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When Cultural and Pro-Market Institutions Shape Business Success

Business Model Innovation (BMI) involves significant changes in a firm's value creation and capture mechanisms. Recent studies have emphasized BMI as crucial for firms to maintain competitiveness in a rapidly changing world. However, the success of BMI is not uniform across all firms, suggesting that its effectiveness could be contingent on various factors, including national institutions. These cultural and pro-market institutions can shape the effectiveness of a firm's growth strategies, thereby influencing how firms leverage BMI.

The Lens of Institutional Theory

Institution-based view (IBV) in strategic management posits that national institutions - the 'rules of the game' - significantly influence firm decisions. These institutions can be informal, like cultural norms, or formal, like pro-market regulations. They affect how firms strategize and the effectiveness of these strategies. For BMI, both cultural and pro-market institutions are crucial as they shape the behaviors of firms and their stakeholders, influencing the value firms derive from BMI.

The Moderating Role of Institutional Factors

The study theorizes that the BMI-firm performance relationship is moderated by three cultural (uncertainty avoidance, masculinity, individualism) and three pro-market (customer orientation, economic freedom, education) institutions. These institutions affect the learning processes associated with BMI, thereby influencing the extent to which firms can derive value from BMI activities. For example, high uncertainty avoidance may limit firms' ability to benefit from BMI due to a reluctance to deviate from original plans and adapt to new evidence. Similarly, masculine cultures may hinder experiential learning, while individualistic cultures might impede knowledge dissemination and cooperation.

Key Research Findings

• BMI has a large positive effect on firm performance. We, therefore, confirm the relevance of BMI as a growth strategy for a wide range of firms.  
• The positive impact of BMI on firm performance is weaker in countries with high levels of uncertainty avoidance, masculinity, and individualism.
• Conversely, the positive relationship is stronger in countries with high levels of customer orientation, economic freedom, and education.

The Future of BMI in Heterogeneous Institutional Contexts

This research highlights the significant role national institutions play in determining how much value firms can generate from BMI activities. It suggests that future research should further explore how different institutional configurations influence BMI outcomes. Understanding these nuances can help firms tailor their BMI strategies to specific institutional environments, maximizing the potential benefits. This research also has interesting implications for policy. Policy-makers can support firms pursuing BMI by implementing policies that improve national-level customer orientation, education levels, and economic freedom.  

Meet the researchers

• Imran M. Ilyas: Jönköping International Business School, Jönköping University
• Nadine Kammerlander: WHU – Otto Beisheim School of Management
• Roxana Turturea: Stockholm School of Economics, House of Innovation
• Marc van Essen: University of South Carolina​​.