The entrepreneur's business model: toward a unified perspective

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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.

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.

Section snippets

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,

Model development: an integrative framework

Building on these conceptual and theoretical roots, it is possible to develop a standard framework for characterizing a business model. To be useful, such a framework must be reasonably simple, logical, measurable, comprehensive, and operationally meaningful. In seeking generalizability, the extant perspectives tend to oversimplify a firm's model. The challenge is to produce a framework that is applicable to firms in general but which serves the needs of the individual entrepreneur.

Accordingly,

The issue of fit

Sustainability requires that model components demonstrate consistency, as in the Southwest example. Consistency can be described in terms of both internal and external “fit,” where the former is concerned with a coherent configuration of key activities within the firm and the latter addresses the appropriateness of the configuration given external environmental conditions.

Internal fit includes both consistency and reinforcement within and between the six subcomponents of the model. An economic

Conclusions

The business model can be a central construct in entrepreneurship research. This article has sought to provide direction in addressing some of the more vexing questions surrounding models. The model represents a strategic framework for conceptualizing a value-based venture. The proposed framework allows the user to design, describe, categorize, critique, and analyze a business model for any type of company. It provides a useful backdrop for strategically adapting fundamental elements of a

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