The rise of ICT and the ever increasing competitiveness in industries have pushed firms to increase their propensity in changing and innovating their activities. As this need for firms to change constantly increases, the study of business model innovation have taken the spotlight. There exist a need for the knowledge stream to grow and understand the mechanisms surrounding the process, as firms in business strive to do better business model innovation and gain a sustainable competitive advantage.
The constant strive for innovativeness in doing business model innovation seems to be limitless, yet according to various research on institutional theory, there is a limit in how innovative or distinctive a firm can be to not be shunned by its environment (suppliers, competitors, customers, policy-makers).
More specifically, past research have proposed that innovativeness correlates positively with performance. Yet, neo-institutionalism postulates that there is a limit where innovativeness impacts positively to firms and its processes, before being penalized for being too different.
This research empirically observes how the tensions between innovativeness from business model innovation and conformity from institutionalism impacts the business model innovation process in firms. Furthermore, how does insitutionalism ultimately affect firm performance?
The results of this research shows a U-shaped relationship between institutionalism and business model innovation. The observed results also show that institutionalism's effect towards firm performance is mediated partially by business model innovation. The results of this research also support past observation that business model innovation does correlate positively with firm performance.