Understanding business model innovation in start-ups – a dynamic managerial capabilities perspective
Abstract
Although start-ups and incumbent firms both engage in business model innovation, the
research literature on business model innovation has largely focused on incumbent firms.
Start-ups play an important role in the growth of an economy, and with their failure rate being
high, the need for an adequate business model and continuously innovating it, is crucial for
financial performance and competitive advantage. Underpinning this study is the
understanding that a business model represents how a firm creates, delivers, and captures
value. Moreover, business model innovation involves reconfiguring components or the
architecture of a business model for the benefit of the firm, which requires capabilities.
The importance of the dynamic capabilities of a firm, and the need to quickly identify and
respond to opportunities, and consequently innovate business models has previously been
noted. However, gaps still exist in how business model innovation is understood with respect
to dynamic managerial capabilities in start-ups. This study contributes to the body of
knowledge by exploring the influence of capabilities on business model innovation in start-ups.
Based on the theory of dynamic managerial capabilities, the following research question was
examined: What capabilities allow managers (e.g. founders, decision makers) in start-ups to
innovate their business models?
This study was situated within the critical realism paradigm and used multiple explorative
cross-sectional case studies on start-ups. The primary source of data was the subjective
experience of managers, who were recruited through purposive sampling. Semi-structured
interviews were used to elicit the data, which was recorded and transcribed verbatim. The
transcripts were analysed using thematic analysis, and documentary evidence was used for
triangulation. The findings highlight two main dimensions of capabilities that enable start-up
managers to innovate their business models. These are collaboration capabilities (comprising
of networking, commitment, and internal cooperation) and capitalization capabilities
(comprising of experience, searching, and maximizing resources). This study draws attention to
the need for managers to foster these capabilities, and the implications for professional
managerial practises and the research literature are delineated.