Exploring the Antecedents to Business Model Innovation: An Empirical Analysis of Pension Funds

This study explores antecedents to business model innovation and empirically tests theoretical findings. We relate firm characteristics to the propensity to innovate the business model. In order to test our hypotheses, we develop a quantitative model for business model innovation, utilizing the NK-model approach. We developed and analysed a unique dataset of incumbent Australian pension funds covering the years 2003-2010. This dataset allows us to specifically look at firm characteristics that can promote business model innovation. The empirical results indicate significant positive effects of experience with previous merger and acquisition transactions and heterogeneity of industry experience of the management board on the propensity of a firm to innovate its business model. These results indicate that firms incorporate inferences from highly disruptive experiences for subsequent decisions on business model innovation. Furthermore, the analysis underlines the fact that conflict arising from heterogeneity on the management board can counteract inertia within the firm and increase the propensity to innovate the business model. In contrast, dependence on an old business model has a significant negative influence on the propensity to innovate the business model. This is evidence that firms with a strong pull from existing assets embedded within an old business model struggle to break free and innovate their business model.