Raphael Amit

The Business Model: Recent Developments and Future Research

This article provides a broad and multifaceted review of the received literature on business models in which the authors examine the business model concept through multiple subject-matter lenses. The review reveals that scholars do not agree on what a business model is and that the literature is developing largely in silos, according to the phenomena of interest of the respective researchers. However, the authors also found emerging common themes among scholars of business models. Specifically, (1) the business model is emerging as a new unit of analysis; (2) business models emphasize a system-level, holistic approach to explaining how firms “do business”; (3) firm activities play an important role in the various conceptualizations of business models that have been proposed; and (4) business models seek to explain how value is created, not just how it is captured. These emerging themes could serve as catalysts for a more unified study of business models.

Learning About Failure: Bankruptcy, Firm Age, and the Resource-Based View

Systematic differences in the determinants of firm failure between firms that fail early in their life and those that fail after having successfully negotiated the early liabilities of newness and adolescence are identified. Analysis of data from 339 Canadian corporate bankruptcies suggests that failure among younger firms may be attributable to deficiencies in managerial knowledge and financial management abilities. Failure among older firms, on the other hand, may be attributable to an inability to adapt to environmental change.

Entrepreneurship and Firm Formation across Countries

The World Bank Group Entrepreneurship Survey measures entrepreneurial activity around the world. The database includes cross-country, time-series data on the number of total and newly registered businesses for 84 countries. This paper finds significant relationships between entrepreneurial activity and indicators of economic and financial development and growth, the quality of the legal and regulatory environment, and governance. The analysis shows the importance of electronic registration procedures to encourage greater business registration. These results can guide effective policymaking and deliver new capabilities for identifying the impact of reforms.

A dynamic perspective of internal fit in corporate venturing

Abstract Managers of corporate parents and their ventures have long been faced with the question of how closely to tie the parent and venture. A close connection may enable a venture to capitalize on the competencies and resources of the parent. However, venture autonomy could prevent corporate inertia and bureaucracy from constraining venture growth. The lack of consensus on this issue leads us to the first of two complementary research questions that we address in this paper: “What is the effect of internal strategic fit between a corporate parent and its venture on venture performance?” We suggest that a tight fit is positively associated with venture performance because of the ventures access to its parents resources. Managers and researchers alike have often observed that growing enterprises are dynamic entities. In the case of corporate ventures, this implies that the relationship between parent and venture evolves over time. Our second research question directly addresses this issue by asking: “Does the relationship between a corporate parent and its venture(s) evolve over time, and if so, how?” We identify two dimensions of the fit between corporate parents and their ventures: relational and economic. A relational fit reflects organizational culture and structure, while an economic fit is a function of the needs of the venture and the resources of the parent. We develop a series of hypotheses and test them with survey data from 97 Canadian corporate ventures. For the purposes of this study, we define success as the ability of a firm to meet internal milestones on schedule. We find that the degree of fit between a corporate parent and its venture does affect the success of a venture, and that success is associated with high levels of awareness, commitment, and connection. Further, the relational dimension of the parent-venture interface appears to have a greater association with venture success than does the economic dimension. Our data support the idea that the parent-venture relationship is dynamic in nature as ventures in our sample generally lessened their economic connections with their parents as they matured (or vice-versa). We did find, however, that the relational bonds remained more or less intact. The exceptions to these general trends were an increasing emphasis on financial targets along with decreasing CEO involvement as ventures matured. Both of these findings make intuitive sense. Greater financial independence is accompanied by greater financial accountability. And, as a venture gains in both independence and accountability, there is less need for the CEO to provide “air cover.” These two issues aside, the basic model of enduring relational ties and diminishing economic ties was supported. As well, the increasing accountability is consistent with our expectation that a close connection is preferable to high venture autonomy.

Diversification and the Risk-Return Trade-off

The article presents information on a study which investigated the risk-return trade-off at the level of individual firms with both accounting and market-based measures of risk. The author describe...

The Business Model: A Theoretically Anchored Robust Construct for Strategic Analysis

Anchored in our research on business models, we delineate in this article a future research agenda. We establish that the theoretical and empirical advancements in business model research provide solid conceptual and empirical foundations on which scholars can build in order to explore a range of important, yet unanswered research questions. We draw inspiration on the direction of the business model research agenda by briefly reviewing several distinct bodies of literature adjacent to the business model literature including new organizational forms, ecosystems, activity systems, and value chain. In doing so, we also distinguish the business model concept from seemingly similar concepts that have been proposed by researchers.

Designing Your Future Business Model: An Activity System Perspective

Building on the received literature, we conceptualize a firms business model as a system of interdependent activities that transcends the focal firm and spans its boundaries. The activity system enables the firm to create value in concert with its partners but also to appropriate a share of the value created. Anchored on theoretical and empirical research, we suggest two sets of parameters that activity systems designers need to consider: design elements - content, structure and governance - that describe the architecture of an activity system; and design themes - novelty, lock-in, complementarities and efficiency - that describe the sources of the activity systems value creation.

Human resources management processes: a value-creating source of competitive advantage

HRM processes refer to the deeply-embedded, firm-specific, dynamic routines by which a firm attracts, socializes, trains, motivates, evaluates, and compensates its human resources. This perspective integrates economic considerations with contextual social legitimacy aspects. It provides new lenses on the tacit, and evolutionary aspects of HRM and the value it creates.

Does Venture Capital Foster the Most Promising Entrepreneurial Firms

Venture capital seed investments seem not to foster the most promising entrepreneurial firms. The venture capitalists difficulty in assessing an entrepreneurs ability to develop a successful venture is the key to explaining what type of entrepreneur will choose to involve a venture capitalist in the seed stage. The authors find that venture capital backed firms are not initiated by the most capable entrepreneurs because the most able entrepreneurs will not find the prices offered by venture capitalists sufficiently attractive and will seek other sources of financing. Under the current institutional structure of the venture capital industry, a higher failure rate can be expected among venture capital backed firms than in the population of new firms in general.

Petroleum reservoir exploitation: Switching from primary to secondary recovery

The petroleum recovery process has two potential phases: primary recovery, during which the natural drive forces the oil to the well bore, and secondary recovery, during which a producer uses artificial means to recover the resource. A producer may choose to switch from primary to secondary recovery if the desired ultimate output is more than can be obtained by exploiting the natural drive, or when the desired current extraction rate is larger than can be obtained by the natural drive. These decisions are affected by the interaction between geological, technical and market conditions. We formulate an investment and production model that incorporates the relationships between extraction rates, investment decisions and cumulative recovery, and investigate a two-phase dynamic optimization problem. We do so by defining and analyzing a more general optimization problem and applying the results to our model. The major findings relate to the timing and size of investment, the rate and duration of secondary recovery, and the optimal switching policies from primary to secondary recovery. We discuss each of these issues in detail, and outline and explain quantitative policy recommendations.