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| The Relationship between Distinctiveness in Business Model and Entrepreneurial Performance: The Perspective of Optimal Distinctiveness |
| Han Jiaping1,Li Yonghui2 |
| (1.State Grid Energy Research Institute Co., LTD., Beijing 102209, China;2. School of Economics and Management, Communication University of China, Beijing 100024, China) |
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Abstract How business models affect firm performance has been an academic focus for the last two decades. The existing research on the relationship between business model and firm performance shows two opposing directions: the issue of how business model builds competitive advantage and how business model affects stakeholders' perceptions. The business model is one of the sources of enterprise competitive advantage, and value creation in the business model requires the support of stakeholders. So the legitimacy of the business model among stakeholders is crucial. However,research on the issue of legitimacy in business models is not sufficient, and little is known about how business models balance competitive advantage and legitimate pressure.#br#How do business models balance the tension between competitive advantage and legitimate pressure to achieve optimal performance? This issue is theorized as "optimal distinctiveness". With respect to the relationship between distinctiveness and firm performance, existing research has included the strategic balance view, the trade-off view, etc. Research topics have covered the fields of strategy, social responsibility, technological innovation and so on. In addition, entrepreneurial firms always rely heavily on support from stakeholders to innovate and survive, which makes them face more serious challenges in coping with legitimacy and competitive advantage. Therefore, this study explores the relationship between business model and the performance of entrepreneurial firms from the perspective of optimal distinctiveness.#br#This study uses the panel data of listed firms on the National Equities Exchange and Quotations (NEEQ) market in China. The firms on the NEEQ market are mainly innovative and entrepreneurial SMEs whose business models are relatively stable compared to new ventures. What's more, these firms face greater challenges between legitimacy and competitive pressures in their growing stages. In addition, the NEEQ market requires the listed firms to formally disclose their business models in their annual reports. Therefore, the listed firms on the NEEQ market are suitable for this research. Specifically, it obtains 2 934 unbalanced panel data from 1 075 samples from 2015 to 2017, applies the LDA topic model to analyze the text content of business model chapters in annual reports and uses fixed effect regression to test hypotheses.#br#It is found that first the moderate distinctiveness of the business model brings the best performance. That is, there is an inverted U-shaped relationship between the distinctiveness of the business model and the performance of an entrepreneurial firm. Second, firm age weakens this relationship. Compared with mature firms, the business models of new ventures face more challenges from the issue of optimal distinctiveness. Third, category heterogeneity strengthens the inverted U-shaped relationship. It shows that category heterogeneity amplifies the tension between competitive advantage and legitimacy caused by the distinctiveness of business models. These findings contribute to the literature on business models and the optimal distinctiveness perspective and are important for the practice of entrepreneurial firms. On the one hand, this study highlights the legitimacy mechanism behind the relationship between business model and entrepreneurial performance. Moreover, it advances the literature on business models by introducing the optimal distinctiveness perspective to the relationship between business model and firm performance and focusing on the tension between competitive advantage and legitimate pressure. On the other hand, this study extends current research topics on the optimal distinctiveness perspective by focusing on the business model and the contingent view in the optimal distinctiveness literature by identifying contingency factors at the category and firm levels.#br#There are important implications for how to use business models to achieve optimal performance. For their business model, entrepreneurs need to establish legitimacy by maintaining conformity with incumbents. Entrepreneurial firms should choose a moderately distinct or differentiated business model to balance legitimacy and competitive pressures and achieve optimal performance. Moreover, the tension between legitimacy and competitive pressures in a business model depends on the stage of development and industrial characteristics. For example, the challenges of optimal distinctiveness in business models are more serious for new ventures, and they can gain more benefits from moderate distinctiveness in their business models. Meanwhile, entrepreneurs can take advantage of analogies with existing business models to avoid the cognitive barriers of stakeholders.#br#
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Received: 29 November 2021
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