Perceptions of Initial Business Models in New Technology-Based Firms

Paper in proceeding, 2015

Objectives: The paper explores the perception of initial business models in new technology-based firms (NTBF). Understanding perceptions of the business model concept could offer explanations to decisions made when developing the business model. Moreover, it could offer explanations about consequences that business models may have on firm performance and survival. Literature review: The field of business model has expanded since the nineties, discussing perspectives of firms and how firms create, deliver and capture value (see e.g. Zott et al., 2011). For NTBFs, the change and innovation of the initial business model are important for adapting to the variation in the business environment, thus influencing the success (Morris et al., 2005; Andries and Debackere, 2007). However, how founders perceive and define their business model are still not addressed clearly in previous research (DaSilva and Trkman, 2014), which create a gap in our understanding of what influences decision-making when developing the business model. Consequently, it will affect the performance of these new ventures. Hence, exploration of founders’ perception of initial business models in NTBFs is important to increase our understanding of how business model are formed and ultimately affect firms’ performance and survival. Approach: Due to the explorative nature of our research problem, case studies where chosen as the most appropriate data collection method. In total 28 Swedish NTBFs has been investigated through semi-structured interviews, discussions with founders and managers of these firms and plant visits. Cases (NTBFs) were selected based on two criteria; founding year (not older than five years) and technological intensity and based on NACE codes. An interview guide was developed with interactive elements, which enhanced the possibilities to capture the perceptions of initial business model. The guide was partly based on the Business Model Canvas (Osterwalder and Pigneur, 2010) – a tool that is frequently used to describe, analyse and design business models. The interactive elements included timelines and physical cards with names of business model building blocks that the respondent where asked to sort, rank, and describe. Further, analysis of the data were made in two steps: first, each case was coded and within-analysed, and secondly, cross-case analysis (Eisenhardt, 1989; Eisenhardt and Graebner, 2007) was used to compare and find relationships between cases. Results: The findings from the qualitative data demonstrate that founders with a coherent (complete) perception of what a business model is – that is can account for the essential elements contained in the concept – more often prioritize customers in the development process, and further have a more controlled process (i.e. knowing where the firm is heading) when it comes to performance. There are also indications that involvement of external financial partners in the business model development process, can have either an influence towards a partial perception and an uncontrolled process on the one hand, or a complete perception, prioritization on customers and a controlled process on the other hand. Implication and value: The paper enhance the business model literature by offering propositions of a relation between founders’ perception of the business model concept and possible consequences for the firms’ performance. Further, the study provides implications for practitioners and entrepreneurs founding NTBFs by suggesting consideration of customer interaction in the start-up phase, and what founders should have in mind if involving external financial partners in the development process.