Dynamic Capabilities and Business Model Innovation: Driving SME Performance in China

The Power of Business Model Innovation

In today's cut-throat business world, small and medium-sized enterprises (SMEs) face constant pressure to adapt and innovate. Business model innovation (BMI), the art of reinventing how a company creates and delivers value, has emerged as a key differentiator. This study delves into the impact of BMI on SME performance in China, exploring how dynamic capabilities like enterprise risk management (ERM), organizational agility (OA), and entrepreneurial orientation (EO) can pave the way for successful BMI.

Navigating Risk, Embracing Agility, and Fostering Entrepreneurship

SMEs often operate with limited resources, making effective risk management crucial. ERM provides a structured approach to identifying and mitigating potential threats, allowing SMEs to make informed decisions in uncertain environments. Organizational agility, the ability to quickly adapt to market changes, is another essential dynamic capability. Agile SMEs can respond effectively to shifting customer demands and capitalize on emerging opportunities. Finally, entrepreneurial orientation, characterized by a proactive and innovative mindset, empowers SMEs to explore new possibilities and venture into uncharted territories.

Efficiency-Centered BMI: The Catalyst for Success

This study differentiates between two types of BMI: novelty-centered and efficiency-centered. While novelty-centered BMI focuses on disruptive innovations, efficiency-centered BMI aims to optimize existing processes and reduce costs. Our findings reveal that efficiency-centered BMI plays a pivotal role in mediating the relationship between dynamic capabilities (ERM, OA, and EO) and SME performance. By streamlining operations and improving resource utilization, efficiency-centered BMI enhances profitability and market competitiveness.

The Case of Daxin: From Traditional Furniture to Tech-Savvy Innovator

To illustrate the practical implications of our findings, we present a case study of Daxin (DX), a Chinese home furnishing SME. Facing declining profitability and market share, DX adopted our recommendations, focusing on ERM, OA, and EO to drive efficiency-centered BMI. By implementing modular manufacturing techniques and integrating digital technologies, DX transformed its business model and regained its competitive edge.

“By embracing ERM, OA, and EO, SMEs can unlock the transformative power of efficiency-centered BMI and achieve sustainable growth in dynamic markets.”

The Path Forward: Future Research Directions

While this study provides valuable insights into the dynamics of BMI and SME performance, further research is needed to explore the long-term impact of novelty-centered BMI and the role of technology and market dynamics in shaping BMI strategies. By continuing to unravel the complexities of business model innovation, we can empower SMEs to thrive in an increasingly competitive global landscape.