How Much Does Business Model Matter?

Drawing on disruptive innovation theory, we argue that considerable performance differences exist between disruptive and traditional business models. We further argue that disruptive business models typically emerge and co-exist with traditional models in developed markets, rather than developing markets, implying that the relative importance of business model in explaining performance variation may be contingent on whether firms mainly compete in developed or developing markets. Based on panel data of firms in the global retail-trade sector between 1997 and 2010, we find that business model is indeed economically important in explaining performance variation among developed-market firms (16.8%), but not among developing-market firms (1.4%). Overall, our findings shed some light on the magnitude of the business model effect on firm performance in different geographical contexts.