Moving Business Models Forward for Positive Social, Environmental and Economic Outcomes: Managing Externalities (and Internalities) for Sustainability Innovation
DOI:
https://doi.org/10.54337/jbm.v11i3.8128Abstract
Purpose: Organisations are crafting business models to operate and be able to continue operating. While it is now common to mention the importance of the ecosystem surrounding a focal organisation, business models are often considered as internal configurations between resources, organisation and offers. Consequently, the ecosystem is only convoked as a matrix for value creation for stakeholders and value capture for a focal company. In this article, we contend that ecosystems are also the place where externalities of the focal business model operate, eventually destroying value for stakeholders. We suggest that a sustainable business model can only be designed and implemented with a complete account of externalities, and we propose that the business model is the key determinant between externalities and internalities.
Design/Methodology/Approach: We build on the research about business models and externalities to theorise at the crossroads of this literature. We then draw consequences from our theoretical development and advance business model recommendations for managers, consultants and researchers.
Findings: We propose to complete the concept of externalities with the symmetrical concept of “internalities” to analyse and design business models. We also offer eight policies to manage (or not) externalities and identify potential consequences of these policies for the business model of the focal organisation and its ecosystem. We conclude that business model thinking allows organisations to decide on what the externalities and internalities of their business model will be and thus induce management responsibilities.
Originality/Value: Instead of focusing on business models as an internal configuration, we contend that organisations must make decisions on externalities and internalities generated by their business model. We make propositions to design and preserve sustainable business models. Business models’ future should focus on the management of externalities.
References
Ackerman, R.W., & Bauer, R.A. (1976), Corporate Social Responsiveness, Reston Publishing. Reston, VA.
Amit, R. & Zott, C. (2021). Business model innovation strategy. John Wiley & Sons. ISBN : 978-1-119-68968-3
Attanasio, G., Preghenella, N., De Toni, A. F., & Battistella, C. (2022), Stakeholder engagement in business models for sustainability: The stakeholder value flow model for sustainable development. Business Strategy and the Environment, Vol.31, N°3, pp. 860–74. https://doi.org/10.1002/bse.2922
Ayres, R. U., & Kneese, A. V. (1969), Production, consumption, and externalities. The American Economic Review, Vol.59, N°3, pp. 282-297. https://doi.org/10.1007/978-3-642-27922-5_24
Bocken, N.M.P., Short, S.W., Rana, P., & Evans, S. (2014), A literature and practice review to develop sustainable business model archetypes, Journal of Cleaner Production, Vol. 65, pp. 42-56. https://doi.org/10.1016/j. jclepro.2013.11.039
Bocken, N.MP., Boons, F., & Baldassarre, B. (2019), Sustainable Business Model Experimentation by Under- standing Ecologies of Business Models, Journal of Cleaner Production, Vol. 208, pp. 1498–1512. https://doi. org/10.1016/j.jclepro.2018.10.159
Boldrini, J. C., & Antheaume, N. (2021), Designing and testing a new sustainable business model tool for multi-actor, multi-level, circular, and collaborative contexts, Journal of Cleaner Production, Vol. 309. https://doi. org/10.1016/j.jclepro.2021.127209
Brundtland, G.H. (1987). Report of the World Commission on Environment and Development: Our Common Future, 300 pp. https://sustainabledevelopment.un.org/content/documents/5987our-common-future.pdf
Carrasco-Farré, C., Snihur, Y., Berrone, P., & Ricart, J. E. (2022), The stakeholder value proposition of digital platforms in an urban ecosystem, Research Policy, Vol. 51, N°4. https://doi.org/10.1016/j.respol.2022.104488
Casadesus-Masanell, R., & Ricart, J. E. (2010), From strategy to business models and onto tactics, Long Range Planning, Vol. 43, N° 2-3, pp. 195-215. https://doi.org/10.1016/j.lrp.2010.01.004
Demsetz, H. (1967), “Toward a theory of property rights”, The American Economic Review, 57, 2, Papers and Proceedings of the 79th Annual Meeting of the American Economic Association, pp. 347-359. https://doi. org/10.1057/9780230523210_9
Demil, B., Lecocq, X., & Warnier, V. (2018), “Business model thinking”, business ecosystems and platforms: the new perspective on the environment of the organisation, M@n@gement, Vol.21, n°4, pp. 1213-1228. https://doi. org/10.3917/mana.214.1213
El Baz, J., Tiwari, S., Akenroye, T., Cherrafi, A., & Derrouiche, R. (2022), A framework of sustainability drivers and externalities for Industry 4.0 technologies using the Best-Worst Method, Journal of Cleaner Production, 344. https://doi.org/10.1016/j.jclepro.2022.130909
Fehrer, J.A., & Wieland, H. (2021), A Systemic Logic for Circular Business Models, Journal of Business Research, Vol. 125, pp. 609–620. https://doi.org/10.1016/j.jbusres.2020.02.010
Foss, N. (2023), Organisational design issues and the proper dimensionalisation of business model innovation, Journal of Business Models, Vol. 11, No. 3, pp. 13-17
Friedman, M. (1970), “A Friedman doctrine – The social responsibility of business is to increase its profits”, New York Times, Sept.13, pp. 17. https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social- responsibility-of-business-is-to.html
Gassmann, O., Frankenberger, K., Choudury, M., & Csik, M. (2020), The business model Navigator: The strategies behind the most successful companies, FT Publishing International, 2nd edition. ISBN-13 : 978-1292327129.
Gerasymenko, V., De Clercq, D., & Sapienza, H. J. (2015), Changing the business model: effects of venture capital firms and outside CEOs on portfolio company performance, Strategic Entrepreneurship Journal, Vol. 9, N°1, pp. 79-98. https://doi.org/10.1002/sej.1189
Gertner, D. & Rifkin, L. (2018), Coca-Cola and the Fight against the Global Obesity Epidemic, Thunderbird International Business Review, Vol. 60, pp. 161-173. https://doi.org/10.1002/tie.21888
Grasso, M. & Heede, R. (2023), Time to pay the piper: Fossil fuel companies’ reparations for climate damages, One Earth, Vol.6, n°5, pp. 459-463. https://doi.org/10.1016/j.oneear.2023.04.012
Helmers, E. & Marx, P. (2012), Electric cars: technical characteristics and environmental impacts. Environmental Sciences Europe, Vol. 24, N°1, pp. 1-15. https://doi.org/10.1186/2190-4715-24-14
Jambou, M., Torre, A., Dermine-Brullot, S., & Bourdin, S. (2022), Inter-firm cooperation and local industrial ecology processes: evidence from three French case studies. Annals of Regional Science, N°68, pp. 331–358. https://doi.org/10.1007/s00168-021-01088-5
Juntunen, J. K., Halme, M., Korsunova, A., & Rajala R. (2019), Strategies for Integrating Stakeholders into Sustainability Innovation: A Configurational Perspective, Journal of Product Innovation Management, Vol.36, N°3, pp. 331–355. https://doi.org/10.1111/jpim.12481
Kanda, W., Geissdoerfer, M., & Hjelm, O. (2021), From circular business models to circular business ecosystems, Business Strategy and the Environment, Vol. 30, N°6, pp. 2814-2829. https://doi.org/10.1002/bse.2895
Koens, J.F., Dieperink, C. & Miranda, M. (2009). Ecotourism as a development strategy: experiences from Costa Rica. Environment, Development and Sustainability, Vol. 11, pp. 1225–1237. https://doi.org/10.1007/s10668- 009-9214-3
Laasch, O. (2018), Beyond the Purely Commercial Business Model: Organisational Value Logics and the Heterogeneity of Sustainability Business Models, Long Range Planning, Vol.51, N°1, pp. 158–183. https://doi. org/10.1016/j.lrp.2017.09.002
Lave, L. B., Hendrickson, C. T., & McMichael, F. C. (1995), Environmental implications of electric cars, Science, Vol. 268, pp. 993-995. https://doi.org/10.1126/science.268.5213.993
Lecocq, X., Demil, B. & Warnier, V. (2006), Le business model, un outil d’analyse stratégique, L’Expansion Management Review, N° 123, pp. 96-109. https://doi.org/10.3917/emr.123.0096
Lecocq, X., Demil, B., & Ventura, J. (2010), Business models as a research program in strategic management: An appraisal based on Lakatos, M@n@gement, Vol. 4, pp. 214-225. https://doi.org/10.3917/mana.134.0214
Lingens, B. (2023), How ecosystem management will influence business model innovation: Bridging the gap between theory and practice, Journal of Business Models, Vol. 11, No. 3, pp. 97-104
Mikhalkina, T., & Cabantous, L. (2015). Business model innovation: How iconic business models emerge. In Baden-Fuller C. & Mangematin V. (Eds) Business models and modelling, Emerald Group Publishing Limited, pp. 59-95. https://doi.org/10.1108/S0742-332220150000033024
Nielsen, C. (2023a), How Regulation Affects Business Model Innovation, Journal of Business Models, Vol. 11, No. 3, pp. 105-116
Nielsen, C., (2023b). The Impact Report: The Report that all Companies with a Conscience should be Disclosing, available at SSRN: https://ssrn.com/abstract=4594438 or http://dx.doi.org/10.2139/ssrn.4594438
Osterwalder, A. & Pigneur, Y. (2010), Business model generation: A handbook for visionaries, game changers and challengers, John Wiley & Sons. ISBN-13: 978-0470876411
Proctor, R.N. (2012), Golden Holocaust: Origins of the Cigarette Catastrophe and the Case for Abolition, University of California Press, First Edition. ISBN-13: 978-0520270169
Ricart, J.E. (2023), Business Model Innovation as the new strategy arena, Journal of Business Models, Vol. 11, No. 3, pp. 18-23.
Schaltegger, S., Hansen, E.G., & Lüdeke-Freund F. (2016a), Business Models for Sustainability: Origins, Present Research, and Future Avenues, Organisation & Environment, Vol. 29, N° 1, pp. 3–10. https://doi. org/10.1177/1086026615599806
Schaltegger, S., Lüdeke-Freund, F., & Hansen E.G. (2016b), Business Models for Sustainability: A Co-Evolution- ary Analysis of Sustainable Entrepreneurship, Innovation, and Transformation, Organisation & Environment, Vol. 29, N° 3, pp. 264–289. https://doi.org/10.1177/1086026616633272
Schneider, S., & Clauß, T. (2020), Business Models for Sustainability: Choices and Consequences, Organisation & Environment, Vol. 33, N°3, pp. 384–407. https://doi.org/10.1177/1086026619854
Spender, J.C. (2010), Theory of the Firm or Framework? Paper for the Boisot-Spender seminar, April 26, pp.1-26.
Swanson, D.L. (2008), Top managers as drivers for Corporate Social Responsibility, in Crane, A., McWilliams, A., Matten, D., Moon, J., Siegel, D.S. (Eds), The Oxford Handbook of Corporate Social Responsibility, chap. 10, Oxford University Press. https://doi.org/10.1093/oxfordhb/9780199211593.003.0010
Turner, R. K. (1987), Sustainable global futures: common interest, interdependency, complexity and global possibilities, Futures, Vol. 19, N°5, pp. 574-582. https://doi.org/10.1016/0016-3287(87)90066-8
Vatn, A., & Bromley, D. W. (1997), Externalities—a market model failure, Environmental and Resource Economics, Vol. 9, pp. 135-151. https://doi.org/10.1007/BF02441375
Walkiewicz, J., Lay-Kumar, J., & Herzig, C. (2021), The integration of sustainability and externalities into the “corporate DNA”: A practice-oriented approach. Corporate Governance: The International Journal of Business in Society, Vol. 21, N° 3, pp. 479-496. https://doi.org/10.1108/CG-06-2020-0244
Ziaee Bigdeli, A., Li, F., & Shi, X. (2016), Sustainability and scalability of university spinouts: A business model perspective, R&D Management, Vol. 46, N°3, pp. 504-518. https://doi.org/10.1111/radm.12167
Zott, C., & Amit, R. (2010), Business model design: An activity system perspective, Long Range Planning, Vol. 43, N° 2-3, pp. 216-226. https://doi.org/10.1016/j.lrp.2009.07.004
Zott, C., & Amit, R. (2013), The business model: A theoretically anchored robust construct for strategic analysis, Strategic Organisation, Vol. 11, N° 4, pp. 403-411. https://doi.org/10.1177/1476127013510466
Downloads
Published
Issue
Section
License
Articles published in Journal of Business Models follow the license Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported (CC BY-NC-ND 3.0)
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License: Attribution - NonCommercial - NoDerivs (by-nc-nd). Further information about Creative Commons
