The entrepreneur’s business model: toward a unified perspective Michael Morrisa,*, Minet Schindehutteb, Jeffrey Allenc
Witting Chair in Entrepreneurship, Syracuse University, Syracuse, NY 13244, USA b Miami University, Oxford, OH 45056, USA c University of Central Florida, Orlando, FL 32816, USA Received 29 September 2002; accepted 6 November 2003
Abstract Highly emphasized in entrepreneurial practice, business models have received limited attention from researchers. No consensus exists regarding the definition, nature, structure, and evolution of business models. Still, the business model holds promise as a unifying unit of analysis that can facilitate theory development in entrepreneurship. This article synthesizes the literature and draws conclusions regarding a number of these core issues. Theoretical underpinnings of a firm’s business model are explored. A six-component framework is proposed for characterizing a business model, regardless of venture type. These components are applied at three different levels. The framework is illustrated using a successful mainstream company. Suggestions are made regarding the manner in which business models might be expected to emerge and evolve over time. D 2003 Elsevier Inc. All rights reserved. Keywords: Activity sets; Architecture; Business model; Strategy; Model dynamics
1. Introduction Ventures fail despite the presence of market opportunities, novel business ideas, adequate resources, and talented entrepreneurs. A possible cause is the underlying model driving the business. Surprisingly, little attention has been given to business models by researchers, with much of the published work focusing on Internet-based models. The available research tends to be descriptive in nature, examining approaches to model construction, noting standard model types, citing examples of failed and successful models, and discussing the need for new models as conditions change. Yet, no consensus exists regarding the definition or nature of a model, and there has been no attempt to prioritize critical research questions or establish research streams relating to models. The purpose of this study is to review existing perspectives and propose an integrative framework for characterizing the entrepreneur’s business model.
2. Literature review 2.1. What is a ‘business model’? No generally accepted definition of the term ‘‘business model’’ has emerged. Diversity in the available definitions poses substantive challenges for delimiting the nature and components of a model and determining what constitutes a good model. It also leads to confusion in terminology, as business model, strategy, business concept, revenue model, and economic model are often used interchangeably. Moreover, the business model has been referred to as architecture, design, pattern, plan, method, assumption, and statement. It is possible to bring order to the various perspectives. A content analysis of key words in 30 definitions led the authors to identify three general categories of definitions based on their principal emphasis. These categories can be labeled economic, operational, and strategic, with each comprised of a unique set of decision variables. They represent a hierarchy in that the perspective becomes more comprehensive as one progressively moves from the economic to the operational to the strategic levels. At the most rudimentary level, the business model is defined solely in terms of the firm’s economic model. The
* Corresponding author. Tel.: +1-315-443-3164. E-mail address: firstname.lastname@example.org (M. Morris). 0148-2963/$ – see front matter D 2003 Elsevier Inc. All rights reserved. doi:10.1016/j.jbusres.2003.11.001
M. Morris et al. / Journal of Business Research 58 (2005) 726–735
concern is with the logic of profit generation. Relevant decision variables include revenue sources, pricing methodologies, cost structures, margins, and expected...