming is due to BMI’s lack of ‘paradigmatic neatness’ (p. 6).

This article makes three contributions. First, we enrich BMI epistemology by adopting a process-based ontological view of the phenomenon, underscored by the longitudinal design adopted by more than one-third of the empirical research sampled in this study. Our study shows that BMI constitutes several interdependent mechanisms. This contribution complements dimensions of the entity-based ontology (i.e. value proposition, creation and capture components) in that we suggest dexterity (i.e. skilfulness in the way business models are innovated) and velocity (i.e. speed of development of business models), as evoked by the process view, are equally crucial.

Second, by analysing the preeminent research in the field, we identify six mechanisms unique to the BMI phenomenon: extra-generative cognition, a systems perspective, dynamic ambidexterity, modularisation for reconfiguration and exaptation, paradox heuristics and coopetive mutuality alliances. These mechanisms are indigenous to BMI and reflect continuity from extant research (Shepherd and Sutliffe, 2011). We contend that the mechanisms are a set of ideal types that reflect the attributes of organising (Weick et al., 2005), and that the process-based typology used in this study may enhance the predictive utility of BMI (Doty and Glick, 1994).

Third, by adopting an expansive view of BMI, we extend the reach of BMI theorising and offer a prescient outlook of BMI as a metatheory (Corley and Gioia, 2011). In doing so, we build on studies that have identified various forms of business model change (Demil and Lecocq, 2010; Sabatier et al., 2010) in arguing that BMI is a phenomenon encompassing a constellation of business model transformations including business model evolution, replication, secondary business modelling (as a defensive strategy) and portfolio management. Such a composite perspective anticipates the future trajectory of BMI research and theorising.

2. Underlying motivation of the study

This section contains two main parts that justify this study’s theorising of BMI: a highlighting of the progress and limitations of extant BMI research and a reasoning of the theorising approach adopted. The first section shows that, while the field has seen significant advances, BMI research is centrifugal, particularly with respect to (a) the variedness in its links with the business model concept, (b) the diversity of BMI definitions, (c) the richness in underpinning fields and lenses used, (d) the high dependency on theory borrowing and (e) the tensions arising from a heavy focus on an entity-based ontology. In the second part of this section, we justify our theorising approach using mechanisms, given that contemporary organisational theory is more oriented towards organising than organisations (Weick et al., 2005). We contend that mechanism-based theorising offers a robust and conjunctive problem-solving approach that is flexible and equipped to address a cross-paradigmatic, multi-level phenomenon.

2.1. BMI research – rich but centrifugal

BMI research has contributed to theories in many ways. For example, Zott and Amit (2007) found that novel business models correlate with organisational performance. Researchers have also generated theories that frame BMI as enabling a firm to reposition itself advantageously in its value network (Morris et al., 2005), as a catalyst in reshaping industry-structures (Gambardella and McGahan, 2010) and in encouraging firms to operate across industries (Al-Aali and Teece, 2013). Extant research has also contributed to the innovation literature; Souto (2015) found that BMI is a trigger for other innovations, while Chesbrough (2010) determined that new and innovative business models are necessary to mediate, for example, between novel technologies and markets. Studies also generally concur that BMI is a discovery-driven process (McGrath, 2010) that requires dynamic consistency to balance change and stability (Demil and Lecocq, 2010).

Osiyevskyy and Dewald (2015b) found that individual dispositional factors influence decisions related to BMI, while Loon et al. (2020) contributed to both human resource (HR) and strategic management literatures by showing how the microfoundations of HR practices enable the development of strategic capabilities that, in turn, foster BMI. Other research has addressed external factors as they build on the notion of the extended enterprise, in particular, the role of alliances in providing complementary resources and competencies bolstering the innovativeness of business model (Miles et al., 2009). And finally, studies have offered theoretical contributions by demonstrating the nuances involved in BMI; Velu (2016), for example, found that the success of BMI is contingent on firm dominance, the strategy adopted and the speed of innovation in coopetitive environments.

Yet, the above-described BMI research admits of several shortcomings. First, this work has a high degree of heterogeneity, especially in the way BMI has been conceptualised and applied. For example, Zott and Amit’s (2010) conceptualisation of business models as an activity system was applied by Miller et al. (2014) in the context of universities; Casadesus-Masanell and Ricart’s (2010) framing of BMI as a matter of choices and consequences was applied by Sanchez and Ricart (2010) in their study of low-income markets; Demil and Lecocq’s (2010) development of the resources, competencies, organisation and value propositions (RCOV) framework was applied by Gerasymenko et al. (2015) in their research of venture capital firms; and Osiyevskyy and Dewald’s (2015b) application of George and Bock’s (2011) argument that the building blocks of BMI are ‘resource, transactive and value’ structures (p. 83) was applied in the context of small businesses. In addition, there are various componential views of business models, such as that including the value proposition, value creation and value capture constructs adopted by Clauss (2017).

Second, there are diverse definitions of BMI, ranging from Bock et al.’s (2012) broad description, referring to BMI as ‘a type of organisational innovation in which firms identify and adopt novel opportunity portfolios’ (p. 281), to more specific definitions, such as the view of BMI as activity components (Amit and Zott, 2001). Some argue that the essence of BMI is its underlying logic (Casadesus-Masanell and Zhu, 2013), while others present BMI as a set of capabilities (Loon et al., 2020) or outcomes (Laudien and Daxböck, 2016). Gambardella and McGahan (2010) focused on the internal aspects such as technology management, while others (Simmons et al., 2013) addressed the external elements such as market networks. Other research emphasised the threshold of innovativeness (i.e. redefining the degree and scope of newness) in defining BMI (Taran et al., 2015).

Third, extant research has assumed or applied varying underpinning fields, such as strategy (Eyring et al., 2011), entrepreneurship (Ernkvist, 2015) and technology (Bogers et al., 2016), giving rise to a fourth issue, ‘eclecticism’ (Corley and Gioia, 2011), in that these diverse underpinnings suggest that BMI significantly borrows theories. Although borrowing of theory is acceptable, its profligate tendencies in BMI research mean that subsequent attempts to identify a ‘neat’ paradigm and a definitive theoretical framework will remain a challenge. Table 1 provides a list of examples of theories and concepts used in BMI research at the micro (i.e. intra-individual), meso (i.e. organisational) and macro levels (i.e. industry), juxtaposed against the different stages of BMI.

Table 1.

Example of key theories and concepts borrowed and used in BMI research.

BMI stage	Level of analysis
BMI stage	Macro	Meso	Micro
Triggers of BMI Internal (Doz and Kosonen, 2010; Govindarajan and Trimble, 2011; Osiyevskyy and Dewald, 2015a) and external antecedents (Casadesus-Masanell and Ricart, 2011; Tierney et al., 2013; Yunus et al., 2010)	Environmental opportunities and presence of potential partners (Sanchez and Ricart, 2010; Yunus et al., 2010) Schumpeter’s (1934) theory of creative destruction (Markides and Oyon, 2011)	Behavioural theory of the firm (Osiyevskyy and Dewald, 2015b) Knowledge assets and BMI (Denicolai et al., 2014), Organisational design and structure, that is, modularised firms (Kodama, 2004) Path dependence (Rothmann and Koch, 2014) Resource-based view of the firm (Kim and Min, 2015)	Bounded rationality (Casadesus-Masanell and Zhu, 2013) Categorisation theory (Markides and Charitou, 2004) Effectuation theory (Andries et al., 2013) Entrepreneurial capital (Schindehutte et al., 2008) Generative cognition (Martins et al., 2015) Prospect theory (Osiyevskyy and Dewald, 2015b) Strategic agency theory (Osiyevskyy and Dewald, 2015b)
BMI change process Experimentation process (Andries et al., 2013); effectuation process (Chesbrough, 2010); journey (Chesbrough, 2007); trial-and-error process (Sosna et al., 2010); discovery-driven practice (McGrath, 2010)	Actor network theory (Simmons et al., 2013) Boundary spanning (Brettel et al., 2012) Institutional theory and emerging markets (Sanchez and Ricart, 2010) Coopetition (Velu, 2016) Extended enterprise (Dimache and Roche, 2013; Miles et al., 2009) Stakeholder theory (Lange et al., 2015)	Absorptive capacity (Denicolai et al., 2014) Activity systems (Amit and Zott, 2012) Alliances and organisational flexibility (Bouncken and Fredrich, 2016) Competitive imitations (Casadesus-Masanell and Zhu, 2013) Competitive reactions (Kim and Min, 2015) Configurational theory (Kulins et al., 2016) Dynamic capability (Mezger, 2014) Metacapabilities (Doz and Kosonen, 2010) Organisational ambidexterity (Markides and Charitou, 2004) Organisational design and change, and BMI (Bock et al., 2012)	Corporate political entrepreneurship (Ernkvist, 2015) Decision-making processes (Gnatzy and Moser, 2012) Design theory (Amit and Zott, 2015) Double-loop learning (Sosna et al., 2010) Sensemaking (Spieth et al., 2014) Theory of discovery and creation (Sanchez and Ricart, 2010)
		Organisational identity (Snihur, 2016)Organisational learning (Cucculelli and Bettinelli, 2015)Relationship marketing (Brettel et al., 2012)Strategy making process (Cortimiglia et al., 2016)Value chain (Dimache and Roche, 2013)Structuration theory (Kodama, 2009)
Degree of BMIIncremental BMI (Mezger, 2014) and radical/disruptive BMI (Cucculelli and Bettinelli, 2015)	Disruptive innovation (i.e. BMI) achieved through partners and alliances (Velu, 2015)Ecosystem (Laudien and Daxböck, 2016)Network theory (Calia et al., 2007)Relational assets (Ng et al., 2013)	Contingency theory (Velu, 2015)Dominant logic (Sabatier et al., 2012).Organisational culture and BMI (Hock et al., 2015)Research and development investment (Cucculelli and Bettinelli, 2015)Technology cross fertilisation (Björkdahl, 2009)Techno-organisation speciation (Garnsey et al., 2008)	Cognitive distance theory (Enkel and Gassmann, 2010)
Outcomes from BMIEnabling strategy (Cortimiglia et al., 2016), stimulating other innovations (Souto, 2015) and enhancing overall firm performance (Zott and Amit, 2007)	Network externalities enable firm to take advantage of network externalities through networks and ecosystem (Chatterjee, 2013)	Competitive advantage (Cucculelli and Bettinelli, 2015)Firm survival (Velu, 2015)Performance (Sorescu et al., 2011)Speed to market (Bouncken and Fredrich, 2016)Strategic flexibility (Bock et al., 2012)Strategy implementation (Bohnsack et al., 2014)Value creation (Teece, 2010)	–
‘Resilience’ of new BMIInternal durability; efficiency and reinforcing (Amit and Zott, 2012; Brettel et al., 2012), and external durability; robustness, inimitability and patentability (Casadesus-Masanell and Ricart, 2011; Casadesus-Masanell and Zhu, 2013; Desyllas and Sako, 2013)	Business model replication (Dunford et al., 2010)BMI portfolio (Sabatier et al., 2010)Lock-in customers with complementarities from partners and alliances (Amit and Zott, 2012).Secondary BMI (Wu et al., 2010)	Cannibalisation (Velu and Stiles, 2013)Imitative BMI (Kim and Min, 2015)Inimitability of BMI (Casadesus-Masanell and Zhu, 2013)Profiting from innovation theory, for example, patenting (Desyllas and Sako, 2013)Reinforcing business models, that is, virtuous cycles (Casadesus-Masanell and Ricart, 2010)Resource advantage theory (Morris et al., 2005)Strategic agility (Doz and Kosonen, 2010)Transaction cost economics, for example, efficiency in BM (DaSilva and Trkman, 2014)	–

BMI: business model innovation.

Fifth, there is a preference towards entity-based ontologies, that is, typologies of innovative business models (Loon and Chik, 2019). Except for a few examples (Christensen et al., 2016), most studies are underpinned by an entity-based ontology. For example, the extant literature shows a variety of BMI types, such as circular (remanufacturing and reuse) (Linder and Williander, 2017), coopetition (Velu, 2016), corporate-NGO collaboration (Dahan et al., 2010), crowdsourcing (Kohler, 2015), netchising (Morrison et al., 2004), marketplace (B2B and B2C) (Büyüközkan, 2004), outcome-based contracts (Ng et al., 2013), social (Yunus et al., 2010), sustainability-based (Nidumolu et al., 2009) and two-sided Internet platform-based business models (Muzellec et al., 2015). To address the partiality towards entity-based ontologies, BMI research should reflect, equally, the process-based ontology. The argument for adopting a process-based ontology is supported by the adoption of longitudinal research designs in extant BMI studies, as the final form of the new BMI is usually not known ex-ante (Berends et al., 2016; Khanagha et al., 2014).

In sum, BMI research shows a centrifugal trajectory, which should not be surprising given the plurality of fields of study shaping the phenomenon (Kodama, 2009; Zott et al., 2011). Although such richness in BMI is celebrated, the diversity of inputs does compound the challenge of elucidating the phenomenon within a comprehensive theoretical foundation. We argue that, given the breadth and depth of research, it is time to integrate and analyse these contributions in BMI theorising. This approach is consistent with Corley and Gioia’s (2011) view that theorising is more about ‘integration’ than ‘creation’ to demonstrate consilience (Keil, 2006; Wilson, 1999). In this regard, the topic of business models and BMI now warrant an integrated literature review, an approach that is especially useful for theorising using mechanisms and developing metatheory (Post et al., 2020). As we have demonstrated then, and as underlined by Torraco (2016), an integrated literature review is needed to synthesise and connect different streams of literature and to advance research in the field of BMI.

2.2. Theorising BMI – a mechanism-based approach

On the significance of theorising, Shepherd and Suddaby (2017) argue that, ‘By focusing on theorising, rather than theory, research is considered on a continuum of ‘theory’ that acknowledges the emerging nature of the story and the interim struggles on the way to advancing knowledge’ (p. 76). Weick (1995b) posits that a full-blown theory must contain clearly defined constructs and stated boundary conditions with explicit propositioned relationships between constructs that can be falsified – that is, those with alternate explanations (Popper, 1963); however, Weick (1995b) also recognises that the process of theorising is more accommodating, noting that, ‘Theory development starts with guesses and speculations and ends with explanations and models’ (p. 386). Theorising may be viewed as the telling of a compelling story (Shepherd and Suddaby, 2017), a bricolage (Boxenbaum and Rouleau, 2011) and disciplined imagination (Folger and Turillo, 1999; Weick, 1989), involving activities such as abstracting, synthesising and generalising.

In practice, theorising may involve developing conceptual frameworks, principles and models (Runkel and Runkel, 1984), while Weick (1995b) contended, even more, that the basic use of references and humble lists and diagrams are also part of the theorising process. We offer a more contemporary option by adopting a mechanism-based approach to theorising, bringing together scholars’ empirical observations and theoretical contributions to represent the BMI phenomenon, highlighting its foundational mechanisms (Davis and Marquis, 2005). The mechanism-based approach is appropriate for BMI theorising for several reasons. First, building on the work of authors such as Clauss (2017), who adopted an entity-based ontology, our study informs scholarly debates on BMI by developing a complementary process-based ontology (Shepherd and Suddaby, 2017) that could provide a more comprehensive perspective of the phenomenon (Christensen et al., 2016).

Second, mechanisms are explanans, forming the basis of a story (Shepherd and Suddaby, 2017) and acting as an intermediary between description and storytelling (Hedström and Swedberg, 1998). Davis and Marquis (2005) analogise that mechanisms are not so much about the nuts-and-bolts (i.e. the details) but the cogs-and-wheels (i.e. the bigger picture). In a similar regard, Anderson et al. (2006) suggest that mechanisms show an assembly of elements and describe how parts interact – that is, ‘how and/or why one thing leads to another’ (p. 103). Mechanism-based theorising contemplates how concepts interact to generate the observed phenomenon and why observable relationships may exist (Weber, 2006).

Third, mechanisms allow for synthesising phenomena explained by multiple theories at different levels. On this point, Weber (2006) argued that mechanisms are ‘tools’ used to ‘elaborate, sharpen, transpose, and connect theories’, while Stinchcombe (1991) posited that mechanisms are ‘bits of theory about entities at a different level (e.g., individuals) . . . that serve to make the higher-level theory more supple, more accurate, or more general’ (p. 367). Here, mechanisms are viewed as toolkits, resources to solve the puzzles related to theories that offer flexibility in generating order and aggregates. Davis (2006) reasoned that mechanisms are a lingua franca, a common set of ideas that can be drawn upon, recombined, elaborated and refined. Davis and Marquis (2005) argued that given the complexity in today’s world, the ‘sometimes true’ (p. 336) approach offered by mechanism-based theorising provides more versatility in making sense of specific phenomenon in an organisational field.

Fourth, mechanism-based theorising is well-positioned to address contemporary dynamic issues. Davis and Marquis (2005) posited that in times of considerable economic change, new approaches and perspective to organisational and management research should be adopted. Velu et al. (2016) supported this view, observing a number of dramatic and paradigmatic changes in the organisational landscape: from industry to ecosystems, products and services to solutions, physical to digital, and from value based on present-day price to value based on future use and performance. Mechanisms are a problem-driven approach to theorising, in contrast to the paradigm-driven approach (Weber, 2006). Davis and Marquis (2005) have argued that a ‘problem-driven’ approach is intended not only to mean providing solutions to real-life problems but also to distinguish this term from a paradigm-driven approach that begins from an a priori theory to be tested as a hypothesis.

Fifth, the use of mechanisms reflects Tsoukas’ (2017) idea of complexifying theories in that this approach is better suited to addressing problems in practice. BMI is a complex phenomenon (Foss and Saebi, 2017); and, as such, scholars must expect that any BMI theory will reflect its conjunctive nature, addressing the limitation of existing research that tend to compartmentalise the concept (Tsoukas, 2017). Mechanism-based theorising is a robust approach that absorbs variety (Ashby, 1956; Tsoukas, 2017) and grasps richness (Weick, 2007), while also allowing of parsimony (Bacharach, 1989). One example of such a mechanism is ‘markets’, which are widely used to explain economic theory (Anderson et al., 2006). Although critics argue that mechanism-based theories remain abstract, Shepherd and Suddaby (2017) find that such abstractions can bridge disparate theories (e.g. the resource-based view or effectuation theories), levels of analyses (e.g. meso and micro) and paradigm boundaries (e.g. strategy, entrepreneurship) used across BMI research. These scholars argue that the value of mechanism-based theorising is evaluated against its ability to ‘explain’ a phenomenon in a reasonable number of contexts and in a parsimonious but comprehensive manner.

3. Methodology

To establish a BMI theory, this study integrates scholarly research and dialogue on BMI. Our approach here is informed by Loon et al. (2019, 2020), emphasising transparency and reproducibility, with our research progressing through three broad stages. In Stage One, we planned the review, developing inclusion and exclusion protocols to minimise bias; in Stage Two, we conducted the review, including selecting the research studies as our ‘data’ for analyses and synthesis; and in Stage Three, we report our findings (presented in the next section) (Linnenluecke et al., 2020; Tranfield et al., 2003). Table 2 provides a summary of the three stages and their constituent steps, including examples of why articles were included and excluded in the final analyses of BMI mechanisms using the CIMO framework.

Table 2.

Example of stages in the literature review highlighting the inclusion and exclusion criteria applied.

Stages	Short description of steps
Stage I	Planning the review. Panel agrees on inclusion and exclusion protocol to minimise bias as suggested by Linnenluecke et al. (2020). One of the authors is an expert of systemic reviews
Stage II	Conducting the review. Selection of studies of ‘data’ analysis and synthesis.Step 1: Boolean search using 12 terms as keywordStep 2: Selection of two databases, ISI Web of Science and Scopus, as they are recognised as the most comprehensive databases in the field of business management. We use filters within the databases, in particular, we specify only journal articles in English to be returned.Step 3: The use of the Chartered Association of Business Schools (2018) journal quality list (i.e. 4- and 3-star articles, cross-checked with the ABDC list) to identify articles that have been rigorously reviewed in keeping with our application to Podsakoff et al.’s (2005) notion of validated knowledge.Step 4: Applying the CIMO analytical framework. Example of how the CIMO framework was applied:

Stages

Short description of steps

Stage I

Planning the review. Panel agrees on inclusion and exclusion protocol to minimise bias as suggested by Linnenluecke et al. (2020). One of the authors is an expert of systemic reviews

Stage II

Conducting the review. Selection of studies of ‘data’ analysis and synthesis.Step 1: Boolean search using 12 terms as keywordStep 2: Selection of two databases, ISI Web of Science and Scopus, as they are recognised as the most comprehensive databases in the field of business management. We use filters within the databases, in particular, we specify only journal articles in English to be returned.Step 3: The use of the Chartered Association of Business Schools (2018) journal quality list (i.e. 4- and 3-star articles, cross-checked with the ABDC list) to identify articles that have been rigorously reviewed in keeping with our application to Podsakoff et al.’s (2005) notion of validated knowledge.Step 4: Applying the CIMO analytical framework. Example of how the CIMO framework was applied:

	Criteria	Example of reasons for articles included	Example of reasons for articles excluded
	Context	Contains a clear description of the context, for example, the telecommunications industry and specific challenges facing the sector in which BMI occurs	BMI is only mentioned in a cursory manner as a driver for the intense internationalisation of supply networks and clusters, with the focus drawing upon the supply chain literature
	Intervention	Identification of action/activities undertaken to enable BMI to take place, such as the strategic decisions and decision-making phases in which a new and novel business model emerged	BMI is discussed in the context of other innovations with a focus on comparing innovation types, for example, product. Intervention is general for all innovation types
	Mechanisms	The underlying ambidextrous capability that enabled a firm to address tensions in BMI and to enact change swiftly. This mechanism allowed for risk-taking to achieve radical BMI	General proposition that high valuation of new business models drives BMI. Discussion focused on how to value business models from an economic perspective
	Outcomes	Discusses how new BMI may be sustained and replicated overseas	BMI is only cited as a general outcome from the advancement of e-marketplaces
Stage III	Reporting as per the ‘Findings’ and ‘Discussion’ sections in this study.

ABDC: Australian Business Deans Council; CIMO: Context-Intervention-Mechanism-Outcome; BMI: business model innovation.

In Stage Two, the first step was to identify keywords associated with BMI. Our word search string included the core term business model combined with any of the following 12 other terms found in the title, keywords or abstract: ‘innovation’, ‘adaptation’, ‘change’, ‘design’, ‘discontinuous’, ‘disruptive’, ‘evolution’, ‘experimentation’, ‘new’, ‘reinvention’, ‘rethinking’ and ‘revolution’. We adopted an expansive view of BMI as ‘new-to-the-world’ innovative business models, that is, ‘game changers’ are rare (Loon et al., 2020; Taran et al., 2015). In addition, the literature indicates a lack of clarity between other forms of business model change, such as business model evolution and BMI. In other words, at what point does a novel and impactful evolution of a business model become recognised as a BMI? Also, innovative business model typologies, such as crowdsourcing, may not be new to the world but may be newly applied by a firm in some sector. Garcia and Calantone (2002) have argued that innovation is a continuum ranging from ‘really new innovations’ to radical, discontinuous, incremental and imitative innovations, all of which may be known by different terms. Drawing on Lane et al.’s (2006) study of absorptive capacity and its divergent development, we included these terms to better reflect the plurality of the labels that might be used to describe BMI. We arranged our search to begin with the year 1990, because Osterwalder et al. (2005) found that the term ‘business model’ only emerged towards the end of that decade, with only two articles including the term published prior to that, in 1957 and 1960.

In the second step of Stage Two, we conducted our search on two of the most commonly used databases, the ISI Web of Science and Scopus (Klang et al., 2014; Loon et al., 2019; Schneider and Spieth, 2013). Using the ISI Web of Science, our initial search using the predefined terms resulted in 1074 artefacts; using Scopus, our search resulted in 1367 artefacts. In step three of Stage Two, we relied exclusively on peer-reviewed journals, adopting the position of Podsakoff et al. (2005) that only such articles could be deemed validated knowledge. In addition, we specified the journals using the Chartered Association of Business Schools (CABS, 2018) list that describes a journal’s quality in the business management field and that helps determine how quality is defined. Specifically, we selected journals that were highly ranked, that is, four- and three-star rated, meaning these outlets are highly selective due to their rigorous peer-review process, making them consistent with our reliance on Podsakoff et al. (2005). By applying these criteria, our search narrowed to 120 outlets for the ISI Web of Science and 125 for Scopus.

In step four of Stage Two, we merged the articles from both databases and eliminated any overlap, yielding 164 articles. We reviewed these articles by adapting and using the CIMO framework (Denyer et al., 2008) as an inclusion criteria (see Table 2; 116 articles remained) and as an analytical framework. The CIMO framework is based on the logic of design science (Bunge, 1967, 1997; Pawson and Tilley, 1997), which states that outcomes (O) can be traced back to their context (C) through a unique intervention (I). Denyer et al. (2008) refined the notion of mechanisms as thematic underlying ‘explanations’ that link interventions to outcomes. The CIMO framework, which has also been adapted to and used in areas such as the medical field (De Brún and McAuliffe, 2020), is, therefore, appropriate in that it allows for holistic analyses of the literature, enables insights to be drawn and facilitates ‘theory’ development (i.e. elucidating cause-and-effect).

‘Context’ compels the evaluation of the demand-side perspective of BMI, while ‘interventions’ are the wide-ranging actions or activities related to BMI (e.g. decision-making, creating business rules and boundary-spanning). ‘Mechanisms’ are the underpinnings of the interventions that enable us to aggregate and order the interventions (i.e. common themes) in BMI across all the studies. More importantly, the dimension of ‘mechanisms’ in the CIMO framework has equivalent meaning to the mechanism-based theorising approach that we adopted, reflecting the ‘foundations’ – that is, the cogs-and-wheels. Finally, ‘outcomes’ relate to the specific features of BMI (e.g. antecedent, process, degree, impact and resilience), which were the focus of each article. In other words, using the CIMO framework, we specifically focused on the ‘context’ of the study to identify possible boundary conditions of BMI (Busse et al., 2017), thereby informing our assessment of the meta-theoretical properties of BMI. Through the use of ‘interventions’ and outcomes, we highlight the cause-and-effect chain between actions and BMI-related outcomes; using ‘mechanisms’, we succinctly and thematically categorise the ‘means–end’ relationships employed in our mechanism-based theorising. These 116 articles offered a substantive elaboration of or contribution to our theoretical understanding of BMI (Newbert, 2007), and we also examined the key BMI literature cited by the these pieces to confirm that our 12 search terms were exhaustive. Finally, we cross-checked the CABS journal rankings against the Australian Business Deans Council (ABDC, 2019) list and found that 98.2% of the articles published in ABDC journals were rated either A* or A, with one published in a journal rated B and one other appearing in a journal rated C.¹

We found that three-quarters of the articles were empirical papers and that more than one-third involved a longitudinal research design. Many of the empirical studies used multi/mixed data collection methods. Case studies were most prominent compared with hypothesis-testing papers. Multi-firm, cross-sector sampling was the most prevalent. Although most studies used firms as the unit of analysis, business models as a unit of analysis have become more common. Table 3 provides details of the type of articles reviewed. Stage Three is presented as part of the ‘Findings’ and ‘Discussion’ sections.

Table 3.

Type of articles reviewed.

Type of study	Data collection (total sample of 116)^a
Type of study	Empirical cross section(n = 83)^b	Empirical longitudinal(n = 33)
Conceptual/discussion	26	NA
Review	3	NA
Quasi experimental/simulation	3	NA
Case study/qualitative (n = 67)
Single firm (n = 14)	IW: 1	Arch: 1
	IW + Arch: 1	ACR: 1
	IW + Arch + SV: 1	IW + Arch: 5
		IW + Arch + OE: 3
		IW + Arch + OE + FC: 1
Multi-firms (cross-industry) (n = 23)	IW: 1	Arch: 2
	Arch: 1	IW + Arch: 4
	IW + Arch: 4	IW + SV: 1
	IW + SV: 2	IW + OE: 1
	IW + SV + Arch: 3	IW + SV + Arch: 1
	IW + Arch + OE: 2
	IW + Arch + EC: 1
Multi-firms (industry specific) (n = 18)	Delphi: 1	IW + Arch: 6
	SV: 5
	Arch: 2
	IW + SV: 2
	IW + Arch: 1
	IW + SV + Arch: 1
Business-model specific (various firms) (n = 12)	IW: 2	Arch: 1
	Arc: 1	IW + Arch: 4
	IW + Arch: 2	IW + Arch + Seminars: 1
	IW + SV + Arch + OE: 1
Hypotheses-testing (n = 17)
Single firm (n = 1)	NA	SV (primary and secondary data): 1
Multi-firms (various sectors) (n = 6)	SV: 4	NA
	SV (face-to-face): 1
	IW + SV: 1
Multi-firms (sector specific) (n = 8)	SV: 5	NA
	Arch: 1
	SV + Arch: 2
Business-model specific (multi participants) (n = 2)	Arch: 1	NA
Business-model specific (multi participants) (n = 2)	SV + IW: 1	NA

IW: interviews; Arch: archives, artefacts; ACR: action research; SV: survey for primary data; OE: observation/ethnography; FC: focus group; EC: email correspondence.

Includes the 26 conceptual, three review papers and three quasi experimental/simulation.

Our review also revealed the most prevalent research field in which BMI was situated is strategy (including strategic-as-practice; n = 38), technology (n = 20), entrepreneurship/small business (n = 9), general management (n = 8), innovation (n = 6), operations management (n = 4), policy and legislation (industrial, technology; n = 4), ethics, sustainability (n = 2), change (n = 1), marketing (n = 1), services (n = 1) and leadership (capabilities; n = 1). The other papers were situated across different combinations of the research fields, for example, strategy, technology and innovation (n = 21).

Includes the 26 conceptual, 3 review papers and 3 quasi experimental/simulation.

4. Findings

Our findings are organised according to the ‘context’, ‘mechanisms’ and ‘outcomes’ of the extant BMI research. We focus on mechanisms rather than interventions for three reasons. First, as Denyer et al. (2008) contend, mechanisms ‘explain’ the interventions. Second, mechanisms may be construed as aggregates (Davis and Marquis, 2005) as they reflect the recurring and underpinning themes of the interventions. Third, interventions are wide-ranging, reflecting the above-described contention that BMI research is centrifugal. The interventions are unique in each of the articles sampled (as the articles must demonstrate the originality required by top journals).

4.1. Context

The papers reviewed show that BMI is studied in a broad range of contexts describing the demand-side of BMI involving the general or tasks environments of firms. We find that BMI thrives in many contexts – with or without exogenous triggers – and it manifests across different industries and market structures. This is not to say that context is unimportant; to the contrary, extant research demonstrates that successful BMI is a function of how well the firm understands and leverages institutional factors.

While technology influences dynamism in the external environment, BMI research has often stressed that the coalescence of varying environmental factors instigates volatility (e.g. regulatory and actions of the competition) with technology. For example, mobile network operators (MNOs) are used in BMI research because they face (a) disruptive technology innovation (e.g. cloud computing) and increasing mobile devices tailored to Internet use, such as smartphones and tablets, (b) diffusion of data-intensive content, (c) innovation and increasing investments in network infrastructure, (d) lower mobile data tariffs and changing pricing mechanisms, (e) new regulations, (f) changing customer habits and preferences, (g) repositioning of competitors and partners alike in the value network and (h) convergence in the information communications and technology (ICT) industry, for example, software developers and hardware producers (Ghezzi et al., 2015; Khanagha et al., 2014). The mix of external factors creates a volatile, uncertain, complex and ambiguous environment that can radically change the competitive landscape and the business models of firms. Garnsey et al. (2008), in their study of Acorn-ARM, showed that the intensity of change, and continuous and discontinuous shifts in the technology sector have resulted in the ‘shake-up’ of players in the industry.

Nonetheless, the extant research also shows that BMI occurs in the absence of direct and dramatic change, as demonstrated in some research involving small and medium enterprises (SMEs). For example, Laudien and Daxböck (2016) showed that average market players (i.e. firms that are neither market leaders nor niche players, including traditional manufacturing firms as well as service firms) are also involved in BMI to gain competitive advantage. Lee et al. (2012) demonstrated that the exposure to global markets inspired Korean SMEs to change business models, while Sabatier et al. (2010) showed how European biotech SMEs, who have fewer resources than major firms, are spurred to innovate through ‘bridging’ activities between academia and large pharmaceutical firms.

The influence of the institutional framework is underscored by Bolton and Hannon (2016), who found that energy firms in the United Kingdom require institutional support to accelerate the development of the sustainable energy sector. The interdependency between BMI and the institutional framework is also observed in the electric vehicles sector (Avci et al., 2015), reflecting a structure similar to that of the traditional vehicle sector, which is dominated by a few players, including a new private equity-backed ventures (Bohnsack et al., 2014). Kodama (2009) showed the influential impact of the Japanese keiretsu economic system on BMI as firms co-evolve across industries to create a complementary win–win alliance (e.g. NTT DoCoMo). The importance of institutions is no more relevant than in emerging markets, including both influences from governments and non-governmental organisations (NGOs). For instance, multinational corporations (MNCs), irrespective of their sectors, must consider involving NGOs or social enterprises such as Grameen enterprise in Bangladesh (Yunus et al., 2010) in the development of their new business models, because NGOs can bridge governmental gaps (e.g. by providing services that a government has failed to provide).

4.2. Mechanisms

We identified six mechanisms that underpin the BMI phenomenon, with each reviewed paper containing at least one mechanism. The six mechanisms are a portmanteau of existing labels used in BMI research, reflecting both novelty (i.e. they are indigenous to BMI) and continuity (i.e. they are derived from extant research; Shepherd and Sutliffe, 2011). Our thematic analysis revealed that system perspective was the most prevalent mechanism (n = 40), followed by dynamic ambidexterity (n = 39), extra-generative cognition (n = 37), coopetive mutuality alliances (n = 32), modularisation for reconfiguration and exaptation (n = 24) and paradox heuristics (n = 22). We organise the findings on mechanisms from a process-based ontology, storytelling perspective as (a) extra-generative cognition, (b) system perspective, (c) dynamic ambidexterity, (d) modularisation for reconfiguration, (e) paradox heuristics and (f) coopetive mutuality alliances.

Whether or not externally triggered, BMI requires a spark of ingenuity. A key mechanism often associated as the catalyst of BMI is extra-generative cognition, defined as the cognitive function that enables sensemaking, creativity and learning for BMI. Extracognition is usually associated with highly perceptive individuals (Shavinina and Ferrari, 2004) and largely involves sensemaking (e.g. reframing and multi-perspective taking; Weick, 1995a) and double-loop learning (Argyris, 2002), owing to risk-taking that is inherent in innovation (Taran et al., 2015). Generative cognition is essentially ‘disciplined creativity’ that involves generating new knowledge, such as through analogical reasoning (Miller and Lin, 2015; Ward, 2004) and integrating knowledge (Loon, 2019; Runco, 2004). Table 4 provides examples of the extra-generative cognition mechanism from the literature.

Table 4.

Examples of the extra-generative cognition mechanism.

Dimensions	Examples
Sensemaking to overcome disorientation in BMI	Extra-generative cognition to help with making choices and trade-offs under conditions of resource scarcity and ambiguity (Amit and Zott, 2012)
Double loop learning	ICT MNCs change ‘mental models’ to synthesise disparate technologies and identify the optimum economic value creation and appropriation; also, to learn from the process of business model change, which are crucial for developing new business models (Bohnsack et al., 2014)
Disciplined creativity reorganisation of knowledge	Extra-generative cognition required in searching and ‘matching’ new environments for recently developed technologies, and to then change business models to drive and/or accommodate the ‘matching’ (Garnsey et al., 2008)

BMI: business model innovation; ICT: information communications and technology; MNC: multinational corporation.

A system perspective is also crucial in BMI because it enables entrepreneurs and executives to appreciate how the germane elements (e.g. from the external and internal environments of an organisation) work together as a system (Baden-Fuller and Haefliger, 2013; Bolton and Hannon, 2016). We define a system perspective as the capacity and capability allowing firms to understand the ‘whole’ and to establish links between important elements (Frank, 2010), thus identifying levers for maximum change (Senge, 1992). Finally, a system perspective provides insights into how elements offer ‘feedback’ and reinforce one another (Checkland, 1999). Table 5 provides examples of the system perspective mechanism from the literature.

Table 5.

Examples of the system perspective mechanism.

Dimensions	Examples from the extant literature
Seeing the whole and making links	The ‘transition along the product-service system’ approach requires the firm to analyse and review its entire value chain and how each element need to be adapted to servitise its BM and to be coherent (Dimache and Roche, 2013)
Appreciating levers for maximum change with minimal effort	System view enables firms to identify where and what type of business rules are most effective. Business rules may apply to the proposition (e.g. value drivers), customer interactions, and enhancing loyalty and for taking advantage of network effects (Chatterjee, 2013)
Feedback and reinforcement	Systems view show how different components, that is, product and service, through use of a ‘complementarity’ index, may complement and/or be in conflict one another. This allows firms to take enhancing/mitigating action as appropriate to enable components to reinforce one another (Visnjic Kastalli et al., 2013)

While the extra-generative and system perspective mechanisms set BMI in motion, it is dynamic ambidexterity that makes BMI materialise. The mechanism of dynamic ambidexterity reflects the constructs of dynamic capabilities (Teece, 2017) and organisational ambidexterity (O’Reilly and Tushman, 2008). The literature shows that firms in BMI must be both dynamic and able to undertake a variety of activities simultaneously, even those that are contradictory. Dynamic ambidexterity is defined as a firm-level ability to efficiently manipulate resource configuration (Eisenhardt and Martin, 2000), and to remain flexible, agile enough to react to and enact change (Bouncken and Fredrich, 2016). Dynamic ambidexterity also involves dynamism in performing multiple contradictory or conflicting tasks (Markides, 2013). Table 6 provides examples of the dynamic ambidexterity mechanism from the literature.

Table 6.

Examples of the dynamic ambidexterity mechanism.

Dimensions	Examples
‘Manipulate resource configuration’	Dynamic ambidexterity in being able to adopt to the roles of a technological and corporate entrepreneur in introducing a new national exchange in Stockholm. Entrepreneur needs to be dynamic, plays multiple roles to source and reconfigure resources available at any given time (Ernkvist, 2015)
Flexible and agile to react to and enact change	Flexibility in searching and locating relevant external knowledge, and enabling high degrees of absorptive capacity in internalising varied types of external knowledge (Denicolai et al., 2014)
Able to perform multiple tasks that are contradictory or conflicting	Dynamic ambidexterity enable firms to adapt to regulatory changes, and reconfigure assets and resources while addressing conflicts between regulatory changes and firm goals as well as the ability to take advantage of disruptive technologies (Dobusch and Schüßler, 2014)

While dynamic ambidexterity enhances firms’ dexterity in establishing their new BMI, they must still modularise structures and processes to reduce complexities. Modularisation increases the velocity of change through reconfiguration and exaptation; this mechanism also implicates the modularisation of organisational structures and processes into discrete components for interchangeability and to attain equifinality. So too does this mechanism enable and even accelerate the continuous change and innovation of business models (Brettel et al., 2012; Kodama, 2009; Quan and Chesbrough, 2010).

Kodama (2004) argued that modularisation is an organising strategy to simplify complex structures and processes. Modularisation leads to more effective BMI decision-making as the firm can better model and prototype new business models (McGrath, 2010), become more agile in implementing new BMIs (Doz and Kosonen, 2010), and augment the efficiencies of existing business models (Johnson et al., 2008). Using modules in reconfiguration increases fungibility that maintains functionality between modules while improving performance-related aspects (Bock et al., 2012; D’Adderio and Pollock, 2014). Fiss et al. (2013) have stated that this mechanism is complemented by a systems perspective, stressing that ‘the whole is best understood from a systemic perspective and should be viewed as a constellation of interconnected elements’ (p. 2). Configurations facilitate equifinality, that is, the possibility for several ways to lead to the same outcome (Kulins et al., 2016), while also allowing for exaptation in co-opting the use of an activity/function for a different purpose than that for which it was originally created (Avci et al., 2015; Landau et al., 2016). Table 7 provides examples of the modularisation for reconfiguration/exaptation mechanism from the literature.

Table 7.

Examples of the modularisation for reconfiguration/exaptation mechanism.

Dimensions	Examples
Modularisation and componentisation	Creating discrete components in firm structure and process, and being able to flexibly reconfigure components facilitates temporal separations to address tensions inherent in the cannibalisation process (Velu and Stiles, 2013)
Interchangeability of components while maintaining performance under challenging conditions	Reconfiguration in innovating (and interchanging) B2C and B2B business models, in realigning the value proposition, creation and capture amongst business partners and customers (Muzellec et al., 2015)
Co-opting the use of an activity/function for a different purpose than what it was originally created for	By reconfiguring its new business model, the firm, Progressive was able to profit from innovation by ensuring that each element of its new BM was transformed and co-opted to take advantage of its patent and complementary assets (Desyllas and Sako, 2013)

BMI is challenging, however, because it also implicates paradoxes. For instance, firms transitioning to a new business model may need to operate contrasting business models under conflicting dominant logics and capabilities (Loon et al., 2020). Paradox heuristics is the ability to make sense of paradoxical challenges and to harness the creative potential arising from tensions and dilemmas. The literature recognises the importance of a paradox heuristics mechanism (Ricciardi et al., 2016) in accepting tensions as normal, attending to contradictions and competing demands at the same time and in viewing paradox as an opportunity to harness the benefits of creativity (Loon et al., 2019; Smith and Lewis, 2011). Table 8 provides examples of the paradox heuristics mechanism from the literature.

Table 8.

Examples of the paradox heuristics mechanism.

Dimensions	Examples
Accepts tensions as normal – a way of thinking	Paradox heuristics is necessary to be able to address tensions, especially the divergent values of NGOs and for-profit firms, and to expect such differences to emerge but that it can be resolved (Dahan et al., 2010)
Attending to contradictions and competing demands at the same time	Paradox heuristics to enable the operation of two conflicting business models during the cannibalisation process, that is, destroying the old business model in a constructive manner while establishing the new business model (Velu and Stiles, 2013)
Views paradox as an opportunity to harness creativity and is beneficial	Paradox heuristics balances the needs for exploitation–exploration, cooperation–competition, and institutional conformity–agency, that emerges in BMI, and to harness the opportunities that catalyses from creative problem solving as a result of addressing paradoxes (Ricciardi et al., 2016)

NGO: non-governmental organisation; BMI: business model innovation.

The need for paradox heuristics is evident, too, when creating alliances for mutuality that involve firms competing with one another at the same time. Alliances are crucial in BMI, not only extending firms’ resources but also accelerating the BMI process; however, alliances can diminish a firm’s flexibility, making a coopetive mutuality alliance approach necessary. Coopetive mutuality alliance is the ability to develop effective, mutual-benefit partnerships that are transactional yet relational, enabling simultaneous cooperation and competition between partner firms. This mechanism involves recruitment and partnership with external organisations in sharing relevant resources (Bohnsack et al., 2014) and cost for mutuality (Nosella et al., 2005), while, as indicated by several studies (Ritala et al., 2014), be in competition with one another. For new BMI to be successful then, firms must have modalities of alliances that are both transactional and relational, cooperative and competitive (Barney and Hansen, 1994; Dyer and Singh, 1998; Rothmann and Koch, 2014). Table 9 provides examples of the coopetive mutuality alliances mechanism from the literature.

Table 9.

Examples of the coopetive mutuality alliances mechanism.

Dimensions	Examples
Sharing of resources and risks	Alliances with station operators who are incentivised to absorb the risk transferred from motorist (for electric car BMI; Avci et al., 2015)
Transactional and relational	Given the dynamic change in the mobile network sector, partnerships that are transactional and relational are important to enable firms to have the flexibility and not be constrained by existing partnerships in changing tact when the environment necessitates it. For example, for firms in ‘renting’ their technological assets and capabilities to long-term partners but with variable terms and tariffs (Ghezzi et al., 2015)
Cooperative and competitive	Coopetive mutuality alliances can influence downstream adoption and further co-innovation. However, at this stage, university spinouts must carefully select partners that they can cooperate with even if there may be instances where firms may compete with one another (Lubik and Garnsey, 2016)

BMI: business model innovation.

4.3. Outcomes – BMI features

‘Outcomes’ relate to at least one of the five features of BMI: antecedent, process, degree, impact and resilience. From the process-based ontology perspective, BMI is not a strictly linear process; it is, instead, iterative, involving back-and-forth movements and leaps between mechanisms. The process ontology of the six BMI mechanisms is ‘sometimes true’ (Davis and Marquis, 2005).

The antecedents of BMI are extra-generative cognition (Chesbrough, 2010) and the systems perspective mechanisms enable executives and entrepreneurs to be creative and to see the whole (Bogers et al., 2016). Once BMI has been instigated, the next stage involves undertaking the change. In this feature, dynamic ambidexterity is central, allowing for flexibility and encouraging dexterity (Calia et al., 2007). The modularisation for the reconfiguration/exaptation mechanism supports the change process by modularising organisational structures and processes that permit components to be more portable, swiftly reconfigured and co-opted for other purposes (Kulins et al., 2016). Many BMI initiatives involve developing partnerships. Coopetive mutuality alliances enable firms to draw on valuable resources from external parties, share risks and gain access to non-traditional markets in a cooperative yet competitive arrangement (Laudien and Daxböck, 2016). The extra-generative cognition mechanism is vital to facilitate double-loop learning to self-correct and improve the enactment change while the process is ongoing (Govindarajan and Trimble, 2011). Table 10 summarises examples of how the mechanisms support each BMI feature from a process-based ontology perspective.

Table 10.

BMI features and mechanisms – insights into a process ontology.

Outcomes	Summary of example of how key mechanisms play a role in each BMI feature
Antecedent: Triggers and context of BMI	• Generative cognition – creativity and analogical reasoning for vision for new BMI.• Systems perspective – making links for BMI, provide insight into levers to instigate BMI
Process: Transformational stages in BMI change	• Dynamic ambidexterity – increases dexterity in enabling successful BMI.• Modularisation for reconfiguration/exaptation – enhances and the speed and velocity of BMI.• Coopetive mutuality alliances – opportunity to draw on partners’ resources in enabling BMI, venture into/create new markets by cooperating and even competing with partners.• Generative cognition – double-loop learning during the change process to enable self-correction
Degree: Continuum of incremental and radical innovation	• Systems perspective – more systemic change resulting in more radical/disruptive change.• Coopetive mutuality alliances – the right partners allow synergies to allow greater degree of change
Impact: Outcomes arising from BMIs	• Dynamic ambidexterity – maintain firm performance while change is taking place.• Paradox heuristics – success in dealing with ambiguity, tensions and paradoxes to allow for radical BMIs to have impact
Resilient: Durability of BMI	• Systems perspective – adopt a synoptic view of how new and innovative business model can be enhanced as a virtuous circle.• Modularisation for reconfiguration/exaptation – allows for components to be changed and integrated for continuous improvement

BMI: business model innovation.

While all six mechanisms contribute to the impact of BMI, dynamic ambidexterity, more than any other, allows for firm performance to be maintained while change is taking place. Such ambidexterity allows for the short-term profits of the existing business model to support the medium-term development of the new BMI (Wei et al., 2014). Nonetheless, we find that the ability of firms to address paradoxes is another, often understated, critical success factor. Paradox heuristics enable firms to successfully overcome ambiguity, tensions and paradoxes, allowing for radical, innovative business models to have an impact (Ricciardi et al., 2016).

Finally, the literature recognises the importance of resilience; without it, BMI enjoys only a short-lived appropriation, even if the business model is highly innovative. Of the two perspectives of resilience, the internal version involves the efficiency and reinforcing attributes of a business model (Amit and Zott, 2012; Brettel et al., 2012) that concerns cost and cost surrogates, such as productivity and yield. The systems perspective allows for a synoptic view of how new and innovative business models can be enhanced as a virtuous circle – that is, as reinforcing and efficient (Casadesus-Masanell and Ricart, 2010). The external perspective, by contrast, includes robustness, inimitability and patentability (Casadesus-Masanell and Zhu, 2013; Desyllas and Sako, 2013). A robust business model precludes any party from holding a firm to ransom. A business model is also considered robust when it can tolerate a degree of (detrimental) shocks, such as partial imitation by competitors (Casadesus-Masanell and Zhu, 2013).

Inimitability relates, as well, to the patentability of a business model. Although in most cases it is difficult to patent a whole business model, some of its integral aspects can be patented, such as Amazon’s ‘one-click’ option and Jones Soda Co’s myjones.com website (Schindehutte et al., 2008). Desyllas and Sako (2013) found that the view that business methods should not be patentable has changed considerably since the 1990s, especially with changes to regulation in countries such as Australia, Japan, Singapore and, in particular, the United States. Indeed, the US Supreme Court has gone so far as to rule that business methods can be patented so long as the pertinent idea is not simply an abstract notion (Desyllas and Sako, 2013). The mechanism of modularisation for reconfiguration/exaptation allows for critical components of a business model to be identified, enhanced for inimitability and potentially patented. Given our findings, we define BMI as the meaningful construction or change of a business model that is both resilient and novel, either to the firm itself or to the market and surrounding industry.

5. Discussion

The first part of this section involves an evaluation of the mechanisms as the basis of a BMI theory. Building on the principle of coherence to a theory contribution (Azevedo, 2017; Shepherd and Sutcliffe, 2011), Shepherd and Suddaby (2017) argued that theories with explicit mechanisms are preferable because they provide a clearer explanation by demonstrating how and why one thing leads to another and therefore provides an explanation. These scholars also posited that a simple theory tends to be the better theory because it does not carry the weight of elements that add little additional value to our understanding. Better theories are those that have a broader application and have fewer acceptable alternative explanations. In sum, with regard to criteria for mechanism-based theorising, Shepherd and Suddaby (2017) emphasise explanatory value, parsimony, comprehensiveness and robustness in explaining a phenomenon in various contexts. Next, this section offers a prescient view of BMI as a metatheory. This is followed by a discussion on the study’s practical implications, its limitations and suggestions for future research.

5.1. Evaluation

First, the six mechanisms identified in this research offer an explanation about BMI, attending in particular to the questions, Why does BMI come about? and How does it come about? (Whetten, 1989). Threats and opportunities from the external environment do not automatically trigger BMI; it is, instead, entrepreneurs’ and executives’ ability to apply extra-generative cognitions and to adopt a systems perspective that inspires a response employing BMI (rather than through product innovation, for example). Dynamic ambidexterity enables firms to be agile in simultaneously undertaking change and conflicting tasks. To increase the velocity of change, firms may need to modularise their business model for reconfiguration and co-optation. Firms may draw upon alliances to address gaps in resources, which may increase the radicality of BMI. Arrangements with alliances are based on mutuality; they are transactional and relational, cooperative and competitive, and are supported by the capability of paradox heuristics to effectively deal with conflict that emerges.

Second, the wide-ranging interventions are parsimoniously represented by the six mechanisms. Each of the six mechanisms is essential, and the removal of any mechanism will degrade the explanatory power of the overall framework (Whetten, 1989). Third, the six mechanisms are comprehensive, while being neither exhaustive nor exclusive, and while still adequately explaining the BMI phenomenon such as playing an essential role in all five features of antecedents, process, degree, impact and resilience in BMI (Bacharach, 1989; Feldman, 2004). The mechanisms are also balanced, involving micro (e.g. extra-generative cognition and system perspective mechanism), meso (e.g. dynamic ambidexterity, modularisation for reconfiguration/exaptation and paradox heuristics) and macro (e.g. coopetive mutuality alliances) levels of analyses. Finally, the mechanisms are robust in explaining BMI in various contexts, as demonstrated in the findings that indicate, in a corollary manner, that there may be fewer acceptable alternative explanations (Read and Marcus-Newhall, 1993). This perspective of mechanisms extends existing knowledge (Whetten, 1989) in offering something new (Feldman, 2004).

5.2. BMI as a metatheory

Corley and Gioia (2011) define prescience as ‘the process of discerning or anticipating what we need to know and, equally important, of influencing the intellectual framing and dialogue about what we need to know’ (p. 13). We offer a prescient view of BMI as a metatheory due to its robust presence in diverse contexts, and overarching perspectives, for example, entity-based and process-based ontological, and varied epistemological foundations. Bates (2005) defined a metatheory as ‘the philosophy behind the theory, the fundamental set of ideas about how phenomena of interest in a particular field should be thought about and researched’. Nevertheless, she conceded a considerable overlap between a metatheory and a paradigm, a position shared by Qiu et al. (2012) and Robledo (2014), who defined a metatheory as a ‘theory that is dedicated to the study of other theory or set of theories. In a general sense, it could be considered a ‘theory of theories’ ’ (p. 536).

While a metatheory is essentially a ‘theory of theories’, other scholars, such as Hesketh and Fleetwood (2006) posited that metatheory provides an overriding assumption applied by all theories attempting to explain a phenomenon. Tsoukas (1994) argued that a metatheory is particularly useful when there is no one single acceptable theory that applies in all situations consistently, while Schweizer et al. (2015) contended that metatheories are tools to overcome fragmentation and embrace eclecticism. Such an approach is appropriate, given that BMI research has generated many theories in different fields and there is a need to understand – using a metatheoretical approach – how these theories may be valid and how one concept could have such divergent explanatory powers.

An important finding in our study is the apparent robustness of BMI in a variety of contexts, traversing developed economies, such as France, Germany, Italy, the United Kingdom and the United States (Ghezzi et al., 2015), as well-emerging markets, such as Bangladesh, China and India (Quan et al., 2018). BMI transpires in many industries, including bond trading, confectionary, electric automotive, higher education, pharmaceutical and retailing. BMI also materialises within a variety of market structure, such as monopolistic markets structures (e.g. US automotive insurance and print newspaper sector, Italian clothing producers, and German media and publishing sector), oligopolistic markets (e.g. northern European telecommunications, Italian network operators and the Brazilian metallurgy sector) and monopolies (e.g. the Swedish electronic options exchange). BMI also explains shifts between markets – from a monopolistic to oligopolistic market structures – as demonstrated in the case of the PAYD automotive insurance sector. BMI emerges in the voluntary sector, as well as in the private sector. Many studies show that BMI need not be instigated by exogenous factors such as new technologies (Chesbrough and Rosenbloom, 2002), but can instead be entirely endogenously triggered (Girotra and Netessine, 2014).

Our review shows that BMI is a pervasive and bridging ‘meta’ phenomenon, consistent with the view of Ghezzi et al. (2015), who posited that BMI has a ‘meta-role’ linking strategic planning and change, as well as others, such as King et al. (2010), who offered the metatheoretical proposal that organisations are social actors. We argue that BMI requires a broader perspective in terms of what constitutes the phenomenon, considering that business model evolution, replication and change are not always clear-cut. A complete understanding of BMI requires explicit acknowledgement of the role of business model evolution in BMI (Laudien and Daxböck, 2017), business model adaptation and replication in foreign markets as a form of incremental BMI (Dunford et al., 2010), and even the adoption of the business model of foreign competitors in defending local markets (Wu et al., 2010). Such a broader perspective acknowledges that a firm may have a portfolio of BMI initiatives, ranging from those in their infancy to ‘full-fledged’ new innovative business models. This portfolio perspective views ambidextrous change (Markides, 2013) and cannibalisation activities (constructively destroying the old business model while establishing the new business model; Velu and Stiles, 2013) as normative processes.

We argue that the BMI mechanisms demonstrate metatheoretical attributes of a ‘theory of theories’ (Robledo, 2014). Using the guidance provided by Post et al. (2020), we show how BMI mechanisms can be applied to other phenomena, in particular, using systems theory to show how the mechanisms come together as a system to depict other phenomena. By doing so, we further expose and establish the emerging perspective of BMI as a process ontology. The six BMI mechanisms identified in this study can be applied to many strategic organisational-change initiatives. While not all six mechanisms may be vitally important, even the least prominent is likely to have a role to play. For example, the mechanism of coopetive mutuality alliances may be present as firms seek external help to expedite their change process.

Next, as exemplified in Table 10, each mechanism is interdependent. This interdependency is not necessarily linear; more likely, it resembles a network with mechanisms linked to one another via feedback loops such as system-perspective stimulating and enhancing new and existing ideas initially produced through extra-generative cognition. Finally, as we argued above, there is a paucity in research adopting a process-based ontology of BMI. This study has addressed this lacuna and created a new trajectory of research for this emerging perspective by showing that BMI is as much about strategic change as it is about competitive advantage. These arguments are grounded in the influential metatheory work of Post et al. (2020), Robledo (2014) and Bates (2005) that underpins our claim that BMI mechanisms are metatheoretical.

5.3. Practical implications

From a managerial perspective, these mechanisms provide a useful problem-solving tool for practice (Nicolini, 2012). Firms that intend to commence BMI must develop the extra-generative cognitions in key members of staff so they are equipped with the creative skills to envision new business models, make sense of the complexity and ambiguity that the BMI process entails, and effectively learn during the process. Firms also need to encourage staff to adopt a systems perspective and develop capabilities to deal with paradoxes. In addition, firms must develop enterprise-level capabilities in dynamic ambidexterity using spatial and temporal separations as tactics and by establishing modularised components in their business model to facilitate speed in BMI. Finally, firms must be more astute in establishing alliances for mutuality that are transactional but still relational and that allow for productive working relationships to develop while still retaining flexibility for firms and not limiting them to existing partnership arrangements.

5.4. Limitations and future research

The first limitation is that our article is entirely dependent on the extant literature. Future research may involve empirical data, specifically to validate the mechanisms. Second, the mechanisms were identified, described and evaluated at a general level. Future research may undertake further analysis focusing on the change processes in each mechanism and how they may be further interrelated. Third, future studies may adopt a hypotheses-testing approach to investigate the relationship among the micro, meso and macro levels. Finally, future research may build on the findings by framing BMI as a metatheory and by operationalising its application through an employment of the six mechanisms as a lens to evaluate explanatory reach in strategic organisational-change studies.

6. Conclusion

BMI provides a competitive advantage to firms; however, while research has offered a rich understanding of this phenomenon, the centrifugal nature of its contributions has, paradoxically, driven us further from developing theory on BMI. By adopting a theory-building approach, this systematic review of indigenous, emic research affords us a closer approximation of BMI theory (Bacharach, 1989), providing a ‘vantage point’ (Weick, 2003) that allows for new ways of seeing, interpreting, discovering and illuminating the phenomenon to facilitate future research (Tsoukas, 2017).

We make three primary contributions in this article. First, we have enriched BMI epistemology by adopting a process-based ontological view and demonstrating that BMI is a series of interdependent mechanisms. Second, we have identified six mechanisms unique to the BMI phenomenon: extra-generative cognition, systems perspective, dynamic ambidexterity, modularisation for reconfiguration and exaptation, paradox heuristics and coopetive mutuality alliances. By identifying these mechanisms, we have introduced novelty and continuity into BMI theorising. These six mechanisms are a set of ideal types representing a unique combination of the attributes of organising. Third, we have offered a prescient outlook by presenting BMI as a metatheory.

Footnotes

Funding

The author(s) received no financial support for the research, authorship and/or publication of this article.

ORCID iD

Mark Loon

Notes

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