Business model innovation vs replication: financial performance implications of strategic emphases

Abstract

Abstract The purpose of this article is to examine the financial performance implications of a firm's strategic emphases with respect to business model innovation vs replication. It is also examined how the financial performance implications differ between larger and smaller firms. Based on survey data including top managers' reports from approximately 500 firms, the authors analyze the differences in average profitable growth across firms that differ in their strategic orientations. It is found that firms that have a high strategic emphasis on business model innovation as well as a high emphasis on replication exhibit a higher average value of profitable growth than firms that do not strategically emphasize either dimension. Concerning a strategy that puts a high emphasis on business model innovation but low on replication, a difference is found between small and large firms. Large firms with a high emphasis on business model innovation but low on replication exhibit, on average, weaker profitable growth than large firms with low emphases on both business model innovation and replication. In contrast, small firms with high emphasis on business model innovation but low on replication exhibit, on average, stronger profitable growth than small firms with low emphases on both business model innovation and replication. Keywords: business modelsinnovationreplicationfinancial performancestrategic orientation Notes 1. Note that by coincidence (and due to prevalence of small/micro firms in the firm population), this median-split resulted in the small firms likening – empirically – to the definition of micro firms by the Commission of the European Union (see European Commission, Citation2009).