The Performance Effect of Business Model Innovation: An Empirical Analysis of Pension Funds

This paper focuses on the performance effect of business model innovation in incumbent firms in an environment where IP protection is not an option. We utilize a direct measure of business model innovation to test the performance effect. Furthermore, we look at the influence of contingency factors on this relationship. Business model innovation is operationalized by using a NK-model approach. We use a panel dataset consisting of single, incumbent firms to test our hypotheses. The empirical setting is the Australian pension industry, an established and fast growing industry. The panel spans the years 2003-2010 and consists of a total of 64 firms. The empirical analysis shows a positive effect of business model innovation within incumbents on their operational performance. This effect is moderated by the size of the firm and the experience of the firm. Larger sized firms are better able to exploit the opportunities of business model innovation and show a reinforcement of the effect. Firms with experience in a domain close to the target environment also show a stronger ability to exploit the opportunities of business model innovation.

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