Investigating the Performance of Digital Business Model Innovation in Established Firms

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Firms increasingly compete on business models. Differentiation is based on innovative business models instead of high-quality products. Examples show how firms provided similar offerings with a different business model and quickly gained success: Nespresso offers a coffee maker for capsules at a very low price and sells needed consumables, i.e., coffee capsules, five times as expensive as regular coffee. Xerox introduced a usage-based leasing contract instead of selling their model 914. Advancements in information technology (IT) further increase the potentials of business models for competitive advantage. Novel IT enable digital business models and change whole economies. Several firms utilize digital platforms with a multi-sided markets business model: eBay, Amazon, Netflix, Apple iTunes, Google Play Store, Tinder, or WeChat. Other firms utilize digital business models to offer services for free, as Google did with its search engine. Skype became the largest telecommunication provider without a network infrastructure by building on VoIP and the freemium business model. Research, however, has only anecdotally explored the business model as a unit of analysis and its impact on firm performance. A wide range of research builds on strategy as the unit of analysis with the two main theories, i.e., the positioning/ market-based view (MBV) and the resource-based view (RBV). Although the business model incorporates the two fundamental strategic theories and challenges their assumptions, research on business model choice and competitive advantage remain scarce. Most studies are qualitative with limited generalizability or address entrepreneurial firms. However, especially established firms struggle to capture value from business model innovations, and many fail. Reasons are uncertainty concerning the business model to choose and resulting experimentation.To tackle this research gap and reduce uncertainties of established firms, I analyze the impact of business model choice on firm performance. The following research question guides the analysis:How does implementing a new business model impact the performance of established firms?To test this relationship, I focus on an individual industry and an individual business model innovation. A candidate to do so is the change from an upfront software licensing model to a subscription model with continuous revenue streams in the software industry. Various established software firms, such as Adobe, Microsoft, SAP, and Salesforce, having tremendous success with subscription models. Research, however, has underexplored the impact of the subscription model on firm performance in the software industry. Extant studies are mostly qualitative with lacking largescale quantitative generalizability. Therefore, this research project aims for a large-scale quantitative study on the impact of business model innovation, i.e., from the upfront licensing model to subscription, on firm performance in the software industry.