The Role of Internationalization in Business model Innovation: assessing the successfulness of a business model

in China.

Ziyi Zhao, PhD student

School of Management, Zhejiang University

Hangzhou, China

1. Introduction The emergence and swift expansion of the information technologies has allowed the

development of unconventional ways in organizing business transactions and has

shown the new directions for business model design. During the recent fifteen years,

both practitioners and scholars have recognized business model innovation as being

able to reshape industries, generate value growth, or leapfrog competitors

(Chesbrough, 2007; Johnson, et al., 2008; Casadesus-Masanell & Ricart, 2011;

Martzler, et al., 2013). Besides product innovation and technological innovation, the

injection of new business model can fulfill customers’ various personalized needs in a

rapid and quality way (Zott & Amit, 2010), as well as explain competitive advantage

and firm performance (Zott & Amit, 2007). Therefore, more and more firms seek

methods to make business model innovation for the sake of increasing

competitiveness.

The past decade and half has also seen the prosperity of global economy. One of the

motivations for firms’ to internationalize their business is to expand their market for

economies of scale and scope (Yip, Biscarri & Monti, 2000). It is common in

nowadays for multinational firms seek to expand their business in global market.

Nevertheless, it is a challenge for firms to implement their original business model in

a new market, especially in emerging markets for the infrastructures are often

underdeveloped or even absent (Khanna, Palepu, & Sinha, 2005). Especially in the

context of emerging countries, the development of multinational firms may be

influenced by various factors, such as the complexity of competition, market

uncertainty, market dynamism, legislation and regulations (Prahalad & Mashelkar,

2010). The level of market complexity, culture distances and distinct customers’

behavior may impact the effectiveness of a successful business model (Fleury &

Fleury, 2014). Firms’ performance and competitiveness might also be reduced if

implementing the business model forcibly into a different market. Therefore, a firms’

business model should provide stability for the development of a company’s activities

as well as dynamics for change (Cavalcante, Kesting & Ulhoi, 2011). Firms should

not take for granted but have better to establish solid, precise recognition on their

target market and assess if their original business model can fit into a new context.

Instead, firms have to gain enough dynamic capabilities to conquer the disadvantages

in emerging market, to localize the business model (Wu, Ma & Shi, 2010) or to

conduct business model innovation (Dasilva & Trkman, 2014). Thus, business model

innovation is vital for firms to enter and survive in emerging markets, and to compete

in globalized competition.

However, there are only few former studies that have paid attention on the link

between the field of internationalization and business model. Firms’ successfulness in

multiple countries is hinted as originated from the adaptation of business models to

various foreign market environments (Sleuwargen & Onkelinx, 2014). The repeated

application of a specific business model contributes to firms’ rapid and early

internationalization (Dunford, et al., 2010). Rask (2014) points out four paths for

firms to internationalize their business through business model innovation. These

researches primarily treat business model innovation as a viable tool for firms to

realize internationalization and expand to multiple countries. But the effect of

internationalization on business model innovation still needs to be unveiled. Empirical

studies are also in need as evidence to prove the different paths for

internationalization through business model innovation.

Based on a real life case, this research investigates the internationalization of business

model in emerging market. Combining established business model with local

environment characteristics, this research provides insights for the process of

internationalizing an established business model as well as figures out the role of

internationalization as motivating business model innovation.

The purpose of this paper is to understand international business models where

context specific aspects are integrated and to open the blackbox of how a firms’

internationalization interacts with business model innovation. The first research

objective is to overview the internationalization in emerging market; the barriers in

emerging market will be highlighted. The second objective is to dissect the

relationship between internationalization and business model innovation, what

conflicts will be triggered in internationalization. Last but not least, this research aims

to assess the business model in the context of emerging market, and points out

possible solutions of business model innovation.

The main contributions of this research is to bridge two research fields, and to analyze

the role of internationalization in business model innovation, which helps to explain

one of the antecedents of business model innovation as well as to facilitate the

successfulness of internationalization through business model innovation.

2. Theoretical Background

2.1 A Definition of Business model

Many previous studies investigate business model on its definition and components.

Business model is a system of interdependent activities, which depicting the content,

structure, and governance of transactions in order to create value (Zott & Amit, 2010).

It describes a template of how firm conducts its business (Zott & Amit, 2013); a

pattern of organization exchanges, which can generate value for firms (Brousseau &

Penard, 2007); as well as a structure of the focus, locus and modus of activities

(Onetti et al., 2012). Encompassing different components and the interactions

between these components, business model is an architecture that provides a holistic

view with focal firm in the center (Dubosson-Torbay, Osterwalder & Pigneur, 2002;

Zott, Amit & Massa, 2011). Comparing with strategy, business model is an extended

concept, which can reflect realized strategies (Casadesus-Masanell & Ricart, 2010).

From the aspect of value, a business model can be conceptualized as a set of

capabilities that is configured to enable value creation (Seelos & Mair, 2007); and a

rationale of how firms can create, deliver and capture value (Teece, 2010). This aim

of business model is to create and deliver value (Johnson, et al., 2008), it also reveals

the logic of the firm, the way it operates and creates value. While the intangible part

of business model cannot be neglected, business model could also be a cognitive

system for managers to make decisions on actions (Tikkanen, et al., 2005).

In recent studies, business model study develops towards several aspects, including

the cognitive approach of business model (Velu & Stiles, 2013; Osiyevskyy &

Dewald, 2015; Chroneer, et al., 2015; Martins, et al., 2015), business model dynamics

and evolution (Demil& Lecocq, 2010; Achtenhagen, Melin & Naidi, 2013),

internationalizing a business model (Onetti, et al., 2012; Rask, 2014; Bouncken, et al.,

2015) and business model in specific industries (Kley, et al., 2011; Bohnsack, et al.,

2014; Ghezzi, et al., 2015). However, due to the variation of flexible and special

business models for each industry and for different firms, there is a lack of general-

accepted consistent definition on the term of business model (Onetti, et al., 2012; Zott

& Amit, 2013;). The connection between business model and other management

theories is still ambiguous (Dasilva & Trkman, 2014). Business model research still

lacks theoretical grounding: some researchers take business model as theoretical

support in analysis, while others take it as tools for analysis. Thus, its underlying

mechanism remains to be unraveled.

2.2 Business model innovation

Business model represents dynamics (Afuah & Tucci, 2001) and innovation in time of

changes (Amit & Zott, 2010). As a flow of value, business model innovation implies

an outward-facing, highly creative, explorative process (Johnson, et al. 2008), which

discovers and adopts different modes of value proposition, value creation and value

capture (Velu, 2015). Business model innovation plays an important role in

appropriating value (Amit, Zott & Pearson, 2012). It represent ‘paradigm shift’ that

characterize not transformation at the level of business processes or workflows, but

radical rethinking of the business as well as the dividing lines between organizations

and industries (Malhotra, 2000).

From the system perspective, business model innovation can be achieved by adding

new activities, linking activities in new ways, or changing which parties perform an

activity (Massa & Tucci, 2013). It can be categorized into three types, namely,

innovations in supply chain, innovations in revenue models and innovations in the

roles that an enterprise plays in value chains (Giesen, Berman, Bell & Blitz, 2007).

Researches on business model innovation are primarily from three aspects. With

regard to technological innovation, technological innovation transfer techniques into

productivity, while business model innovation is able to realize the commercialization

of new technology (Chesbrough & Rosenbloom, 2002; Chesbrough, 2007). When

current models are too expensive or too complicated for large amount of customers,

there are needs to fend off low-end disrupters and respond to a shifting basis of

competition (Johnson, Christensen, Kagermann, 2008), which can be achieved by

business model innovation.

Furthermore, business model innovation could provide competitive advantage for

firms, especially start-up enterprises (Zott & Amit, 2008). Comparing with incumbent

firms, business model innovation is able to contribute in digging out market

opportunities, enhance competitive advantage and thus foster performance

improvement. Business model innovation represents an overlooked source of future

value and is difficult for competitors to imitate (Amit & Zott, 2010).

Business model innovation is highlighted as a choice for managers and entrepreneurs

to create new value, specifically in times of economic change (Zott & Amit, 2010).

When in a new market, business model innovation could act as a reaction regarding to

external technological change or institutional impact (Amit & Zott, 2001; Teece,

2010). In other words, business model innovation is the result of trial-n-error

experimentation in response to environmental changes (McGrath, 2010).

Most previous studies consider business model innovation as a response to exogenous

dynamics when firms “have to change”. Yet at the same time, firms should develop

prospective capabilities to initiate business model change. Cognitive perspective on

business model innovation could provide a forward-looking, more dynamic view for

firms to compete effectively (Martins, et al., 2015). There is a lack of research on the

antecedent of business model innovation. Questions such as what motivates firms to

conduct business model innovation, why managers choose to change business model,

and what can be the start point of a firms’ business model innovation, are still

unveiled.

2.3 Internationalization and Business model innovation

Internationalization is defined as the process of increasing involvement in

international markets (Welch & Luostarinen, 1988) and increasing commitments to

foreign operations (Johanson & Vahlne, 2003). A same business model can have

different effectiveness in different locations (Cortili & Menegotto, 2010); therefore

internationalization is one of the contexts that call firms to change.

Former studies show that entrepreneurs often refer to business models to try to gain

legitimacy from the market (Doganova & Eyquem-Renault, 2009). However, not only

the entrepreneurial start-ups are influenced, but also the incumbent firms, especially

when there is possibility to integrate components that are new to firm (Baden-Fuller

& Mangematin, 2013). Internationalization is one of the conditions that generate

uncertainty and new possibilities to firms’ dominant business model. When firms

enter new international markets, they are facing challenges from the host market, the

lack of knowledge and information asymmetries make it more difficult for

multinational firms to access the local resources and supply chain (Dahan, et al, 2010).

Firms will be engaged in global competitions in value proposition, global sourcing, as

well as resource and activities allocation (Bouncken, Muench & Kraus, 2015). The

central challenge for firms in internationalization is to find new ways to deliver and

capture value (Nidumolu, Prahalad & Rangaswami, 2009), namely, business model

innovation according to the value interpretation of business model. It has been argued

that firms need to differentiate business models to overcome the barriers that hinder

market penetration (Johnson & Suskewicz, 2009; Kley et al., 2011). However, facing

these challenges, there are only few studies directly implying the direct connection

between internationalization and business model innovation.

Some researchers hinted that business model could deal with the internationalization

challenge from dynamic capabilities approach. Dynamic capabilities is concerned

with how firms achieve necessary business model when the environment inevitably

shifts and has important implications for the choice and design of business (Augier &

Teece, 2009). The selection of business model is a key microfoundation of dynamic

capabilities (Teece, 2010). Business model concept is to cover the dynamics of the

business model over time and the cognitive and cultural constrains that managers

have to cope with (Hedman & Kalling, 2003). Therefor, it is necessary for firms to

cultivate their dynamic capabilities in sensing, seizing and reconfiguring market

opportunities and to deal with the constraints through business model innovation in a

changing market.

As Onetti, et al. (2012) pointed out, “internationalization activities are location

sensitive”. The operational attributes of internationalization activities can be defined

as business modes, cross-border modes, and entry modes, which are all business

model decisions (Onetti, et al., 2012). Business model would also be reflected by

external factors, including dynamics, legislation, and technological innovation

(Ryschka, et al., 2014). Describing a strategic and dynamic process, business model

should be characterized by specific offerings, linked to particular customers, as well

as using specific delivery and communication methods so as to be adapted to foreign

markets (Bouncken, Muench & Kraus, 2015). International strategy guides business

model innovation as managerial choices for setting the firm in the global market,

where firms can achieve internationalization through business model innovation by

taking both upstream production and downstream markets into account (Rask, 2014).

Business model innovation greatly influences the early stage of internationalization.

In the born-global research, it has been seen in many cases that internationally

dispersed resources and activities, which can be viewed as encompassed by business

model, is crucial to a firms’ emergence and success in international marketplace

(Zander et al., 2015).

However, there is a lack on empirical evidence to support the different paths of

internationalize a business model. Other than born-globals, firms with an established

dominant business model in home country also rely on business model innovation to

penetrate in a new market.

2.4 Constraints in internationalizing a business model

When internationalized into a new market, firms face resource poverty and

information asymmetry, which may bring high level of uncertainty and complexity

(Shostack, 1987), increase non-routine decision-making (Tushman & Romanelli,

1983), and require different management approaches (Welch & White, 1981). Firms

need to do more information search to fit in well in a different context (Brossard,

1998). There are culture distances and psychic distances in foreign market, which

refers to the obstacle in information flow within host market (Hofstede, 1980; Evans

& Mavondo, 2002; Sousa & Bradley, 2006). These distances have impact on firms’

experience in the process of internationalization.

When firms expand from developed markets to emerging markets, a series of

constraints influences the operations of the original business model. Targeting

emerging markets will require firms to develop new business models (Cavusgil &

Knight, 2015). The antecedents of business model change trigger business model

innovation deliberately or environmentally (Demil & Lecocq, 2010).

From the environmental perspective, business models are partially influenced by

distinct institutional and cultural environments, which provide incentives to identify

or implement different value propositions (Fleury & Fleury, 2014). The infrastructure

facilities, law and order situation, government support in emerging markets, the

education background of customers and labourers is different and most of the time

worse than in developed markets. This forms barriers for firms to undertake their

original business model in emerging markets (Chowdhury, 2007). In the process of

value creation, the inadequate of raw material resources, financial resources and

production resources would be constraints; while market access, market power and

market security are constraints in the value capture process (London, 2010). In

addition, the lack of knowledge and information asymmetries in host country would

intensifies the cultural distance between home market and host market, which makes

it more difficult for multinational firms to access the local network and supply chain

(Dahan et al. 2010).

On the other hand, path-dependent behaviour has been recognized as cognitive

constraints for firms to find new ways for value creation and value capture, as they

prefer to rely on the successes on established models (Bohnsack, Pinkse & Kolk,

2014). Any change in business model may require cognitive attention from the

management team (Martins, et al., 2015). It is far from clear for managers to figure

out the right business model. Managers may conquer the confusion or obstruction

barrier via a commitment to experimentation (Chesbrough, 2010), through which

firms enact the market instead of studying it. Vital challenges for firms also include

how to sense the timing of shifting resources and to know who is responsible for

business model innovation (Chesbrough, 2010).

2.5 Internationalization drives business model innovation

Multinational enterprises get internationalization experience and commitment step by

step. The barriers in internationalization stem from the conflicts between

environmental dynamics and the dominant logic of business model, which thus

become constraints for the survival of dominant business model and realize the

effectiveness on internationalization. For further analysis, the driven factors in

internationalization need to be figured out firstly. This research proposes that the

conflicts are deeply rooted from two driven factors, environment-driven factors and

enterprise-driven factors (Ghezzi et al., 2015).

From the environmental perspective, dynamism in emerging market are prominent

factors challenging the operation and survival of dominant business model, business

model innovation is described as strategic response to exogenous shocks (Amit &

Zott, 2001; Teece, 2010; Ghezzi, 2015). Regulatory change is widely accepted as

major conflicts in emerging market (Chowdbury, 2007; Fleury & Fleury, 2014;

London, 2010; Dahan et al., 2010; Ramamurti, 2012; Ghezzi et al., 2015). Regulatory

change makes it different on factors such as aging infrastructures, industry standard

and regulations, legal environment, intellectual property protections, fiscal and

income imbalance etc, which may lead to the insufficient in resource acquisition in

emerging market. External innovation factors in internationalization represents the

disruptive innovation in emerging markets, especially the imitators in emerging

market (Zhou, 2005; Casadesus-Masanell & Zhu, 2013), who are able to conduct

secondary business model innovation based on latecomer advantages (Wu, Ma & Shi,

2010). It calls for adding dynamism into business model design. The technological

innovation and imitation leads to the shortening of the product life cycle; the increase

on the complexity of products; and new value proposition emerges constantly.

Cooperation and competition represents the change in market stakeholders competing

or supporting the focal firm in the whole market. With new partners and competitors,

the appropriability or intellectual regime may be changed in a new stakeholder

network (Teece, 2010). Knowledge leakage may lose the firms’ competitive

advantage and the way it captures value. The insufficient market commitment in

emerging market buffers the way that focal firm interacts with its stakeholders.

What’s more, the management of customer relationship is identified as a significant

aspect in the management of a company’s business model (Tikkanen, et al., 2005).

Customer behaviour is rooted from cultural distance and psychic distance plays a

minor role. The internationalization will bring radical changes in customer habits and

preferences, which are also environmental-driven factors that may change the ways of

generating value through the dominant business model logic (Johnson et al., 2008).

On the level of the firm itself, organizations are imprinted by strong environmental

forces at birth (Stinchcombe & March, 1965). Firms tend to make decisions according

to established routines and conduct local exploration based on the routines (Ahuja &

Lampert, 2001; Amburgey & Miner, 1992; Stuart & Podolny, 1996). Firms also tend

to choose the capabilities that they have had already (Tripsas & Gavetti, 2000).

Multinational enterprises are thus will rely on the capabilities and innovation method

that they have in home market (Govindarajan & Ramamurti, 2011). The application

of experience may form path dependence that will impede firms’ reaction to

environmental conflicts. As they are dependent on changing external factors, business

models must be capable of redesign and adaption (Øiestad & Bugge, 2014).

Liability of foreignness is the additional costs foreign firms suffer when operating

abroad (Zaheer, 1995). It arises mainly from the foreign firm not sufficiently

embedded in the information networks in host country, which is likely to adversely

affect its continued survival in industry (Zaheer & Mosakowski, 1997). The conflicts

in foreign market are turning into a relationship-specific and network-specific

problem (Johanson & Vahlne, 2009).

Having explained the previous studies on the internationalization, business model

innovation, and the interplay between internationalization and business model, it is

clear that there is a need to investigate in the internationalization as an antecedent of

business model innovation. This research expects a direct link between

internationalization with firms’ business model innovation. When a firm

internationalize its business into foreign markets, will the dominant business model

still be effective? If not, what factors constraints the implementation of business

model? And how can firms release these constraints through business model

innovation? Thus, the aim of this research is to open the black box of how

internationalization impacts incumbent firms’ business model innovation.

Setting in emerging market, this research integrates context constraints with cognitive

decision-makings within internationalization process. The interplay between them is

expected to reveal underlying mechanism of how internationalization works on

business model innovation. Table 1 summarizes the major impacts and an empirical

case follows to prove these expectations that internationalization is one of the motives

for business model innovation, and business model innovation could be the key to the

emergence and success for multinational firms under the context of emerging market.

Table 1. The expected impact of internationalization on business model innovation

Internationalization driven factors

Possible conflicts with dominant business model

Possible impact on business model innovation

Environment Emerging market dynamism

• Ineffective value proposition • Insufficient resource

acquisition

• New value proposition

Cooperation and Competition

• Knowledge leakage • Obstruction on system

interactions

• Market Infrastructure: Add or reduce partners activities

• Business ecosystem Customer behaviour

• Unserved niche market • Customer Interfaces: Re-targeting

Cognition Path dependence • Rely on dominant business

model logic • Ineffective value proposition

• Business model Redesign

Liability of foreignness

• Confusion on information • Increasing transaction cost

• Market Infrastructure: Get involved with network

• New cost/revenue model    

3. Methodology This research is a qualitative case study based on fieldworks and interviews with the

aim of investigating the internationalization process of a specific business model

under the context of emerging market. A case of a British ebook platform company

has been employed for further analysis. Its established business model has been

proved successful in European market, yet faces great challenges in Chinese academic

ebook market. With this failure case, this research illustrates in detail that what

problems will be triggered by internationalization, and how does these problems

reflect on business models. Thus, internationalization’s motivation mechanism on

business model innovation could be revealed, while business model innovation

facilitates the successfulness of internationalization.

Qualitative methods can provide logical analysis and in-depth understanding of

contexts through abundant materials and talking with people (Myers, 2013). The data

of this research comes from various sources, including documents and literature, case

and interviews. Various techniques are employed in investigations to assure the

quality of research (Whittermore, Chase & Mandle, 2001), and different sources of

data can provide evidence for each other and result in “triangulation” (Yin, 1993).

The data source is summarized in Table 2.

Documentary research has firstly been conducted for the purpose of deepening the

understanding of the ebook industry and Chinese ebook market. Governmental

publications, industrial reports, public archival data and statistics have been collected

to display the current situation and dynamics in Chinese academic ebook market.

In-depth case study is applied as it considered as revealing contemporary

phenomenon within real-life context (Yin, 1989), probing into particular situations or

problems (Ghauri, 2004), and facilitating the understanding of value, actors, activities

as well as their relationships (Pettigrew, 1997). Through case study, this research

shows the barriers and constraints that conflict with the dominant business model of

the case company in their internationalization process into Chinese market. The study

on case company can represent the dominant business model in academic ebooks

industry. Considering specific context characteristics and cognition, the case shed

light that there is need of business model innovation to conquer the conflicts in

internationalization, especially in emerging markets.

Based on the basic knowledge from preliminary research, semi-structured interviews

have been designed and 22 respondents are approached for this research. Half of the

interviewees are academic ebook experts from different market participants within

academic ebook market, including 3 academic book publishers, 2 ebook agents, 4

institutional users (librarians) and 2 executive officers from ebook platforms. The

respondents are approached on Beijing International Book Fair 2013 & 2014(BIBF),

which is a professional fair, and they are considered as capable of revealing the

ebooks business model as professionals in the industry. The other 11 interviewees are

individual customers of ebooks, who are approached in university libraries and are

considered as being able to present their opinions and evaluate the effectiveness of

ebook platforms. Through in-depth interviews, this research identifies and maps the

value creation and value capture process for academic ebooks. The business model of

case company is disclosed through interviews in accordance with the framework of

business model developed by Osterwalder and Pigneur in 2010.

The data is analyzed using content analysis, semantic analysis, cross-reference, and

constant comparison. Further analysis of the data consisted of (1) the conflicts

between dominant business model and host market, (2) the comparison between focal

firms’ business model with other companies’, and the matching with market

environment, and (3) the synthesizing of the data, validating the expected impact of

internationalization on business model.

Table 2. Data Collection Overview Time /Location Data Source Data

2013 Beijing (BIBF)

Interviewee: • First in-depth with Asian-

Pacific regional manager from E company

• The international business of E company • Current Situation of E company in China

2013 Beijing Interviewee: • Ebook agent for E company

(CNPIEC) • Current Situation of E company in China

2013 U.K. Documentary Research: • E company website; JISC

website and statistics, U.K.; Ministry of Education, China

• Current business model of E company in European market;

• Current development of Chinese academic ebook market; Barriers and regulations.

• Identification on academic ebook users • Prediction on the potential user size in

Chinese market 2013 U.K. Interviewee:

• First in-depth interview with ebooks sales director, head of corporate development from E company

• E company’s business model in European market and their goals in Chinese market

2014 U.K. Documentary Research: • Chinese university library

websites; Agent and peer ebook platforms website

• Identification on potential niche market • Identification on stakeholders and competitors • Identification on barriers for the development

of ebook platforms 2014 U.K. Interviewee:

• Second interview with the head of corporate development from E company

• Identification on potential niche market and development direction

2014 Beijing (BIBF) & University Libraries

Interviewee: • Second in-depth interview

with the Chinese agents’ for E company.

• In-depth interview with: § Stakeholders: ebook

publishers, agent company

§ Institutional users § Individual ebook

platform users

• The current situation of ebook platform industry in Chinese market

• The ebook platform value chain in Chinese market

• The dominant business model logic in Chinese market.

• Evaluation on the successfulness of E company’s business model

2014 Beijing & U.K.

Interviewee: • Telephone interview with • Institutional Users • Individual ebook platform

users

• Complementary data

4. Case analysis

4.1 The case of E company

Ebook are the digital representation of print books with a similar layout in electronic

medium (Van der Velde & Ernst, 2009). The advent of the digital age has greatly

changed the reading habits of people due the carrier variation of words and writing as

well as the evolution of mobile terminals. More and more users turn to ebooks and

ebook platforms, which are considered as easy to search and access, and cheaper than

print books. Ebook can be categorized into academic ebook and trade ebook.

E company, part of the B Group, is one of Europe’s largest suppliers of academic

print books, academic ebooks, shelf ready services and information systems to the

higher educational markets. In the supply chain of ebook, there are many suppliers

including publishers, vendors, aggregators, ebooks specialists, online retailers as well

as high-street booksellers (Grigson & Holloway, 2011). E company has positioned

itself as an aggregator, when integrates different publishers and distribute books

through its own channels. Its service includes both print books and ebooks. In the year

2013, academic ebooks account for 4% of its total sales. On one hand, E company

works as an intermediary in print books between publishers and downstream retailers

or customers. It takes advantage of distribution channels and builds up solid

relationship with both publishers and downstream customers. E company provides an

acquisition portal, which brings utility to all aspects of book selection and acquisition,

and facilitates worldwide librarians to realize “one stop” online shopping instead of

reading catalogues and ordering offline. However, it is reported that the sales of its

print books have been decreased by 13.5% in the first season in 2014 for the reason

that student turn to the Internet (Foster, 2014)1.

On the other hand, E company invests aggressively in digital and online propositions,

which are expected to be complementarities for print books. Their online digital

books platform, EP, continues to make progress with sales growth by 38% in 2013. E

company plan to continually invest in the EP for the next three years to develop

digital and online propositions and enhance the range of content, functionality of the

platform as well as the foreign language capacity for foreign markets. Launched in

2007, its ebook platform has taken full advantage of the print books business. E

company integrates over 450 leading international publishers, and provides a

comprehensive range of over 340,000 ebooks, which keep increasing everyday. The

content of EP is academic only and the cooperation with Joint Information System

Committee, which is funded by UK government and provides service for all British

educational institutions (JISC), has further enhanced its leading position in exploring

British e-textbook market. EP claims streamlined workflows and seamless integration,

which maximize the convenience for librarians and are consistent with university

library systems.

EP is famous for its innovative business model in European market. Considering the

constraints of university budgets, flexible lending models and pricing models are

developed for EP for the purpose of various needs of individual users. Innovative

purchasing models have been employed to catch up with the needs of customers and

at the same time to control expenditure for libraries (Reiners et al., 2012). Moreover,

new features are continuously introduced on the platform in order to create an

interacting learning experience, including making notes on the documents and

                                                                                                               1  Foster, G. 2014. Market report on E company.

integrating with virtual learning environments (VLE). With empowering more

freedoms to the individual users, EP is trying to establish direct relationship with

readers, which at the same time are the control of libraries.

EP keeps expanding their business across European countries. Website interfaces of

different language versions have been developed for the purpose of ensuring

comfortable navigation as well as reinforcing the growth in continental Europe. Since

2011, E company serves customers from 95 countries, and has established

international offices in France, Germany, Spain, Southern Africa and Far East Asia.

With a large population base and growing scale of higher educational markets, the

Pacific-Asian region attracts focuses and interests from E company, especially China,

who ranked as second largest book market by 2013 (IPA, 2013)2. EP entered the

Chinese market via agents. Especially in Mainland China, censorship policy and

regulation constraints limit EP to develop their business independently. Using an

agent is written in industry regulations and becomes a must when foreign ebooks

companies to enter Chinese market.

In 2012, E company entered Mainland China through an agent, China National

Publications Import & Export (Group) Corporation, abbreviated as CNPIEC, with

the expectation of utilizing their established distribution channels and relationship

with universities, thus to provide their ebooks for Chinese higher educational

institutions. In European countries, EP has proved its successful business model and

leading position in academic ebooks services by a strong digital sales growth of 38%

in the year 2013. However, in the Chinese market, EP failed to achieve the same

success as they were in European market. Only few Chinese universities know their

                                                                                                               2  International Publishers Association (IPA) Research. 2013. Annual Report 2012-2013.

business so that its international popularity is not as good as it is in European markets.

Till September 2014, only 2 in the C9 league universities (top universities in China)

chose to go on trial with EP, while none of them decided to purchase it after the trial.

The internationalization of E company’s successful business model into the Chinese

market has seen difficulties and been below expectations.

Table 3. Purchased ebook platforms for C9 universities

University Foreign Ebook platform resources Myilibrary, EBSCO ebooks, ebrary Case company: E Tsinghua University √ Peking University √ √ Shanghai Jiaotong University √ √ √ √ (Trial, May 2014)

Fudan University √ √ √ (Trial, Jun 2014)

Zhejiang University √ √ University of Science and Technology of China √ √

Nanjing University √

Sun Yat-sen University √ √ √

Xi’an Jiaotong University √

Source: Ministry of Education, 2013; university libraries website, 2014.

Based on this case, the follow discussion addresses on three key issues: the challenge

of internationalization in emerging countries; what problems these challenges may

brought to the effectiveness of dominant business model; how these problems can be

reflected on business model innovation. The final section briefly sketches the impact

of internationalization on business model innovation.

4.2 Internationalization drives business model innovation

Statistics show that, as a part of e-publishing industry, Chinese academic ebook

market sees a huge and rapid growth with strong support from the government. With

education is still a priority for many Chinese, PwC predicts that the revenue of

Chinese book industry will surpass Japan and Germany and will account for 35% of

Asia Pacific’s total books revenue in 2017, with revenue of more than £8.26 billion

(PwC, 2014)3. The market size of academic ebook is likely to reach more than 17

million people. Though promising, the challenges cannot be neglected. Therefore, it is

reasonable for companies to internationalize their business and seek new

opportunities in an emerging market such as China. However, as an emerging market

and the distinct geographic and cultural characteristics, China is a market with totally

different resources, risks, customers, competitors as well as unique institutional

environments. Various factors will incur business model innovation in emerging

markets like China, mainly from the environment and enterprise itself. Shown in

Table 4 and Table 5, the driven factors are disclosed from the case and data.

4.2.1 Environment-driven factors

Emerging market dynamism. In emerging markets, academic ebook is a driving

sector for digital publishing, which is often subject to significant government policies

(Wisenchart, 2014). The market dynamism for E company in China firstly reflects as

regulatory change, including policies and regulations, intellectual property

environment and network access. Chinese central government lists ebook industry as

one of emerging industries, and introduces relevant policies to encourage the

development of domestic ebook industries. According to the 12th five-year plan, the

government of China supports Chinese publishers in their transition to digitalization

and exporting by ensuring funds and implementing projects. However, corresponding

regulations that may isolate foreign companies in Chinese market have also been

enacted: only organizations have publications import licenses that can engage in

importing foreign publications (Regulations on Publication Administration, Article 16,

GAPP, 2011).

                                                                                                               3 Pricewaterhouse Coopers (PwC). 2014. Global entertainment and media outlook 2014-2018: Book publishing.

Secondly, publishing industry is intellectual property (IP) intensive industry, and

copyright is an ever-increasingly complicated form of IP referring to “rights given to

creators for the literary and artistic works”4. However, traditional Chinese culture did

not prepare the way for IP protection (Yang, 2003; Yang & Clarke, 2005). Thirdly, as

a network-based platform, the stability of network determines whether users can

access to the platform. However, China set up the “Great Fire Wall” for Internet

censorship (Hachigian, 2001). As content provider, there is a risk in the network

accessibility for E company. According to some users’ comments (Student 6), the

network access is questionable.

Besides regulatory change, external innovation is another factor of emerging market

dynamism. Disruptive innovations in emerging market could drive firm to change its

business model. Latecomer firms could gain capabilities through learning (Mathews,

1999) and imitation (Wu, et al., 2010). In the case of E company, Chinese players in

ebook industry enjoy lower cost in business model, which leads to their competence

and wins great share in Chinese market.

Cooperation and competition. As in global ebook market, ebook publishers/ebook

originators, intermediaries and end-users are three basic roles in the e-publishing

ecology of China. Though in global market, E company is an intermediary between

publishers and downstream distributors. But in Chinese market, E company is more of

an ebook originator, and agent plays intermediating role.

In 2009, 42 firms have been certificated with publications import and export license

(GAPP, 2009). The regulation implies that ebook agent work as intermediary between

ebook platform and user, which enlarges the distance between EP and end users. To

                                                                                                               4 Source of “copyright” definition: http://www.wipo.org

make it worse, EP’s agent is one of the five biggest agents with customers of different

ebook platform; the service it provided seems non-differentiated.

Other than agents, another important player in Chinese ebook market is national

library service system who directly access to university libraries and university

alliance libraries. In order to push forward the information construction, the national

library service systems for higher education has been established and provides

services for “211 project” universities. However, E company fails to develop any

linkage with national library service systems.

As to competitions, a list of notable ebook platforms that are competing for the same

group of customers in the Chinese market, including EBSCO ebooks collection,

Myilibrary, Ebrary, as well as Chinese ebook platforms such as Chaoxing and Apabi.

However, the specialization in ebook value network is not clear, which leads to a

competitive environment and low margins for market players. Chinese ebook firms

mainly adopt efficiency strategy and try to lower down cost in order to increase value

capture, which leads to a vicious focus on cost instead of content. Moreover, the

leapfrogging development of stakeholders influences E company’s position in value

chain (For example, Agent 1 is an agent and later turns to be an ebook provider),

which means that E company's margin is even thinner than in home market.

Customer behaviour. From the aspects of users, the ebook supply chain consists of

publishers, aggregators or vendors and institutional users. Institutional users, who are

university libraries represented by librarians, play an important role as delivering

ebooks to individual users. In the global ebook market, a significant mind-shift is

taking place in libraries regarding ebook purchasing: a willingness to relax control

and empower the customer, giving the customer more choice and minimizing the time

taken to provide the end product (Sharp & Thompson, 2010). However, the traditional

mindset of librarians is deeply rooted in Chinese culture, which is difficult to transit.

As investing on the acquisition of ebook, they focus on factors such as the budget of

ebook platform, opinions from individual users as well as the content. For individual

users in the Chinese market, academic ebook are not popularized among students; the

recommendations from scholars and ebook content play a significant role in attracting

customers. However, statistics show that only 22% of the university students use

academic ebooks for more than 5 hours per week, others are not frequent ebook users

(ProQuest, 2014)5. They find difficulties in the pricing models, user experience,

accesses, or search process when using an ebook, which also impede firms’ value

delivery and ask for new value proposition.

Regarding to these environment-driven factors, firms need to make strategic response

to release the possible conflicts, and business model innovation is described as a

possible solution for regulatory changes and technological innovation, or a result of

trial-n-error experimentation responding to environmental changes (Amit & Zott,

2001; Teece, 2010; Chesbrough, 2010; McGrath, 2010; Martins, et al., 2015; Ghezzi,

2015).

                                                                                                               5  ProQuest. (2014). Survey: Meeting the Changing Research Needs of Students: an ebook survey on China students.

Table 4. Conflicts with dominant business model: environment-driven factors

Internationalization

conflicts

Driven factors Conflicts with dominant business model

Environment-driven

Emerging market dynamism

- “It is a very risky market, the future also is not so bright...the value distribution of value chain is not clear...” (Publisher 1).

Regulatory Change - Only with a license can individuals or firms import electronic

publications (Xu & Fang, 2008; according to Regulations on Publication Administration and Provisions on the Administration of Publication Market, GAPP, 2011)

- Weak intellectual property environment (Zhao, 2006). - Great Fire Wall. “We cannot even get access to the website of E

company now, or it has already been blocked...” (Student 6) External Innovation - The cost for Chinese ebook platform to build a collection is rather

low, e.g. recycling library books to make ebooks: new ways in value creation.

- Agent turn into competitors: “we have integrated various contents and we are aiming to we are aiming to integrate all ebooks content on our own platform. ” (Agent 1: Their own ebook platform officially launched in Aug 2014, which has integrated advanced features from foreign ebook platforms with a Chinese web interface.)

Cooperation and Competition

Cooperation: - “The presentation modes are just assistant appliances, are carriers of

content, yet the ebook content are the ‘king’.... we provide professional marketing team for publishers free of charge.” (Platform 2)

- “We integrate their contents on our platforms...” (Agent 1) - “The agents in China starts from low point, development and growth

are very slow... ” (Publisher 3) - Prominent national library service systems: CALIS, CADAL, CASHL

(Ministry of Education & Ministry of Finance, 2002). Competition: - “We have our own platforms, which can provide integrated

promotions for upstream publishers and ebook platforms....” (Agent 1)

- “We are agents of different foreign ebook platforms and publishers...” (Agents 2)

- “The industry order was under establishment...” (Platform 2)

Customer behaviour

Willingness - Only 1.0% students are willing to pay for ebooks (Ma, 2011) - “I never paid for academic ebooks...” (Student 2) - “...As we libraries want to build our resources, we do expect that

more ebook platforms could provide mirror websites, thus we can do more than providing access but to keep resources in our server...” (Librarian 3)

Awareness - More than 20% of individual users are still not aware of ebook

platforms (ProQuest, 2014) Purchasing model - “We would not exceed the budget…we prefer subscribe or lending

model, for the reason that downloading charges a lot...” (Librarian 4)

4.2.2 Enterprise-driven factors

External uncertainty generates business model innovation. However, business model

innovation not only results from environmental changes, but can also be proactive

(Martins et al., 2015). In internationalization, firms should take a forward-looking

view for the market environment and be aware of the change. Firms’ cognition for

environment and upcoming challenges will initiate business model innovation (Sosna,

et al., 2010). Proactive business model innovation driven by the firm itself would also

be incurred under the context of internationalization. In turn, the insufficient cognition

on the foreign environment will impede the business model innovation.

Path dependence. Firms tend to make decisions based on established routines,

conduct local exploration and rely on established completed capabilities (Ahuja &

Lampert, 2001; Amburgey & Miner, 1992; Stuart & Podolny, 1996; Tripsas &

Gavetti, 2000). Multinational firms will thus rely on capabilities and innovation

pattern built up in home country (Govindarajan & Ramamurti, 2011). Institutional

factors in home country also influence institutional environment choice, network

embeddedness and adaptation (Laurilla & Ropponen, 2003). In established firms, the

implement of new business model is constrained significantly by its current business

model (Gerasymenko, Clercq & Sapienza, 2014). The case of E company, we also

inspect that E company just implement their established business model in EU market

to Chinese market through an agent. Without any change in their business model, path

dependence deepens the conflicts between its business model and the emerging

environment in China.

Liability of foreignness. Firms setting up operations abroad face certain unavoidable

costs that firms operating in their own home market do not (Hymer, 1976). These

costs of doing business abroad are considered as liabilities of foreignness, which

could arise from a number of sources, coordination, unfamiliarity, lack of information

networks or political influences etc (Zaheer & Mosakowski, 1997). The costs pressure

pushes firms to follow a vicious circle: costs pressure demands lowering costs, while

lowered costs lead to ineffective value proposition which may in turn intensify the

cost pressure. For example, as a new entrant in the Chinese ebooks market, E

company has not set up their sales team for the limits of local staff as well as

minimizing costs. This leads to the fact that E company does not have direct accesses

to their customers and relies on their agent to reach the customers. Thus, it is not

possible to provide institutional and individual users with proper guidance (Ashcroft,

2011). In addition, their insufficient information on marketplace impedes their

nationwide operations in China.

Table 5. Conflicts with dominant business model: enterprise-driven factors

Internationalization

conflicts

Driven factors Conflicts with dominant business model

Enterprise-driven

Path dependence

- Value proposition: • English academic book only. vs. immature bilingual education

linguistic context. • Innovative technologies for academic libraries vs. traditional 3.

Libraries facing paradigm shift. • Seamless integrated service vs. Agent as the intermediary.

- Revenue model: • Stick to pricing models in Eurepean market: credit model. vs. “we

prefer subscribe or lending model, for the reason that downloading charges a lot...” (Librarian 4)

- Market Infrastructure: • Strong relationship in print books in U.K. contexts; mainly

cooperates with U.K. based publishers. - Customer Interfaces:

• Serve for the all subjects, without prominent subject feature. Vs. “...we do need ebooks with clear professional classification. (Librarian 4)”

Liability of foreignness.

- Cost pressure. - Insufficient information from the market and users & No established

partner relationship. • One agent for national business. vs. “we will assign the regional

agents for users to purchase our ebooks…” (Platform 2) • No aware of national library service system. vs. “national library

service system is one of the major sources of purchasing ebooks” (Librarian 1)

It can be concluded that environment and the firm itself drive the conflicts in

internationalization. Environmental-driven factors lead to a different network location

in the new market, insufficient resource acquisition, and low effectiveness of value

proposition. These conflicts together lead to the inefficiency in value creation and

value capture. Enterprise-driven factors lead to the barriers in exploring and

exploiting of information and resources, which increase the total transaction costs in

the new market.

4.3 Business model Innovation

Two kinds of business model innovation may contribute in the solving the problems

in emerging market, that is novalty-centered business model innovation and

efficiency-centered business model innovation (Zott & Amit, 2007). Novelty-

centered business model innovation refer to the exploration, application and

realization of new ways of appropriating value, for example, generating relationship

with new partners or relating to incumbent partners through new transaction

mechanisms. Efficiency-centered business model innovation is to initiate the

effectiveness of business through business model innovation, which aim is to decrease

the transaction cost for firms and other stakeholders.

This paper evaluates the business model of E company based on the two types of

business model innovation, which considered as capable of solving the

internationalization conflicts. One influential ontological framework is four

interlocked elements in business model, which are value proposition, market

infrastructure, customer interface and financial aspects (Osterwalder, 2004; Johnson,

Christensen & Kagermann, 2008). The four components are in accordance with the

value representation of business model, which can reflect on the value proposition,

value network, value creation and value capture of the focal firm (Chesbrough &

Rosenbloom, 2002). This paper uses previous literature on business models to

develop a systematic framework of the busienss model of ebook platform. This paper

evaluates and compares various business model configurations according to the

imperatives in internationalization.

E company’s strengths originate from its mature business model in the European

market. It has profound relationships with publishers, especially British publishers.

Due to the solid background of print books, large titles of quality ebook content are

available timely through EP. Tailored collections can be established according to

various needs. Advanced technologies and systems have been developed with the aim

of providing professional services to users and protecting copyrights for upstream

publishers.

Comparing E company’s business model in UK and in China (Table 6), it can be

found that the two business models are almost the same with slightly difference,

which are the only changes in business model that suppose to relief the pressure from

Chinese ebook market. However, their response to environment and the lack on

cognition achieve no positive effect on business model innovation. The

ineffectiveness of business model makes it difficult to deliver their value proposition

to customers for they are insufficient on resources, such as channels and customer

relationships, and in turn leads to increasing transaction costs.

Table 6. Business model in home market and in China

Business Model Internationalization Value proposition Customer interfaces

Market infrastructure Financial aspects

Home Market

- Academic online ebook and e- textbooks

- 24/7 access - Collection

package - Intellectual

property protection

- Quick service from EP

Target: - University

library and individual users

Channel & customer relationship: - Based on print

book channels - Through

institutional users

Key partners: - U.K. based

publishers - JISC and

universities Key resources: - Print book

strengths - Local warehouse Key activities: - Print books and

self-ready books - Ebooks portal

and platform

- Tailored and flexible pricing models

Chinese market (Emerging market)

- English academic online ebooks

- 24/7 access - Collection

package - Intellectual

property protection

- Service from Agent *

Target: - University

library and individual users

Channel & customer relationship: - Through Chinese

agent*

Key partners: - U.K. based

publishers - Agents * Key resources: - Agents’ channels

& customers Key activities: - Ebooks

platforms and ebook platforms on agents’ portal

Cost Model: - Increasing

costs * Revenue Model: - Tailored and

flexible pricing models (high price for Chinese users according to exchange rate) *

‘*’ represents different items.

Comparing E company’s business model with its relatively successful competitors, it

can be found that two types of business model innovation could contribute in

releasing the barriers in emerging market. In the case of Myilibrary, who have been

subscribed by more than 36 universities in Chinese market (Ministry of education,

2013), it is clear that Myilibrary finds new partners in Chinese market, various

partners like regional agents and national service systems provide a broader customer

interface and initiate Myilibrary to acquire necessary resources in Chinese market.

The business model innovation of Myilibrary can be explained as novelty-centered as

it locates Myilibrary at a new position in the value network. Another case is ebrary.

Ebrary implements its business across Chinese market through its domestic channels

of parent company, ProQuest, which is an early entrant in Chinese market with

relatively mature distribution channels and abundant relationship resources in Chinese

market, thus the costs in exploring new resources could be decreased. Ebrary make an

emphasis on its e-resources of arts and social science, trying to differentiate from

other comprehensive ebook platfroms. What’s more, it delivers training service to

librarians together with ProQuest in order to provide additional value other than

competitors. At the same time, the costs are low as it can be delivered following

ProQuest’s steps. The new utilization of old resources is a reflection of novelty-based

business model innovation, and the lowered costs reflect its efficiency-based business

model innovation.

Table 7. Business model innovation in Chinese academic ebook market

Business Model: Major features in Chinese market Company Name Value proposition Customer interface

Market infrastructure Financial aspects

Myilibrary

- Academic online ebook and e- textbooks

- 24/7 access - Comprehensive

collection and package

- IPP - Quick service

Target: - University

library, individual users

- National institutes1

Channel & customer relationship: - National library

service system1 - Regional agents

Key partners: - Regional agents - CALIS1 - Chinese ebook

company: Chaoxing1

Key resources: - Local platform

access1 - Broader

customer base Key activities: - Ebooks portal

and platform

- Tailored and flexible pricing models

Ebrary

- Academic online ebook and e- textbooks

- 24/7 access - Featured

collection package - IPP - Quick service and

training service

Target: - Libraries and

individual users - Universities with

advantage disciplines 1

Channel & customer relationship: - Regional agents - Locked-in

customers from ProQuest 2

- National library service system1

Key partners: - Regional Agents - CALIS1 Key resources: - Complementary

for ProQuest 2 - Brand impact 2 Key activities: - Ebook platforms - Training service1

- Tailored and flexible pricing models

1 Novelty-centered BMI; 2 Efficiency-centered BMI.

4.4 Findings

Through in-depth case study, this paper reveals the impact of internationalization on

business model innovation. Firstly, firms’ foreign expansion to a new market may

conflicts with firms’ dominant business model logic; the conflicts are driven by both

environment and enterprise factors. Though the current business model for E

company is proved successful in European market, E company failed to achieve the

same success in Chinese market. The environment-driven factors are emerging market

dynamisms, cooperation and competitions and the customer behaviour. The

enterprise-driven factors are firms’ cognition to the environment and whether can they

make proactive business model change. The enterprise-driven factors reflect as firm’s

path dependence and liability of foreignness in the new market.

Secondly, the conflicts make the dominant business model difficult to sustain for

resources are scarce and costs are heavy. The driven factors give rise to the

difficulties for E company to acquire the resources to create value, at the same time

trigger higher transaction costs that hinder value capture.

Thirdly, novelty-centered and efficiency-centered business model innovation becomes

imperatives to release conflicts and facilitate firms’ survival in the new market. Two

types of business model innovation could help reshape the value proposition, value

network and value appropriation of the firm and thus facilitate value creation and

value capture in the new market.

The failure case of E company is greatly influenced by these driven factors, a redesign

of business model is in need to continue and survive in Chinese market. Possible

business model innovation is on three dimensions, value proposition, value network

and value appropriation.

The value propositions are defined as early as in the home market. There is no

differentiation in their value propositions between home market and Chinese market,

and the ebook content has no distinct features. While academic ebooks is not for

public reading, even in universities, it would be costly to provide undifferentiated

ebook content to comprehensive universities. E company should figure out the

unserved niche market where it could compete with other competitors.

And the highly involvement of agent in business model makes the integrations with

customer interfaces and market infrastructure becomes even difficult. The business

model analysis reflects that E company has put itself in a dilemma in the value

network: they need agents to provide complementary resources, such as channels and

customer relationships, to achieve value creation; they also need to isolate the agent

from the value capture, for agents makes the value capture less profitable. Difficulties

demand for an extension or a revision on its current value network. E company should

figure out the right partner in Chinese market who can provide as much

complementary resources as possible.

As to the value appropriation, E company should establish isolating mechanisms to

prevent knowledge leakage to players on the value chain. A possible way is to grasp

crucial strategic segment with high additional value in their own hand, such as the

service to customers.

5. Conclusions

According to the analysis, it can be found that the failure of E company in Chinese

market comes from the conflicts between its dominant business models with emerging

market environment. We can conclude that when a firm internationalize its business

into foreign markets, the dominant business model may not be effective as in home

country. The constraints are the conflicts between dominant business model design

with the new market, which come from two aspects: environmental-driven factors and

enterprise-driven factors.

These conflicts impede firms’ resource exploration and exploitation in the new market,

give rise to increasing transaction costs in searching information and customers, as

well as locate firms at a position with thinner margin. Business model innovation is

possible solution to release these conflicts, for the reason that: business model

innovation can be explained as a kind of strategic response to environmental-driven

factors; enterprise-driven factors refer to business model innovation as proactive

facilitation to internationalization. Therefore, internationalization could be the

antecedent of business model innovation, for it triggers business model innovation

otherwise, the firm may fall or unsustainable in the new market. It is important to

innovate in areas where competition does not act, by developing new competencies,

alliances etc (Amit & Zott, 2010) . Thus, when internationalizing into foreign market,

firms could reestablish its business model by create, extend or revise its linkages with

old or new stakeholders (Cavalcante, Kesting & Ulhoi, 2011). In turn, business model

innovation facilitates internationalization by releasing the conflicts in the process. In

conclusion, internationalization is not only the consequence of business model

innovation but also the antecedents of business model innovation.

This research implies further directions of business model research. From this case,

we can infer that internationalization is the antecedent and consequence of business

model innovation, thus the coevolution between internationalization and business

model innovation is worth to look into from a historical view. Another direction is to

investigate the influence of strategic alliance on business model innovation. Firms are

never isolated in the market. Questions such as how can a business model create value

based on the complementary assets provided by alliances, how can it isolate alliance

in value capture, how to achieve value creation and value capture through business

model innovation remain to be explained.

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