Business Models for Sustainability: Choices and Consequences

Abstract

Business models for sustainability (BMFS) explicitly consider, jointly, economic with social and/or ecological value contributions. Thus, managing BMFS requires that one should combine multiple institutional logics, consider different stakeholders, and integrate distinct value dimensions. While research into BMFS has proposed frameworks and tools to capture this complexity, the mechanisms that underlie the interaction of the economic with social and/or ecological value creation cycles in BMFS remain unknown. We use a longitudinal, multiple-case study approach to identify a framework of fundamental choices and consequences that lead to economic and social/ecological value creation. Our findings highlight the interdependence of a set of three fundamental choices (an ambition to cater for multiple purposes, behavioral consistency, and collaboration) that lead to a virtuous circle of reinforcing consequences and cascaded value creation. Furthermore, we show how acceptance of limitations and restrictions functions as a powerful coping mechanism to deal with paradox tensions.

Keywords

business models competitive advantage and environmental strategy hybrid organizations case studies qualitative methods longitudinal analysis

Introduction

Our society, despite manifold economic and technological achievements, faces grand social and ecological challenges, such as climate change, hunger, and water shortages (e.g., Godfray, Pretty, Thomas, Warham, & Beddington, 2011; Howard-Grenville, Buckle, Hoskins, & George, 2014). To address and potentially solve these challenges, most of which are wicked or super-wicked, we need collective and sustainable contributions from everyone, including individual, corporate, and governmental actors (Kurucz, Colbert, Lüdeke-Freund, Upward, & Willard, 2017; Olsen, Sofka, & Grimpe, 2016). We are increasingly experiencing emerging peer pressure, governmental initiatives, and customer demands that are forcing firms to consider addressing these challenges (Moon, 2007; Morioka, Bolis, Evans, & Carvalho, 2017; Zollo, Cennamo, & Neumann, 2013), in particular by integrating contributions to ecological and social needs into their business activities (Boons, Montalvo, Quist, & Wagner, 2013; Vilá & Bharadwaj, 2017). Thus, increasingly more firms are simultaneously pursuing economic, ecological, and social value contributions instead of only concentrating on profit maximization (Zollo et al., 2013). At the same time, increasingly more entrepreneurs are starting social businesses—firms that are not only economically viable but also contribute to the environment and to society (Schaltegger, Hansen, & Lüdeke-Freund, 2016).

Firms that seek to achieve economic as well as social and/or ecological objectives face additional and different challenges to traditional, profit-focused organizations. They deal with multiple, interdependent objectives in addition to a wide variety of different stakeholders (Abdelkafi & Täuscher, 2016; Joyce & Paquin, 2016; Stubbs & Cocklin, 2008). As a result of multiple and potentially conflicting objectives, firms often need to combine more than one institutional logic (doing good and doing well). These institutional logics are taken-for-granted social prescriptions that represent shared understandings of what constitutes legitimate organizational goals and how they can be pursued (Scott, 1995). Therefore, these logics define material practices, assumptions, values, and beliefs that shape decision making and behavior (Thornton, Ocasio, & Lounsbury, 2012). To prevent potential conflict and rivalry between the competing objectives of each logic (Jay, 2013), firms need to systematically integrate sustainability into their organization and business model design (Abdelkafi & Täuscher, 2016; Lüdeke-Freund & Dembek, 2017; Morioka et al., 2017). In recent sustainability research, the business model concept has become a central unit of analysis (Boons & Lüdeke-Freund, 2013; Lüdeke-Freund & Dembek, 2017; Schaltegger et al., 2016). Business models for sustainability (BMFS) are “characterized by creating economic success through (and not just along with) a certain ecological or social activity” (Schaltegger, Lüdeke-Freund, & Hansen, 2012, p. 98). A BMFS that tries to combine multiple institutional logics is a prototype example of a paradox tension, which refers to the existence of “contradictory, yet interrelated elements that exist simultaneously and persist over time” (Smith & Lewis, 2011, p. 382). The academic literature on BMFS has shifted from describing the concept (e.g., Stubbs & Cocklin, 2008) to developing practical tools and methods for creating and running BMFS (e.g., Belz, & Binder, 2015; Geissdoefer, Bocken, & Hultink, 2016; Joyce & Paquin, 2016; Yang, Vladimirova, & Evans, 2017).

In strategic management research, business models have been understood as a set of managerial choices and their consequences (Casadesus-Masanell & Ricart, 2010). Research in the context of incumbent for-profit companies has highlighted how strategic choices and their consequences are interdependent and tend to reinforce one another (Casadesus-Masanell & Ricart, 2010, 2011). Recently, Spieth, Schneider, Clauss, and Eichenberg (2019) emphasized the value drivers that foster and enable social and/or ecological value creation in social business contexts. Bolis, Morioka, and Sznelwar (2017) advocated that decision makers should consider sustainability related values more holistically. However, despite the relevance of the multiple value types generated by BMFS (i.e., economic, ecological, and social value), to date, we have very limited insight into the interactions of these value creation processes and related choices and consequences.

This study seeks to narrow the identified gap. We investigate the fundamental choices and consequences of firms that engage in BMFS and how they interact with one another. To achieve our research objective, we follow a multiple-case study approach to BMFS to identify the particular choices and their consequences for the development of BMFS. We propose a framework of propositions that explain BMFS choices and the network of their corresponding and reinforcing consequences. Thus, we contribute to the academic and managerial debate on BMFS. We advance the understanding of BMFS by revealing how three fundamental decisions—the combination of multiple logics, strong behavioral consistency, and extensive collaboration with an emphasis on community—lead to a virtuous circle of reinforcing consequences in the BMFS context. We apply an activity-based lens to BMFS to show how closely sustainability-oriented and strategic decisions are linked. Furthermore, we identify acceptance of limitations and restrictions as a coping mechanism to address paradox tensions caused by multiple institutional logics, and we show how the achievements of firms with a BMFS can benefit from cascaded value generation.

The Literature

Business Models

Business models have been popular in academic work and in corporate practice, at least since the emergence of the Internet and related e-business activities (Amit & Zott, 2001; Massa, Tucci, & Afuah, 2017; Wirtz, Pistoia, Ullrich, & Göttel, 2016; Zott, Amit, & Massa, 2011). From a research perspective, the business model concept has become a well-accepted unit of analysis in strategic management and entrepreneurship (Aversa, Furnari, & Haefliger, 2015; Wirtz et al., 2016). Furthermore, business models are often subject to change and innovation (Foss & Saebi, 2017; Schneider & Spieth, 2013). Following exhaustive discussions about what a business model is, researchers now widely agree that business models are structural templates for organizations (Amit & Zott, 2001) that can provide a holistic and systemic view on how firms run and develop their businesses (Spieth, Schneckenberg, & Ricart, 2014; Zott et al., 2011). These models describe how a firm can create and capture value (Amit & Zott, 2001; Teece, 2010; Wirtz et al., 2016).

There are two distinct conceptual perspectives on business models. First, the elements-based perspective assumes that a business model is a configuration of distinct elements (Aversa et al., 2015; Baden-Fuller & Haefliger, 2013). This research stream offers practical tools for business model design, such as the business model canvas (BMC; Osterwalder & Pigneur, 2010) or classifications of business model archetypes such as the business model navigator (Gassmann, Frankenberger, & Csik, 2013), as well as instruments for measuring business models and the extent of business model innovation (Clauss, 2017; Spieth & Schneider, 2016). Second, the activity system perspective assumes that a business model is a system of interrelated and interdependent activities that allows a firm to create value and competitive advantage (Casadesus-Masanell & Ricart, 2010; Zott & Amit, 2010). In this perspective, business models provide a holistic and systemic understanding of how activities for value creation are orchestrated (Massa & Tucci, 2014). The activity system perspective links business models to corporate strategy. It assumes that the particular activities and their orchestration within a business model are consequences of fundamental strategic choices made by managers (Casadesus-Masanell & Ricart, 2010). These choices comprise policy choices (e.g., general courses of action), asset choices (e.g., investments in tangible assets), and governance choices (e.g., overarching structural and contractual arrangements). As a result of these choices and their reinforcing effects, stable activity systems emerge that represent a firm’s dominant operational logic (Casadesus-Masanell & Ricart, 2010; Demil & Lecocq, 2010). These activity systems are fairly rigid on a short-term basis and only provide room for tactical maneuvering. Strategic business model changes require that managers return to fundamental choices and adapt the system from its core.

Business Models for Sustainability

In recent years, the business model concept has increasingly attracted attention among sustainability scholars, in particular owing to the concept’s capacity to provide a holistic perspective on a firm. Many studies in the BMFS area have contributed to a better description and conceptualization of BMFS. Characteristics of BMFS include its high levels of integration of economic, social, and ecological concerns; its extended notion of value, a managerial mindset that favors sustainability-oriented norms and values; a plurality of stakeholders with distinct expectations; and the necessity to include the wider value creation ecosystem to understand the business model (Evans et al., 2017; Lüdeke-Freund & Dembek, 2017). Thus, firms engaging in BMFS face challenges such as inertia or competing institutional logics (Hockerts & Wüstenhagen, 2010; Loorbach & Wijsman, 2013; Pache & Santos, 2013). Business model thinking can provide an integrative approach to adapt and redesign the organization in a way that allows it to combine the profit and sustainability orientations. Research has further demonstrated that integrating social, ecological, and economic performance requires high innovation levels from incumbents (Eccles & Serafeim, 2013). Introducing the business model as a unit of analysis for these innovation efforts has emerged as a viable approach to implementing sustainability strategies (Rauter, Jonker, & Baumgartner, 2017).

Different yet synonymous labels are used for business models that address sustainability issues, such as BMFS (e.g., Roome & Louche, 2016; Schaltegger et al., 2016) or sustainable business models (e.g., Biloslavo, Bagnoli, & Edgar, 2018; Morioka et al., 2017). BMFS incorporates sustainability as an integral element of a firm’s value creation and captures logic (Abdelkafi & Täuscher, 2016). BMFS focuses on creating economic success and competitive advantage through ecological or social activities (Boons & Lüdeke-Freund, 2013; Morioka et al., 2017; Schaltegger et al., 2012). Lüdeke-Freund (2010, p. 1) defined BMFS as “a business model that creates a competitive advantage through superior customer value and contributes to the sustainable development of the company and society.” This illustrates the broader definition of value, which is not limited to economic value, as it is emphasized by sustainability-oriented firms, in comparison with traditional profit-oriented firms (Roome & Louche, 2016; Stubbs & Cocklin, 2008; Yang et al., 2017). Thus, performance metrics in the BMFS context such as Upward and Jones’s (2016) tri-profit measure simultaneously capture and integrate ecological, societal, and economic value creation.

Franca, Broman, Robèrt, Basile, and Trygg (2017) noted that traditional business model concepts poorly capture the particularities relating to the sustainability dimension: the need to consider a wide range of stakeholders, to capture social value creation, and to consider long-term social value capture. In response, the authors combine the principles of the “framework for strategic sustainable development” (FSSD; Broman & Robèrt, 2017) with the BMC (Osterwalder & Pigneur, 2010) into the FSSD-BMC. Upward and Jones (2016) integrated several formative and instrumental principles that guide the design of the business model along the BMC. Joyce and Paquin (2016) recently suggested the triple-layered BMC as a tool for sustainability-oriented business model innovation. By adding an ecological and a social layer to the BMC, this tool focuses on the holistic view of the multiple value types of a sustainability-oriented firm. Kurucz et al. (2017) built on prior work, integrating relational leadership with FSSD and a version of the BMC. In addition to these extensive and partly highly complex descriptive templates, other studies have provided approaches to identify uncaptured sustainable values or to redefine business value (Biloslavo et al., 2018; Yang et al., 2017). Recently, Lüdeke-Freund, Carroux, Joyce, Massa, and Breuer (2018) introduced a taxonomy of 45 patterns of BMFS to allow for more unified studies of the phenomenon. Finally, several studies have emphasized the categorization of BMFS into archetypes divided across ecological, social, and economic categories (Bocken, Short, Rana, & Evans, 2014; Ritala, Huotari, Bocken, Albareda, & Puurnalainen, 2018).

Recently, researchers have begun to explore drivers and consequences of successful BMFS. For instance, Inigo, Albareda, and Ritala (2017) investigated dynamic capabilities that enable firms to innovate their business models toward sustainability. Täuscher and Abdelkafi (2018) simulated BMFS’s scalability and robustness, substantiating the reinforcing effects of sustainable and economic objectives. However, they also showed that high competition threatens BMFS’s financial performance. Spieth et al. (2019) applied a business model perspective to identify four value drivers of social businesses: responsible efficiency, impact complementarities, shared values, and integration novelties. de Lange (2017) empirically highlighted significant challenges to successful BMFS, as a firm’s sustainability orientation (either ecological or social) reduces the likelihood and amount of external funding. In addition, Belz and Binder (2015) suggested a six-phase sustainable entrepreneurship process to explain how entrepreneurs create BMFS. They explain that despite an initial social or ecological emphasis, these entrepreneurs tend to develop a triple bottom line solution over time because for them, ecological and social issues go hand-in-hand.

Few studies explicitly considered the key role of managers in developing successful BMFS. Bolis et al. (2017) reviewed literature on the rationalities and decisions behind sustainable development. They find that the dominant decision-making model does not appear to integrate the holistic sustainability-related values but is more driven by an instrumental logic in which sustainability is just a means to achieve or improve economic success. However, their study does not explicitly consider BMFS. Wu and Pagell (2011) analyzed organizational decision making for sustainability-oriented supply chain management. For the case of incumbent firms, they find that the initial decision for supply chain sustainability leads to incremental yet continuous improvements. Solving potential tensions through innovation and sequential follow-up decisions contributes to achieving the sustainability-oriented goals. Rauter et al. (2017) assumed that it is a crucial managerial task to decide on which values, besides economic ones, are strategically important. Their analysis revealed that the individual values of the founders of sustainability-oriented firms significantly influence their strategic decision making, indicating that the motivation to engage in sustainability-oriented business activities is personal and value-based. Similarly, Morioka et al. (2017) recommended including sustainability into the core of any business decision. They proposed three guidelines to help integrate sustainability into a business model value system: (a) connecting business purpose and employees’ values and beliefs, (b) proactive engagement for sustainability problems driven by company leaders, and (c) resulting system-level changes.

These latest efforts substantiate our assumption that fundamental strategic choices lead to the development of sustainability-oriented activity systems. However, from a strategic management perspective, BMFS studies are still in their infancy. Furthermore, since research into BMFS—with a few exceptions (e.g., Abdelkafi & Täuscher, 2016; Täuscher & Abdelkafi, 2018)—relies on an elements-based perspective, considering the systemic consequences of strategic managerial choices can significantly enhance our current understanding of how BMFS works from a strategic management perspective.

Methodology

Research Design

We explored and identified the underlying fundamental choices and their consequences in BMFS. We chose a qualitative research design to explore the notions of choices and consequences in this natural context of BMFS (Bansal & Corley, 2012; Eisenhardt, 1989; Yin, 2014). The complexity of BMFS, the detailed understanding we seek to achieve, and the relevance of the contextual settings further encouraged us to apply a qualitative research design (Creswell, 2013). With our style of theorizing focused on pattern descriptions (Cornelissen, 2016), our inductive research design emphasized the emergence of theory from data (Eisenhardt, Graebner, & Sonenshein, 2016). We applied a multiple-case study approach to achieve the required breadth for comparing the results (Eisenhardt, 1989; Eisenhardt & Graebner, 2007). Furthermore, since we are looking at a temporally evolving phenomena—choices and their consequences—our longitudinal analysis emphasized how things develop over time (Langley, Smallman, Tsoukas, & van de Ven, 2013). Following an initial set of interviews in 2015, we developed an initial draft of choices and consequences and used external data sources for triangulation. Two years later, we conducted a second round of interviews with the same managers and entrepreneurs to confirm, adjust, and complement our initial understanding. The longitudinal aspect within our data set allowed validation of any expected consequences of choices made shortly before the initial interviews. As the unit of analysis, we focused on each case company’s individual business model. In the case of multiple business models within a company, we focused on the firm’s core business model in support of its sustainable mission. In terms of geographic focus, we included only firms with headquarters in Austria and Germany to ensure an environment with similar legal and political framework parameters.

Data Collection

We applied a purposeful sampling strategy to select information-rich cases (Creswell, 2013; Eisenhardt, 1989; Glaser & Strauss, 1967; Meredith, 1998), applying a combination of a typical criterion-based sampling with a snowball sampling strategy (Patton, 1990). We started identifying potential cases by searching for firms that explicitly address a sustainable mission. We defined this as either an explicit ecological or social mission, in addition to a legal, profit-oriented business organization type. We were interested in recently founded firms since we wanted to interview persons that had made the choices and experienced the consequences. To create a homogenous sample, we considered only firms that were founded during the foregoing 5 years. In addition to our own search, we asked experts in the community, mostly involved in start-up finance with an emphasis on sustainable entrepreneurship, for further recommendations. Since it was our purpose to identify patterns across the individual companies, we decided to focus on a larger sample size (Eisenhardt, 1989; Eisenhardt & Graebner, 2007; Yin, 2014); in total, we worked with seven case companies (see Table 1).

Table 1.

Data Sample.

Case	Industry	Sustainable mission	Data sources
1	Mobility services	Fosters shared services in B2C and B2B environments (Focus: ecological sustainability)	2 Interviews, annual reports, website
2	Education services	Supports families in raising and educating children (Focus: social sustainability)	2 Interviews, annual reports, website
3	Financial services	Supports P2P finance for exiting from nuclear and fossil fuel energy (Focus: ecological sustainability)	2 Interviews, annual reports, website
4	HR services	Supports recruiting and HR management for sustainable businesses (Focus: social sustainability)	2 Interviews, annual reports, website
5	Food and beverages	Provides fair working conditions and payment in a consensus-oriented context (Focus: social sustainability)	2 Interviews, annual reports, website
6	Consumer goods	Fosters shared services for tools and equipment (Focus: ecological and social sustainability)	2 Interviews, annual reports, website
7	Consumer goods	Reduces single-use packaging materials (Focus: ecological sustainability)	2 Interviews, annual reports, website

The sample included three firms with a social mission (Cases 2, 4, and 5), three with an ecological mission (Cases 1, 3, and 7), and one with a balanced ecological and social mission (Case 6). The firms with a social mission comprise Case 2, an educational services provider with the social mission of supporting families in raising and educating their children; Case 3, an HR services provider that supports recruiting and HR management for sustainability-oriented businesses; and Case 5, a food and beverage products provider that emphasizes fair working conditions and payment in a consensus-oriented work context. The firms with an ecological mission include Case 1, a provider of shared mobility services; Case 3, a peer-to-peer financial services provider in the context of renewable energies; and Case 7, an agent in the consumer goods industry with the objective of reducing single-use packaging materials. Case 6 is a company in the same industry that offers shared services for tools and equipment with both the ecological objective of reducing the number of tools produced and a social objective in terms of enabling consumers to work with high-quality tools that they could not afford to purchase.

We collected primary data in the form of semistructured interviews based on a range of predefined, standardized open questions. The first focus of the interviews was the entrepreneur’s or the manager’s cognition of their business model. To avoid any potential bias, we very openly started this section by asking them to describe their business models in their own words. Follow-up questions focused in particular on the organizations’ value contributions (economic, social, and ecological) and on how the organizations manage to achieve them. We also asked for interdependencies among the value contributions and the stakeholders involved. The second focus of the interviews was on the challenges and opportunities that the managers and entrepreneurs perceived due to the hybrid character of their business models. Again, we openly asked them to describe their cognition of the situation. Follow-up questions related to how they deal with these challenges and opportunities and how this affects their value contributions. These questions allowed us to compare the different views of the interviewees across the case firms and over time. A temporal combination, in terms of gradually moving to a more conversational approach throughout the interview, allowed us further to respond flexibly to emergent topics. The first round of interviews with the founders took place in 2015, and the second round with the same interviewees in 2017. These interviews included an additional section on the changes within the organization’s business models since 2015. All of the interviews, each of which lasted on average 54 minutes, were recorded and transcribed. The interviewees reviewed the transcripts to ensure a correct understanding of their statements. In addition to the primary data gathered for this study, we considered secondary data in the form of organizational documents and existing interview data for triangulation that would strengthen construct validity (Benbasat, Goldstein, & Mead, 1987; Eisenhardt, 1989; Leonard-Barton, 1990; Yin, 2014). These data included the firms’ annual reports, websites, and additional documentation provided by the firms.

Data Analysis

Throughout data analysis, we wrote detailed memos and descriptions of each individual case (Pettigrew, 1990; Yin, 2014) before comparing and contrasting the individually emerging patterns in a cross-case analysis (Benbasat et al., 1987; Eisenhardt, 1989; Yin, 2014). This means that we understood each case as a distinct experiment and that theory building was a result of cross-case replication (Eisenhardt, 1989; Yin, 2014). Central to the data analysis was our recognition of relationship patterns among the identified constructs and their underlying logic, both in each individual case and across all cases (Eisenhardt & Graebner, 2007).

To identify regularities and patterns in the data, we applied a comprehensive coding procedure (Creswell, 2013; Stake, 1995; Yin, 2014). In support of our inductive approach and to ensure an open-minded and context-sensitive analysis, we based the first initial coding of the raw data on open, in vivo codes (Corbin & Strauss, 2007; Glaser & Strauss, 1967; Miles, Huberman, & Saldaña, 2014). In a second round of coding the same data, we used a set of a priori codes based on prior work in this field and on the secondary interview material to complement the inductive approach of Round 1 (Eisenhardt, 1989). Thus, codes that shared the same idea were aggregated into first-order categories, second-order categories, and aggregate dimensions (Charmaz, 2006; Corbin & Strauss, 2007; Gioia, Corley, & Hamilton, 2013). Our analysis was supported by visual mapping of the preliminary findings (Langley & Abdallah, 2011). To support our data analysis, in particular, to code the data, we used MAXQDA software.

Results

For each of the seven case companies, we explored the fundamental choices within their business models and the choices’ consequences individually before deriving patterns in a cross-case analysis. We provide a complete overview of the single-case analysis in the Supplemental Appendix available online.

Case 1’s ecological mission was to reduce CO₂ emissions and the number of cars in cities. The firm chose to achieve this through offering a highly convenient shared mobility service in both commercial and social contexts. Their mission restricted their growth options due to limited availability of suitable resources. However, together with the ecological value they generated, the consequent behavioral consistency increased their reputation as an ecological contributor. The firm’s business models further aimed at engaging its clients into making an ecological contribution, even though they were primarily interested in the mobility service provided.

Case 2’s social mission was to offer economically feasible solutions for high-quality early childhood day care on a corporate site for smaller companies. The firm’s behavior consistently reflected the values underlying their mission and displayed how they prioritize their mission’s values over economic growth opportunities. We further observed a strong emphasis on helping their partners, the smaller firms, to be able to offer child care benefits to their employees.

Case 3’s ecological emphasis centered on offering collective finance mechanisms for investment in sustainability. This approach provided clear guidance to the firm concerning the potential scope of their project portfolio. The firm found achieving trust, through outstandingly high levels of transparency and the integration of sustainable behaviors into their daily routines, to be very important. Furthermore, they emphasized the value of collective efforts and supported individuals in joining these efforts to achieve the aspired value contribution.

Case 4’s social impact mission centered on offering recruiting services for jobs that have high social and/or ecological impact. The firm followed a list of predefined criteria to select suitable projects and rejected engagement in any projects that did not fulfill these expectations, specifically rejecting economically lucrative offers. A key element of their service offering was to put others in positions that would make a difference, either by finding a meaningful position for a talented and motivated person, or by helping a firm fill a slot in order to achieve a social and/or ecological mission.

Case 5’s social mission focused on providing fair working conditions and payment while considering ecological aspects. The firm was consistent in prioritizing social value over any economic opportunities and willingly accepted any delays or initial costs that this might cause. Furthermore, they emphasized absolute transparency and honesty about everything they do. Instead of negotiating contracts with employees or suppliers, they relied on consensus-driven verbal agreements that ensure all players receive fair treatment within the firm’s ecosystem, thus fostering highly balanced, long-term relationships.

Case 6’s ecological and social mission was to offer a sharing economy model for high-quality products to reduce consumption-related production and resource consumption and to make those products available to everybody. The firm only offered high quality, repairable products and tried to engage the product’s manufacturers as long-term partners. While they captured most of their client’s interest with their service offering itself, not its ecological impact, they also focused on multipliers and ambassadors of their concept within the sustainability community who were less interested in the service itself but engaged in promoting the concept.

Case 7’s ecological mission focused on reducing packaging material in retail food sales and logistics. The firm operated as an agent and consultant to promote solutions that include reusable packaging and package free retail sales. The sustainability mission, more than any economic consideration, was the firm’s key purpose. This included a purposeful decision on using existing infrastructure of others, rather than engaging in this business and building additional capacity. Instead, the key emphasis of all business activities centered on providing and promoting solutions for others (retail supermarket clients and retailers or logistics providers), thus fostering the avoidance of single use packaging.

Patterns of Choices

Our cross-case analysis revealed that firms engaging in BMFS made three fundamental choices. First, the firms chose to combine distinct institutional logics, with their social and/or ecological mission strongly prioritized. Second, the firms chose to be highly consistent in their behavior. Third, the firms chose a strong emphasis on partnerships and community support. Following here, we outline these choices, as summarized in the data structure given in Figure 1, in some detail. Additional sample statements appear in the Supplemental Appendix available online. Since we could observe no difference between the firms pursuing a social and those pursuing an ecological mission, we did not differentiate between them.

Figure 1.

Data structure.

The Choice to Combine Logics While Prioritizing the Social and/or Ecological Missions

Congruent with any for-profit organization, our sample firms aimed for economic viability. They emphasized that “the economic dimension determines . . . [the] viability” of their actions (I 3.2) and that “although sustainability is the main priority, everything . . . must be economically feasible” (I 3.1). Although they emphasized the relevance of economic sustainability, they pointed out that this is no more than the means to enabling their sustainability-oriented actions: “economic sustainability comes first, otherwise we won’t be in business for long and cannot support others” (I 4.2). However, their raison d’être is their ambition to make changes in terms of ecological and/or social impacts, “to make the world a better place, to leave something positive behind” (I 4.2). They considered “social and environmental elements . . . [to form part of our] DNA, which is the initial requirement of everything . . . [we] do” (I 6.2). These objectives followed in a deliberate combination of economic and ecological or social objectives that reflected each firm’s awareness of the interactions between and interdependence of these dimensions.

The firms’ ambition to create ecological and/or social impacts were further reflected in their approaches to business, via prioritizing ecological and/or social purpose over economic objectives in their actions. They put pressure neither on developing their business nor on solely optimizing economic returns. This observation is reflected by statements such as “It is not my plan to make the company grow and more profitable and thereby attractive for investors” (I 7.2) and “We don’t want to grow so fast that we would have to ditch all our social intentions. For us, it is definitely about growing and becoming economically successful, but not without considering the social aspect” (I 2.2). Furthermore, the firms concentrated on organic growth to remain independent from external influences:

We have decided against any investors. This meant that we grew on our own strength only, at a pace we could afford. However, no one pressured us to achieve a certain return, interest rate, or profit, so no one could force us to take actions we did not want to take. (I 5.2)

The firms also reported negative experiences with external investors “that sought the highest profit,” stating that they would “no longer do this . . . [but] now concentrate on organic growth” (I 1.2).

The Choice to Maintain Consistent Behavior

We perceived an emphasis on consistency in behavior in the case firms’ absolute honesty and transparency about all their actions. They actively engaged in “being much more open and transparent [than traditional providers]” (I 3.2) by their transparency concerning “publishing an official, audited report about what and how . . . [we] are doing” (I 4.2) or by providing “all . . . [our] business calculations . . . with the only limit to this . . . [being] the protection of data privacy” (I 5.2). Furthermore, they showed high consistency concerning what they claim and what they do. This consistency was reflected by “many small things such as taking the train, consuming green electricity, having . . . team meetings at organically oriented restaurants . . . try[ing] to purchase secondhand office furniture, and so on” (I 4.2), as well as by the firms’ ambition to only “have one face, not like companies that spend a lot of money on public relations to create a positive image disconnected to their behavior in reality” (I 5.2).

The firms also decided to reject business opportunities that did not allow them to act according to their values. They noted that they “have predefined criteria on whether or not to accept an order. If it doesn’t help to make the world better . . . [we wouldn’t] do it” (I 4.2). This sentiment is illustrated in Case Company 6, which promotes shared services for tools and equipment. They claim that they

could have acted differently, potentially economically better, by buying cheaper tools. This would have made no difference to most of . . . [our] customers. However, that is not what . . . [we] wanted to do. [We] . . . purchased only high-quality tools. This was important to . . . [us], and was financially challenging. (I 6.2)

Another example is Company 5, which noted that

we often get orders from many countries, such as China or Taiwan, that want to buy . . . [our] products. However, . . . [we] don’t want to deliver . . . [our] products to distant regions, because it isn’t ecologically viable. This is a restriction . . . [we] place on . . . [ourselves]. (I 5.2)

They also willingly accepted limitations concerning the availability of suitable resources to act in alignment with their social and ecological values, despite “taking on additional challenges that traditional firms don’t need to consider” (I 5.2).

The Choice to Foster Partnerships and Community Support

The case firms also applied their ecological and social values to their choices of actors involved in their value creation processes. They strongly emphasized the importance of collectively achieving their goals. Thus, they sought to get people involved in their efforts if they shared their objectives. Case Company 3 reflects this: “We always talk about collective thinking. We strongly believe that it is crucial for the aspired exit from nuclear and fossil fuel energy to get as many people involved as possible” (I 3.2). They further explained that they “have many actors that consciously address the issue” (I 5.2) and that they perceive among their partners, “everyone is aching to contribute to the joint objective. It’s a great joy to be active in this field. It’s simply amazing!” (I 4.2). Furthermore, the firms acknowledged and used existing infrastructure rather than building it from scratch themselves:

There are limitations to what I can and should do myself. There was no necessity at all to build my own production sites, because the systems that solve the problem already exist. And it would have made no sense to build additional infrastructure for this. We can be resource-efficient here . . . (I 7.2)

Firms also emphasized building long-term partnerships and creating co-ambassadors among their partners. For instance, Case Company 6 described its relationships to the tool manufacturers as not

want[ing] to buy the tools from the manufacturers, but . . . want[ing] to build long-term relationships with them . . . actually do some marketing for the manufacturer by letting . . . [its] customers know that the products they hire are of high quality. (I 6.2)

Case Company 5 emphasized that

those involved in the value chain quickly become co-ambassadors for how . . . [we] collaborate. They tell others how great it is to work with . . . [us], that . . . [we] don’t put pressure on them, that . . . [we] pair fairly, that . . . [we] allow them to plan by themselves and to decide stuff. (I 5.1)

The sample firms further highlighted the strong support they receive from the community. This includes the support that sustainability-oriented firms experience from their investors within the community. They highlighted that “investors from the social impact community are also stakeholders . . . and they provide more than money—contacts, reputation, etc.” (I 4.2). They also reported perceiving support from other actors within the community that believe in the same objectives. The firms reported being “very grateful for the support of associations that share the same values and that strive for the same objectives” (I 7.2), and they emphasized that there are “people in . . . [our] community, . . . [our] environment that support projects because they are . . . [our] projects and they want to support what . . . [we] do” (I 3.2). They characterized their community as a “much more in-depth network . . . [that is] much stronger although there are not that many actors, but you tend to know one another. It is much more straightforward, and you find one another easily” (I 2.2). They also emphasized the importance of people in the community who “are interested in our concept, but who are not our core customers. They are more like multipliers or ambassadors for our idea” (I 6.2).

Patterns of the Consequences

Each of the three identified choices had a number of direct and indirect consequences. Figure 2 visually represents the virtuous cycle of the three fundamental choices in BMFS and their consequences, while Table 2 complements the graphical display. We provide more on the single-case analyses in the Supplemental Appendix available online.

Figure 2.

Choices and consequences.

Table 2.

Choices and Consequences.

Choice	Consequence I	Consequence II
To combine logics while prioritizing social and/or ecological goals	→ Priority alignment	→ Consistent behavior
	→ Path dependence	→ Partnering/community
	→ Involving/utilizing others	→ Value creation
	→ Value creation	→ Credibility
To maintain consistent behavior	→ Credibility	→ Partnering/community
To maintain consistent behavior	→ Path dependence	→ Partnering/community
To foster partnerships and community support	→ Enabling others	→ Value creation
To foster partnerships and community support	→ Credibility	→ Partnering/community

The combination of multiple institutional logics and a high priority on the social and/or ecological mission directly affects the creation of social and/or ecological value. Operating as a business organization enables the firms to generate this value type through their economic activities. Their business offerings also reach customers who do not care about social and or ecological responsibilities, who consider the social or ecological impact as a nice-to-have add-on to the product or service they were looking for. By consuming the social or ecological firm’s value offering, these customers contribute to the firm’s mission by satisfying a need of their own. Firms engaging in BMFS not only satisfy those customers’ needs but also utilize or involve these customers in generating positive social and/or ecological value. A great example of this is given in Case 1, where the firm manages to engage its clients in making an ecological contribution by offering them a shared mobility service that is attractive enough on its own (in terms of service quality, convenience, and pricing), even for those clients not initially interested in the ecological benefits. The firm thereby manages to turn the initial challenge that they “can’t afford to concentrate on the ecological benefits only. This would exclude 90% of . . . [their] users” (I 1.1) into an opportunity for generating ecological value. As a result of generating such positive social and/or ecological value, firms are likely to gain more credibility for their mission. Credibility refers to their appreciation and acceptance as a serious contributor to ecological and/or social value within their relevant community.

While a firm’s focus on the social and/or ecological mission increases its credibility, it could also narrow the firm’s scope of business opportunities, eventually leading to path dependence. Path dependence in this context refers to situations where a firm’s options narrow down to a very limited corridor of choices. For example, Case Company 2 designs, builds and operates corporate child care solutions, with its priority assigned to the social purpose more than economic return. This setup limits the range of potential investors to those who share the same value priorities. Despite struggling to find investors as “there are many more investors that are not socially or sustainability oriented, there are venture capital providers or much more business angels—this is far more limited in the social business or sustainability scheme” (I 2.2), and despite having to compromise on growth, the firm is not willing to leave its chosen path.

Furthermore, the choice to combine distinct logics while prioritizing the social and/or ecological dimension results in a number of clearly defined priorities that determine a firm’s actions. For Case Firm 4 that offers headhunting services for projects and jobs with social and/or ecological impact, its mission leads to a restriction in their business scope (path dependence), according to a list of decision criteria for evaluating whether to engage in an offer (in case the job or project has a social and/or ecological impact). They are very clear that they “only operate for the sustainability sector . . . [they] take a look at the job, at its potential to make the world a little bit better” (I 4.2). This approach reinforces strong behavioral consistency, which in return increases the path dependency effect. Such consistency and priority alignment is also a conscious choice that helps firms engaging in BMFS to gain credibility.

A strong emphasis on collaborating and support in a community of shared values represents the third conscious choice. Engagement in and support from the community help firms increase their credibility and allow them to enable others to act in social and/or ecologically responsible ways. Thus, firms are required to collaborate with partners who share the same values; they also become attractive partners of these firms. Increasing levels of path dependence further lead firms to search for like-minded partners. In addition, enabling others by giving them opportunities to do something good, positively impacts on overall social and/or ecological value creation. This means that the firm enables other actors to act in a more social and/or ecological manner. Case Firm 7 exemplifies this aspect well by offering packaging solutions to enable retail customers to package free sales. In facing the complexity tied to efficient packaging solutions, the firm contributes greatly by supporting the individual actors: “We want to enable those involved in trade as well as their customers to act responsibly when it comes to packaging.” (I 7.1).

Patterns of Choices and Their Consequences

Our analysis revealed the same three fundamental choices made in all BMFS: (a) The firms combine economic and ecological and/or social missions, whereas the ecological and/or social purpose dominates behavior; (b) They behave consistently with the values of the social and/or ecological mission; and (c) They strongly emphasize a community of actors with similar mind-sets. The analysis of the consequences of these choices across the cases revealed a range of direct and indirect consequences. We will now discuss these relationships to derive a framework of propositions (see Figure 3).

Figure 3.

4A Framework: Ambition, acceptance, action, and achievement.

The initial starting point of any BMFS was the strong ambition to combine economic activities with a social and/or ecological mission as the purpose of all of their activities. This holistic value creation approach and the consequent plurality of institutional logics are a key challenge of any BMFS (e.g., Biloslavo et al., 2018; Breuer & Lüdeke-Freund, 2017; Pache & Santos, 2013). As previously emphasized by Stubbs and Cocklin (2008), any economic profit that a BMFS makes was no more (and no less) than a means to achieve their mission to create socially and/or ecologically value, which leads to Proposition 1a:

Proposition 1a: The firms’ ambition to combine economic with social and/or ecological missions provides them with the means to create social and/or ecological value by themselves or to enable others to create such value.

Rauter et al. (2017) showed that BMFS require certain adaptations and extensions to traditional business models. The authors emphasized factors such as leaders’ idealism and personal values as motivation. Our findings indicate similar aspects. For all case companies, the social and/or ecological mission restricted their business activities, either in terms of limiting their potential scope (path dependence) or by requiring them to act in alignment with their values (priority alignment). This consideration was taken for granted and willingly accepted in all our case companies, which leads us to Proposition 1b:

Proposition 1b: To realize their missions’ ambition, firms pursuing a BMFS concept are willing to accept restrictions and enter into path dependency.

Our case companies responded to the accepted restrictions and dependencies following two action patterns. First, they displayed behavioral consistency across all their actions, in that they acted on their values and beliefs and in line with their mission without any exception. This behavioral consistency affected not only the BMFS’s range of activities but also how they performed these activities (e.g., using green electricity, purchasing secondhand office furniture). Second, our case companies actively recruited like-minded partners for support and collaboration. This resembles the previously raised arguments of the relevance of building networks (e.g., Roome & Louche, 2016) and the success of its stakeholders for the company (e.g., Stubbs & Cocklin, 2008; Zollo et al., 2013). Despite being smaller in terms of size, these partner communities emerged as a key asset for the case companies in our sample, enabling them to cope with the accepted restrictions and dependencies. Consequently, we suggest the following:

Proposition 2a: Due to path dependencies and restrictions, firms pursuing a BMFS concept display behavioral consistency.

Proposition 2b: Due to path dependencies and restrictions, firms pursuing a BMFS concept display community engagement.

Morioka et al. (2017) proposed the idea of a cascaded sustainable value capture. This idea means that value is captured not only by the organization that creates the value but also by its stakeholders and the stakeholders’ stakeholders. Our data reveal a similar effect for value creation. The firms’ actions lead to social and/or ecological value creation, either directly through their actions, or indirectly as they engage or utilize other actors. Direct value creation can be a result of the firms’ behavioral consistency (e.g., by saving energy or reducing waste throughout their activities) or by the output of their activities. In addition to a positive value contribution, firms further increase their credibility within the community. Indirect value creation stems from situations in which the firms leverage a wider community to achieve the value contribution. Similar to Morioka et al.’s (2017) idea of cascaded sustainable value capture, indirect value creation refers to a cascaded value generation process. Firms either enable other actors to make a social and/or ecological contribution (e.g., customers of package-free retail sales or crowd investors for investment in sustainability) or they target customers with an attractive value offering through which they make a social and/or ecological contribution (e.g., shared rides or shared tools and equipment). Therefore, we propose the following:

Proposition 3a: Due to behavioral consistency, firms pursuing a BMFS concept increase their credibility in the community and directly generate social and/or ecological value.

Proposition 3b: Due to community engagement, firms pursuing a BMFS concept increase the involvement of other actors and involve or utilize them to indirectly generate social and/or ecological value.

The achievements of a BMFS continue beyond the actual direct or indirect value creation as a positive social and/or ecological value contribution leads to increased credibility of the firm and to greater awareness of their activities. This situation is likely to strengthen their community ties. The idea of mutual interdependencies of value creation for the various stakeholders and the overall reinforcing impact for overall value creation is a key theme in BMFS (e.g., Abdelkafi & Täuscher, 2016). Consequently, to close the loop, we propose the following:

Proposition 4a: Due to direct social and/or ecological value creation, firms pursuing a BMFS concept increase their credibility within the community.

Proposition 4b: Due to indirect social and/or ecological value creation, firms pursuing a BMFS concept increase their credibility within the community.

Discussion

Key Findings

We have investigated managers’ fundamental strategic choices and these choices’ consequences in BMFS. We identified three fundamental choices that lead to a virtuous circle of reinforcing consequences: (a) Managers in BMFS consciously decide to combine sustainable and economic institutional logics, (b) They keep their behavior consistent, and (c) They emphasize partnerships and community building. The virtuous circle created by these fundamental choices and their reinforcing consequences allows a firm to combine economic and ecological and/or social concerns in value creation. This concept is reflected throughout four components in our proposition framework: ambition, acceptance, actions, and achievements.

Managers in BMFS base their initial choices on their ambition to realize sustainable achievements. Hence, they are intentionally choosing to combine sustainable and economic institutional logics. Although they prioritize sustainable objectives concerning ecological or social aspects over economic ones, these firms still decide to achieve economic viability as a necessary enabler of their ecological and/or social mission. This finding is in line with previous studies that argue that sustainable business models have to integrate these three interrelated objectives (Upward & Jones, 2016) and have to define a more holistic value creation logic to achieve sustainable, social, and/or ecological value (Biloslavo et al., 2018; Breuer & Lüdeke-Freund, 2017; Lüdeke-Freund & Dembek, 2017). In line with Morioka et al.’s (2017) proposition, we found that clear guidelines (such as a priority assigned to ecological and/or social objectives) can help transfer the sustainable business purpose into the values and beliefs held by the employees. Such guidelines further facilitate the simultaneous maneuvering of multiple organizational logics present in a firm.

The ambition of firms with BMFS leads to a range of limitations and restrictions that these firms need to accept. We found that the integration of multiple logics rests on early choices that define the logic of a firm’s activity system. Such a firm has very clear priorities that determine behavior and future decision making of its members with the initial choice made at the firm’s foundation. On the down side, strategic decisions to combine different objectives create path dependencies (Sydow, Schreyögg, & Koch, 2009) that might limit the firm’s organizational flexibility (e.g., ruling out certain investors, markets, and technologies). However, in line with their understanding of economic profits as a means of more relevant value creation, managers of BMFS showed a high willingness to accept these restrictions. This conscious acceptance of restrictions is a phenomenon that has not received particular attention within the BMFS literature so far.

Influenced by both the ambition and the acceptance of restrictions and limitations, managers of BMFS choose two action patterns. First, they decide to act highly consistently with their claimed values and beliefs and to be very transparent about all their activities. Such consistent behavior creates high reliability for the internal and external stakeholders and signals credibility to the other actors in the value network. Second, we found that managers of BMFS consciously choose to rely on a network and stakeholder community with shared beliefs for their value creation. This involves cocreation activities of the broader community as well as purposefully selected partners that contribute to the firm’s sustainable value creation. In addition to their benefits for value creation, these partners take the role of ambassadors who disseminate a firm’s idea, enabling others to join in. This purposeful integration of stakeholders into value creation processes is in line with previous studies’ findings (Breuer & Lüdeke-Freund, 2017; Evans et al., 2017). Constrained by their sustainable mission, the sample firms partnered with stakeholders who share their beliefs and values.

Finally, the achievements of BMFS center on two dimensions: the creation of sustainable value and the improvement of the firm’s credibility as a mediator of future value creation. The sustainable value stems from three sources. First, it can be a direct outcome of the BMFS’s value proposition. Second, the BMFS might engage other actors’ involvement to create social and/or ecological value. The integration of different value logics enables a firm to integrate and utilize others to achieve its sustainability mission. This becomes possible as the firm’s value proposition also addresses customers who are interested in the product or service offering and who do not necessarily care about the sustainable benefits associated with the firm’s activities. BMFS utilize these customers, simply by providing products and services that satisfy their needs, to enable and support the firm’s dedicated social and/or ecological mission. Third, the BMFS might enable other actors to create social and/or ecological value. Credibility, besides the actual social and/or ecological value creation, is another key achievement of any BMFS. This credibility is necessary to create trust among stakeholders (e.g., customers and partners), particularly owing to the multiplicity of institutional logics present in the firms (Loock & Mueller, 2012). Credibility can be the outcome of a firm’s consistent behavior, the recognition and reputation of its partners and the ecological and/or social value the firm has created before.

Overall, our findings substantiate certain features that are in line with the findings of previous studies on BMFS. However, we could also show that these are not random features of the firms, but rather result from clear and strategic choices made early on in creating the organizational logic and the business model. In accordance with the arguments of Abdelkafi and Täuscher (2016) and Täuscher and Abdelkafi (2018), we see that these choices and their consequences in BMFS form systems of mutually reinforcing activities that facilitate the creation of sustainable (e.g., ecological, social, and economic) value.

Theoretical Contributions

In this study, we have revealed the causal relationships between a firm’s initial ambition level, its acceptance of the underlying limitations and restrictions, its actions, and its achievements (see Figure 3). Our study thereby contributes to the theoretical discourse in three ways:

First, we contribute to the understanding about how BMFS cope with the different potentially conflicting institutional logics. Managers’ strategic choices are the pillars of the institutional logic that underlies any business model (Casadesus-Masanell & Ricart, 2010). BMFS need to combine multiple institutional logics: (a) social logic, (b) ecological logic, and (c) commercial logic (Gao & Bansal, 2013; Jay, 2013). Our study challenges previous research that assumed that this logic multiplicity would lead to contestation and conflict (Battilana & Dorado, 2010; Newton, 2002) because of inconsistent or incompatible goals (Pache & Santos, 2013), internal competition for scarce resources (Ocasio, 2011), or inconsistent performance measures (Anheier & Krlev, 2015; Townsend & Hart, 2008) and would, therefore, potentially hinder organizational performance (Tracey, Phillips, & Jarvis, 2011). Managers in our study consciously put the sustainability-oriented goals at the core of their organization, thereby defining a clear dominant logic for their organizations. In contrast to other studies, the particularity here lies in the prioritization of the institutional logics. Whereas others described difficulties in incorporating sustainability (e.g., caused by organizational inertia) if the dominant institutional logic is commercially oriented (Bolis et al., 2017; Glover, Champion, Daniels, & Dainty, 2014; Maguire & Hardy, 2009) and the sustainability logic is only emergent (Stål, 2015), we realize that BMFS are primarily designed to achieve sustainability goals. This finding demonstrates that BMFS are characterized by an integrative rather than an instrumental logic in managing business sustainability (Gao & Bansal, 2013). Therefore, the sustainability logic in BMFS seems to take the role of a dominant logic for the organization, which is reinforced by social and ecological subsidiary logics (Besharov & Smith, 2014). This clear dedication to a dominant institutional logic leads to a sequence of decisions that are congruent with the initial mission. Thus, the institutional logics are blended in such a way that conflicts can largely be prevented.

More specifically, we identify acceptance as a coping mechanism with the paradox tensions that firms with a BMFS face. Commercial goals are considered necessary and thus integrated to support the dominant logic. However, as the sustainable institutional logic drives managerial decisions, BMFS will develop certain path dependencies. These paths can lead to restrictions (e.g., dismissing certain commercial opportunities) but also create new opportunities (e.g., supporting sustainable goals through customers who do not value sustainability). In line with Casadesus-Masanell and Ricart (2010), this clear institutional logic sets clear boundaries for major strategic shifts but allows for tactical decisions that are in line with the organizational mission. Additionally, we note that conflicts between different institutional logics are prevented as managers in BMFS seem to accept the tradeoffs between the commercial and the dominant sustainable institutional logic. This situation leads to a clear definition of actions as well as the acceptance of certain—even painful—restrictions. This finding is in line with the notion of paradoxical thinking (Gao & Bansal, 2013; Hahn, Preuss, Pinkse, & Figge, 2014) that is required to successfully integrate multiple institutional logics. More precisely, the acceptance of restrictions has emerged as a powerful coping mechanism for managers of a BMFS to deal with the paradox tensions of managing multiple institutional logics.

Second, we contribute to the ongoing debate about managing BMFS by emphasizing the power of reinforcement through the network of choices and consequences revealed in this study and the resulting opportunities for cascaded value generation. In particular, we illustrate the importance of (early) managerial decisions. We rely on work from the activity system perspective on business models, which emphasizes that business models are the result of strategic choices (Casadesus-Masanell & Ricart, 2010) and shows that a few fundamental decisions lead to a virtuous circle of reinforcing consequences in the BMFS context. This finding, in agreement with recent research (e.g., Kurucz et al., 2017; Morioka et al., 2017; Rauter et al., 2017) emphasizes the importance of leadership influence in BMFS endeavors. By showing the interdependence and the reinforcing character of these fundamental choices, we revealed parts of the complexity of the mechanisms that underlie BMFS value creation. This finding complements recent research by Spieth et al. (2019), who identified value drivers in social businesses by identifying the fundamental decisions that allow firms to pursue a BMFS strategy.

Third, we contribute to the literature that considers business models as open systems that cocreate value with actors from the outside. We show that the achievements of a BMFS tend to build on a set of indirect effects. This includes the way that credibility is created through actions and prior achievements. This process comprises the mechanisms through which a BMFS tends to involve/utilize or enable others to create social and/or ecological value. This concept is similar to Morioka et al.’s (2017) idea of a cascaded form of sustainable value capture; however, the phenomenon identified in this study refers to a cascaded value generation process. This cascaded value generation allows firms to expand the reach of their impact by engaging a wider group of actors in the social and/or ecological value creation efforts.

Managerial Implications

Our study has a number of key managerial implications for entrepreneurs and managers in incumbent firms interested in engaging in BMFS. We reveal the fundamental decisions, the related network of consequences, and the reinforcing factors that enable social and/or ecological value creation. These findings reveal that managers of a BMFS face a range of interdependent challenges, with some of them being within their control, some that are beyond their influence, and some in which the actors depend on other actors.

Managers of BMFS define the ambition of the firm when assigning it a purpose. This initial strategic decision may occur either at the very outset of a startup creation or when incumbents try to shift a for-profit business model toward sustainability. This ambition clearly lies within the influence of the firm. Prior research has emphasized the high difficulty when incumbents implement sustainability-oriented aspects, compared with newly established startups (Aguilera, Rupp, Williams, & Ganapathi, 2007; Hockerts & Wüstenhagen, 2010). This observation relates to greater institutional inertia (Loorbach & Wijsman, 2013) if the dominant intuitional logic is not sustainable, but commercial. In this case, adaptations to the organization are assessed and implemented under conditions of an incompatible prevalent logic. Thus, these firms are advised to initiate change with bold strategic decisions (Doz & Kosonen, 2010) that demonstrate top managers’ commitment to sustainability-oriented values. Following the logic of Casadesus-Masanell and Ricart (2010), if a firm does not start with new strategic choices that build or alter its business model, the scope of change in the existing system is limited to tactical maneuvering. In particular, this means that sustainability’s role in a profit-oriented activity system could be minor and might conflict with the established system.

Our findings further reveal that, in parts driven by the consequences of their chosen ambition to prioritize social and/or ecological objectives and to consider economic profits as a means to achieve these, firms with a BMFS put emphasis on consistent behavior that creates credibility and strongly accentuates collaboration within the community of actors with similar values and beliefs. Even though the choice to engage in consistent behavior and partnering are fundamental and interdependent choices of the firms’ managers, the firms have to align all actions to their ecological and/or sustainable mission. Although it is largely beyond their influence which business restrictions and limitations this might include (i.e., narrow availability of suppliers, the necessity to turn down customers whose delivery would interfere with their social and/or ecological standards), managers should assess how their clear dedication to sustainability will affect their residual choices. Furthermore, strategies to deal with these issues need to be developed.

For most of their achievements, firms with a BMFS depend on other actors. The emergence of an actor’s credibility, which is an interim achievement of the ultimate goal to create social and/or ecological value, is one such example. To some extent, credibility comes from an actor’s behavioral consistency. However, it also originates in a firm’s partnering community and often stems from its partners’ reputations. This dependency applies to both entrepreneurial ventures and incumbents that wish to become more sustainable. Furthermore, some of the firm’s ultimate social and/or ecological value creation stems from the engagement of others. While, again, firms depend on others to achieve this value, there lies also an opportunity. In this study, we revealed how firms can utilize customers that are not particularly interested in the social and/or ecological value or how they can utilize the community by cocreation activities, for crowdsourcing or even crowdfunding. Firms can leverage this pattern and, by making the outlined choices, add indirect value creation mechanisms to their BMFS.

Overall, as we find that the inherent combination of sustainable and economic goals is fundamental to BMFS, these firms’ founders and managers need paradoxical thinking skills, as they have to effectively cope with competing, but need equally important and reinforcing options (Hahn et al., 2014). In line with this finding, founders and managers of BMFS also require an interdisciplinary perspective (e.g., an understanding of sustainability and the particular market needs, or an understanding of the economic principles behind profitable business models). To develop the necessary systemic understanding of their business models’ activity system (Abdelkafi & Täuscher, 2016), founders of BMFS are advised to systemically plan and configure their business models using adequate tools (e.g., the triple layered BMC; Joyce & Paquin, 2016) or value mapping (Bocken et al., 2014). Our framework adds transparency to the dependencies and reinforcing components that any BMFS faces.

Limitations and Future Research

This study is the first to combine the notions of choices and consequences in business models within the context of BMFS. Despite its contributions, our study has limitations, which should be addressed by future research. First, we used a primarily interview-based, multiple-case study approach to unveil strategic choices and consequences of BMFS. Despite the study’s longitudinal character, individual reflections of the interviewed managers could be retrospectively biased. Future studies could reveal additional insight by integrating a different variety of data sources (e.g., thinking-aloud protocols, observations, and meeting protocols) to further strengthen the identified decision patterns’ validity. Second, we limited our analysis to firms founded with a dedicated social and/or ecological mission. Thus, our analysis did not include incumbent firms that later decided to integrate sustainability goals during ongoing operations. Further research that contrasts this particular perspective with ours could challenge our findings’ generalizability and may reveal additional insights for incumbents. Third, we developed a causal loop diagram that links strategic choices to consequences relating to the organizational activity system. Although the order follows the logic and the argumentation identified during the longitudinal research process, these data did not allow us to substantiate this system’s causality comprehensively. Finally, this study did not consider performance measures from either an economic or a social/ecological perspective. Future research should incorporate this consideration to validate the strength and power of the reinforcing mechanisms that we identified.

Supplemental Material

Suppl_OandE_854217 – Supplemental material for Business Models for Sustainability: Choices and Consequences

Supplemental material, Suppl_OandE_854217 for Business Models for Sustainability: Choices and Consequences by Sabrina Schneider and Thomas Clauß in Organization & Environment

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

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

Supplemental Material

Supplemental material for this article is available online.

ORCID iDs

Sabrina Schneider

Thomas Clauß

Author Biographies

Sabrina Schneider is an assistant professor for Technology Management at the University of Kassel, Germany. Her research centres on the strategic implications of digital technologies on business and society.

Thomas Clauß is an assistant professor for Management and Innovative Value Creation Concepts at the Philipps University of Marburg, Germany. His research areas are business model innovation, buyer-supplier collaboration and innovation as well as digitalization. His research appeared in leading international journals such as Long Range Planning, IEEE Transactions on Engineering Management, Industrial Marketing Management, and R&D Management.

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