Business model experimentation in SMEs: the application of a dual scaling technique

Abstract

Business model experimentation is an essential step for developing new business models. While the benefits of business model experimentation are increasingly studied, it is still poorly understood why companies engage in business model experimentation. This paper examines, starting from environmental turbulence reasoning, which external and internal drivers serve as antecedents for business model experimentation by firms that already have established business models. We do so by making use of a unique, quantitative data set based on a survey study among 929 European SMEs actively engaged in business model innovation. Using Dual Scaling, a procedure to scale categorical inputs that yields the least-squares lower-rank approximation to the elements of our data set, we find that external drivers relating to technological turbulence are the most important antecedents for business model experimentation. External competitive intensity doesn’t motivate business model experimentation. Regarding internal drivers, strategic change, related to product innovation, is a significant antecedent, while innovative activities are less outspoken. By examining why companies engage in business model experimentation, the paper contributes to understanding the antecedents of business model innovation.