Revisiting the Modularity-Performance Nexus: Business Model Innovation as a Missing Mechanism

Abstract

Prior research on the modularity–performance nexus is heavily biased towards product innovation, leaving the impact of modularity on other types of innovation such as business model innovation unknown. This study seeks to address this gap. To do so, we develop and test a parsimonious model which examines whether a firm’s pursuit of business model innovation serves as a salient conduit through which modular product and process translate to firm performance. In addition, we examine environmental dynamism as a contingency that to further illuminate these associations. Using data from 87 manufacturing SMEs in Australia we find partial support for our model. Specifically, we find that pursuit of BMI is a missing mechanism only in the process modularity-performance nexus not the product modularity. In addition, contrary to predictions, we observe that environmental dynamism negatively moderates this relationship. These findings have important implication for theory and practice of innovation management. We discuss these implications and suggest several directions for future research.

An integration of antecedents and outcomes of business model innovation: A meta-analytic review

“…Second, the study further clarifies the influence of BMI on firm performance and finds significant positive correlations in this link. Inconsistent conclusions have been reported in the prior studies; for example, some scholars have pointed out a discrepancy in understanding whether BMI will benefit firm performance (e.g., Casadesus-Masanell & Zhu, 2013;Futterer et al, 2018) or whether BMI has the same impact once the correlations between it and firm performance are predicted to be positive(e.g., Bouncken & Fredrich, 2016 versus;Najmaei, 2016). Through a meta-analysis, this study obtains relatively reliable correlations between the abovementioned relationships.…”

“…The situational factors that enterprises face have been examined in prior research; they include environmental uncertainty and innovation legitimacy (e.g., Najmaei, 2016;Osiyevskyy & Dewald, 2015). Environmental uncertainty (e.g., environmental dynamism, threat and competition) results from the dynamic change and unpredictability of the environment; this conflicts with the prototype of the BM (Ghezzi, Cortimiglia, & Frank, 2015;Wiprachtiger, Narayanamurthy, Moser, & Sengupta, 2019;Zott & Amit, 2013).…”

“…From the strategy perspective, BMI is associated with a process in which enterprises constantly make decisions (Casadesus-Masanell & Enric Ricart, 2010). Results have also shown that organizational structure (e.g., Najmaei, 2016) and organization activity (e.g., Wang et al, 2017) can promote BMI. Therefore, the study proposes the following hypothesis:…”

“…Environmental uncertainty describes the degree of change and unpredictability faced by a firm within its environmental settings, which is regarded as an important moderator in existing studies (Najmaei, 2016). Environmental uncertainty is characterized by instability, complexity, and competition, which presents many unclear situations to organizations (Duncan, 1972).…”

Building blocks for the development of an IoT business model

“…The application of such principles in the inception of business models can ease structural and design changes while improving flexibility, and complexity management, and creating opportunities for business innovation (Aversa et al , 2015). However, academic research is often focused on product innovation, leaving a gap in the modularity impact on other kinds of advance, such as the development of new business models (Najmaei, 2016).…”