Performance Feedback and Business Model Innovation: Insights from a Case Study-based Analysis

Business Model Innovation (BMI) enables companies to increase performance and achieve sustainable competitive advantage. Although BMI research has intensified during the last years, the role of firm performance (FP) as an antecedent to BMI is still scarcely investigated. Taking a Performance Feedback Theory (PFT) perspective, we study the relationship between FP and BMI by looking at the way companies innovate their business models based on their past and current competitive performance aspirations. The paper uses a multiple-case study approach and finds that, when performing above aspiration and having slack resources, companies engage in adding a new business model (BM) to the existing one. Reversely, when performing below aspiration and do not possessing slack resources, companies tend to change the original BM by replacing it with a new one (replacive BMI) or exploiting synergies with the current BM to create a new but related one (synergetic BMI). Hence, this research deals with the relationship between the PFT and BMI literatures and contributes to a better understanding of FP’s role in triggering BMI. Moreover, it broadens the perspective by using a qualitative research method for exploration in PFT, a domain which has been so far dominated by quantitative studies.