852 
PERSPECTIVES ON
 BUSIN
ESS M
ODEL EXPERIM
EN
TATION
 IN
 IN
TERN
ATION
ALIZIN
G 
 
HIGH-TECH COM
PAN
IES
Tom
m
i Rissanen
PERSPECTIVES ON BUSINESS MODEL 
EXPERIMENTATION IN INTERNATIONALIZING 
HIGH-TECH COMPANIES
Tommi Rissanen
ACTA UNIVERSITATIS LAPPEENRANTAENSIS 852
Tommi Rissanen
PERSPECTIVES ON BUSINESS MODEL 
EXPERIMENTATION IN INTERNATIONALIZING 
HIGH-TECH COMPANIES
Acta Universitatis 
Lappeenrantaensis 852
Dissertation for the degree of Doctor of Science (Economics and Business
Administration) to be presented with due permission for public examination 
and criticism in Hall 1318 at Lappeenranta-Lahti University of Technology 
LUT, Lappeenranta, Finland on the 10th of May, 2019, at noon.
Supervisors Professor Sami Saarenketo 
LUT School of Business and Management 
Lappeenranta-Lahti University of Technology LUT 
Finland 
Professor Liisa-Maija Sainio 
LUT School of Business and Management 
Lappeenranta-Lahti University of Technology LUT 
Finland 
Reviewers Professor Christian Nielsen 
Department of Business and Management 
University of Aalborg 
Denmark 
PhD Arto Ojala 
Faculty of Information Systems Science 
University of Jyväskylä 
Finland 
Opponent Professor Christian Nielsen 
Department of Business and Management 
University of Aalborg 
Denmark 
ISBN 978-952-335-368-8 
ISBN 978-952-335-369-5 (PDF) 
ISSN-L 1456-4491 
ISSN 1456-4491 
Lappeenranta-Lahti University of Technology LUT 
LUT University Press 2019 
Abstract 
Tommi Rissanen 
Perspectives on business model experimentation in internationalizing high-tech 
companies 
Lappeenranta 2019 
73 pages 
Acta Universitatis Lappeenrantaensis 852 
Diss. Lappeenranta-Lahti University of Technology LUT 
ISBN 978-952-335-368-8, ISBN 978-952-335-369-5 (PDF), ISSN-L 1456-4491, ISSN 
1456-4491 
 
The main research question addressed in this doctoral dissertation is “How do high-tech 
companies employ business model experimentation in their internationalization 
processes?” As the business model concept is itself complex and diverse, this issue is 
approached from five distinct perspectives, yielding differing interpretations of business 
model experimentation. For present purposes, the five chosen perspectives are (1) 
company development stage; (2) application of business model ambidexterity; (3) effects 
of home market context; (4) approach to internationalization; and (5) relation to technical 
debt as an outcome of business model experimentation in high-tech companies. 
Digitalization and the Internet has made most industries more prone to change and 
disruption. As high-tech companies are especially vulnerable to disruptive forces, they 
must find new ways of staying competitive in a changing business environment. Among 
these companies, internationalization is now commonplace and further increases the 
uncertainties they face, requiring them to find ways of rapidly changing their business 
model. As a process of trying out new methods to find the best solution, experimentation 
is a useful way of identifying a new business model through an iterative cycle of 
exploration and exploitation. 
Using qualitative methods, the purpose of the present research was to provide new 
insights into this process of experimentation for both practitioners and academics. The 
data were collected through interviews with relevant actors from internationalizing 
companies in high-tech industries. The main findings indicate that the contextual factors 
of company development stage and home market maturity strongly affect how these firms 
approach business model experimentation. In addition, it emerged that companies may 
follow different routes by experimenting with multiple business models at the same time 
when entering international markets. It became clear that business model experimentation 
could not be done in isolation, as it affects and is in turn affected by product innovation. 
Keywords: business model, business model experimentation, internationalization, high-
tech 

Acknowledgements 
The idea of PhD studies first came to me in 2003. I was working in a University project 
organization in Tampere and many of my colleagues began their PhD studies. I was also 
encouraged to begin my own journey, but the time was not right for me. I thought that I 
would not have the persistence to study any one topic deeply enough. The idea stayed, 
however, and in 2013 I had several discussions with Professor Liisa-Maija Sainio that led 
into finding project funding for my work and her becoming my first supervisor. After 5,5 
years I am finally writing these final words to finish my thesis. 
I would like to thank my supervisors Professor Sainio and Professor Sami Saarenketo. 
Professor Sainio guided me for the first two years and Professor Saarenketo the latter part 
of my dissertation journey. I was quite lost in the academic world in the beginning and 
needed a lot of help in finding my way. Both of my brilliant supervisors learned quickly 
how to make progress with me: clear deadlines and regular meetings. I sincerely thank 
you both for your patience and for your valuable guidance throughout the process.  
I warmly thank the pre-examiners of my dissertation, Professor Christian Nielsen and Dr. 
Arto Ojala, for your valuable feedback. It is a great honor to have Professor Nielsen as 
my opponent. 
I have had a pleasure to work with great fellow researchers in writing the articles for my 
dissertation. I would like to thank Sami, Lissu, Kari, Ali, Lyuba, Päivi, Lasse, Andrey, 
Jesse and Agnes for your valuable collaboration. 
I have greatly enjoyed my time at LUT and especially at LBM. Fervent discussions at 
Mediatori and always forward-looking mentality has brought me great joy for working in 
this community. I have had the pleasure of having superb roommates for the whole of my 
junior researcher career. Our diamond mine with Päivi and Jenni was indestructible even 
if one of spent a bit longer in creating the final jewel. With Satu and Argyro I had shorter 
but equally joyful period together. All other colleagues made my days bright during the 
long winter days in Lappeenranta; Maaren, Lasse, Anssi, Sanna-Katriina, Joona, and 
many others. Ari was playing the tough cop and Juha the nice one and both supported me 
with my final push. Eva has been always helping to get everything done and solving all 
problems with a smile in her face. 
I also want to thank my family. It has been a rocky road with always too much work to 
do. Thank you, Paula, for your support, and showing me what true grit is. With you, 
nothing is impossible and I can reach my potential. Thank you for believing in me even 
when I did not believe myself. I am also in debt to my dear children; Ronja, Iris, Ria and 
Urho, who came to spar with me for the final two years. I am proud of you all and want 
to make you proud of me. I have also had great support from my mother Maija, who has 
always been there. Thank you also Jukka, my father, Eeva-mummo, Taina, Tupu, Anne 
and Hele and my great extended family. 
Finally, I have to thank myself. I had so many doubts of myself and many times I felt that 
I am not up to this task. But I did it – and for me it means I can do anything! 
 
 
Tommi Rissanen 
May 2019 
Lappeenranta, Finland 
 
 
 
 
 
 
 
 
 
 
 
 
To Paula. 
 
 
 
 

Contents 
Abstract 
Acknowledgements 
Contents 
List of publications 11 
1 Introduction 13 
1.1 Research background ........................................................................... 14 
1.2 Research objectives and questions ........................................................ 15 
1.3 Research gap ........................................................................................ 17 
1.4 Definitions and key concepts ............................................................... 18 
1.4.1 Business model ........................................................................ 18 
1.4.2 Business model innovation ....................................................... 22 
1.4.3 Business model experimentation .............................................. 22 
1.4.4 Internationalization .................................................................. 23 
1.5 Outline of the study .............................................................................. 24 
2 Theoretical points of departure 27 
2.1 Business models .................................................................................. 28 
2.2 Business model innovation................................................................... 31 
2.3 Business model experimentation .......................................................... 33 
2.4 Perspectives on business model experimentation .................................. 34 
2.4.1 Effects of industry context ....................................................... 35 
2.4.2 Company development stage .................................................... 35 
2.4.3 Business model ambidexterity .................................................. 36 
2.4.4 Effects of home market context ................................................ 37 
2.4.5 Approach to internationalization .............................................. 37 
2.4.6 Technical debt and outcomes of business model 
experimentation ....................................................................... 37 
3 Research methodology 39 
3.1 Research approach and design.............................................................. 39 
3.2 Research methods ................................................................................ 39 
3.2.1 Qualitative research methods.................................................... 40 
3.2.2 Case study approach................................................................. 42 
3.3 Data collection ..................................................................................... 43 
3.3.1 Sampling .................................................................................. 43 
3.3.2 Qualitative data collection ........................................................ 44 
3.4 Data analysis ........................................................................................ 45 
3.5 Reliability and validity ......................................................................... 46 
4 Summary of publications and review of results 49 
4.1 Publication 1: “Business model experimentation in incumbent and 
startup companies” ............................................................................... 49 
4.2 Publication 2: “The role of home market context in business model 
change in internationalizing SMEs” ..................................................... 50 
4.3 Publication 3: “New organizational forms of innovation: What is 
business model ambidexterity?” ........................................................... 51 
4.4 Publication 4: “Business model experimentation in internationalizing 
SMEs: Evidence from Finland” ............................................................ 53 
4.5 Publication 5: “The relationship between business model 
experimentation and technical debt” ..................................................... 54 
5 Discussion and conclusions 57 
5.1 Theoretical contributions ..................................................................... 60 
5.2 Practical and managerial implications .................................................. 61 
5.3 Limitations of the research ................................................................... 62 
5.4 Avenues for further research ................................................................ 63 
References 65 
Publications  
11 
List of publications 
This dissertation is based on the following papers. The rights have been granted by 
publishers to include the papers in the dissertation. 
I. Rissanen, T., & Sainio, L. M. (2016). Business model experimentation in 
incumbent and startup companies. Proceedings of XXVII ISPIM Innovation 
Conference (Porto).   
II. Rissanen, T., Ermolaeva, L., Torkkeli, L., Ahi, A., & Saarenketo, S. (2019). The 
role of home market context in business model change in internationalizing SMEs. 
European Business Review (tbc: accepted for publication). 
III. Rissanen, T., & Karhu, P. (2017). New organizational forms of innovation: What 
is business model ambidexterity? Proceedings of ISPIM Innovation Symposium 
(Melbourne). 
IV. Rissanen, T., Asemokha, A., Torkkeli, L., & Saarenketo, S. (2018). Business 
model experimentation in internationalizing SMEs: Evidence from Finland. 
Proceedings of 22nd McGill International Entrepreneurship Conference 
(Halmstad).  
V. Yli-Huumo, J., Rissanen T., Maglyas, A., Smolander, K., & Sainio, L. M. (2015). 
The relationship between business model experimentation and technical debt. In: 
Fernandes, J. M., Machado, R. J., and Wnuk, K. (Eds.), Proceedings of 
International Conference of Software Business, pp. 17–29. Cham: Springer. 
Author's contribution 
Tommi Rissanen is the principal author and investigator in papers I-IV. In paper V, Dr. 
Yli-Huumo was the corresponding author, and Rissanen conducted the interviews, 
analyzed the data, and assembled the literature review with Dr. Yli-Huumo. 

13 
1 Introduction 
Since the wider adoption of the Internet, all industries have gradually entered a state of 
continuous change. The Internet made new business models possible and, along with 
digitalization, has affected businesses since the beginning of this century to much the 
same extent as industrialization (McGrath, 2010). In most industries, these changes have 
not been fast, but on a global scale, the cumulative effects of digitalization have been 
unprecedented.  
Two streams in the strategy literature focus on the issue of competitive advantage. 
According to the industry positioning view, competitive advantage depends on a 
company’s ability to find and defend a unique market position among the competitive 
forces of customers, suppliers, substitute products, new entrants, and competitors (Porter, 
1979). On the other hand, the resource-based and dynamic capability views explain 
competitive advantage in terms of a company’s unique resources and capabilities relative 
to their competitors (Barney, 1991; Teece, Pisano, & Shuen, 1997; Eisenhardt & Martin, 
2000). The problem with both of these views is that neither provides an adequate account 
of dynamic factors or tools for rapid change in a turbulent business environment where 
the ability to adapt is of increasing importance (McGrath, 2010). 
Innovation can transform the structure of company value creation process or create new 
product offerings for a company (McMullen & Dimov, 2013). Until recently, innovation 
has been understood as the process of developing new and more effective products, 
services, and technologies. However, since the Internet opened up, new possibilities for 
business model innovation have also entered this realm (Schneider & Spieth, 2013). Three 
decades on, business models have become the primary focus of innovation, and the 
world’s largest companies, such as Google, Facebook, Alibaba, Amazon, and Apple, all 
rely as much on business model innovation as on technological breakthroughs.  
While business models are recognized as an important source of innovation, the dynamic 
process of actually developing and improving business models has received less attention. 
For a long time, academia has concentrated on defining business models and the elements 
of business model innovation. However, companies have shown less interest in the 
process of business modelling, as they have been busy keeping up with the competition. 
They are very interested in new business models, however. While academia has 
contributed to systematic development in this area, the issue is so wide-ranging and 
industries are so different that it has been impossible to find a solution that meets 
everyone’s needs. 
Experimentation is the key to creating new knowledge (Hayashi, 2009). The 
experimentation-based approach to product development was popularized by Steve 
Blank’s (2005) customer development concept and by Eric Ries’ (2011) lean startup 
process. Business model experimentation means applying this process to change existing 
business models or to develop new ones. However, academic research on business model 
experimentation suffers from the same difficulties as business model and business model 
1 Introduction 14 
innovation research; companies, industries, and the competitive landscape are so varied 
and so volatile that it is almost impossible to develop a universal definition of business 
model experimentation. In addressing that problem, this dissertation examines five 
distinct perspectives in an attempt to increase understanding and to provide for the 
development of practical tools for in-company business model experimentation. 
1.1 Research background 
Alongside more traditional planning-driven methods, experimentation-driven innovation 
has become increasingly popular over the past decade (Hassi & Tuulenmäki, 2012). 
Experimentation is a form of problem solving that builds on a best guess and looks to 
learn from the results of the experiment (Thomke, 1998). This is something we all do as 
toddlers, wondering about our surroundings and learning through a process of trial and 
error. Well-planned and properly executed experiments are also essential to the scientific 
process of creating new knowledge (Hayashi, 2009). Experimentation is an iterative 
process involving a number of interrelated stages. Thomke (1998) divides the process of 
experimentation into four stages; (1) design; (2) build; (3) run; and (4) analyze. He also 
suggests that it is sometimes more beneficial to first identify “wrong” ways of doing 
things rather than getting it “right” at the first attempt. In other words, learning is essential 
to experimentation, and experimentation-based innovation is most appropriate where the 
process and the outcome are uncertain (Tuulenmäki & Välikangas, 2011). 
Business models have been studied intensively since 1990’s, when the number of articles 
in both academic and non-academic business and management journals began to rise 
steeply (Zott et al., 2011). However, this body of research is very diverse, and the concept 
of the business model still suffers from a lack of theoretical grounding in the business and 
economics literature (Teece, 2010). Given the lack of scholarly consensus, interpretations 
of the business model are wide-ranging; in one review, Onetti et al. (2012) identified 70 
different definitions published between 1996 and 2009. That said, it seems clear that the 
business model concept has attracted significant academic interest, and has been applied 
in different ways in business model research as the basis for enterprise classification, 
enterprise performance, and innovation (Lambert & Davidson, 2013). 
Research streams in the business model literature can be variously categorized. For 
example, Zott et al. (2011) distinguished between (1) e-commerce; (2) strategy; and (3) 
technology and innovation management. Wirtz et al. (2016) also identified three 
perspectives to business model literature: (1) technology-oriented; (2) organization 
theory-oriented; and (3) strategy-oriented.  
The difference between the concepts of business model and strategy is not entirely clear, 
but McGrath (2010) notes four ways in which the business model differs from the more 
traditional concept of strategy. (1) The business model looks at the company from the 
outside in rather than from the inside out. (2) While the business model cannot be fully 
anticipated in advance, strategy is always explicitly stated. (3) While business models 
embrace dynamism, strategy pursues sustainable competitive advantage. (4) The business 
 15 
model determines the extent to which strategy is discovery-driven or planning-oriented. 
Teece (2010) views the business model concept as more generic than business strategy, 
claiming that the business model is not in itself sufficient to deliver competitive 
advantage, as it is often easily imitated. Casadesus-Masanell and Ricart (2010) see the 
business model as a reflection of a company’s realized strategy, and they define strategy 
as a plan for reconfiguring the business model in the event of unexpected changes. 
In this dissertation, the business model is seen as a dynamic concept following McGrath’s 
(2010) approach. The business model research streams are defined as entrepreneurship, 
strategy and innovation and they will be described in more detail in Chapter 1.4.1. 
1.2 Research objectives and questions 
The business model has received a lot of research attention, but that research is very 
diverse. This has impacted on business model innovation research and on business model 
experimentation as part of the same stream. The main objective of the present research 
was to explore different perspectives on business model experimentation in order to make 
better sense of the process and to provide new insights for both practitioners and 
academics. 
Table 1.1 sets out the dissertation’s main research question, along with three sub-
objectives and three sub-questions, and links the publications associated with this thesis 
to the research sub-questions, which together address the main question. 
 
Table 1.1: Main research question and sub-questions 
Main research question:  
How do high-tech companies employ business model experimentation in their internationalization processes? 
Publications Research sub-objective Sub-question 
1, 2 To understand the different ways in which 
companies can experiment with multiple 
business models and how company 
background affects that process 
RQ 1: How does company development stage and 
home market context affect the business model 
experimentation process? 
3,4 To construct typologies of the ways in 
which companies build and experiment 
with multiple business models during 
internationalization 
RQ 2: How can companies experiment with multiple 
business models when internationalizing?   
1 Introduction 16 
5 To examine the connection between 
business model experimentation and lean 
startup product development in high-tech 
companies 
RQ 3: What are the effects of business model 
experimentation on product development in high-tech 
companies? 
 
This dissertation explores business model experimentation from five distinct 
perspectives, following Courtney’s (2001) decision-making paradigm as shown in Figure 
1.1. Business model experimentation is a cyclical process (Thomke, 1998; Ries, 2011) 
that begins with problem recognition, followed by perspective development. In 
Courtney’s model, those perspectives include (1) technical; (2) organizational and social; 
(3) personal and individual); (4) ethical; and (5) aesthetic. Perspective development is 
followed by perspective analysis, actions, and results, after which the cycle starts again. 
 
 
Figure 1.1: Decision making paradigm for decision support systems (adapted from 
Courtney, 2001). 
 
Courtney’s (2001) paradigm is based on Singerian philosophy and is well suited to 
solving “wicked” or complex problems that are affected by multiple conflicting forces. 
For present purposes, five selected perspectives are examined to explain business model 
experimentation in an internationalizing company. 
 17 
 
Figure 1.2: Business model experimentation in internationalizing high-tech companies. 
 
Business model experimentation in an internationalizing high-tech company can be 
analyzed in terms of the layered framework in Figure 1.2. The layers are independent of 
each other meaning that an incumbent company can come from immature home market 
and so forth. The first layer is the company’s state of development. There are other 
company development stages, but for the purposes of this thesis, the division between 
startup and incumbent companies is adequate. While incumbents are established SMEs 
or large companies, startups have yet to build a sustainable business. Home market 
context is the second layer of analysis in understanding the business model 
experimentation process of an internationalizing company. While a mature home market 
provides a better platform for gradually moving the business toward internationalization, 
an immature home market can force companies to internationalize early. The mode of 
ambidexterity layer reveals how companies can run different business models 
simultaneously as a necessary element of business model experimentation. The next layer 
examines different approaches to internationalization companies can have depending on 
the way they conduct business model experiments, what is their international business 
model and what kind of internationalization strategy they adopt. Finally, business model 
experimentation will incur intentional or unintentional technical debt to high-tech 
companies that must be assessed and dealt with. This layered framework provides an 
overview of the different perspectives on business model experimentation discussed in 
greater detail throughout this dissertation. 
1.3 Research gap 
Business model experimentation has been studied in various contexts that include 
designing new products (Thomke, 1998); development of new offerings (Hassi & 
Tuulenmäki, 2012); building products with lean startup methods (Ries, 2011); attempts 
to apply successful product experimentation to business model experimentation (Hayashi, 
1 Introduction 18 
2009); trial and error in developing new business models (Teece, 2010; Sosna et al., 
2010); the relationship between business model experimentation and effectuation 
(Chesbrough, 2010); and the discovery-driven approach to business models and 
experimentation (McGrath, 2010).  
However, as there is still no holistic view of business model experimentation that 
encompasses the different research streams, this dissertation attempts to bridge that gap 
by examining five perspectives on business model experimentation. The layered 
framework outlined above conceives of business model experimentation in an 
internationalizing company as an ongoing process, involving different stages that 
interlock and affect each other.  
While this framework illuminates business model experimentation in internationalizing 
high-tech companies, the process of business model experimentation is context-specific 
and cannot be universally generalized. Because it is unique to each case, the dynamic and 
cyclical nature of business model experimentation and innovation may not be easy to 
replicate. Courtney’s (2001) multiple perspectives approach has been adapted to 
overcome these challenges. 
1.4 Definitions and key concepts 
To understand the concept of business model experimentation, it is first necessary to 
define for present purposes the concepts of business model, business model innovation, 
and internationalization.  
1.4.1 Business model 
The concept of business model has been widely researched, and definitions differ slightly 
across literature streams and even within the same research field. Tables 1.2 - 1.4 
summarize business model definitions used in key studies from the streams of 
entrepreneurship, strategy, and innovation. The choice of research streams is based on 
Zott, Amit, and Massa’s (2011) classification of the business model literature into e-
business, strategy, and innovation. Here, the e-business stream has been replaced by 
entrepreneurship because e-business has become “business as usual” while 
entrepreneurship has emerged as an important and interesting research area in the 
business model literature (Demil, Lecocq, Ricart, & Zott, 2015). The choice of studies in 
the tables is based on clear definition of the concept in published research papers The 
entrepreneurship literature is presented first in Table 1.2, followed by the strategy stream 
in 1.3, and finally, innovation in Table 1.4. The order of presentation within streams is 
based on year of publication. The theoretical background is included to provide deeper 
understanding to the definitions. 
 
  
 19 
Table 1.2: Business model definitions in entrepreneurship literature  
Author(s) Theoretical background 
Literature 
domain Business model definition 
Bock & 
George 
(2011) Organization theory 
Entrepre- 
neurship 
The business model is the design of three 
organizational structures to enact a commercial 
opportunity: resource structure, transactive 
structure, and value structure. Resource structure 
refers to the static architecture of the firm’s 
organization, production technology, and core 
resources leveraged to serve customers. 
Transactive structure is the organizational 
configuration that determines key transactions 
with partners and stakeholders. Finally, value 
structure is the system of rules, expectations, and 
mechanisms that determine the firm’s value 
creation and capture activities.  
Trimi & 
Berbegal- 
Mirabent 
(2012) 
Entrepreneurship and 
new venture creation 
Entrepre- 
neurship 
(1) How things have to be done to (2) deliver 
value to customers, (3) invest money for firm 
sustainability, and (4) manage the organization. 
 
In relation to business models, the entrepreneurship literature emphasizes the 
importance of opportunity and structures for creating value, capturing part of that value 
for the company, and managing and organizing the operation.  
 
Table 1.3: Business model definitions in strategy literature  
Author(s) Theoretical background 
Literature 
domain Business model definition 
Magretta 
(2002) Drucker Strategy 
Business models are stories that explain how 
enterprises work by answering the following 
questions. 1) Who is the customer? 2) What does 
the customer value? 3) How do we make money 
in this business? 4) What is the underlying 
economic logic that explains how we can deliver 
value to customers at an appropriate cost? 
Voelpel, 
Leibold, & 
Tekie (2004) 
Competitive advantage, 
change management Strategy 
Core value proposition for customers, a 
configurated value network, and leadership 
capabilities that ensure the satisfaction of relevant 
stakeholders. 
Zott & Amit 
(2008) 
Contingency theory, 
Porter’s product market 
positioning Strategy 
Structure, content, and governance of transactions 
between the focal firm and its exchange partners 
1 Introduction 20 
Chesbrough 
(2010) 
Dominant logic, open 
innovation 
Strategy/ 
Innovation 
The business model 1) articulates the value 
proposition; 2) identifies the market segment and 
specifies the value generation mechanism; 3) 
defines the structure of the value chain required to 
create and distribute the offering and complemen-
tary assets needed to support position in the 
chain; 4) details the revenue mechanisms by 
which the firm will be paid for the offering; 5) 
estimates the cost structure and profit potential; 6) 
describes the position of the firm within the value 
network linking suppliers and customers; and 7) 
formulates the competitive strategy by which the 
innovating firm will gain and hold advantage over 
rivals. 
McGrath 
(2010) 
Arguments against the 
industrial positioning and 
RBV or dynamic 
capability views 
Discovery-driven 
planning Strategy 
BM comprises two components: 1) the basic “unit 
of business” that customers pay for and 2) the 
process or operational advantages yielding 
performance benefits. 
Moigneon & 
Lehmann-
Ortega 
(2010) 
Integrating Porter's 
competitive advantage 
(Porter 1985), resource-
based view (RBV), 
theory of transaction 
costs, and 
entrepreneurship Strategy 
A firm's business model is a description of the 
mechanisms that enable it to create value through 
a) the value proposition to clients; b) the value 
architecture and harnessing of this value to 
transform it into profits; and (c) the profit 
equation. 
Sosna, 
Trevinyo-
Rodriguez, & 
Velamuri 
(2010) 
Behavioral theory, 
organization theory Strategy 
“The design of transaction content, structure and 
government so as to create value through the 
exploitation of business opportunities” (Amit & 
Zott) 
Teece (2010) Dynamic capabilities Strategy 
Business models reflect management’s 
hypotheses about what customers want, how they 
want it, and how the enterprise can organize to 
best meet those needs, get paid for doing so, and 
make a profit. 
Casadesus-
Masanell & 
Ricart (2011) Drucker Strategy 
A business model comprises four elements: a 
customer value proposition, a profit formula, key 
resources, and key processes. 
Khanagha, 
Volberda, & 
Oshri (2014) 
Change theory  
(Pettigrew, 1990) Strategy 
A business model consists of a customer value 
proposition, key resources and processes, and a 
profit formula. 
 
The strategy literature offers the widest range of interpretations and definitions, from 
business models as stories of how companies work to different configurations of value 
proposition, value creation, and revenue model.  
 21 
Table 1.4: Business model definitions in innovation literature  
Author(s) Theoretical background 
Literature 
domain Business model definition 
Demil & 
Lecocq 
(2010) 
Own RCOV framework 
based on the Penrosian 
view of the firm Innovation 
Elaborating the Penrosian firm view, a business 
model is described as having three core 
components: 1) resources and components, 2) 
organizational structure, and 3) propositions for 
value delivery. 
Cavalcante, 
Kesting, & 
Ulhoi (2011) 
Organizational change, 
dynamic capabilities Innovation 
An abstraction of the principles supporting core 
repeated standard processes necessary for a 
company to perform its business. 
Dmitriev 
Simmons, 
Truong, 
Palmer, & 
Schnecken-
berg (2014) 
Innovation literature, 
Schumpeter's technology 
push vs. market pull Innovation 
Business model development includes the 
following elements: customer value proposition; 
target market segment; revenue model; partners’ 
network; key resources; key assets; cost structure; 
and estimation of profit potential. 
Clauss (2017) Multidisciplinary Innovation 
The three main dimensions of a business model 
are (1) value creation; (2) value proposition; and 
(3) value capture. Value creation consists of four 
sub-constructs (new capabilities, new 
technologies, new processes and new 
partnerships); value proposition consists of four 
sub-constructs (new offerings, new customer 
segments, new channels and new customer 
relationships); and value capture consists of two 
sub-constructs (new revenue models, new 
price/cost structures). 
 
The innovation literature also defines the business model mainly as the sum of different 
components.  Business model definitions are more recent in innovation literature than in 
the other two literature streams. 
There are slight variations in the language used in different studies of business models. 
The most comprehensive recent analysis of the concept was Clauss’s development of a 
business model innovation scale (2017). On this interpretation, the business model entails 
three main dimensions, each with a number of sub-constructs. The present study adopts 
Clauss’s approach as the most comprehensive study to date. For present purposes, the 
business model is defined as the structural template on which companies build and 
develop their business, comprising value creation, value proposition, and value capture 
elements (Zott et al., 2011; Spieth et al., 2014; Zott & Amit, 2013; Clauss, 2017). 
1 Introduction 22 
1.4.2 Business model innovation 
Like the concept of business model, the term business model innovation is variously used 
in different studies. Spieth et al. (2014) divide perspectives on business model innovation 
into three categories: (1) explaining the business; (2) running the business; and (3) 
developing the business. According to Trimi and Berbegal-Mirabent (2012), (1) business 
models may themselves entail a form of innovation without altering the essence of the 
product or service; (2) technology-push innovation involves small changes in the business 
model and product renewal; and (3) demand-pull innovation involves reformulation of 
the business model to address changes in customer needs and the business environment.  
Business model innovation activities can be characterized as incremental changes in some 
business model dimensions; extension of the current business model; creation of a parallel 
business model, or replacement of the existing business model by a disruptive new model 
(Khanaga et al., 2014). The present dissertation focuses on understanding how companies 
actively change their business model through experimentation. In this context, business 
model innovation is interpreted as developing the business (Spieth et al., 2014) using the 
demand-pull approach (Trimi & Berbegal-Mirabent, 2012; Teece, 2010), and again 
follows Clauss’s (2017) approach in defining business model innovation as changes in 
the three dimensions of the business model to meet market demands. 
1.4.3 Business model experimentation 
Experimentation is fundamental to innovation (Thomke, 1998). While economic activity 
in general always aims at making the right decisions, experimentation processes 
acknowledge the value of making errors and learning from them (Thomke, 1998; Sosna 
et al., 2010). Developing a company’s business model is rarely a straightforward journey, 
instead involving an incremental process of exploring the optimal business model and 
subsequently exploiting that model to achieve high growth (Sosna et al., 2010). The 
exploration phases benefit from cyclical experimentation, managing the uncertainty of 
changes in the market environment. The more uncertainty a company faces as a result of 
customer needs, market development, or their own actions (e.g., internationalization), the 
better an experimentation-driven model is suited to changing the business model (Hassi 
& Tuulenmäki, 2012). 
Continuous search and experimentation with changes to model dimensions is one of four 
key requirements for successful business model innovation (Mitchell & Bruckner Coles, 
2004). To provide real learning, business model experimentation should simulate real 
market situations as closely as possible (Chesbrough, 2010). Effective experimentation 
requires robust in-company entrepreneurial and leadership skills (Doz & Kosonen, 2010; 
Trimi & Berbegal-Mirabent, 2012; Mitchell & Bruckner Coles, 2004). 
Saebi et al. (2016) distinguished between business model adaptation and business model 
innovation. Business model adaptation refers to how management reacts to changes in 
the market by realigning the company’s business model. Business model experimentation 
 23 
can be defined in various ways; for present purposes, the term is used to refer to an active 
process of iterative testing of one or more business model dimensions to arrive at a 
disruptive new business model for a given market.  
1.4.4 Internationalization 
Internationalization is the process by which a company gradually increases its 
involvement in international markets through a series of incremental decisions (Johanson 
& Vahlne, 1977). Beyond this incremental model, there are reports of young 
entrepreneurial startups that enter international markets rapidly from the outset (Knight 
& Cavusgil, 2004).  
 
Figure 1.3: (a) The basic mechanism of internationalization (Johanson & Vahlne, 1977) 
and (b) a process model of business network internationalization (Johanson & Vahlne, 
2009). 
 
According to the original Uppsala model (Johanson & Vahlne, 1977) in Figure 1.3(a), 
internationalization is an incremental process, involving an interplay between state and 
change. State aspects include commitment of resources to a foreign market and 
understanding or knowledge of that market by the internationalizing company. Change 
aspects include current business activities and the decision to commit resources to foreign 
operations. According to this model, a company’s existing market risk is the product of 
existing market commitment and existing market uncertainty. In general, a company will 
increase internationalization activities incrementally until it encounters its maximum 
tolerable market risk.  
1 Introduction 24 
The revised Uppsala model (Johanson & Vahlne, 2009) in Figure 1.3(b) also distinguishes 
between state and change aspects. The elements of state are network position in terms of 
partner relationships and knowledge opportunities. In this revised model, change aspects 
include learning, creating and building trust, making current business activities more 
dynamic, along with relationship commitment decisions (adding to the original model). 
In the revised model, then, internationalization depends on the company’s relationships 
and partners as well as on its own actions. Rather than mechanically calculating risk, the 
new model is opportunity-driven.  
While the Uppsala model is well known and widely accepted, it does not adequately 
describe rapidly internationalizing companies. As risk and change increase, stable 
incremental internationalization has become difficult if not impossible for most 
companies. Internationalization is very common for early-stage companies, especially in 
the high-tech industry and must be examined holistically rather than as a separate process 
(Jones, 1999). Oviatt and McDougall (1994) introduced the concept of global startups to 
refer to companies that from their inception seek opportunities in global markets. The 
rapid internationalization of these born global companies requires strong domestic and 
international networks, and there are many ways of utilizing the elements of born global 
internationalization (Chandra, Styles, & Wilkinson, 2012). For present purposes, 
internationalization is defined as the exploitation of international opportunities as a 
dynamic process of learning from involvement in foreign markets (Johansson & Vahlne, 
1977; Oviatt & McDougall, 2005; Johansson & Vahlne, 2009; Ellis, 2011).  
1.5 Outline of the study 
Table 1.3 summarizes the main research question, empirical data, and key findings of 
publications in this dissertation.  
Table 1.3: Dissertation publications  
# Publication Research question Findings 
1 Business model 
experimentation in 
incumbent and startup 
companies 
What are the differences in 
business model experimentation 
process between startup and 
incumbent companies? 
Incumbents have better business model 
experimentation processes, but startups are 
more willing and able to use business model 
experimentation. 
2 The role of home 
market context in 
business model change 
in internationalizing 
SMEs 
How does home market affect 
business model change in 
internationalizing SMEs? 
Home market maturity affects the timing of 
companies’ internationalization efforts and 
the home market context has an effect on 
how companies aim to change their 
business model when internationalizing 
 25 
3 New organizational 
forms of innovation: 
What is business model 
ambidexterity? 
How do companies respond to the 
challenges of exploration and 
exploitation through business 
model experimentation to achieve 
organizational ambidexterity? 
Typology of seven distinctive business 
model ambidexterity applications 
4 Business model 
experimentation in 
internationalizing 
SMEs: Evidence from 
Finland 
How do internationalizing SMEs 
use business model 
experimentation? 
Four different approaches to 
experimentation with international business 
models 
5 The relationship 
between business 
model experimentation 
and technical debt 
What effect does business model 
experimentation have on the 
amount of technical debt incurred 
during the software development 
lifecycle? 
While business model experimentation can 
reduce the amount of technical debt, too 
much focus on experimentation can reduce 
product quality in high-tech companies. 
 
The rest of the dissertation is structured as follows. Chapter 2 establishes the theoretical 
background from the point of departure. There follows a review of the existing literature 
on business models, business model innovation, and business model experimentation, 
setting out the perspectives applied in the thesis. 
Chapter 3 describes the research methodology, detailing approach and design, research 
methods, data collection, and analysis and discusses the study’s reliability and validity. 
Chapter 4 introduces all the publications included in the dissertation, including research 
objectives and main contributions.  
Finally, Chapter 5 elaborates conclusions, theoretical contributions, managerial 
implications, limitations, and suggestions for further research. The chapter begins by 
offering answers to the research questions based on the dissertation publications.  
Following the Introduction and References, the five publications are presented in section 
2.

27 
2 Theoretical points of departure 
To reduce the potential bias of a single approach and to strengthen interpretation of the 
results, this study approaches business model experimentation from multiple perspectives 
(Ordoobadi & Wang, 2011). The multiple perspectives approach is especially useful in a 
holistic worldview, in which everything is connected to everything else (Courtney, 2001). 
This approach is based on the Singerian model of the inquiring organization, which 
supports an open and cooperative culture, holistic decision-making, diffuse authority, and 
continuous assessment and refinement of progress (Richardson, Courtney, & Paradice, 
2001).  
 
 
Figure 2.1: Decision making in business model experimentation using a multiple 
perspectives approach (adapted from Courtney, 2001, p. 31). 
 
The use of multiple perspectives to describe the process of business model 
experimentation is described in Figure 2.1. This provides a more comprehensive view of 
the issue than a single perspective approach. For example, interpreting a company’s 
business model experimentation process by referring only to its development stage would 
provide only a partial explanation of the end results. To understand the whole picture, a 
wider lens is needed, incorporating all five perspectives as described below. 
For incumbent companies, business model experimentation is typically reactive, 
following some kind of difficulty. In contrast, startup companies experiment proactively 
to find a winning business model before anyone else (Sosna et al., 2010). This is not 
because incumbent companies are ignorant or badly managed, but because they are built 
2 Theoretical points of departure 28 
to maximize revenues and profit, and experimentation in pursuit of new and often 
disruptive business models is not rewarding within these boundaries (Christensen, 1997). 
For that reason, company development stage—that is, incumbent or startup—offers a 
useful perspective on a company’s business model experimentation process. 
Home market and industry sector have been identified as the two main contextual 
influences on a company’s international business model (Child et al., 2017). As the focus 
here is on business model experimentation in high-tech companies, home market context 
is the second perspective selected to explain the process and outcomes of business model 
experimentation. 
As described earlier, business model ambidexterity refers to a company’s ability to run 
multiple business models at the same time. Seven different applications of business model 
ambidexterity have been identified, and these modes of ambidexterity provide a third 
perspective in the present study.  
Internationalization introduces significant uncertainty for decision-making because of 
limited knowledge about the international market and the process of internationalization 
(Andersen, 1993). No matter how much the new market is studied or how well the process 
is planned, unexpected events and challenges will need to be addressed. As companies 
can adopt different approaches that will affect their business model experimentation 
process, approach to internationalization is the fourth perspective to business model 
experimentation. 
Finally, a fifth useful perspective is outcomes of experimentation in high-tech 
companies. Business model experimentation needs to minimize effort, cost and time, as 
in the case of agile software development, which results in unintentional and/or 
intentional technical debt. As business model experimentation is linked to technical debt, 
this fifth perspective considers the outcomes of the process in this regard. 
2.1 Business models 
Business model research emerged in the 1990s when the Internet suddenly made new 
models possible, stimulating academic interest in this new phenomenon. Between 1995 
and 2009, more than 1000 scientific articles were published on this topic (Zott et al., 
2011). In a number of literature reviews, scholars have identified different research 
streams on business models, which are variously grouped, depending on the study. For 
example, Zott et al. (2011) claimed that the business model has been used to describe or 
explain three phenomena: (1) e-business; (2) strategy; and (3) innovation. Wirtz et al. 
(2016) divided the business model literature into three further research domains: (1) 
technology-oriented; (2) organization theory-oriented; and (3) strategy-oriented research.  
The business model literature can also be classified by level of abstraction. Massa, Tucci, 
and Afuah (2016) identified three categories: (1) business models as attributes of real 
firms; (2) business models as linguistic schemas, and (3) business models as formal 
2.1 Business models 29 
conceptual representations of the firm. Using varied terminology, the first of these 
categories investigates value creating and value capturing attributes. The second category 
explores business models as cognitive schemas or images of real systems rather than as 
actual systems. The third category investigates formal conceptual representations of how 
firms do business, making business models easier to understand and compare. 
Spieth, Schneckenberg, and Ricart (2014) again divided the business model literature into 
three categories: (1) explaining the business; (2) running the business; and (3) developing 
the business. The first of these refers to research that seeks to explain how companies 
work and make a profit. The second category describes the operational models that 
companies use to run the business in relation to employees, management, and 
shareholders. Finally, the third category explores how companies identify opportunities 
and create sustainable competitive advantage. 
Another way of classifying the business model literature by level of abstraction is to 
consider the unit of analysis. Business models can be studied at product level, business 
unit level, company level, and industry or networked business level (Wirtz et al., 2016), 
and these different units of analysis contribute to the difficulty of defining the concept. 
The first business model studies looked at the business model for a single product. With 
the digitalization of the business environment, the emphasis shifted to company level. 
More recently, business model research has focused on industry networks or ecosystems.  
Foss and Saebi (2017) offered another tripartite classification of this literature: (1) 
business model as a basis for company classification; (2) business model as a factor in 
company performance; and (3) business model as a unit of innovation.   
The most comprehensive approach to the business model concept in terms of level of 
abstraction was first introduced by Massa and Tucci (2013) and further developed by 
Nielsen, Lund and Thomsen (2016). Their six levels of abstraction are described in Figure 
2.2. 
2 Theoretical points of departure 30 
 
Figure 2.2: Business model levels of abstraction (adapted from Massa & Tucci, 2013; 
Nielsen, Lund, & Thomsen, 2016). 
 
The levels of abstraction in Figure 2.2 help to clarify the differences between business 
model definitions. At the highest level of abstraction (narrative or metaphor), business 
models are stories that explain how enterprises work (Magretta, 2002). The next level 
(archetype) describes the business model in a generic way—for instance, the razor is sold 
at a minimal margin while repeat sales of disposable razor blades yield the profit (e.g., 
Teece, 2010). These two highest levels of abstraction provide a good overall 
understanding of what a firm does but do not explain the actual mechanisms of how it 
actually functions.  
The next level of abstraction is the ontological or graphical framework, best described in 
the well known concept of the business model canvas (Osterwalder, Pigneur, & Tucci, 
2005; Osterwalder & Pigneur, 2010). This provides a comprehensive visualization of a 
company’s business model and has become the de facto tool for managers and consultants 
because of its simplicity and its ability to describe core company functions on a single 
sheet. Again, however, it is fairly generic and offers only a static snapshot at one point in 
time. At the next level of abstraction, business model configurations (Nielsen, Lund and 
Thomsen, 2016) or meta models (Massa and Tucci, 2013) provide a more functional 
approach and accommodate dynamic aspects. Although less generalizable, this offers a 
more accurate description of the company and its functions, and any company’s business 
model can be described as one of 71 possible business model configurations (Taran, 
Nielsen, Montemari, Thomsen, & Paolone, 2016). 
2.2 Business model innovation 31 
Just above the actual operating firm, the final level of abstraction is business activity 
systems. This approach views business models as design elements that describe the 
architecture of the activity system and design themes that describe the sources of value 
creation (Zott & Amit, 2010). This provides a highly specific description of a firm’s 
business model but is difficult to apply to an actual company environment.  
As this study views the business model as a dynamic concept that is intelligible for 
companies, the business model configurations approach is considered most applicable. 
2.2 Business model innovation 
As business model innovation is closely linked to the business model concept, it can also 
be viewed from different perspectives. In their literature review, Foss and Saebi (2017) 
divided the research into four distinct streams: (1) conceptualizing business model 
innovation; (2) business model innovation as a process of organizational change; (3) 
business model innovation as an outcome; and (4) consequences of business model 
innovation. The first stream concentrates on defining business model innovation as a 
concept. The second stream investigates business model innovation as a dynamic process 
of organizational change. The third stream studies business model innovation as an 
outcome of successful change or as an innovative business model. Finally, the fourth 
stream considers the implications of business model innovation for firm performance.  
Schneider and Spieth (2013) proposed a theoretical framework for business model 
innovation rooted in the strategic entrepreneurship literature. Their framework puts 
business model development in a different category comprising identification, 
adjustment, and results of deploying firm resources and competences. According to this 
framework, business model innovation involves the exploration and exploitation of new 
opportunities. 
 
Figure 2.3: Hierarchical elements of business model innovation: dimensions and sub-
constructs (adapted from Clauss, 2017). 
 
2 Theoretical points of departure 32 
Clauss (2017) developed a scale to measure business model innovation based on three 
dimensions: (1) value proposition innovation; (2) value creation innovation; and (3) value 
capture innovation. As shown in Figure 2.3, these dimensions entail 10 further sub-
constructs. This approach supports the interpretation of business model innovation used 
in this study.   
Massa and Tucci (2013) described business model innovation as a subset of business 
model design and reconfiguration. They further described the staging between product 
innovation, process innovation, and business model innovation as a continuum of market 
development (Figure 2.4). 
 
Figure 2.4: Innovation at different stages of market development (adapted from Massa & 
Tucci, 2013). 
 
Massa and Tucci (2013) proposed that business model innovation could be used by 
companies to explore new opportunities in three different ways: (1) to support new value 
propositions for existing customers; (2) to identify new customer segments for existing 
value propositions; and (3) to enter entirely new markets with new value propositions. 
The first two of these follow the path in Figure 2.4. In the early stages of new market, 
companies concentrate on product innovation. As the market develops, the focus shifts to 
2.3 Business model experimentation 33 
process innovation. Finally, when peak growth is reached, the company turns to business 
model innovation in their attempt to stay competitive. 
2.3 Business model experimentation 
Experimentation is a problem-solving process that aims to find the optimal solution as an 
outcome of successive experiments (Thomke, 1998). This approach to solving complex 
problems was first introduced by Lindblom (1959) as the method of successive limited 
comparisons. As building and implementing a business model is a highly complex 
process, experimentation is especially useful in this context. From a company perspective, 
it is not a question of whether the business environment and the rules of the game will 
change but of whether the company can make the radical changes required for long-term 
survival (Voelpel et al., 2004). Business model experimentation can provide companies 
with the tools to survive such changes. These tools can lead into concrete business model 
experiments or provide an experimental mindset to the organization culture that helps it 
overcome the changes.  
Kaplan (2012) claimed that business model innovation is all about experimentation, and 
his approach closely resembles the lean startup model (Ries, 2011). However, while the 
lean startup model concentrates on product development, Kaplan developed 15 principles 
within the mantra connect-inspire-transform. His main message is that business model 
innovation is a collaborative effort between the company and its stakeholders, that 
passion and inspiration is needed to build anything great, and that success depends on 
experimentation and customer contact rather than deskbound incremental change. 
Business model experimentation is most often described as a cyclical process, in which 
the business model is constantly changing. Voelpel et al. (2004) visualized business 
model change as the “wheel of business model reinvention” that involves four sensing 
elements: (1) customer sensing (acceptability of a new value proposition); (2) technology 
sensing (importance of technology in customer perceived value); (3) business 
infrastructure sensing (ease of change of business configuration); and (4) 
economic/profitability sensing (economic feasibility of the new model). This approach 
looks at business model from inside the company and it does not take elements outside of 
the company into account. In this dissertation the approach to business model 
experimentation is more holistic, but still following a cyclical approach of continuous 
improvement. 
Ojala (2016) suggested a preliminary theory for business model creation and evolution. 
He used an iterative cycle in which the process begins with business model creation 
followed by business model reassessment and further business model development. After 
that, a new business model is realized and the cycle starts over or the business model is 
abandoned. This approach supports very well the business model experimentation 
thinking where the business model is never ready, but in constant loop of reassessment 
and development.  
2 Theoretical points of departure 34 
Wrigley and Straker (2016) also claimed that the business model is a dynamic concept 
that is never “ready” but instead requires ongoing iteration. They proposed five design 
typologies for business model experimentation.  
 
Table 2.1: Five design typologies for business model experimentation (Wrigley & 
Straker, 2016) 
Strategy Objective Focus of experimentation 
Customer-led Finding new customer 
segments 
Exploring potential new customer segments 
beyond current norms 
Cost-driven Reducing costs Finding radical cost savings by challenging all 
current processes 
Resource-led Restructuring resources Exploring new ways of structuring and applying 
existing and new resources 
Partnership-led Identifying new 
partnerships 
Breaking current constraints and finding partners 
for value co-creation 
Price-led Positioning firm as price 
leader in the market 
Radically reducing costs to provide the same 
offering for a much lower price 
 
Design typologies show that there are various ways for implementing business model 
experimentation depending on the strategy of the company. This supports very well the 
approach in this dissertation that provides different perspectives on business model 
experimentation. There is no one way of interpreting business model experimentation, 
but instead it can be very different depending on the strategy or the context of the 
company.  
Whereas Wrigley and Straker’s (2016) typology concentrates on the focus of 
experimentation, this dissertation proposes an alternative typology, looking at the process 
of experimentation from a more holistic perspective, encompassing the type of 
experimentation, mode of business model ambidexterity, and the context of 
internationalization.   
2.4 Perspectives on business model experimentation 
Because of the inconsistent development of the business model literature as a whole, there 
are multiple alternative interpretations. The present thesis introduces five perspectives on 
2.4 Perspectives on business model experimentation 35 
business model experimentation in high-tech industry. The objective here is to specify 
the filters that an internationalizing high-tech company must pass through and to describe 
how these affect company’s business model experimentation. 
2.4.1 Effects of industry context 
As this research is confined to high-tech companies, industry context is not addressed 
here. However, the choice of context is significant. Because high-tech companies must 
often operate on a global scale from the outset, their business environment is 
characterized by uncertainty from the beginning (Rasmussen & Tanev, 2015). These 
companies also incur high research and development (R&D) expenses as compared to 
sales and employ a high proportion of R&D employees (Burgel & Murray, 2000). 
Information technology is one of the fastest changing high-tech industries and it is 
essential to understand how companies can develop their business model while the 
technology is evolving rapidly and the markets are uncertain and in constant change 
(Ojala, 2016) 
Internationalization is often inevitable for these companies, and they must adjust their 
business model accordingly. Onetti et al. (2012) argued that high-tech companies must 
make crucial decisions about (1) location of activities; (2) relationships with partners; and 
(3) activity focus. In this sense, they identify an important connection between 
internationalization and business model change for high-tech companies, which is central 
to this dissertation. 
2.4.2 Company development stage  
A company’s development stage is a major determinant of available resources and of how 
it does innovation (Massa & Tucci, 2013). The different company life stages can be 
characterized in various ways. For example, Massa and Tucci (2013) defined these stages 
as (1) introduction; (2) growth; (3) maturity; and (4) decline. In their longitudinal study 
of the corporate life cycle, Miller and Friesen (1984) identified five life stages: (1) birth; 
(2) growth; (3) maturity; (4) revival; and (5) decline. The difference between these two 
approaches, 30 years apart, is Miller and Friesen’s (1984) “revival phase,” marking a 
period of diversification and expansion following maturity before the organization finally 
declines.  
The present study distinguishes between incumbent and startup companies. As discussed 
here, incumbent companies are mature and have established their business model. 
Regarding new business models, incumbent companies often have conflicting assets in 
addition to complementary assets for a new business model, which makes adopting new 
business models difficult for them (Kim & Min, 2015). Very often, they are assimilated 
to larger companies when they fail to renew themselves through innovation as new 
competitors with disruptive business models capture their market (Christensen, 1997). 
Although they possess good resources and functioning processes, the problem is not 
straightforward; according to Christensen and Overdorf (2000), their processes are finely 
2 Theoretical points of departure 36 
tuned to achieve success by using the current business model, which yields superior gross 
margins and is supported by the company value system. Nevertheless, incumbent 
companies may be able to take advantage of new innovations.  
Startups are young companies that have not yet reached their potential while testing their 
technology and business model in the market (Batocchio et al., 2017). They can be 
defined as “temporary organizations in search of a scalable, repeatable, profitable 
business model” (Blank & Dorf, 2012, p. xvii). Startups have promising ideas; they are 
agile, willing to take risks and are striving for rapid growth, but they lack the resources, 
processes, and scalability of incumbent companies (Weiblen & Chesbrough, 2015). For 
the purposes of this study, startups are defined as growth-driven companies in the 
development stage of inception and growth while incumbent companies have already 
gone through these two phases and have reached maturity, revival, or decline.  
Because incumbent companies operate in established industries with proven business 
models (Osiyevskyy & Dewald, 2015), they may find business model changes 
challenging. Voelpel et al. (2004) claimed that incumbents resist radical change and are 
often reluctant to let go of their existing business models. To change its business model, 
a company must be able to unlearn things that made them successful in the past, which is 
more difficult for an incumbent company.  
2.4.3 Business model ambidexterity 
The concept of business model ambidexterity derives from the literature on organizational 
ambidexterity—that is, a company’s ability to remain competitive in their current 
business while simultaneously adapting to changes in the business environment (Gibson 
& Birkinshaw, 2004). Simsek et al. (2009) identified four types of organizational 
ambidexterity according to structural and temporal characteristics. Harmonic 
ambidexterity co-exists with existing processes. Cyclical ambidexterity also operates 
within the company, but it is sequential, involving phases of exploiting existing business 
and phases of exploring new opportunities. Partitional ambidexterity refers to 
establishing a structure in which exploration activities can occur simultaneously and 
interdependently with exploitation. Finally, reciprocal ambidexterity sees different units 
of the company in sequential pursuit of exploitation and exploration. 
In the context of business model innovation, ambidexterity refers to simultaneous 
utilization of two (or more) business models (Markides, 2013). As business model design 
themes (Amit & Zott, 2001), Hu and Chen (2016) link efficiency to exploitation and 
novelty to exploration. Their interpretation of ambidexterity deploys these conflicting 
business themes to improve innovation performance through interaction. In the present 
study, business model ambidexterity is defined as a company’s ability to run and develop 
different business models, either sequentially or simultaneously, within the company or 
in separate business units. 
2.4 Perspectives on business model experimentation 37 
2.4.4 Effects of home market context 
Context provides a lens that explains and sets limits to the phenomenon being researched 
and may be understood in terms of several dimensions: (1) business context, referring to 
the industry or market; (2) social context, including networks or household-related issues; 
(3) spatial context, referring to geographical areas; and (4) institutional context, referring 
to cultural and political issues (Welter, 2011). For the purposes of this study, business 
context relates to high-tech industries. Home market context can be linked to both spatial 
and institutional contexts. In this case, spatial context relates to the distance from home 
market to international markets. However, the institutional context is more important here 
as a means of understanding and comparing cultural differences, regulatory issues, and 
societal attitudes (Welter, 2011). 
There is little existing research on how home market context affects internationalization 
or business model experimentation. Companies that have succeeded in domestic markets 
may encounter problems when they enter international markets because the economic, 
political, legal, and cultural environment differs from country to country (Child et al., 
2017). Depending on the extent of those differences between home and target market, 
entry to foreign markets may present major obstacles. Child et al. (2017) proposed three 
predictors to explain an SME’s international business model: industry context, 
entrepreneurial experience, and home market context. A hostile or unstable home country 
situation can exert a strong influence on internationalization and network relations 
between companies (Caputo, Matteo, Pellegrini, Dabic, & Paul Lana, 2016). 
2.4.5 Approach to internationalization 
Internationalization is examined here as a context for business model experimentation, 
involving two state aspects—market commitment and market knowledge—and two 
change aspects—commitment decisions and current activities (Johanson & Vahlne, 
1977). As the process of internationalization entails multiple uncertainties in relation to 
market behavior and company performance in the international market, most innovation-
related internationalization models involve experimentation (Andersen, 1993), making 
this a useful context in which to study business model experimentation. 
For present purposes, internationalization is understood as a continuous and dynamic 
process of exploiting international opportunities. Business model construct provides an 
alternative, value creation -based approach to internationalization (Sainio et al., 2011). 
The present research focuses on international business models (Child et al., 2017) and 
international growth strategy (Rasmussen & Tanev, 2015). 
2.4.6 Technical debt and outcomes of business model experimentation 
The concept of technical debt was first introduced by Cunningham (1992) to describe the 
cost of accelerated software development. While this allows companies to build a good 
enough product in the shortest possible time, they must then rewrite the code more 
2 Theoretical points of departure 38 
robustly to pay back the technical debt. According to Tom et al. (2013), there are five 
categories of technical debt: (1) code debt; (2) design and architectural debt; (3) 
environmental debt; (4) knowledge distribution and documentation debt; and (5) testing 
debt.  
Technical debt can occur through unintentional acts of oversight or ignorance, or as 
intentional managerial choices based on pragmatism or prioritization (Tom et al., 2014; 
Yli-Huumo et al., 2014). Here, technical debt is considered as a conscious choice, 
validating best guesses with the minimum amount of effort in much the same way as lean 
startup thinking, business model experimentation, and discovery-driven planning 
(McGrath, 2010). 
39 
3 Research methodology 
This chapter describes the individual publications and the methods used, including the 
approach to data collection and analysis, providing an overview of the design and 
underlying arguments. 
3.1 Research approach and design 
The purpose of this dissertation is to illuminate the real-world phenomenon of business 
model experimentation in companies’ internationalization processes, with particular 
reference to the strategy, entrepreneurship, internationalization, and innovation literature 
streams. Because the business model literature encompasses a range of disciplines, it 
cannot be reduced to any one epistemological position, where epistemology is the branch 
of philosophy that investigates what is considered acceptable knowledge within a 
discipline (Bryman & Bell, 2011).  
One such position is positivism, which claims that valid knowledge must be confirmed 
by the senses. However, according to Tsoukas and Knudsen (2003), positivism fails to 
take account of the conditions in which knowledge is produced. Realism, on the other 
hand, offers a singular and certain representation of the past while relativism offers plural 
but non-grounded narratives that directly oppose the realist approach (Durepos, Mills, & 
Weatherbee, 2012). As a research tradition, realism holds that all things exist 
independently, regardless of whether they are theorized or experienced by an outside 
observer. (Mir & Watson, 2000) On this view, theoretical claims are either true or false, 
and the objective of theory is always to get as close as possible to the truth. 
Interpretative epistemological approaches argue that the social world differs from the 
natural world and cannot therefore be understood in the same way (Hatch & Yanow, 
2003). Constructivism is “a philosophical school of thought arguing that research is 
fundamentally theory-dependent” (Mir & Watson, 2000, p. 941). On this view, the 
researcher’s theoretical position serves to define the research problem and procedures and 
what constitutes evidence. Mir and Watson (2000) view constructivist researchers as 
craftsmen, who sculpt models of reality grounded in theory; it follows that the researcher 
(subject) and the studied phenomenon (object) cannot be separated, and the same applies 
to theory and practice. This dissertation adopts an interpretative constructivist stance in 
attempting to make sense of the complex decisions and activities that characterize 
business model experimentation in internationalizing firms. 
3.2 Research methods 
The thesis and its associated publications employ qualitative case research methods. Data 
were collected using semi-structured interviews and NVivo software was used for the 
analysis. These choices and processes are discussed in detail below. 
3 Research methodology 40 
3.2.1 Qualitative research methods 
The objective of this dissertation is to examine the process of business model 
experimentation in a holistic way and from different perspectives. A qualitative 
methodology was adopted to enrich data collection and analysis, as there was a need to 
build understanding to a relatively new and multi-faceted phenomenon. (Eriksson and 
Kovalainen, 2010). All of the articles in the dissertation used case study approach, which 
made the results more easily generalizable and theoretically testable (Eisenhardt, 1989; 
Eisenhardt and Graebner, 2007).  
Because each qualitative study is different, the quality of research is difficult to measure. 
Tracy (2010) defined eight criteria for excellent qualitative research: (1) worthy topic; (2) 
rich in rigor; (3) sincerity; (4) credibility; (5) resonance; (6) significant contribution; (7) 
ethics; and (8) meaningful coherence. For present purposes, these criteria can be 
interpreted as follows. 
The topic can be considered worthy if it is relevant, timely, significant, and interesting 
(Tracy, 2010). The present dissertation pursues an in-depth understanding of how high-
tech companies use experimentation to change their business model when entering 
international markets. In light of the acknowledged megatrends of digitalization and 
globalization driving industry competition and change, forcing companies to enter 
international markets much faster than before, the study is relevant and timely for 
companies in the high-tech industry. Indeed, the topic is significant for the many 
companies seeking to respond effectively to this turbulence. All companies must have a 
business model, and increasing internationalization inevitably means change.  
A qualitative study can be considered rich in rigor if its theoretical constructs, data and 
time in the field, samples, contexts, and data collection and analysis are sufficient and 
appropriate (Tracy, 2010). The theoretical constructs used in the present case represent a 
minor weakness, as each article is independent and draws on a particular theoretical 
construct from its literature review. The construct that informs the dissertation as a whole 
is the combination of perspectives to provide a solid understanding of business model 
experimentation in the given context. As described in subsequent chapters, data collection 
and analysis were rigorously conducted, respecting both the context and the scientific 
method. At the same time, it is important to note that this is not the only possible approach 
to the topic.  
The sincerity of qualitative research is evaluated on the basis of self-reflexivity in relation 
to subjective values and biases and transparency about methods and challenges (Tracy, 
2010). In the present case, the sincerity of the research can be considered high, as none 
of the articles addresses personal interests. While many of the interviewees were already 
known to the researcher, this made it easier to build rapport, and there are no personal 
ties. All procedures have been reported truthfully and transparently; there was no agenda 
to pursue certain research results, and the participating companies have not used the 
3.2 Research methods 41 
research results to advance their business. Names of participating companies and 
individuals have been withheld in all cases to facilitate analysis without endangering trust. 
The credibility of qualitative research is marked by thick description incorporating 
concrete detail, triangulation, multivocality, and participant reflections (Tracy, 2010). All 
of the dissertation articles are multiple case studies that focus less on describing individual 
cases than on differences and commonalities between them. In this sense, the cases do 
not include as much concrete detail as highly credible qualitative research would require. 
Triangulation of data was used in some studies mainly to provide financial or historical 
background based on secondary data sources. Actual triangulation involving additional 
data sources to confirm interview data would have been extremely difficult, given the use 
of multiple cases. Multivocality was pursued meticulously to ensure that all informants 
had an equal opportunity to express their thoughts freely. The study made no use of 
member reflections. All interviews were recorded by the researchers and transcribed and 
analyzed without affording informants an opportunity to check what they had said. There 
were multiple interviews with some informants to check some uncertain issues. While the 
study’s credibility is not perfect, the choices made were appropriate to this type of 
research. 
A qualitative study has resonance when it can be said to influence audiences through 
aesthetic representation, naturalistic generalizations, and transferable findings (Tracy, 
2010). In this context, aesthetic representation refers to how the research is presented to 
the reader. While some take this to mean long and difficult sentences that use obscure and 
archaic terms, aesthetic value is defined here as text and illustrations that are clear and 
approachable. Across the different studies, an effort has been made to ensure that cases 
and company stories are accessible and believable, so enhancing the generalizability and 
transferability of the findings.  
Qualitative research can make a significant contribution to theory, practice, morals, 
methodology, or heuristics (Tracy, 2010). Theoretical significance relates to studying a 
phenomenon that has not previously been investigated in the same context. In that regard, 
the present study contributes to the neglected topic of business model experimentation 
from a holistic perspective. At a practical level, the research is significant in many ways, 
as companies in high-tech industries currently struggle to understand how to change their 
business model to remain relevant in the long term. This research does not make any 
significant moral or methodological contribution, but the perspectives approach is 
potentially significant at a heuristic level, suggesting ideas and opportunities for further 
research. 
Ethical research considers procedural, situational, culturally specifics, relational, and 
exiting ethics (Tracy, 2010). Procedural ethics means using ethical methods and avoiding 
fraud and fabrication, as well as informing participants about how the collected data will 
be used. The present research meets high standards of procedural ethics, as all studies and 
data collection were conducted transparently, using predetermined procedures. 
Situational ethics are not immediately relevant here, as the research methods were 
3 Research methodology 42 
straightforward and uncontroversial. Relational ethics considers the actions of the 
researcher and how those actions affect others. As mentioned earlier, the researcher acted 
as objectively as a qualitative researcher can, and there were no issues of attachment or 
power relations with the participants. Finally, exiting ethics refers to how the research 
results are presented. In this dissertation and its articles, all results have been neutrally 
presented, avoiding any effect or phrasing that might enhance their appeal to readers. In 
short, the results have been presented with high regard to research ethics. 
The eighth criterion of good qualitative research is meaningful coherence. This means 
achieving what it claims to be about, using the right methods to meet the research goals, 
and meaningfully linking the literature, research questions, findings, and interpretations 
(Tracy, 2010). The objectives of this dissertation were stated at the beginning, and in the 
author’s humble opinion, the thesis achieves these objectives well. Qualitative methods 
and the case study approach are appropriate for this kind of research. Finally, the structure 
also meets the requirements above, and all parts of the study interconnect to ensure 
coherence.  
In terms of the eight criteria above, this dissertation meets the requirements for good 
qualitative research. The topic is worthwhile for different stakeholders, and the main 
quality issue relates to the rigor of the theoretical contribution. While this could be 
stronger, data collection and analysis were rigorous, and sincerity is very high. The choice 
of a multiple case study approach fails to fully meet the credibility criterion. Resonance 
is considered high by the author’s standards, but someone else might consider more 
difficult and archaic terminology more aesthetically resonant. The study makes 
significant theoretical, practical, and heuristic contributions. Finally, the research meets 
high ethical standards and is meaningfully coherent in all respects. 
3.2.2 Case study approach 
The use of case studies is not a methodological choice but rather a choice of the object to 
be studied (Ghauri, 2004). The case study method is suitable for research that asks 
“How?” and “Why?” (Yin, 1994). The objective of this thesis is to examine business 
model experimentation from different perspectives. As the business model concept itself 
cannot at present be defined unambiguously, the case study method was chosen because 
it facilitates extensive examination of a single instance of the phenomenon of interest 
(Collis & Hussey, 2003).  
Case studies make it possible to explore the choices made by the case companies and so 
advance understanding of the research phenomenon (Ghauri, 2004). All the studies used 
a multiple cases design to concentrate exclusively on the relationships replicated in the 
different cases (see Table 3.1). This approach yielded conceptual frameworks and models 
that are more generalizable than results from a single case study (Eisenhardt & Grabner, 
2007).  
 
3.3 Data collection 43 
Table 3.1: Cases and interviews in each publication 
Publication Number of cases Number of interviews 
Publication 1 19 32 
Publication 2 2 10 
Publication 3 15 28 
Publication 4 12 20 
Publication 5 4 9 
 
The data were collected from a total of 43 semi-structured interviews from 22 different 
companies. The multiple case study approach was used to construct explanatory middle-
range theory in relation to the different perspectives. The criteria for choosing cases 
should be consistent with the research problem (Ghauri, 2004), and this was true of the 
choice of cases in each paper as detailed in Chapter 4.  
3.3 Data collection 
This section describes the process of data collection in the dissertation and articles, all 
using qualitative methods.  
3.3.1 Sampling 
The study was based mainly on purposive sampling (Lincoln & Guba, 1985), which is 
used to identify cases that are likely to provide the best information in relation to the 
research questions (Lee & Lings, 2008). Some elements of convenience sampling were 
also used—that is, approaching informants who meet certain practical criteria such as 
easy access, proximity, or availability at a certain time (Etikan, Musa, & Alkassim, 2016). 
Most of the participating companies were Finnish because they afforded easier access. In 
addition, the selection of companies and interviewees was based largely on the 
researcher’s prior acquaintance with them. This made the selection process easier, as the 
researcher knew which informants could provide relevant and valuable information.  
In choosing informants, the objective was to find those people within the case companies 
who were most knowledgeable about the research topic and problem (Saunders, Lewis, 
& Thornhill, 2009). Most of the interviews were conducted in Finnish and in face-to-face 
meetings rather than online. Purposive sampling seeks to achieve saturation by continuing 
3 Research methodology 44 
data collection until no new information emerges (Etikan, Musa, & Alkassim, 2016), and 
this approach was adopted in all of the dissertation case studies.  
3.3.2 Qualitative data collection 
Collection of qualitative data using case studies is usually interview-based. The objective 
of the research interview is to acquire information from the informants that is as useful 
and truthful as possible (Hannabus, 1996). According to Roulston et al. (2003), the main 
challenges of the interviewing process are (1) unexpected participant behavior; (2) 
consequences of the researcher’s own actions and subjectivity; (3) phrasing of questions; 
and (4) dealing with sensitive issues. The researcher’s experience helped to avoid 
unexpected participant behavior. For example, in several instances during the interviews, 
the informant deviated from the issue or provided very short answers. As the researcher 
had 15 years’ experience of communicating with companies, was very familiar with the 
research topic, and had acquired advance information on the companies, these unexpected 
situations did not undermine data collection.  
Any effects of the researcher’s own actions and subjectivity were minimized by 
employing an interview structure that did not lead the interviewee into any direct answers 
and by avoiding any expression of the researcher’s own opinions. Here, too, the 
researcher’s experience helped. The third challenge was more difficult to overcome, as 
the interviews were semi-structured, and the interviewees were given a lot of freedom in 
answering the questions. In many cases, experienced entrepreneurs told a long story in 
response to a specific question, and the interviewer took the discussion even deeper into 
this digression by asking follow-up questions. In some interviews, the thread was lost for 
an extended period of time. Nevertheless, the main topics of the semi-structured 
questionnaire were covered in each of the interviews. The fourth challenge, dealing with 
sensitive issues, was handled at the beginning of each interview, when provisions for 
confidentiality and data use were explained to the informant. As the interviews did not 
pry into sensitive or personal issues, this was not a problem for data collection. 
Establishing rapport with the respondent is extremely important if the interviewer is to 
gain their trust. In the introductory phase before the interview commences, it is crucial to 
establish a positive relationship with the informant and to reassure them about 
confidentiality issues. In collecting the data for this thesis, particular emphasis was placed 
on building rapport. All informants were first approached to inquire about the possibility 
of their participation in an interview for a doctoral dissertation. Most of the interviewed 
companies were either involved in the same project with the interviewer or were known 
to him personally prior to the interview, making it easier to build trust than would 
otherwise have been the case. 
Interviews can be classified as (1) structured; (2) group; or (3) unstructured (Fontana & 
Frey, 1994). In this study, the interviews concentrated on business model development in 
individual companies. For this reason, group interviews were not appropriate. The 
dissertation articles include several comparative studies; to make the data comparable, 
3.4 Data analysis 45 
interviews had to be conducted using common comparable items. This meant that 
unstructured interviews were unsuitable for data collection. Strictly structured interviews 
would have been most suitable for the purposes of data analysis. However, as the 
objective of the interviews was to understand the development of companies’ business 
models from initial business idea to current status, and because the stories were all quite 
different, it was decided to base all interviews on a semi-structured questionnaire, and the 
same questionnaire was used in every case. During the interviews, the researcher posed 
additional questions about items that were of particular interest for the research.  
Interviews were conducted either in person or via Skype. All interviews were recorded 
after confirming that this was acceptable to the informant. At the beginning of the 
interview, the informant was advised that (1) the interview was being conducted for a 
particular study that formed part of the researcher’s dissertation; (2) the recorded 
interview was confidential, and the data would not be accessed by any outside party; and 
(3) the data would only be used for the stated purpose.  
During the interview, respondents were encouraged to answer questions freely in their 
own words and to ask for clarification if needed. To provide a common understanding, 
the concept of business model was defined at the beginning of the interview, as it might 
be defined in different ways, depending on the situation. The researcher took care to 
ensure that the agreed time for the interview was respected and that the questionnaire was 
fully covered, with additional questions where necessary. The researcher avoided leading 
questions or suggesting answers, concentrating instead on seeking further information on 
any interesting issues that arose during the interview. 
After the interviews were completed, they were transcribed by a professional service, 
making sure that the confidentiality agreement was not broken. The interviews were 
collected and stored by the researcher for subsequent analysis.  
3.4 Data analysis 
The interviews were analyzed using NVivo. This qualitative analysis software allows the 
researcher to code the data meticulously for analysis in relation to the research question. 
This software-based procedure for analyzing the data allowed the researcher to ensure 
and confirm the trustworthiness of the research (Sinkovics, Penz, & Ghauri, 2008).  
For each study, the main research topics were first decided on the basis of a literature 
review. These topics were used to identify and code the relevant items of information in 
the interview data. The coded data were then assigned to containers that included linked 
items of information. These nodes were then labeled, and the labeled nodes were 
categorized and used to build models and to visualize the data. To address the research 
question, the models were linked to the findings from the literature review. 
3 Research methodology 46 
The methods used for data analysis included cross-case analysis as suggested by Miles 
and Hubermann (1994). While publication 2 adopted a within-case focus, all of the other 
publications focused within and across cases (Ayres, Kavanaugh, & Knafl, 2003). 
3.5 Reliability and validity 
External reliability refers to the extent to which a piece of research can be replicated by 
others (Bryman & Bell, 2011). This poses a difficulty for qualitative research studies, as 
the initial social setting changes, and interview-based data collection cannot be replicated 
at a later stage. In the present study, all interviews were recorded and transcribed 
systematically and meticulously, including all sounds and auditive gestures. For that 
reason, although the interviews would be difficult or impossible to replicate, they can be 
accessed at any later time as when the data for each article were collected and analyzed. 
Internal reliability refers to the level of agreement between different observers about what 
they see and hear (Bryman & Bell, 2011). Most of the interviews were conducted by a 
single person (the author of this dissertation). Three of the interviews in publication 5 also 
involved another researcher; these were again transcribed by a professional outside 
service. Five of the interviews in publication 3 were conducted in Russian by a Russian 
researcher and were subsequently translated into English by a professional translator. In 
addition, two of the interviews in publication 5 were conducted by a co-author and were 
again transcribed by a professional outside service.  
Publications 3 and 5 were the most challenging in terms of ensuring internal reliability. 
Publication 3 included two cases: one in Finland and one in Russia. The author of the 
thesis conducted the interviews with the Finnish firm, and the Russian co-author 
conducted similar interviews with the Russian company, based on the same semi-
structured interview template. Interviews with the Finnish company were conducted in 
Finnish, and those with the Russian company were conducted in Russian. All interviews 
were then translated into English text and cross-analyzed by both researchers. Internal 
reliability was ensured by agreeing on the analysis of their own and each other’s 
interviews. In publication 5, the case companies were partly interviewed by the author of 
the thesis, partly by a co-author, and partly by the author of the thesis and the co-author 
of the paper together. All interviews were transcribed using the same outside service and 
were then cross-analyzed by both interviewers. Again, internal reliability was ensured by 
agreeing on the analysis results. This was done for each paper and for this introduction 
by combining the theoretical framework of the dissertation with all of the data collected 
in the different studies. As some of the interviews were used in multiple articles, they 
were used to develop and support different theoretical ideas. Additionally, some 
interviewees were visited multiple times to gain a deeper understanding of their cases. 
External validity determines the extent to which research results are generalizable 
(Bryman & Bell, 2011). This is a known challenge for qualitative research, as cases can 
never be representative of all companies. Although these research papers include only a 
small number of cases, they aim to be as representative as possible of the particular setting 
3.5 Reliability and validity 47 
defined in each article. As a whole, the interview data collected from the different cases 
ground the theoretical framework elaborated here, which cannot usefully be generalized 
beyond the context of internationalizing high-tech SMEs. In addition, most of the 
companies are Finnish, making it difficult to generalize the results to different cultural 
contexts. These must be accepted as limitations of qualitative research. 

49 
4 Summary of publications and review of results 
This chapter summarizes the articles included in the dissertation, setting out the objectives 
and main contributions of each. At the end of the chapter, the results are combined to 
ground the conclusions in Chapter 5. 
 
Table 4.1: Dissertation publications and author’s contribution 
 Publication Authors Outlet Role in publication 
1 Business model 
experimentation in 
incumbent and startup 
companies (2016) 
Rissanen, Tommi 
Sainio, Liisa-Maija 
Proceedings of 
XXVII ISPIM 
Innovation 
Conference (Porto), 
2016 
Corresponding 
author, collected 
and analyzed the 
data. Major 
contribution. 
2 The role of home market 
context in business model 
change in 
internationalizing SMEs 
Rissanen, Tommi 
Ermolaeva, Lyubov 
Torkkeli, Lasse 
Ahi, Ali 
Saarenketo, Sami 
European Business 
Review, 2019  
Corresponding 
author, collected 
and analyzed the 
data. Major 
contribution. 
3 New organizational forms 
of innovation: What is 
business model 
ambidexterity? 
Rissanen, Tommi 
Karhu, Päivi 
Proceedings of 
ISPIM Innovation 
Symposium 
(Melbourne), 2017 
Corresponding 
author, collected 
and analyzed the 
data. Major 
contribution. 
4 Business model 
experimentation in 
internationalizing SMEs: 
Evidence from Finland 
Rissanen, Tommi 
Asemokha, Agnes 
Torkkeli, Lasse 
Saarenketo, Sami 
Proceedings of 22nd 
McGill International 
Entrepreneurship 
Conference 
(Halmstad), 2018 
Corresponding 
author, collected 
and analyzed the 
data. Major 
contribution. 
5 The relationship between 
business model 
experimentation and 
technical debt 
Yli-Huumo, Jesse 
Rissanen Tommi 
Maglyas, Andrey 
Smolander, Kari 
Sainio, Liisa-Maija 
Proceedings of 
International 
Conference of 
Software Business 
(Cham), 2015  
Collected and 
analyzed the data 
with corresponding 
author. Major 
contribution. 
 
4.1 Publication 1: “Business model experimentation in incumbent and 
startup companies” 
The business environment is changing rapidly for incumbent and startup companies, and 
both must find ways of adapting their business model in order to remain relevant in their 
respective markets. 
  
4 Summary of publications and review of results 50 
Research objectives and theoretical approach 
The main objective of the research was to understand differences in the business model 
experimentation processes of startup and incumbent companies. In startups and some 
incumbents, the lean startup method (Ries, 2013) has become popular for experimenting 
with new products. However, incumbent companies are constrained by the innovator’s 
dilemma (Johnson, Christensen, & Kagermann, 2008).  
The study approaches business models and business model innovation on the basis of the 
strategy and entrepreneurship literature streams. Business model experimentation is 
explored by combining three distinct theoretical concepts: entrepreneurial opportunity 
creation, effectuation, and discovery-driven planning. 
Main contributions 
Based on the theoretical analysis, the study concludes that incumbent and startup 
companies operate differently in terms of business model innovation activities. 
Incumbent companies have the necessary resources and processes to change their 
business model, and in most cases, they also acknowledge the need for change. However, 
the limitations of their managerial and entrepreneurial skills make them less effective in 
conducting business model experiments.  
In contrast, startups have the necessary entrepreneurial skills and commitment to change 
but often lack the skills and processes to meticulously pursue the business model 
experimentation process. 
Based on the empirical analysis, the theoretical conclusions from previous studies were 
deemed to be largely accurate. However, incumbent companies were found to be better 
at using experimentation to try out new business models. For incumbents, this 
experimentation more often ended in termination of the project while startups pivoted 
into experiments with another business model. 
4.2 Publication 2: “The role of home market context in business model 
change in internationalizing SMEs” 
Internationalization is always a risky process and commonly requires companies to 
change their business model. Several factors affect how a company approaches business 
model change when entering international markets.  
Research objectives and theoretical approach 
The main objective of this research was to enhance existing understanding of how home 
market context affects how an internationalizing SME changes its business model. The 
study compared two companies with similar backgrounds other than their home market: 
one from Russia and the other from Finland. 
4.3 Publication 3: “New organizational forms of innovation: What is business 
model ambidexterity?” 
51 
In the business model innovation literature, internationalization has to date attracted little 
interest but reveals two different approaches to external stimuli. The first is the threat-
rigidity hypothesis (Staw et al., 1981), which claims that companies facing external 
threats will approach these cautiously and will avoid risk-taking (Shimizu, 2007). The 
second line of research indicates that managers are more concerned to avoid losses than 
to make equivalent gains. Based on cumulative prospect theory (Tversky & Kahneman, 
1992), emphasis is placed on avoiding risks if there is a high probability of equal gains or 
losses.  
One important incentive for taking the risks involved in internationalization and business 
model change is to find and exploit new entrepreneurial opportunities. However, risk 
perception differs across cultures (Weber & Hsee, 1998). 
Main contributions 
As a starting point, there is very little research on the effects of home market context on 
business model changes during the internationalization process. This study adds to the 
discussion by illustrating differences in how internationalizing SMEs act, depending on 
their success and other home market factors. The study also confirms the findings of 
Tversky and Kahneman (1992) in the context of this research. Faced with a choice 
between certain loss of all growth opportunities and a high probability of losing much 
more—possibly even the whole company—if they entered unknown foreign markets, the 
Russian company chose high-risk internationalization with business model 
experimentation, which ultimately paid off. 
Home market maturity has a strong influence on how and when SMEs decide to enter 
international markets and how they change their business model. Depending on its image 
abroad, country of origin m be used in different ways by internationalizing SMEs. 
4.3 Publication 3: “New organizational forms of innovation: What is 
business model ambidexterity?” 
As the business environment becomes more volatile, a static approach to business models 
is no longer adequate. In these circumstances, the interplay between exploration and 
exploitation of new business models is increasingly important. 
Research objectives and theoretical approach 
The objective of this study was to draw on the organizational ambidexterity and business 
model experimentation literatures to understand the different ways in which incumbent 
and startup companies can exploit business model ambidexterity.  
Business model innovation is examined here in terms of exploration and exploitation 
dynamics. Disruptive change in the industry can be responded in different ways; 
companies can (1) ignore the threat and maintain their existing business model; (2) 
4 Summary of publications and review of results 52 
discard the existing business model and explore a new business model; (3) continue to 
run the existing business model while simultaneously exploring a new business model; 
or (4) continue to exploit the existing business model while changing it incrementally. 
The study concentrates on the different ways in which incumbent and startup companies 
react; companies that ignore the threat are not included (Osiyevskyy & Dewald, 2015). 
According to Tushman and O’Reilly (1996), there are three distinct ways of employing 
ambidexterity in response to the exploration-exploitation dilemma. Structural 
ambidexterity means building separate structures for exploration and exploitation 
activities. Cyclical ambidexterity (Simsek et al., 2009) is based on the view that 
companies develop through periods of stability (exploitation) and change (exploration). 
Contextual ambidexterity builds on companies’ capacity to run exploration and 
exploitation activities simultaneously using the same teams (Gibson & Birkinshaw, 
2004).  
Main contributions 
The main contribution of this study is a proposed typology of business model 
ambidexterity applications as shown in Table 4.2. 
 
Table 4.2: Proposed typology of business model ambidexterity applications  
Ambidexterity 
mode 
Group Business model ambidexterity application 
Structural 
ambidexterity 
a Creation of parallel structures for exploration and exploitation 
b Emergence of spin-off from exploration activities 
c Move from spin-off to internal exploration 
Cyclical 
ambidexterity 
d Cyclical alternation of exploration and exploitation activities 
e Rotation of different business models within exploration activities 
Contextual 
ambidexterity 
f Simultaneous internal exploration actions by the same unit 
g Changing business model after exploring new pivots for business 
 
4.4 Publication 4: “Business model experimentation in internationalizing SMEs: 
Evidence from Finland” 
53 
Companies in Group (a) build separate structures for exploring new business models 
while continuing to exploit the existing business model in a separate business unit. Group 
(b) comprises companies that also separate the exploration of new business models into 
a separate entity but as a spin-off while the company continues to exploit the existing 
business model. Group (c) companies begin as a spin-off from a large organization but 
follow up with internal exploration activities. These three groups represent the structural 
ambidexterity mode. 
The cyclical ambidexterity mode is represented by two groups. Companies in Group (d) 
enter exploration mode to devise a new business model and then change to exploit that 
business model. Group (e) companies build a stable and exploitable business model but 
use exploration to experiment with new business models before integration into company 
operations.  
Contextual ambidexterity mode also includes two groups. Group (f) companies run 
multiple business models simultaneously and are in constant exploration mode. 
Companies in Group (g) follow the classical startup model by experimenting with a 
business model in exploration mode until it becomes unsustainable, after which they pivot 
or restructure the business model and start over. 
4.4 Publication 4: “Business model experimentation in 
internationalizing SMEs: Evidence from Finland” 
Business model experimentation is a specific way of pursuing business model innovation. 
It is used to identify the optimal business model in a highly uncertain business 
environment through a cyclical process of experimentation. The megatrends of 
globalization and digitalization make it much more likely that companies will enter 
international markets, and business model experimentation is one way of developing and 
optimizing their business model in the process. 
Research objectives and theoretical approach 
The main objective of this study was to increase understanding of how internationalizing 
SMEs use business model experimentation when entering a new market. 
For the purposes of this study, business model was defined as a combination of value 
proposition, value creation, and value capture dimensions, including the ten sub-
constructs (Clauss, 2017). Business model experimentation is used to prepare for and 
react to unexpected events in the market. In this cyclical process, specific experiments 
with a new business model are conducted with actual customers. Based on the results, the 
business model is adjusted, and a new experiment is devised. In other words, business 
model experimentation is a trial-and-error process that aims to improve the existing 
business model (Sosna et al., 2012). 
4 Summary of publications and review of results 54 
In this study, analysis of the case SMEs was based on three criteria: (1) type of 
experimentation; (2) international business model used; and (3) international growth 
strategy. 
Main contributions 
The main theoretical contribution of the study is a proposed typology of business model 
experimentation for internationalizing SMEs as shown in Table 4.3. 
 
Table 4.3: Typology of business model experimentation in internationalizing SMEs. 
Group Experiment 
type 
International 
Business 
model 
International 
Growth 
strategy 
Description 
Upstart 
startups 
Pivot Market 
adaptive 
Lean to global Lean startups trying to 
succeed in the international 
market after domestic 
success 
Lean global 
startups 
New offering Technology 
exploiter 
Lean global Technology firms going 
straight to international 
markets with unique 
offerings 
Cautious late-
bloomers 
New venture Ambidextrous 
explorer 
Lean to global Building international 
business in a separate 
company after domestic 
success 
Seasoned 
buccaneers 
Pivot Technology 
exploiter/ 
ambidextrous 
explorer 
Lean global Born global startups that 
have made a successful 
major pivot with their 
business model  
 
The study identifies four different ways of using business model experimentation during 
a company’s internationalization process. The investigation concentrates on differences 
in the kinds of experiment performed, the approach to business model used to enter the 
international market, and strategies for international growth.  
4.5 Publication 5: “The relationship between business model 
experimentation and technical debt” 
Companies use business model experimentation to accelerate their product development 
cycle and to minimize time-to-market. This often leads to increased technical debt, which 
4.5 Publication 5: “The relationship between business model experimentation 
and technical debt” 
55 
means sacrificing long-term quality for short term gains in order to get software to market 
quickly.  
Research objectives and theoretical approach 
In this study, the research objective was to examine the similarities and differences 
between business model experimentation and technical debt.  
Mintzberg and Waters (1985) studied the different strategy choices available to 
companies and the degree of deliberation or emergence they entail. The entrepreneurial 
strategy has emergent elements linked to entrepreneurial skills. Lean startup (Ries, 2011; 
Blank & Dorf, 2012) is a well known approach to product and business model 
experimentation that answers the questions posed by Mintzberg and Waters (1985) 
concerning the challenges of emergent strategies: the lack of realized or intentional 
strategy in the business context. 
Technical debt may be intentional or unintentional. Intentional technical debt is created 
when a company realizes it is taking shortcuts that will need to be repaired but decides 
that time-to-market is more important than quality. Unintentional technical debt is created 
as a result of personnel changes, inferior processes or other unplanned events beyond the 
company’s control.  
Main contributions 
There were four key findings linking business model experimentation and technical debt. 
First, business model experimentation creates and requires intentional technical debt. The 
lean startup approach to developing new business combines elements of business model 
experimentation and technical debt. This involves building a minimum viable product for 
business model experimentation to learn more about the product being developed. In 
deciding to build a minimum viable product, the company accepts intentional technical 
debt. 
Second, development without business model experimentation can lead to unintentional 
technical debt. In some cases, a company jumps into developing new software features 
before validating them through business model experiments. In such cases, there is a 
chance that customers will not receive the improvement as intended, and the company 
must make additional changes. This unintentional technical debt is caused by lack of 
business model experimentation. 
Third, both intentional and unintentional technical debt can be reduced through business 
model experimentation. With an experienced team, rigorous use of lean startup methods 
and business model experimentation can reduce both intentional and unintentional 
technical debt. Experts who can identify the most relevant experiments and commit just 
enough resources to get to the next validation point will make the most of business model 
experimentation, minimizing technical debt while achieving excellent results. 
4 Summary of publications and review of results 56 
Finally, too much focus on business model experimentation rather than on technical debt 
reduction can have consequences for product quality. Problems will arise if a company 
pursues a continuous cycle of experimentation without taking the time to correct the 
software and repay the technical debt. Companies cannot remain indefinitely in 
exploration mode without taking the time to exploit the business model; similarly, 
companies must at some point ensure that the product quality is meeting customer 
expectations. 
The findings suggest that the benefits of combining business model experimentation and 
technical debt follow an inverted U-shaped curve. Up to a point, a meticulous 
experimentation process will keep the technical debt on the intentional side and at 
reasonable levels. However, as with any debt, technical debt must be paid back before the 
company is too deep in the red. 
 
 
57 
5 Discussion and conclusions 
The main objective of this dissertation was to illuminate the process of business model 
experimentation in internationalizing companies in a holistic, multi-perspective way. 
Although there is an extensive literature on business models and business model 
innovation, this wider perspective adds a new level to the discussion of how companies 
innovate and experiment with their business model in situations of uncertainty.  
 
Table 5.1: Main research question and research sub-questions. 
Main research question:  
How do high-tech companies use business model experimentation in their internationalization 
processes? 
Publications Sub-research questions 
1, 2 RQ 1: How does company’s development stage and home market context affect the 
business model experimentation process? 
3,4 RQ 2: How can companies experiment with multiple business models when 
internationalizing?   
5 RQ 3: What are the effects of business model experimentation on product development 
in high-tech companies? 
 
The overarching research question is “How do high-tech companies use business model 
experimentation in their internationalization processes?” This has been addressed 
through the three sub-research questions presented in Table 5.1, combining the five 
perspectives on business model experimentation in internationalizing companies. This 
section discusses the sub-questions, and the main research question is answered. 
Theoretical conclusions and managerial implications are then presented. This 
introduction to the dissertation concludes by noting the limitations of the study and 
suggesting avenues for further research. 
RQ 1: How does company’s development stage and home market context affect the 
business model experimentation process? 
All companies start small; as they grow, they develop advanced processes and acquire 
resources. Company development stage has an effect on how they conduct business 
model experiments and how well they endure the risks associated with business model 
experimentation under uncertainty. Incumbent companies have adequate resources and 
abilities for successful business model experimentation, but they often lack the courage 
5 Discussion and conclusions 58 
to take a chance. In contrast, startups have the courage and will to change their business 
model as often as they need to but lack the systematic processes and resources needed to 
take advantage of that experimentation. 
An SME’s home market context can have a significant effect on the timing of 
internationalization. High-tech companies from immature home markets are likely to 
commence business model experimentation in international markets early in their startup 
phase, regardless of the risks involved and their lack of requisite skills. Companies from 
stable and mature home markets can grow steadily and begin internationalization at the 
later incumbent stage. However, business model experimentation processes are largely 
similar regardless of the timing of internationalization.  
Business model experimentation is always a risky process, and entrepreneurs, like most 
people, are risk averse. Risk-seeking behavior is more likely in two circumstances. First, 
people like to take minor risks if the prize is large, even if the probability of winning is 
very small. Second, people take risks when choosing between a sure loss and a high 
probability of even greater loss (Kahneman & Tversky, 1992). The present findings can 
be interpreted to mean that startups are willing to take their chances because they have 
less to lose but can do really well if they succeed, however improbable that may be. On 
the other hand, incumbents often avoid the risks of business model experimentation until 
faced with a sure loss. 
RQ 2: How can companies experiment with multiple business models when 
internationalizing?  
Running a company with an existing business model while at the same time looking for 
a new business model involves a constant interplay between exploitation of the existing 
one and exploration of the new one. These processes can be internal to the company or 
external. There are three different modes of business model ambidexterity, with different 
applications. While development stage does affect which mode is adopted, incumbents 
and startups can be found in almost all categories. Here, the main differentiating factor is 
that all of the companies studied have experimented with their business model.  
Internationalizing companies can approach business model experimentation in different 
ways. This may be seen to depend on international growth strategy, choice of international 
business model, or type of experimentation, and these criteria can be combined to 
categorize internationalizing SMEs and their business model experimentation activities.  
The findings in publications 3 and 4 must be combined to answer the research question. 
Business model ambidexterity applications can be used to offset the challenges of 
business model experimentation in internationalizing companies. Although it remains 
unclear how these explain the business model experimentation process, both provide tools 
that can help companies to better understand their options in this regard.  
4.5 Publication 5: “The relationship between business model experimentation 
and technical debt” 
59 
RQ 3: What are the effects of business model experimentation on product development in 
high-tech companies? 
The third research sub-question aims to bring business model experimentation closer to 
the product innovation process in high-tech company context. In many ways, business 
model experimentation processes and practices resemble the lean startup approach to 
product development and agile methods for software development. This is especially true 
with high-tech companies. For this reason, it is useful to investigate the parallel with 
technical debt as a means of understanding both the benefits and some of the risks of 
becoming too involved in business model experimentation.  
As a company matures, it can move from product innovation to process innovation and 
on to business model innovation (Massa & Tucci, 2013). These are distinct processes, but 
there is a link between them. Additionally, business model innovation (and business 
model experimentation) can take place early in a company’s development. As 
simultaneous business model experimentation and product development can reduce 
technical debt, business model experimentation can have both indirect and direct 
outcomes.  
Based on the publications and the combined answers to the sub-research question, it is 
possible to answer the main research question: How do high-tech companies employ 
business model experimentation in their internationalization processes? First, the way in 
which high-tech companies approach business model experimentation relates to 
development stage and home market context. Startup companies from countries with an 
immature domestic market for their products or services are the most eager to enter 
international markets and to begin experimenting with their business model. However, 
despite their innate caution, incumbents or companies from a stable and mature home 
market can also engage in business model experimentation. For some incumbents, the 
risks may seem too great, but they often have the requisite processes and resources. 
Second, companies can make various choices about running multiple business models at 
the same time and about how to use business model experimentation during 
internationalization. The business model ambidexterity application was described in 
publication 3, and the types of experiment, international business model, and international 
growth strategy were described in publication 4. 
 
  
5 Discussion and conclusions 60 
Table 5.2: Business model experimentation choices for internationalizing high-tech 
companies  
Choice Options 
Business model 
ambidexterity application 
a) Parallel structures for exploration and exploitation 
b) Spin-off for exploration 
c) From spin-off to internal exploration 
d) Cyclical alternation of exploration and exploitation 
e) Rotation of different business models 
f) Simultaneous internal exploration by the same business unit 
g) Changing business model after exploring new pivots for business 
Type of experiment a) Pivot: a new business model to experiment with 
b) New venture to experiment with a new business model 
c) New opportunity to experiment with current offering  
International business 
model 
a) Market adaptive: securing value through rapid market adaptation 
b) Exploiting technological innovation in international markets 
c) Exploring new business models in international markets 
International growth 
strategy 
a) Lean to global: domestic validation of business model before 
rapid internationalization 
b) Lean global: lean startup entry to global markets from inception 
 
Third, companies must realize that business model experiments cannot be done in 
isolation, as they will affect product development processes and outcomes (and vice 
versa). The technical debt incurred in high-tech companies by taking shortcuts to develop 
minimum viable products or business model experiments may in the long run affect 
business model experimentation unless addressed in timely fashion.  
In conclusion, internationalizing high-tech companies make different choices in respect 
of business model experimentation. Company development stage and home market 
context affect these choices, and there are consequences for product development in the 
form of technical debt.  
5.1 Theoretical contributions 
This doctoral thesis makes three theoretical contributions to the existing literature on 
international entrepreneurship and business model experimentation. As a qualitative 
research project, the theoretical outcomes serve to increase understanding of the complex 
phenomenon of business model experimentation in internationalizing high-tech 
companies. 
First, the study contributes to the existing literature by describing a holistic approach to 
the process of business model experimentation and proposing two typologies: of business 
5.2 Practical and managerial implications 61 
model ambidexterity application (after Tushmann & O’Reilly, 1996; Simsek et al., 2009; 
Gibson & Birkinshaw, 2004; Markides, 2013); and of business model experimentation in 
internationalizing SMEs (after Johnson et al., 2008; Blank, 2007; Child et al., 2017; 
Rasmussen & Tanev, 2015). While acknowledging the possibility of alternative 
approaches, the thesis provides a starting point for further research in this area. 
Secondly, the dissertation adds to the international entrepreneurship literature. 
Internationalization is a risky venture and, despite all preparations, some uncertainties 
cannot be anticipated (Figueira de Lemos et al., 2011). The thesis provides tools for 
business model experimentation by specifying different choices that internationalizing 
companies can make. Although it is known that choice of business model explains why 
some rapidly internationalizing companies succeed from the beginning while others take 
much longer (Hennart, 2014), this thesis provides a new perspective to the process of 
business model experimentation during internationalization. 
Finally, while business model innovation has commonly been described as an ongoing 
cyclical process (e.g., Dmitriev et al., 2014; Spieth et al., 2014), this dissertation adds a 
level of abstraction to that process and its development by adopting a multiple 
perspectives approach (Courtney, 2001) to business model experimentation. Choices 
related to business models and business model experimentation are difficult because the 
outcomes depend on multiple factors beyond the company’s control. Instead of trying to 
map all possible outcomes, the multiple perspectives approach provides for continuous 
assessment of the different perspectives to be considered when experimenting with a 
business model. 
5.2 Practical and managerial implications 
It can often seem contradictory for an academic to discuss business models with a 
manager. Most managers are well aware of the business model canvas (Osterwalder & 
Pigneur, 2010) and have even used it to visualize their business model for financiers or 
for colleagues. In that sense, managers can be said to be more familiar with this topic than 
with other interesting research topics in business studies. However, when asked about the 
company business model, managers often struggle, and all the more so if the discussion 
turns to changing business models or business model innovation. While the business 
model canvas is known to most managers, most remain unclear about the essence of 
business models. 
Clearly, this thesis is not a managerial handbook, but a number of its implications can 
help managers to introduce business model experimentation to their management toolbox. 
First, business model experimentation is valuable for all kinds of company. For example, 
startups are often willing to change their business model biweekly, but if those changes 
are not well planned and aligned with company strategy, they are likely to fail. Rigorous 
use of business model experimentation can also save a lot of time and effort, which is 
crucial for early stage startups. Incumbent companies are by nature careful about taking 
risks with proven business models. While many incumbent companies experiment in this 
5 Discussion and conclusions 62 
way, the results are often compared against their existing model, and future opportunities 
are overlooked. For this reason, most experiments are discarded before having any chance 
to prove their potential. For incumbents, business model experimentation promises to 
create new opportunities for alternative futures as long as the experiments are not 
discarded and forgotten. Business model experimentation can be used in many different 
ways—for example, to offer choices for changing the core business, creating a spin-off 
company, or building a new business unit targeting new markets. 
Secondly, the thesis proposes a typology of business model ambidexterity. There are 
practical examples of how companies can experiment with business models while 
continuing to exploit their existing model. All companies are different, and one way of 
describing the company’s business model, such as the business model canvas, does not 
fit all. Similarly, running multiple business models at the same time is a complex problem, 
to which there are different solutions. The present study proposes seven business model 
ambidexterity applications (described in detail in publication 3 and in section 4.3). 
Third, there are various ways of using business model experimentation as a pathway to 
international markets; the type of experiment, the international business model, and the 
international growth strategy all affect how the process unfolds. Publication 4 identifies 
four archetypes for SMEs that use business model experimentation as part of their 
internationalization process, providing a yardstick for any such company. The elements 
of the typology serve as a lens through which to explore the process of business model 
experimentation.  
Fourth, many startup companies (and, increasingly, incumbents) adopt the lean startup 
model (Ries, 2011) of build-measure-learn and use agile software development methods 
to devise new products. These processes have much in common with business model 
experimentation, and a link was identified between technical debt incurred by the 
minimum viable product thinking of the lean startup method and business model 
experimentation. For managers, it is important to understand that it is possible and even 
desirable to create new products using agile methods while simultaneously using business 
model experimentation to optimize the business model. However, it is crucial to balance 
the two processes to avoid falling into a never-ending cycle of building non-functioning 
minimum viable products in one business model experiment after another while 
accumulating technical debt that needs to be paid back before the product is ready. 
Experimentation is an increasingly popular managerial mantra, but it can be dangerous to 
fall too deeply in love with the process without recognizing its limitations in actual 
business settings. 
5.3 Limitations of the research 
While the use of qualitative methods here is well founded, exclusive use of this approach 
has certain limitations. Compared to quantitative research, the qualitative approach is 
softer and more subjective. While quantitative data can provide exact answers supported 
by numbers, qualitative data require interpretation, and the results are suggestive rather 
5.4 Avenues for further research 63 
than exact. This limitation could have been avoided by using mixed methods at some 
points. Nevertheless, the methods used here serve the objectives of the study very well. 
As noted in section 1.2, the main objective was “to explore different perspectives on 
business model experimentation in order to make better sense of the process and to 
provide new insights for both practitioners and academics.” In general, the use of 
qualitative research methods best meets this objective. 
A second limitation relates to the volume of data. All of the included publications drew 
on different samples, but more data would provide further support for the theoretical 
contributions and managerial implications. On a related point, most of the data referred 
to Finnish high-tech companies, and more international cases would help to clarify how 
cultural differences affect the process of business model experimentation.  
A third limitation of this dissertation is that the publications span a period of five years, 
during which time the thinking that eventually became the doctoral dissertation also 
evolved. Consequently, the insights in the latter publications (and in this introduction) are 
less clearly articulated in the earlier publications.  
5.4 Avenues for further research 
This dissertation opens up a number of avenues for further research. First, as mentioned 
in the previous paragraph, this study depended solely on qualitative methods, and mixed 
or quantitative methods would undoubtedly help to confirm or challenge the findings. In 
particular, the two typologies would benefit from quantitative inputs. 
Business model experimentation in incumbent and startup companies is a complex issue. 
While some differences were identified between these company types, further research is 
needed to clarify how company development stage affects business model 
experimentation. In addition, longitudinal research would provide further insights into 
how home market context affects the decisions that companies make about the use of 
business model experimentation during the process of internationalization. 
As noted in the limitations above, all but one of the case companies in the thesis 
publications were based in Finland, and it would be interesting to compare these results 
with companies from other countries and cultural backgrounds, especially with regard to 
the influence of home market context and international growth strategies.  
Finally, it was beyond the scope of this dissertation to examine how the business model 
experimentation process affects company performance, and this issue would be of great 
interest to academics and practitioners alike. 

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Publication I 
Rissanen, T., and Sainio, L.M. 
Business model experimentation in incumbent and startup companies 
Proceedings of XXVII ISPIM Innovation Conference, June 19th-22nd 20016, Porto, 
Portugal 

This paper was presented at The XXVII ISPIM Innovation Conference – Blending Tomorrow’s
Innovation Vintage, Porto, Portugal on 19-22 June 2016. The publication is available to ISPIM
members at www.ispim.org.
1
Business model experimentation in incumbent and
startup companies
Tommi Rissanen*
School of Business and Management, Lappeenranta University of
Technology, Skinnarilankatu 34, 53850 Lappeenranta, Finland
E-mail: tommi.rissanen@lut.fi
Liisa-Maija Sainio
School of Business and Management, Lappeenranta University of
Technology, Skinnarilankatu 34, 53850 Lappeenranta, Finland
E-mail: liisa-maija.sainio@lut.fi
* Corresponding author
Abstract: All companies are facing toughening global competition in rapidly
digitalizing business environment. In order to stay competitive they must be
ready to challenge, adjust and even change their business models constantly. This
applies to both incumbent and startup companies. Traditionally incumbent
companies have been perceived as unable to stay innovative, but now they do
not have a choice. This paper presents research on the differences between
incumbent and startup companies on how they change their business model
through a process of experimentation. Incumbent companies have imitated the
startup business model experimentation methods but they still lack the agility
and courage of startup companies in business model change. However, the
incumbents excel in business model validation processes. This study confirms
previous research on the importance of managerial skills and managerial choices.
Keywords: business model; business model innovation; business model
experimentation; effectuation; entrepreneurial opportunity creation; discovery
driven planning; startup; incumbent; entrepreneurship; lean startup;
digitalization.
1. Introduction
In the rapidly changing business environment companies face toughening global
competition. New business opportunities emerge and old business models are made
redundant fast. Both incumbent companies that have stabilized their business, and startup
companies that are in the beginning stages of their entrepreneurial journey, must find
ways to adjust or change their business models in order to stay competitive. Business
model innovation is a term used to describe incremental changes in the components of a
business model; extension of an existing business model; introduction of a parallel
business model with the existing one; or creation of a new disruptive business model
(Khanagha, Volberda, & Oshri, 2014). Business model experimentation is an iterative
process of changing business model through experiments. Its well-known practical
applications include the lean startup method and customer development (Blank & Dorf,
This paper was presented at The XXVII ISPIM Innovation Conference – Blending Tomorrow’s
Innovation Vintage, Porto, Portugal on 19-22 June 2016. The publication is available to ISPIM
members at www.ispim.org.
2
2012; Ries, 2011). There is little academic research on the business model
experimentation process and how different kinds of companies use it in their business
model innovation activities, however.
This study concentrates in understanding the business model experimentation process in
startup and incumbent companies. Incumbent companies are often reluctant or even
incapable of changing their existing business model (Johnson, Christensen, &
Kagermann, 2008). On the other hand, many large incumbent companies have created
internal startup initiatives with which they try to solve this innovators’ dilemma. Startups,
on the other hand, lack the resources and to rigorously follow the lean startup method by
Eric Ries (2011) for long enough to go through the number of iterations it takes to
succeed. What makes it more difficult is the fact that in digitalized business environment
it is not possible to create permanent competitive advantage even with the most ingenious
business model. That means all companies must continuously develop and adjust their
business models.
2. Literature review
Academics approach business models from different domains, which causes different
interpretations to the term.  The different business model research domains identified by
Zott, Amit, & Massa (2011) are innovation, strategy and e-business. An alternative way
of approaching business model research is to view them from three distinctive
perspectives: explaining the business (entrepreneurship); running the business
(innovation and technology management); and developing the business (strategy) (Spieth,
Schneckenberg, & Ricart, 2014).  Business model research can also be divided into
technology oriented, organization theory oriented and strategy oriented domains (Wirtz,
Pistoia, Ullrich, & Göttel, 2016). George & Bock ( 2011) identified 6 thematic groups
that reflect and describe the business model in their own way. The themes are: (1)
organizational design; (2) the resource-based view (RBV); (3) narrative and sense
making; (4) nature of innovation; (5) nature of opportunity; and (6) transactive structures.
In this paper we study how startups and incumbents use business model experimentation
in changing their business model. To achieve this goal we concentrate on
entrepreneurship and strategy streams of business model research.
The essence of a business model is a representation of how a company is designed to
create value to its customers, find a way to make the customers pay for the created value
and convert the payments into profit (Teece, 2010); or a logic of the firm, how it operates
and creates value for its stakeholders (Casadesus-Masanell & Ricart, 2010); or a system
of interdependent activities (Christoph Zott & Amit, 2010). In entrepreneurship literature
business model has been defined as the design or organizational structures to enact a
commercial opportunity. Organizational structures mean resource structures or static
architecture of the firm’s resources; transactive structure, or the organizational
configuration enabling and determining key transactions with customers and partners;
and value structure, or the firm’s way of creating and capturing value. (George & Bock,
2011) Business models in entrepreneurship literature can also be defined as opportunity
facilitators that provide entrepreneurs the means for exploiting the better understanding
of endogenous market interaction costs and exogenous outside options for resource
providers (Fiet & Patel, 2008).
Business model is equally important to both incumbent and startup companies.
Incumbents are defending their market position against startup companies that try to
disrupt their business. In most cases incumbent companies have superior resources and it
should be easy for them to replicate a successful business model that is threatening them.
However, incumbents may be reluctant of changing their business model, because it
could cannibalize their existing business model and shock both existing customers and
company stakeholders (Teece, 2010). While incumbents’ assets create the potential for
positive performance after the implementation of a new business model, the incumbents’
managerial choices are what is required to succeed or fail in realizing the opportunities
(Kim & Min, 2015). On the other hand, even though startups require business model
experimentation to rapidly validate their business model (Trimi & Berbegal-Mirabent,
2012), small startups may fail in creating a successful business model to create and
retrieve maximum amount of value from customers and instead content in selling items
rather than solutions to customers’ problems (Teece, 2010). The ability of a company to
create business model innovation is related to the top managers’ managerial skills,
entrepreneurial skills and managerial ties. (Guo, Zhao, & Tang, 2013) It is more likely
that entrepreneurs that are capable of adjusting their business model will succeed better,
especially in emerging industries (Teece, 2010).
Concluding the literature on incumbents and startups in business model innovation we
suggest that incumbent companies have the resources for business model innovation, but
they often lack the managerial and entrepreneurial skills to change an existing, well-
functioning business model. Startups have the inherent ability to continuously experiment
with their business model, but they lack the processes and resources to take full
advantage of a successful business model.
Business model experimentation
Business model experimentation is one form of business model innovation in which new
business model is sought in a continuous, iterative process of trial and error. Especially
early-stage companies require experimentation to rapidly test and validate their
assumptions on the market (Trimi & Berbegal-Mirabent, 2012). Thomke’s (1998)
experimentation process consists of four steps; (1) design, (2) build, (3) run and (4)
analyze. Widely known lean startup process is a three-step iterative process the steps
being (1) build, (2) measure and (3) learn (Ries, 2011). The goal of business model
experimentation is to identify the most crucial hypothesis in the business model and find
as efficient way as possible to test if it holds with customers. If the hypothesis is
validated, move to the second important hypothesis. If it was not, change the elements of
the business model and build new hypothesis. Because the market elements in most
industries are changing rapidly, business model experimentation should become an
ongoing process that will continuously validate the company’s business model elements.
“Business model innovation is not a matter of superior foresight ex ante - rather it
requires significant trial and error, and quite a bit of adaptation ex post” (Chesbrough,
2010: 356).
Business model experimentation has strong ties to entrepreneurship and strategy domains
of business model research. There are three theoretical concepts used in this research to
This paper was presented at The XXVII ISPIM Innovation Conference – Blending Tomorrow’s
Innovation Vintage, Porto, Portugal on 19-22 June 2016. The publication is available to ISPIM
members at www.ispim.org.
4
approach business model experimentation: entrepreneurial opportunity creation,
effectuation, and discovery driven planning.
Entrepreneurial opportunity is one of the main concepts in entrepreneurship literature.
“An opportunity is an idea or dream that is discovered or created by an entrepreneurial
entity and that is revealed through analysis over time to be potentially lucrative.” (Short
et al., 2010: 55) There are two dominant approaches to entrepreneurial opportunity in the
literature: entrepreneurial opportunity discovery and entrepreneurial opportunity creation.
The first approach sees opportunities as existing, tangible realities that entrepreneurs
must find and exploit. Entrepreneurial opportunity creation approach claims that the
opportunity development is an essential part of creating a business from an
entrepreneurial opportunity and that business model development begins with the
creation of an opportunity. (Ardichvili, Cardozo, & Ray, 2003) In this study we follow
the entrepreneurial opportunity creation approach.
Effectuation is a principle introduced by Sarasvathy (2001). She created an alternative
approach to prediction-based logic of causation in interpreting the existence and creation
of firms and markets.  In effectuation process the set of means are given and the focus is
in selecting between the possible effects that can be created by the means. In more
traditional causation approach the effects are chosen first and the means are selected so
that the effects can be created with them. (Sarasvathy, 2001). In effectuation thinking the
focus of the company is in the creation of short-term experiments to identify business
opportunities that can be tested affordably (Chandler, DeTienne, McKelvie, & Mumford,
2011). The thinking relies on existing resources that are assembled to create value rather
than strong understanding of the market needs.
Conventional strategic thinking concentrates in planning and the success is measured by
comparing the projections to the actual events. Discovery driven thinking aims at
learning as much as possible at the lowest possible cost instead of careful planning and
rigorous implementation of the plan. Discovery driven approach to business models
assumes that it will take market place experimentation and time to discover the most
effective model to survive in the market. The investment strategy in discovery driven
planning follows real options theory by investing in many small opportunities instead of
betting on one large plan. Most of the experiments will fail, but some will succeed and all
of them will increase learning. (McGrath, 2010)
There are similar elements in all three concepts mentioned above. In this study we define
the concepts in relation to business model experimentation as follows:
x Entrepreneurial opportunity creation is the experimentation of a radically new
business idea before the creation of a service or product.
x Effectuation is the experimentation of a business model based on the existing
resources and processes of a company. Company possesses tangible and intangible
resources, but no understanding of customer needs. The needs are validated by
creating affordable experiments.
x Discovery driven planning is the experimentation of a business model in a systematic
way following a pre-determined plan that is adjusted as the understanding increases.
The experimentation is done through an iterative experimentation process following
the real options theory.
3. Research design
This study has been conducted as a multiple case study using inductive reasoning. A total
of 32 interviews were made with 28 interviewees from 19 different companies. 11 of the
companies were startups and 8 of them incumbents. The companies were all from Finland
representing ICT service, ICT product, media and venture capital industries. These
industries were selected because the global competition that the internet has made
possible has had a very profound impact in these industries. The selection of the
companies was based on preliminary inquiries and knowledge of the companies
beforehand. All of the selected companies had used experimentation in either developing
the business model of the whole company (startups), or in developing the business model
of a product or service (incumbents).
The interviews were semi-structured and lasted from 25 minutes to 71 minutes. Most
interviews were conducted between 29.7.2015 – 22.12.2015 with 8 interviews a year
earlier. The questionnaire was designed to follow the development path of the company
from the first idea to the present day concentrating on the creation and changing of the
business idea and business model.
Table  1  Interviewees
Company Main Industry Size Offering
Startup 1 ICT products small b2b
Startup 2 ICT products small b2b
Startup 3 VC small b2b
Startup 4 ICT services micro b2b
Startup 5 ICT products small b2b
Startup 6 ICT products micro b2b
Startup 7 ICT products/services small b2b
Startup 8 Food products small b2c, b2b
Startup 9 ICT services small b2b
Startup 10 ICT services small b2b
Startup 11 ICT products small b2c
Incumbent 1 ICT services/VC medium b2b
Incumbent 2 Media large b2c
Incumbent 3 ICT services large b2c, b2b
Incumbent 4 ICT products medium b2b
Incumbent 5 Media medium b2b
Incumbent 6 ICT services medium b2b
Incumbent 7 VC large b2b
Incumbent 8 Media small b2b
The interviews were transcribed into text and analyzed using Nvivo qualitative research
software. The objective of the analysis was to identify differences between incumbent
and startup companies in how they use business model experimentation. For that purpose
the interview data was coded to highlight different phases of the business model
This paper was presented at The XXVII ISPIM Innovation Conference – Blending Tomorrow’s
Innovation Vintage, Porto, Portugal on 19-22 June 2016. The publication is available to ISPIM
members at www.ispim.org.
6
innovation: ideation, validation and change. Also, elements of using entrepreneurial
opportunity creation, effectuation and discovery driven planning were coded.
4. Findings
The different instances where business model experimentation was mentioned by the
interviewees are presented in figure 1.
Figure 1. Business model experimentation divided between different concepts and
different business phases.
The triangles in Figure 1 represent startups and circles incumbent companies.
Alphabetical identifiers with incumbents refer to different interviewees in the same
company. This study is qualitative rather than quantitative and thus the number of
comments in different segments is not analyzed any further.
Entrepreneurial opportunity creation
Entrepreneurial opportunity creation in this study refers to presenting a new business
model idea to customers or other stakeholders without building a service or product yet.
Only ideation phase of the business model development in companies had features of
entrepreneurial opportunity creation in it.
“It was this high-flying vision. And the thought that something like this could
probably be done with today’s technology. And something like this would make
consumers’ life easier in this content flood. Very fuzzy [idea]. High level… suits
to the company strategy and customer feedback promised some interest. And on
the other hand I had a thought that this would be a killer thing and that we must
do something” – Incumbent 2
Entrepreneurial opportunity creation begins with an idea that has some backing to it. This
idea later became a new service that was experimented with using other methods.
Effectuation
Effectuation was interpreted in this study as trying out an idea based on existing tangible
and intangible resources with customers. There were much more comments to the
effectuation category. There were features of effectuation in all business model
innovation phases of one company and two had them both in ideation and validation
phases. With incumbents there were also features of effectuation in all three phases of
one company, but otherwise mostly with the ideation phase.
“…For example this [spin-off company] began so that we had a guy working for
us who had done this kinds of systems and he had a vision and a thought on how
the business could be done better. Then we built it around him, because he
wanted to do it and he obviously had the competence and contacts and so that
company pretty much was born around the initiative of this one person.” –
Incumbent 1
Above quotation was an example from the idea phase. Sometimes just one person is
enough to initiate a change.
“What worked well was that people were interested in this sharing activity and
it got pretty good publicity and also quite many [people] began these free... pretty
fast  about  a  thousand  of  them  were  started  all  over  the  world.  In  over  50
countries. And people were very enthusiastic saying ‘yes, this is great what you
are doing, cool that this is done, it is very important’.” – Startup 2
This startup had put out a new service following effectuation logic and got validation for
it from customers.
“Five years ago we were in a situation where we had to make a decision. At that
point we decided that we will begin making something similar to businesses
[than we previously had done for consumers]. When we have a team, we have
the competence and we have fought for this so much that we decided to change
our business upside down and to quit this community service and start a b2b
service with tan idea that everything we do has a price. So we can create cash
flow fast and prevent business going bankrupt. This is where we began. For the
first two years the company name stayed the same and the community existed
even though there was no upkeep to it. Then later we closed the community and
changed the company name to what it is now.” – Startup 10
In the above quotation startup 10 describes a rare case in which their company changed
their business model radically and leaned only to the competence of their team without
understanding the market at all. Through experimentation they have refined their business
model and are now a very successful company with strong funding and steady growth.
Discovery driven planning
Discovery driven planning is in the crossroads of strategic and entrepreneurship streams
of business model research. It is based on causational planning rather than effectuation,
but experimentation, trial-and-error learning and small iterations rather than long lasting
plans are inherent in discovery driven planning. Being closer to traditional business
thinking, there were more comments related to discovery driven planning than to other
concepts used in this study.
This paper was presented at The XXVII ISPIM Innovation Conference – Blending Tomorrow’s
Innovation Vintage, Porto, Portugal on 19-22 June 2016. The publication is available to ISPIM
members at www.ispim.org.
8
Discovery driven planning appears to suit best to explain the validation of a business
model though experimentation. All but one incumbent and 9 out of 11 startups had
features of discovery driven planning in the validation phase of their business model
innovation. Startups were more eager in business model change phase than incumbents.
“Well, yes, we immediately that own thing we had at use… we made a few
additional things to it and just tried to get pilot users to it before nobody could
actually register to the service. And we got the pilot user and talked to the
customers and tried to understand the area more and, before we started coding,
we were sure that there was some sense in this thing.”– Startup 7
This startup used the classical lean startup method to create a minimum viable product to
test the initial hypothesis. That has strong ties to discovery driven planning in the idea
phase of business model innovation.
“The first pilot, I sold it for 150€ per month, a year ahead. And exactly five of
those. … In the next phase I have thought of 250 € per month and tried to charge
something for the implementation, but it is only for this phase and not how it is
going to go next year. … in practice I have an estimation in my head that 2,99 €
per person if it goes over 250 € minimum per month. … But this is not even the
right way to price [the product]. You don’t price them logically according to the
number  of  users,  but  for  me  it’s  the  best  guess,  easy  guess  that  it  should  cost
about that much to your kind of company. … But why should I think that now.
Let’s make the product now and sell it for about the right price and then get
precise.”– Startup 6
“The idea is that we draw a business model canvas from the process. It forces to
make your guesses explicit. Then they are there under your nose. Then we just
evaluate, which is the most critical of the assumptions. We choose that and then
there is the creative part of deciding on the experiment we use to validate the
assumption. Is it an additional feature to the product? In my opinion the
definition of MVP [minimum viable product] is: minimum amount of product or
work that gives a credible result whether our hypothesis was right or wrong.” –
Incumbent 1
The startup example had elements of discovery driven planning in the validation of its
business model in a very free and intuitive way. On the other hand, the incumbent used a
very rigorous and systematic way to validate the assumptions. The limited resources
dictate on how early stage startups can move forward with their business.
“…they sent our users a questionnaire in which they tried to find out why people
were not ready to pay for it. And based on that we would have started to work
on changes, but unfortunately we were not given the chance to that. There were
naturally several  reasons,  but  one big issue was the price.  Okay, the price was
high, but we could not decide the price ourselves, but instead it was decided in
the company management team.” – Incumbent 2
In this case the validation proved one element of the business model flawed. The case
was in a large incumbent company and the service they were building in a very startup-
way was ended. The main reason for failure was not in the service, however, but in
pricing that was decided without testing it with customers. This embodies on main
difficulty of incumbent companies confirming the findings of Guo et al. ( 2013).
The final square of the matrix represents how discovery driven planning are found in the
change phase of business model innovation. There was a strong representation of both
startups and incumbents. Startups were more active in business model innovation than
incumbents, which confirmed the findings of previous studies (Trimi & Berbegal-
Mirabent, 2012).
“The subscription fee… you can always say that things change, but that is so
built-in to the model that it would be hard to change. But hardware is something
that can be adjusted much more, because hardware is the gate to this world and
if it’s our hardware or someone else’s hardware is secondary to us. As long as
users get the right experience and get their hands on this. So, there can happen
changes or could happen.” – Startup 11
“We have been growing our competence palette in kind of backwards direction
to the chronology of the product. We began at the hard code. When we have done
that we have noticed that the things that have taken place before our work began
have not gone well. Always a small team to the customer, enthusiastic people
who want to do it… everyone have always been interested in the end customer.
So, we have realized that we can’t create diamonds, because it has been ruined
already before us. Then the reaction has always been that we need to get this our
little team, this mutual way of doing things that other part as well. So we went
from coding to agile methods, service concepts, business models, data science
and digital marketing.” – Incumbent 1
In many interviews the same difference between incumbent and startup ways of doing
things could be seen. Startups were preparing themselves for a possible changes and
incumbents changed their business model because they had to. It is a rather subtle
difference, but clear in the interview data.
5. Conclusions
In the previous research on incumbents and startups using business model
experimentation the findings were indicating that startups are more active in using
experimentation. The startups’ problems were related to lack of resources and possible
inability to take full advantage of the business model. The biggest difficulties for
incumbents have been related to the very commitment to changing existing, fully
functioning business model. They have the resources and processes to change the model,
but managerial skills, entrepreneurial skills and managerial ties in incumbent companies
do not support business model experimentation.
The theoretical concepts used in this paper to study business model experimentation were
entrepreneurial opportunity creation, effectuation and discovery driven planning.
Entrepreneurial opportunity creation was the most difficult to find in the case companies.
As there is a lot of ideation taking place before companies are established, we could
argue that the data is lacking in this part. However, only the mentioned few case
companies indicated that they had used business model experimentation in the ideation
phase with elements from entrepreneurial opportunity creation. There were no
remarkable differences between incumbents and startups in this area.
Looking at the features of effectuation in business model experimentation there can be
seen some differences between incumbents and startups. Incumbents used business model
This paper was presented at The XXVII ISPIM Innovation Conference – Blending Tomorrow’s
Innovation Vintage, Porto, Portugal on 19-22 June 2016. The publication is available to ISPIM
members at www.ispim.org.
10
experimentation to try out new business opportunities because they had the resources and
wanted to see if it would make a good business. Startups in many instances validated
their business model or made a radical change to it because they did not have any other
choice.
Discovery driven planning was the easiest of the concepts to identify with both
incumbents and startups. Here also the biggest differences between the different kinds of
companies were seen. The startups used business model experimentation intuitively and
in fast cycles while preparing the company for the next business model change. In most
cases they were not even trying to find a lasting, stabile business model, but were in a
mode of constant change instead. Incumbents worked systematically and used their
processes to efficiently pursue the target. In more than one case incumbents decided to
end the development of a product or service based on the experiments. Startups in the
same position pivoted and tried something else. The managerial and entrepreneurial skills
or the lack of them were seen as the cause for this in the incumbents.
In many ways this study confirms the previous research in the area. New findings in this
study were that actually incumbents are better in following the rigorous business model
experimentation process than startups. One reason for that is their better resources and
skilled use of processes. Very few startups use the lean startup method or any other strict
process for business model experimentation, but instead they ready themselves for
change and make quick decisions mostly based on intuition. Many incumbents imitate
startups in business model experimentation and use the lean startup method more than
startups themselves and while some of them succeed for the reasons mentioned above,
many still fail because of the previously identified managerial problems.
There are differences between incumbents and startups in using business model
experimentation. Better understanding of the reasons requires further research on the
topic.
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members at www.ispim.org.
12
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http://doi.org/10.1177/0149206311406265
Publication II 
Rissanen, T., Ermolaeva, L., Torkkeli, L., Ahi, A., and Saarenketo, S 
The role of home market context on the business model change in 
internationalizing SMEs. 
Accepted for publication in 
European Business Review  
April 2nd 2019  

   
 
   
 
The role of home market context in business model change in internationalizing SMEs  
 
Purpose – The paper explores the underlying reasons for business model change among 
internationalizing SMEs and illustrates how home market context affects that change. 
 
Design/methodology/approach – This is a comparative case study of two companies with 
similar backgrounds from different countries of origin. In each case, the data were collected by 
means of in-depth interviews with key informants. For its theoretical background, the study 
draws on the business model innovation and international business literature.  
 
Findings – We found that home market context has two kinds of effect on business model 
change in internationalizing SMEs. First, home market maturity has a strong effect on the timing 
of companies’ internationalization efforts. Second, the company’s home market can either be 
used to strengthen the value proposition or may be disguised, depending on how the country of 
origin is seen in international markets. This factor has a strong influence on how SMEs change 
their business model when internationalizing.  
 
Research limitations – The study’s limitations relate to its qualitative and exploratory nature. 
Future research should further assess the generalizability of these findings across different 
cultural contexts and countries of origin by quantifying the central concepts and examining how 
they relate to larger-scale cross-national and cross-sectional panel data.  
 
Practical implications – As internationalization increasingly poses both threats and 
opportunities, companies must be able to experiment with business models when necessary in 
order to adapt to the host market. In so doing, it is also important to consider how a company’s 
home market affects business model change.   
 
Originality – This is one of the first studies to illustrate how the process of internationalization 
drives SMEs to change their business models. As such, the paper enhances existing 
understanding of business model change in the context of internationalization. To our 
knowledge, no previous study has described these dynamics in a comparative context that 
takes account of SME country of origin. 
 
  
   
 
   
 
Introduction 
In most industries, companies face more changes in their business environment than ever before 
(Teece, 2010; Trimi and Berbegal-Mirabent, 2012; George and Bock, 2011). They need to change 
their business models accordingly, making it crucial to understand the importance of business 
models to ensure success and competitiveness in the market (e.g. Wirtz et al., 2016; Sosna et 
al., 2010). Internationalization often increases business model complexity, as models that work 
well on the home market can encounter challenges abroad in terms of economic, political, legal 
or cultural environments (Child et al., 2017). As the process of internationalization always involves 
greater risk and uncertainty than the domestic market, well-managed companies tend to plan their 
international interventions carefully (Figueira de Lemos et al., 2011). For that reason, 
internationalizing companies usually have no option but to change their business model if they 
are to succeed in the new environment. However, there is to date little research on how 
companies make such changes as they enter international markets, as only a few studies have 
sought to understand how SMEs internationalize through business model innovation (Rask, 2014) 
or how internationalization is linked to the business model (Child et al., 2017). This is a notable 
research gap, as rapidly internationalizing enterprises tend to be characterized in particular by 
business model change (Hennart, 2014).  
  
Child and colleagues (2017) recently attempted to address this gap by investigating the role of 
context in the international business models of SMEs. They argued that three predictors explain 
the variation in SME international business models: (1) industry context, (2) entrepreneurial 
experience of company management and (3) home market context. While the first two of these 
have been studied previously (Child et al., 2017), the influence of home market context has 
received little attention in the international business model literature. As a result, Child et al. (2017) 
called for further qualitative research on the importance and consequences of context in SMEs’ 
choice of international business model, noting this as a promising area for novel research. 
Responding to that call, the present study is a qualitative empirical analysis of business model 
change among SMEs operating internationally. 
 
We focus on the role of home market context in business model change during 
internationalization. Hostile home country factors such as political risk and instability have been 
identified as external issues that can hinder or assist internationalization (Caputo et al., 2016). 
Home market context is also an enabler for international business in the sense that a small home 
market is one of the necessary conditions for international new ventures (INV) or ‘born global’ 
companies (Hennart, 2014). The business model plays a role in this dynamic, as the firm may not 
initially aim to change its business model if it is thought to work efficiently. However, new 
opportunities and, in particular, new threats can prompt a firm to change its existing business 
model (Saebi, Lien and Foss, 2017). 
 
For the reasons outlined above, this study attempts to clarify the effects of home market context 
on business model change in internationalizing SMEs. Drawing on in-depth qualitative data from 
two contrasting cases, we argue that an SME’s home market context affects business model 
change in different ways. Accordingly, our main research question is as follows: How does an 
   
 
   
 
SME’s home market affect how it changes its business model when entering international 
markets? 
 
The paper is organized as follows. The next section outlines the theoretical approach to business 
models and entrepreneurial opportunities in the context of internationalizing companies. We also 
highlight linkages between business model change and international opportunity creation in the 
international business and entrepreneurship literature, emphasising the particular need to 
examine these issues in the Russian-Finnish empirical context. After describing the applied 
research methodology, we present the empirical findings. The paper concludes with a discussion 
of the results in relation to the existing literature and the study’s contribution to theory. 
Business models and business model innovation  
Business model research has been of interest to scholars since the emergence of the world wide 
web (Zott and Amit, 2007). In the early days, the business model concept was variously 
interpreted, depending on the literature stream (Zott et al., 2011). In recent years, the concept 
has matured, and while differences persist in terms of interpretations or elements, the research 
has moved forward (Foss and Saebi, 2018). For Demil and Lecocq (2010), a business model 
consists of the firm’s resources, competences, organizational structure and value propositions. 
Casadesus-Masanell and Ricart (2010) defined the business model as ‘the logic of the firm, the 
way it operates and how it creates value for its stakeholders’. According to Johnson, Christensen 
and Kagermann (2008), the business model comprises four interlocking elements: (1) the 
customer value proposition, (2) the profit formula, (3) key resources and (4) key processes. 
Magretta’s (2002) approach to the business model addressed three questions: ‘Who is the 
customer?’, ‘What does the customer value?’ and ‘How do we make money in this business?’ 
Examining business models from a dynamic point of view, McGrath’s (2010) construct has two 
components: (1) the unit of business and (2) process or operational advantages. Moingeon and 
Lehmann-Ortega (2010) concluded that the business model consists of three elements: (1) the 
value proposition, including the client and the product; (2) the value architecture, including the 
company’s internal value chain and its value network; and (3) the profit formula, explaining 
incomes and costs. A study by Amit and Zott (2001) and its subsequent development (Zott and 
Amit, 2010) defined the business model as an activity system involving two sets of design 
parameters related to (1) content, structure and governance and (2) a dominant value creation 
driver such as novelty, lock-in, complementaries or efficiency. 
 
In an analysis of the business model literature for the period 2002–2014, Clauss (2017) identified 
120 potential business model components, which can be divided into three main dimensions: 
1. value proposition; 
2. value creation;  
3. value capture.  
 
For present purposes, we follow Clauss (2017) in defining the business model in terms of three 
elements (value proposition, value creation and value capture) that evolve and change over time. 
Table 1 organises the various business model definitions above along those three dimensions.  
   
 
   
 
  
Table 1. Business model definitions and dimensions  
 
Study Value proposition Value creation Value capture 
Demil and Lecocq (2010) Propositions for value 
delivery 
Organizational structure, 
resources and components 
 
Casadesus,-Masanell and 
Ricart (2010) 
Policy choices Governance choices, asset 
choices 
Policy choices 
Johnson, Christensen, 
Kagermann (2008) 
Customer value proposition Key processes and resources Profit formula 
Magretta (2002) What does the customer 
value? 
 How do we make money in 
this business? 
McGrath (2010) Unit of business Process or operational 
advantages 
Unit of business 
Moingeon and Lehmann-
Ortega (2010) 
Value proposition Value architecture Profit equation 
Amit and Zott (2001); Zott 
and Amit (2010) 
Design themes of activity 
system: NICE 
Activity system governance, 
activity system structure, 
activity system content 
 
 
 
In a rapidly changing environment, the ability to adapt and change the business model is an 
increasingly important competence for companies (Doz and Kosonen, 2010). However, business 
model definitions rarely account for time or the dynamic nature of the business. McGrath (2010) 
noted that business models can rarely be anticipated in advance but are instead learned over 
time, reflecting what works and what does not. Doz and Kosonen (2010) also emphasized the 
need for companies to transform their business models more rapidly, more frequently and more 
extensively in this era of global competition, discontinuities and disruptions. Achtenhagen et al. 
(2013) suggested that certain strategizing actions, when combined with specific critical 
capabilities, enable companies to change their business model more effectively over time. They 
too stress the importance of the business model’s dynamic nature. Connective mechanisms in 
the business model allow adjustments of its elements, rendering it dynamic and cyclical (Dmitriev 
et al., 2014). However, although the business model may change in response to external shifts, 
little is known about how and why firms adapt their business models to environmental 
opportunities and threats (Saebi et al., 2017). In the strategic and organizational literature, various 
streams (e.g. behavioural theory of the firm) have investigated how firms adapt to their external 
environment (Chakravathy, 1982; Teece et al., 1997), and business model innovation has 
garnered notable research attention in efforts to conceptualize the phenomenon. In different 
studies, the concept of business model dynamics and innovation has been variously 
characterized as business model evolution, business model erosion, business model 
transformation and business model innovation (Foss and Saebi, 2018).  
 
   
 
   
 
Trimi and Berbegal-Mirabent (2012) identified three forms of innovation within business models: 
(1) business models themselves as a source of innovation; (2) the technology-push approach of 
disruptive innovation, encompassing small changes in the business model; and (3) the demand-
pull approach, in which business models are reformulated to meet changing customer demands. 
At a higher level of abstraction, business model innovation can be said to describe either the 
creation of a new business model or changes to an existing one (Clauss, 2017). The term has 
also been used to describe strategizing actions that shape, adapt and renew the business model 
to achieve sustained value creation (Achtenhagen et al., 2013), as well as the design of business 
models to generate virtuous cycles or feedback loops that continuously reinforce competitive 
advantage when aligned with company goals. This is neither strategy nor tactics but refers to the 
use of business models to gain competitive advantage (Casadesus-Masanell and Ricart, 2011). 
Business model improvement is any successful change in any element of the model that delivers 
substantially enhanced ongoing sales, earnings and cash flow for competitive advantage. 
(Mitchell and Bruckner Coles, 2004). On this view, business models are seen as a source of 
innovation and continuous improvement—that is, as vehicles for business transformation and 
renewal. 
 
As business model research rarely takes account of location, internationalization has not received 
much attention in the relevant literature (Onetti et al., 2012; Child et al., 2017). Sosna et al. (2010) 
viewed business model development as a process of trial and error that aims to identify a viable 
business model through cycles of exploration before moving on to an exploitation phase that 
replicates the business model, for example, in new international markets. Osiyevskyy and Dewald 
(2015) concluded that most incumbent firms engage in pure exploitation of the existing business 
model or pursue incremental innovation even when threatened by new disruptive business 
models. Schneider and Spieth (2013) distinguished between incremental business model 
development and radical business model innovation, arguing that business model innovation has 
its roots in strategic entrepreneurship, addressing the question of how to explore and exploit 
opportunities. Foss et al. (2017) also differentiate between business model adaptation and 
business model innovation. The level of business model innovation depends on how many 
business model elements are changed, and on the weight of the changed elements or 
components (Ammar and Chereau, 2018). As defined in the present study, business model 
innovation involves exploring and exploiting new business opportunities rather than creating new 
business models from scratch, developing an existing business model incrementally or serving 
as a source of innovation.  
 
There are two distinct lines of argumentation that predict firms’ behaviour in response to external 
stimuli. The threat-rigidity hypothesis (Staw et al., 1981) assumes that firms faced with external 
threats will respond cautiously, applying known and routinized patterns of action (Shimizu, 2007), 
while opportunities are more likely to lead to risky managerial actions (Chattopadhyay et al., 
2001). The second approach, prospect theory, argues that managers are more sensitive to losses 
than to gains of equal magnitude. They are therefore risk averse with high probability of gains and 
risk seeking with high probability of losses – and reversely risk seeking with low probability of 
gains and risk averse with low probability of losses (Kahneman and Tversky, 1979; Tversky and 
Kahneman, 1992; Barberis, 2013). While some studies therefore acknowledge that business 
   
 
   
 
model adaptation is likely to happen under conditions of external threat (e.g. De Reuver et al., 
2009; Voelpel et al., 2004), others emphasize the importance of perceived opportunities as a 
catalyst for business model adaptation (e.g. Pateli and Giaglis, 2005; Sabatier et al., 2012). For 
companies operating internationally, their home and host markets represent a major source of 
threat or pressure, and we turn to this issue next. 
The role of the home market in SME business model change and 
internationalization 
Internationalization is a dynamic process of learning that results in a firm’s increasing involvement 
in foreign markets (Johanson and Vahlne, 1977, 2009). Although the idea of internationalization 
as a dynamic, incremental process is well established in the international business literature, 
scholars have argued that many SMEs do not adopt this approach (e.g. Buckley, 2011; Knight 
and Liesch, 2016). For example, SMEs may begin by entering international markets early in their 
life (Autio, Sapienza, and Almeida, 2000; Knight and Cavusgil, 2004); these firms internationalize 
rapidly from inception rather than gradually increasing their commitments in foreign markets. In 
addition, some firms may reduce rather than increase their commitments in a foreign market as 
time passes (Benito and Welch, 1997) while others may escalate their involvement abruptly (as 
opposed to incrementally)—for example, by switching from exporter status to wholly-owned 
subsidiary (Calof and Beamish, 1995). Nevertheless, there is consensus that the process of 
internationalization encompasses a firm’s involvement in international markets, regardless of its 
size. The process is risky because of a lack of knowledge of new foreign markets and associated 
managerial decisions (e.g. Andersen, 1993). Because of this uncertainty when operating in new 
environments, firm strategy should adapt continuously during internationalization (e.g. Calof and 
Beamish, 1995).  
 
Changing the business model facilitates trial-and-error learning and therefore eases the 
adaptation to the new environment (Sosna et al., 2010; Chesbrough, 2010). Even when operating 
locally, SMEs often need to adapt their business model in response to uncertainty and ambiguity 
(Andries and Debackere, 2007; Cuccelelli and Bettinelli, 2015). As SMEs face more uncertainty 
when entering international markets, it is unsurprising that the business model must embrace 
innovative response to change if it is to overcome that uncertainty. At the same time, Saebi et al. 
(2017) argued that business model change is also risky, as it always involves altering routinized 
patterns of actions, with uncertain outcomes. They found that the more severe the external threat, 
the more likely it is that firms will engage in business model adaptation. As companies face 
significant barriers when deciding to change their existing business model (Chesbrough, 2010), 
most are reluctant to do so unless there are strong incentives (Saebi et al., 2017). 
 
One important incentive for internationalization, and therefore for business model change, is 
exploitation of international opportunities (Oviatt and McDougall, 2005; Ellis, 2011) as discovered 
by individuals (Venkataraman, 1997). Opportunities can be defined as situations with a higher 
probability of gain, over which more control can be exerted (Chattopadhyay et al., 2001). Ellis 
(2011) defines ‘international opportunity’ as the chance to exchange with new partners in new 
foreign markets. Chandra et al. (2012) found that opportunity identification and development is a 
   
 
   
 
continuous, cyclical process, as one opportunity stimulates and generates other opportunities 
through learning and exposure to new information, resources and network ties. This confirms that 
both the pattern of international opportunity identification, refinement and development and 
commitment to international markets are path- and history-dependent (Sydow, Schreyögg, and 
Koch, 2009). Chandra et al. (2012) also showed that failures and false opportunities are not 
uncommon in internationalization but can be a source of learning insofar as they help firms to 
better define their ‘opportunity space’—that is, which opportunity, business partner, client, and 
country domain to become involved with or enter).  
 
However, firms also face certain threats when entering foreign markets—in other words, situation 
involving a high probability of loss, over which the company has little control (Chattopadhyay et 
al., 2001). To offset the negative consequences of threats, firms are likely to respond by making 
internal changes (e.g. cost cutting, budget tightening) to ensure greater efficiency (Thomas et al., 
1993). This in turn may lead to business model modification in terms of value creation or value 
capture. On the other hand, firms in an unfavourable situation may pursue risk because they have 
little to lose (Kahneman and Tversky, 1979). In this sense, firms may respond to threat with 
externally directed actions. In relation to business model components, external threats may lead 
to value proposition change, and perceived threats may outweigh opportunities as a stronger 
incentive for business model change (Saebi et al., 2017).  
 
Child et al. (2017) argue that home country development level is an important factor predicting 
business model variation in internationalizing SMEs. Home country characteristics affect firms’ 
internationalization, for example, via trade, foreign direct investment, and institutional and 
competitive learning (Cuervo-Cazurra et al. 2018b). Home country institutions such as 
government trade agencies, industry associations, and research institutes are significant 
resources that can support SMEs to internationalize (Brouthers et al. 2009), and therefore 
influence which business models they adopt (Child et al. 2017). In addition, uncertainties arising 
from the home country political risk and corruption can influence firms’ internationalization and 
performance (Cuervo-Cazurra et al. 2018a). For example, firms mitigate their home country 
political risk by entering into foreign markets, as this decreases their dependency on the domestic 
market (Witt & Lewin, 2007; Yamakawa, Peng, & Deeds, 2008). Similarly, home country 
corruption can help firms enhance their performance when internationalizing, as they learn how 
to deal with changing application of rules and regulations and become more adaptable to sudden 
changes — a capability specifically useful for firms dealing with changes in regulations when 
entering a foreign market (Cuervo-Cazurra et al. 2018a). In addition to the role of institutions and 
different uncertainties, home country culture can also influence firm internationalization and 
business model change. For example, Weber and Hsee (1998) identified significant differences 
in how risk is perceived in different cultures. While people in all cultures are willing to pay more 
for less risky options, the home country context can be a major factor in a firm’s willingness to 
pursue risky internationalization through business model experimentation. Despite the significant 
effect of the home country characteristics of an SME on its business model change, there is little 
empirical evidence to clarify this relationship in detail. Using a comparative case study, the 
present research aims to do so.     
   
 
   
 
Methodology 
To address our research question, we compared two contrasting cases. As we sought to 
understand a relatively new and complex phenomenon and related practices, it was deemed 
appropriate to employ a qualitative approach to data collection and analysis (Eriksson and 
Kovalainen, 2010). A comparative in-depth case study enabled us to capture the dynamics and 
complexity of the phenomena to be explored (Woodside and Wilson, 2003; Yin, 2009). In 
addition, the case study approach is easily generalizable and theoretically testable (Eisenhardt, 
1989; Eisenhardt and Graebner, 2007). We expected this approach to yield fresh insights into 
how SMEs’ business models change during the process of internationalization, and how their 
home market affects this change.  
Case selection 
To enhance the existing understanding of business model changes during internationalization, 
we used purposeful sampling (Pratt, 2009). After considering several cases, we finally selected 
two SMEs from different business environments on the basis that they represented contrasting 
situations in terms of internationalization and business model change. In addition, the chosen 
SMEs suited our research purpose in that they originated from quite different home markets while 
being similar in certain other respects, including size, core activities, international operations and 
industry. Both operate in the same industry, and both were founded by friends with a technical 
background. The choice of industry (IT) was based on previous evidence that technology-
intensive industries to be especially suited to rapid internationalization (Crick and Crick, 2014; 
Sekliuckiene, 2017). Their similarities and differences meant that our proposed theoretical 
framework was applicable in both cases; that is, it helped us understand the link between 
internationalization and business model changes and the role of the SME’s home market context. 
As Yin (2009) explained, choosing two contrasting cases facilitates theoretical replication. One of 
the case companies is an IT software producer based in Russia and the other is a software 
consultancy based in Finland. Table 2 presents basic information about the two companies and 
the main similarities and differences. 
 
Table 2. The two case companies 
 
 Software provider 
(Russia) 
Software consultancy 
(Finland) 
Home market Russia Finland 
Size of home market, 
inhabitants 
140 million 5.5 million 
Size of home market, euros 5.3 bn euro 9 bn euro 
Year of incorporation 2008 2000 
   
 
   
 
Founders Two friends (graduates from 
technical university) 
Six friends 
Core activities Internet marketing software 
development 
IT consultancy 
Number of employees 330 400 
Year of entry to foreign 
market 
2008 2014 
International operations FDI, export FDI 
Foreign markets USA, Czech Republic, 
Cyprus 
USA, Japan, Netherlands 
Foreign subsidiary—
number of employees 
USA—60 USA—30 
Foreign subsidiaries 
sales/profit (%) 
20% of total sales 20% of total sales 
 
Although they are neighbours, Russia and Finland have very different economies and business 
cultures. As one of the largest countries in the world, Russia is in many ways self-sufficient, and 
Russian companies do not necessarily need to enter international markets in the same way as 
companies from countries with a smaller home market. However, Russia’s history of socialism 
means that its internal market is less developed than that of many Western countries, and Russian 
companies have recently faced economic constraints because of political disagreements with US-
led countries in the West. Finland is a small but highly developed country with a large number of 
high-technology enterprises, but because its domestic market is small, internationalization is an 
important prerequisite for economic growth. As shown in Table 1, the IT market in Russia is half 
the size of Finland’s. For that reason, and on the basis of the interview data, we defined Russia’s 
home market as immature and Finland’s home market as mature. 
 
Data collection 
 
As the interview is an efficient means of collecting rich, empirical data, particularly in relation to 
previously unexplained phenomena (Eisenhardt and Graebner, 2007), primary data collection 
took the form of interviews with key informants from the case companies. We conducted five 
interviews with the two founders of the Russian firm and their assistant and five interviews with 
three business directors or founding partners of the Finnish company. To ensure that the 
interviewees were involved in decisions about internationalization and were responsible for their 
implementation, we targeted the business owners and founders as key informants.  
 
We used a semi-structured interview guide, simultaneously allowing for a discussion driven by 
the respondents. The interview included open-ended questions, which allowed interviewees to 
tell their own stories and to discuss key issues related to their business. During the interviews, we 
used a repeated comparison approach to detect differences and similarities across the two cases 
and across respondents (Pratt, 2009). The interviews were conducted in Finnish for the Finnish 
company and in Russian for the Russian company. 
 
   
 
   
 
Data analysis  
All interviews were digitally recorded and transcribed, and the transcripts and recordings were 
translated into written English by a professional translation company to minimize the risk of 
mistranslation. The results were also fact-checked by the native interviewer to further minimize 
errors. NVivo software was used for data analysis; employing a software-based procedure for 
analysis and interpretation of the interviews helped to ensure the trustworthiness of the research 
(Sinkovics, Penz, and Ghauri, 2008).   
 
Data coding 
 
For data analysis we used a two-step coding procedure. Firstly, we coded all business model 
changes in value proposition, value capture, and value creation we found in the interview 
transcriptions. We used the business model definition of Clauss (2017) as basis for coding these 
business model elements. Two authors were doing it independently in order to avoid biases. 
Secondly, we coded all environmental changes, including factors related to home market context 
by identifying and coding instances, where the home market had influenced company’s actions 
regarding internationalization or business model changes. After the second stage we combined 
two codes and revealed the connection between business models changes and home market 
context. 
Data analysis  
 
Based on the techniques suggested by Miles and Huberman (1994), we conducted a cross-case 
analysis to examine similarities and differences between the particular cases. First, we conducted 
within-case analyses, combining interview data with archival data to produce an event history 
data set for both cases and to assess each case in relation to the research objective (Garud and 
Rappa, 1994). We then conducted a between-case analysis to look for cross-case patterns. Next, 
we examined the between-case and within-case analyses (Strauss and Cobrin, 1990) to produce 
a summary of the findings and to capture the dynamics of business model change in the two 
different contexts. The process was iterative; moving from data to theory or to emerging patterns, 
we were able to refine our findings, assigning them to specific conceptual categories (Strauss and 
Cobrin, 1990). As is typical of most qualitative research, the analysis involved a cycle of inductive 
and deductive reasoning (e.g. Walsh and Bartunek 2011).  
 
For the data triangulation we complemented our interview data with archival data such as 
companies’ documents available in open data sources, companies’ websites and media materials 
related to the industry and home market situation. This information allowed us to depict the whole 
process of two firms’ internationalization and changes caused by their home market environment.    
Findings  
This section reports the results of our data analysis in relation to business model change at the 
two IT firms during internationalization. We begin by describing the antecedents of business 
model change in each case, looking at the effects of home market context on the 
   
 
   
 
internationalization process. We then present the results of the cross-case analysis. Finally, we 
discuss how home country factors shaped business model change at both firms during 
internationalization.   
 
Case analysis 
 
The Russian company started out in 2008 as a small group of SEO and IT specialists developing 
internet marketing software. After seven years of trailblazing experiments and constant progress, 
the company has grown into one of the world's leading research services for online marketing. 
Having travelled the path from small startup to large international company, they remain loyal to 
the fundamental values that brought the company to where it is now: adapting to change rather 
than following a strict plan, and always prioritizing individuals rather than processes. Today, the 
company employs three hundred specialists in four countries (Russia, USA, Cyprus and the 
Czech Republic).  
 
Founded in 2000, the Finnish company is now a leading ICT consultancy. A pioneer in agile 
methods, the company has grown rapidly over the past 12 years, expanding its services from 
software coding to design, business development and marketing to provide a more 
comprehensive service to its customers. The company has recently opened offices in New York 
and Tokyo; this international expansion owes partly to the limits of growth in the home market and 
partly to an emerging business opportunity in the US. However, initial plans and expectations 
were soon revised as a consequence of certain discoveries—some positive, some negative—
during the internationalization process. The two companies’ different paths to internationalization 
are illustrated in Figure 1. 
 
 
   
 
   
 
Figure 1. Internationalization: Events that changed the case companies’ business models  
 
In the upper half of Figure 1, the blue line indicates the development of the Russian SME’s 
revenues in different markets, and the red dashed lines indicate the point in time when business 
model changes occurred. The first business model change occurred immediately after the 
company was established. As the major driver for entering the US market was the need to be 
closer to customers, most of the US office’s main activities were concentrated in the sales 
department and customer support. The company did not initially deploy its existing business 
model but instead simply entered the new market and followed its rules. According to Business 
Owner 1, ‘The US office was established to support existing business. It gave us a presence in 
our main consumer market. Initially, the office served customers, with only sales and customer 
support in the US market’. This change in value creation was a consequence of threats and 
opportunities in a foreign market.  
 
The second business model change occurred after the company had spent several years in the 
US market and understood the business environment. Although it was becoming difficult to 
manage the affiliate, they saw an opportunity for growth. ‘The office was open, but the market 
doesn’t just come. We had to put a lot into making this office work as we wanted. Just opening 
the office doesn’t ensure success. To understand our customers better, we established a 
marketing department’. (Business Owner 1) 
 
The third major business model change involved global expansion and new locations, using the 
US company to avoid cultural suspicion of Russian companies. ‘Being registered in the US, we 
could be perceived as an American company making an American product’. (Business Owner 2)  
 
The fourth business model change occurred when the company pursued international growth 
and outside investments. This was driven primarily by financial sanctions against Russian 
companies and individuals, as the company wanted to further identify itself as a growing 
international company. ‘Now we wanted to target new customers — large enterprises — 
suggesting new products to them’. (Business Owner 1) 
 
In Figure 1, the curve below the timeline shows the Finnish software consultancy’s 
internationalization path. The company’s first business model change was leaving it late to go 
abroad — 14 years after the company was founded. The driver for internationalization was that 
the domestic market in Finland had become saturated. The company was already working with 
the largest companies in Finland, broadening its position in the value network from software 
development to design and management consulting, and had already pushed pricing to its limit. 
A decision was made to open offices in New York and Tokyo. Although the business culture was 
different, the US business started out well. ‘The US has begun very well, I don’t know why, but 
we have found the right people, who introduced us to our next customers. It is a very fast-moving 
market where you get opportunities, but you are out the door just as quickly if you can’t deliver’. 
(Founding Partner) 
 
   
 
   
 
The second business model change occurred when the company tried to gain a better foothold 
in the US market. The company decided to focus on work-life balance, which is very different in 
Finland as compared to the US, where long working days are widely accepted and respected. 
Customers had to be convinced, but the approach was well received in the competitive recruiting 
market. ‘Companies can pay ridiculous salaries that we can’t afford. We have been able to attract 
professionals who are tired of the high workload and have accepted our salary levels’. (Founding 
Partner) 
 
A third business model change followed once the company had landed a few very prominent 
clients and became known in the market, helping to attract both new business and new talent. 
‘The guys we recruited are very excited about our company, and I believe they will pass it on. 
Once we get the opportunity to show our actual knowhow, that will impress a lot of people’. 
(Founding Partner) 
 
For the Finnish company too, the fourth stage was expansion—in this case, by sharing the work 
between the US and Finnish companies. The original company has a long history of refining its 
processes, and there is a lot of talent in the Finnish office, which therefore performs the most 
complicated work. Scaling software consulting work is very challenging because the output 
depends completely on human expertise. ‘The employer image must be consistent … If talented 
developers have good experiences in one place, it will attract other top talent to join the team. 
The best want to work with the best’. (Business Director 1) 
 
Between-case analysis 
 
Table 3 shows the case companies’ business models. Although both operate in the software 
industry, their business models differ. The Finnish company provides software consultancy, which 
requires close collaboration with their clients. The Russian company’s their main product, on the 
other hand, is a software tool, which can be distributed globally more easily than software 
consultancy. This in part explains the difference in respective internationalization speeds. The 
Russian company aligns well with Hennart’s (2014) characteristics of an INV/born global; as it 
sells niche products globally, there is no need to adapt the international marketing mix, and digital 
products can be delivered at very low cost. In contrast, the Finnish company is left with only a 
small home market, which also seems disadvantageous because the software market in Finland 
is quite mature.   
 
Table 3. Business model comparison 
 
Dimension 
 
Russian SME Finnish SME 
Value proposition 
 
Online marketing solutions 
for SMEs; close cooperation 
with customers; constant 
product improvement  
Collaborative coherence, 
adaptive to unique needs of 
customers 
 
   
 
   
 
Value capture Online marketing software 
sales to worldwide 
customers (mainly SMEs) 
Software project sales 
Value creation Skilled personnel and 
expertise in software 
development, r&d, sales 
and marketing and 
customer support 
Skilled human resources in 
agile software development 
 
The two case companies share similar backgrounds, and although they had different reasons for 
entering the international market, Table 4 shows that there were several similarities in their 
business model changes during internationalization. For example, although both companies had 
several foreign subsidiaries at the time of the interviews, both had recognised a similar initial 
entrepreneurial opportunity: US customers. Both companies concentrated on changing their value 
creation processes to match their new business environment, and for similar reasons, both made 
partial changes to their business model. First, they had to do so because of their new business 
environment; second, once their market position became more stable, they recognized new 
opportunities.  
  
Both companies also faced obstacles resulting from cultural differences. The Russian company 
found that the distance from head office became problematic, and the Finnish company 
encountered difficulties related to differences in the US working culture. Because Russian 
companies are very hierarchical, management becomes difficult across different continents. For 
the Finns, adapting from a 40-hour week and long holidays to the very work-oriented and hectic 
US business environment proved difficult. Both companies overcame these challenges by 
concentrating on new opportunities involving high growth through their US customer base. Both 
companies were able to grow much faster than was initially planned. For the Russian company, 
that meant adjusting to the US market, while the Finnish company turned a short working week 
and long holidays into a recruitment asset rather than a hindrance.   
 
Table 4. Comparison of business model change at different stages 
 
 
 
Russian SME Finnish SME 
First stage 2008 2014 
Driver Gain access to large market area Gain access to large market area 
BM change Value creation: sales and support in 
new market 
Value creation: new resources in the new 
market area 
   
Second stage 2011 2015 
Driver Increase market share Gain a foothold in the market 
BM change Value creation: marketing in US and 
development in Russia 
Value creation: increasing resources via 
recruitment and additional sales effort 
   
Third stage 2014 2015 
Driver Need to build reputation in the global 
market 
Increasing market share 
   
 
   
 
BM change Value proposition: branding as an 
American company 
Value proposition: embracing the Finnish 
reputation of skilled workforce 
   
Fourth stage 2015 2016 
Driver Stabilizing business after sanctions 
against Russian companies 
Responding to increased demand 
BM change Value capture and creation: 
attracting foreign investments, 
providing new products 
Value creation: distributing work between 
domestic headquarters and international 
subsidiaries 
 
In terms of our research focus, the most interesting difference is that the Finnish company has 
grown mainly in the domestic market and has entered international markets much more slowly 
than its Russian counterpart, as shown in Figure 1. Hennart (2014) claimed that home market 
size is one of the denominators in rapidly internationalizing INVs/born globals. Here, absolute 
market size is more important than country population size; the difference is partly explained by 
the fact that the Russian software market is much less developed, with lower revenues than in 
Finland.  
 
The two cases were very similar in many ways, other than the business environment from which 
they came. The Russian company acted much faster and initially did less planning, establishing 
its US office very early in the life of the company. In contrast, the Finnish company concentrated 
first on growth in the domestic market. Although Russia is a large country, the business 
environment is not very well developed, which meant the company found itself in an immature 
home market. That pushed the Russian company to enter the international market much earlier 
while the Finnish company was initially slow to internationalize because its domestic markets 
allowed them to grow over the first 10 years. After the domestic market became saturated, they 
too were quick to change their business model. One major difference between the companies 
was how they used their cultural environment during the change process. The Russian company 
disguised its origins by becoming as American as possible, using its US company in marketing 
and investment negotiations. The Finnish company, on the other hand, used its origins to justify 
differences in working culture and used this to its advantage. Another major difference in the firms’ 
business model changes was in the last stage, where the Russian company changed its approach 
to value capture by accessing the capital markets as an international rather than a Russian 
company while the Finnish company continued changing its value creation approach. The last 
changes made by the Russian company owed in part to an unfavourable home market 
environment at a time of geopolitical tension between Russia and the West, with financial 
sanctions imposed on Russia, and in part to new opportunities offering safe future growth.  
 
In general, then, the home market context played an important role in key decisions, serving as a 
catalyst for business model changes. While both firms faced an unfamiliar environment, the 
Russian company was more radical and quicker to change, reflecting home market risks as well 
as new opportunities. This supports the view that such opportunities are dynamic and may evolve 
over time, requiring business model adaptation and creative decisions; it also confirms the 
findings of Saebi et al. (2017) that perceived threats are more likely to prompt business model 
changes than perceived opportunities.  
   
 
   
 
Discussion and conclusions 
In this study, we have combined two theoretical perspectives: business model innovation and 
internationalization in the context of the home market. Based on data from two similar companies 
from different cultures and business environments, the analysis demonstrates that 
internationalization is risky and requires continuous modification of business models. The home 
market affects how a company adapts its business model in a changing business environment 
during internationalization, especially when facing threats.  
 
McGrath (2010) suggested that business models are more often learned over time rather than 
anticipated in advance. Our findings confirmed that the business model development of the case 
companies was not based on careful planning, but more on learning through experiments and 
adjusting the different elements over time (Dmitriev et al., 2014). Business model innovation can 
take place in three different forms: business models themselves; innovative business models of 
new technological innovations; and new business models to meet the changing customer needs 
(Trimi & Berbegal-Mirabent, 2012). The case companies in this study were very customer-
oriented and experimented and changed their business model based on the changed customer 
needs in the international markets. The changes were done with all different business model 
elements of value creation, value proposition and value capture (Clauss, 2017).   
Thefindings in this study partly support the claim that, when faced with threats, a firm will 
consciously take a risk if it seems that there is high probability for losses (Kahneman and Tversky, 
1979). The Russian case confirms this assumption; risking isolation from financial resources due 
to sanctions, the company took the risk of radically changing its business model by re-branding 
the company as American. Similarly, the Finnish case company was operating in stable markets 
and they saw high probability of gains in the home market, which made them risk aversive towards 
other opportunities. It was not until they were able to put a small bet into an international 
opportunity that the Finnish company went to international markets.  
 
Cuerco-Cazurra et al. (2018a) found out that political risk and corruption can have an effect in the 
firms’ internationalization and performance. The Russian company decreased their dependence 
of the immature home market context by internationalizing early (Witt & Lewin, 2007; Yamakawa, 
Peng, & Deeds, 2008), while the Finnish company grew their business in their mature and stable 
home market for a long time. In this way, home market context can play an important role in key 
decisions, sometimes acting as a catalyst for business model change. While both firms faced an 
unfamiliar new environment and accompanying opportunities, the Russian company changed 
faster and more radically than the Finnish company, in part as a reaction to home market risks 
rather than to new opportunities.  
 
This study contributes to the existing literature by illustrating how internationalization motivates 
SMEs to change elements of their business model. This is valuable information because very few 
studies to date have clarified how business model development and entrepreneurial 
internationalization interact. Those few studies (Rask, 2014; Child et al., 2017) fail to identify 
empirically the change across elements, nor do they provide any cross-country comparison as 
here. In addition, the home market context can have an effect on how companies perceive the 
   
 
   
 
risks in internationalization and therefore also affect the choices they make based on the risk 
seeking or risk averse behavior. 
 
This research also has several managerial implications. First, it is clear that internationalizing 
companies need to prepare not only for planned internationalization but also for the almost 
inevitable changes in their business models that the process entails. Secondly, as well as studying 
foreign market opportunities, it is important to understand the relation between home market 
context and internationalization. Companies carry different baggage into new markets, and 
entrepreneurial opportunities may look different, depending on the company’s origins. Finally, as 
threats may provide a more effective stimulus for business model changes than entrepreneurial 
opportunities, they should be explored even more intently. Internationalization involves many 
uncertainties, and to succeed, a company must be able to react quickly, changing its business 
model to pursue entrepreneurial opportunities or to avoid entrepreneurial threats. 
 
We acknowledge the study’s several limitations, including the retrospective approach to data 
collection. Longitudinal investigation of the processes of business model change and 
internationalization would help to further reveal the logic of business model changes in greater 
detail. We also note that the generalizability of the results may be limited by the qualitative 
approach and the specificity of cultural contexts. Alternative interpretations of the concepts of 
business model and business model innovation may provide a different perspective, and future 
research should explore whether the dynamics of business model change and internationalization 
hold across the definitional spectrum. A comparative study across both countries of origin and 
business model constructs may yield valuable insights for scholars interested in applying the 
concept in different fields and empirical contexts.  
 
Finally, future research can usefully combine theoretical concepts to better understand the 
process of business model change and the relationship between entrepreneurial opportunity and 
business model change during internationalization. Rask (2014) divides the interplay of 
internationalization and business models into upstream and downstream elements, and this 
broader approach may also yield further useful insights. 
  
   
 
   
 
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Publication III 
Rissanen, T., and Karhu, P. 
New Organizational forms of Innovation: What is Business Model Ambidexterity? 
Proceedings of ISPIM Innovation Summit, December 10th-13th 2017, Melbourne, 
Australia 

New​ ​Organizational​ ​Forms​ ​of​ ​Innovation:​ ​What​ ​is 
Business​ ​Model​ ​Ambidexterity? 
Tommi​ ​Rissanen* 
Lappeenranta University of Technology, School of Business and        
Management,​ ​​ ​Skinnarilankatu​ ​34,​ ​53850​ ​Lappeenranta,​ ​Finland 
E-mail:​ ​tommi.rissanen@lut.fi
Päivi​ ​Karhu 
Lappeenranta University of Technology, School of Business and        
Management,​ ​​ ​Skinnarilankatu​ ​34,​ ​53850​ ​Lappeenranta,​ ​Finland 
E-mail:​ ​paivi.karhu@lut.fi
*​ ​Corresponding​ ​author
Abstract: In order to respond to the opportunities or challenges in the turbulent             
operating environment, companies need to innovate and experiment with new          
business models. By conducting a qualitative study with 28 managers in 7            
startups and 8 incumbent companies in Finland, this paper explores the ways            
how companies innovate with two or more business models at the same time or              
sequentially, one after the other. To explain the phenomenon, we draw from            
organizational ambidexterity literature and establish a typology in the business          
model innovation context. As a result we found seven different applications of            
business mode ambidexterity. Specifically we discovered that spin-off        
companies are quite common way for incumbent, but also some startup           
companies​ ​to​ ​run​ ​parallel​ ​business​ ​models.  
Keywords: business model experimentation; organizational ambidexterity;      
business​ ​model​ ​innovation;​ ​business​ ​model​ ​ambidexterity;​ ​business​ ​model 
1​ ​​ ​Introduction 
Business models and business model innovation have been popular research areas in the             
past decade. Much of this is because the business environment has become increasingly             
volatile and many industries are in the middle of disruptive changes (Doz & Kosonen,              
2010). This has put pressure into businesses that have static business models and the need               
for understanding business models and business model innovation has increased fast           
among​ ​both​ ​practitioners​ ​and​ ​academics.  
Companies are faced with the need for exploration and exploitation (March, 1991), which             
are interdependent and non-substitutable activities to the firm (Gibson and Birkinshaw,           
2004). These refer to either maintaining and gradually improving existing marketing           
1 
This​ ​paper​ ​was ​ ​presented​ ​at​ ​The​ ​ISPIM​ ​Innovation​ ​Summit​ ​–​ ​Building​ ​the​ ​Innovation​ ​Century, 
Melbourne,​ ​Australia​ ​on​ ​10-13​ ​December​ ​2017.​ ​The​ ​publication​ ​is​ ​available​ ​to​ ​ISPIM​ ​members​ ​at 
www.ispim.org. 
activities (i.e. exploitation) or challenging existing activities and creating new ones (i.e.            
exploration). The companies, business units or employees who engage in both,           
exploration and exploitation, have been called ‘ambidextrous’ (see e.g. Gibson and           
Birkinshaw, 2004). Ambidextrous organizations, those that can find a good balance in the             
opposite activities, can better survive in a dynamic operating environment in the long-run             
than​ ​those ​ ​that ​ ​over-emphasize​ ​one​ ​or​ ​the​ ​other. 
Exploration and exploitation have also been linked to business model innovation (Sosna            
et al., 2010; Osiyevskyy & Dewald, 2017; Child et al., 2017; Schneider & Spieth, 2013).               
Sosna et al. (2010) see business model innovation as a trial-and-error -process in which              
the initial stages of business model development involve exploration activities and latter            
stages concentrate in exploitation of the found business model. Schneider & Spieth (2013)             
make a distinction between business model development and business model innovation.           
The ​ ​latter ​ ​includes​ ​exploration​ ​and ​ ​exploitation ​ ​activities.  
Casadesus-Masanell & Ricart (2010) emphasize that business models generate virtuous          
cycles that strengthen components of the business model with each cycle. This is on par               
with the exploration and exploitation of new business models. The exploration phase of             
business model innovation is crucial, as it is impossible to know in advance, even with a                
thorough​ ​research,​ ​how​ ​a​ ​new​ ​business ​ ​model​ ​will ​ ​function ​ ​in ​ ​real​ ​life​ ​(McGrath​ ​2010). 
Research​ ​gap 
While there has been remarkable progress in understanding certain business models in            
specific industries and market situations, yet little is known about how firms manage dual              
business models (Winterhalter et al., 2015). Majority of the current research suggests            
building new business models as a separate business unit. Even though this may be the               
most straight-forward option, this view is rather simplistic and might not always offer the              
best solution (Markides, 2013) in terms of business model experimentation. With this            
study, we follow up on the call for more in-depth studies to investigate how companies               
respond to the exploration and exploitation challenges with business model          
experimentation to achieve organizational ambidexterity. We do this in the context of            
Finnish​ ​startup​ ​and​ ​incumbent​ ​companies.  
This submission focuses in increasing the understanding of the use of business model             
ambidexterity in the business model innovation processes. Moreover, it investigates the           
different modes of ambidexterity and understanding why companies that are innovating           
new​ ​business​ ​models​ ​use​ ​specific​ ​modes ​ ​of​ ​ambidexterity. 
Our goal is to empirically scrutinize the various ways the managers contend with             
explorative and exploitative demands by altering the business models. We explore how            
2 
the contingency factors such as size of the firm impacts the ambidexterity mode selection              
and​ ​implementation. 
We suggest that firms adopt different ambidexterity modes to leverage the dual business             
models, and ask why do companies decide to facilitate business model ambidexterity in             
different​ ​ways? 
As a result we expect to provide new insight to the different approaches that startup and                
incumbent companies can opt to follow in business model innovation and participate in             
the​ ​emerging​ ​discussion​ ​combining​ ​business​ ​model​ ​innovation​ ​and​ ​ambidexterity. 
In the following chapters, we first review the extant literature on business model             
innovation, and focus in particular to the reasons why companies begin to experiment             
with new business models. We then combine business models to ambidexterity literature            
and refer this as business model ambidexterity. Thereafter, we outline the used            
methodology and empirical data. This is followed by an analysis and discussion of the              
findings.​ ​The​ ​paper​ ​concludes​ ​with​ ​recommendations​ ​for​ ​future​ ​research. 
2​ ​Theoretical​ ​background 
Business​ ​model​ ​innovation 
Despite of two decades of intensive research there is still not an all-inclusive definition to               
the term business model. This is not expected to be solved in the near future according to                 
study by Klang et al. (2014) and therefore the definition of business model varies              
depending on the scope of the target audience and research design. Zott et al. (2011)               
concluded that business models seek to explain both value creation and value capture in a               
holistic approach of explaining how firms operate and that the activities of the focal firm               
and its partners play an important role in the process. The business model also aims in                
securing the competitive advantage of the company, which requires critical evaluation and            
dynamic elements in the business model (Wirtz et al. 2015). Business model research can              
be divided according to the motivations behind the studies. These are: explaining the             
business,​ ​running​ ​the​ ​business​ ​and​ ​developing​ ​the​ ​business​ ​(Spieth​ ​et​ ​al.​ ​2014). 
Business model innovation is used to explain the actions companies do in response to the               
changes in their business environment. Its dimensions are value creation, value           
proposition and value capture (Clauss 2016). Business model innovation derives from           
strategic entrepreneurship literature while minor scale business model development draws          
from dynamic capabilities and resource-based view literature (Schneider & Spieth 2013).           
In this study we are particularly interested in the exploration and exploitation dynamics             
of business model innovation and thus lean towards strategic entrepreneurship literature           
on​ ​business​ ​model​ ​innovation.  
Business model change can be divided into explorative adoption of new business models             
and exploitative strengthening of an existing business model. Osiyevskyy & Dewald           
(2015) see that incumbent companies can respond to disruptions in their industry with any              
combination of exploration and exploitation. They can (a) ignore the threat and do             
nothing; (b) discard their existing business model and exploratively adopt a new one; (c)              
simultaneously strengthen their existing business model and explore a new one; and (d)             
incrementally develop and exploit their existing business model. In this study we are             
looking for both startup and incumbent companies that are not ignoring the threat, but              
reacting​ ​to​ ​it ​ ​in​ ​one​ ​of​ ​the​ ​three​ ​aforementioned​ ​ways. 
Business​ ​model​ ​ambidexterity 
In 1996, Tushman and O’Reilly suggested that the firms that are capable of engaging in               
exploration and exploitation activities at the same time are more likely to obtain a              
superior performance than those that lean on one or the other. Those firms that tend to                
merely explore bear a risk of having difficulties in estimating their returns and their              
investments entail uncertainty of when or if those will be materialized (Raisch &             
Birkinshaw, 2008). In a long run, this develops into a vicious cycle of experimentation,              
search and failure without achieving the desired outcomes. In addition, the benefits of the              
exploitation, like the returns from the knowledge, cannot be reaped (Volberda & Lewin,             
2003; Levinthal & March, 1993). On the contrary, the firms that have their primary focus               
on exploitation of current knowledge and activities enjoy high specialization and           
predictability of returns, however, which may not be the case in the turbulent business              
environment. ​ ​The​ ​old​ ​practices​ ​may ​ ​become​ ​obsolete​ ​very ​ ​rapidly.  
The past research shows that companies have been responding to the exploration and             
exploitation needs differently (March, 1991) to achieve organizational ambidexterity,         
which indicates the ways and the methods how companies have decided to respond to the               
demands of maintaining their current activities viable and experimenting novel differ.           
When companies change the focus from exploitation to exploration of new, this may             
causes changes also their business models. These methods have been discussed as            
structural, cyclical and contextual ambidexterity and we refer to those as the means to              
obtain​ ​exploration​ ​and​ ​exploitation ​ ​via​ ​novel​ ​business ​ ​model ​ ​application.  
Structural ambidexterity (Tushman & O’Reilly, 1996) refers to so called dual-structures,           
which are characterized by the spatial separation of exploration and exploitation and            
parallel structures facilitating exploration and exploitation (Raisch & Birkinshaw, 2008).          
The spatial separation means that the exploration activities are sustained by separate            
business unit such as the R&D department. Christensen (1998) proposed that exploratory            
units need to be completely separated from exploitative units in order to enable the pursuit               
of disruptive innovation in the first place. Thus, structural ambidexterity ensures the            
realization of both exploitation and exploration by structurally separating the exploration           
4 
activities (e.g., Tushman & O’Reilly, 1996), possibly even outside of the firm’s            
boundaries.  
Cyclical ambidexterity (Simsek et al., 2009) builds on the notion that organizations            
develop through periods of stability, the times for exploitation, which are interrupted by             
episodes of change, the so called exploration periods. The logic of this ambidexterity             
mode thus lies in the temporal alternation of opposite business models and it may refer to                
sequential pursuit of exploitation and exploration across units, where for instance the            
exploration outputs of one business unit become the exploitation inputs of another            
business​ ​unit​ ​in​ ​a​ ​processual​ ​manner. 
Companies can also generate synergies by realizing both exploration and exploitation           
tasks within the same team or by the same individuals, which requires the skills to engage                
in contradictory demands rather simultaneously. This has been termed as contextual           
ambidexterity ​(​Gibson & Birkinshaw, 2004), where companies establish behavioral and          
contextual solutions to do conflicting tasks, exploration and exploitation in parallel. This            
ambidexterity mode allows the individuals to use their own judgment of how best to              
divide their resources between routine and renewal, but this calls for the active support              
and trust from the management team, and facilitation of the conditions that enable such              
behavior to be realized. Contextual ambidexterity has been said to be possible only once              
internal​ ​processes,​ ​structures,​ ​goals​ ​and​ ​rewards​ ​are​ ​in​ ​line​ ​to​ ​support​ ​it.  
Business model ambidexterity literature addresses on the other hand the difficulty of            
running two business models simultaneously (Hu & Chen, 2016), and on the other hand              
the emphasis of integrating the different business models together, especially in the case             
of spatial separation (Markides, 2013). Running two separate business models requires a            
delicate balance between independence and integration to allow synergies (Markides &           
Oyon,​ ​2010).  
3​ ​Research​ ​methodology 
To examine the research question, we conducted 33 semi-structured interviews with the            
founders or managers in 20 companies mostly in ICT and media industry. These             
industries are changing fast and therefore companies often have to develop new business             
models to survive, grow or to respond contradictory demands. The interviewed           
companies included 11 startups and 9 incumbent companies. The distinction between           
startup companies and incumbent companies was based on a combination of company            
size and age. The oldest company, “s7” was established already in 2007, but it has made a                 
major change in its business model in 2012. The smallest incumbent company has a              
turnover of 3 million, but it has stabilized its market position and its revenues have risen                
fast in the past years. The interviews lasted 33-80 minutes, 49 minutes in average, and               
were​ ​recorded​ ​and​ ​transcribed​ ​for​ ​the​ ​analysis.  
After the initial analysis of interviews four startups and one incumbent company were             
removed from the analysis. The reason for this was that one startup had bankrupted after               
their initial business model failed and other companies had not had any major business              
model changes in their history. This left us with 7 startups and 8 incumbents and a total of                  
28​ ​interviews. 
Table 1 and table 2 describe the background of the 15 companies included in the study.                
the financial data is from year 2015, which is the latest year of confirmed financial               
statements​ ​available​ ​for​ ​all​ ​companies. 
Table​ ​​ ​1​ ​​​ ​Startup​ ​and​ ​small​ ​companies 
ID Industry Establ. Pers. Turnover 
s1 
Online​ ​b2b​ ​services 2013 9 111.000​ ​€ 
s2 
Online​ ​b2b​ ​services 2012 14 152.000​ ​€ 
s3 
b2b​ ​software​ ​service 2015 12 430.000​ ​€ 
s4 
b2b​ ​software​ ​consultancy 2011 15 652.000​ ​€ 
s5 
food​ ​production​ ​innovations 2014 0 12.000​ ​€ 
s6 
b2b​ ​IT-​ ​services 2011 8 2.008.700​ ​€ 
s7 
b2b​ ​translation​ ​services 2007 4 607.500​ ​€ 
Table​ ​​ ​2​ ​​​ ​Incumbent​ ​companies 
ID Industry Establ. Pers. Turnover 
i1 
b2b​ ​software​ ​consultancy 2000 145 20.377.200​ ​€ 
i2 
Consumer​ ​media​ ​services 1889 1652 525.264.000​ ​€ 
i3 
Operator​ ​services 1919 2896 1.934.318.500​ ​€ 
i4 
b2b​ ​software​ ​services 2005 113 24.797.000​ ​€ 
i5 
b2c​ ​learning​ ​solutions 2005 168 43.635.000​ ​€ 
i6 
b2b​ ​software​ ​quality​ ​services 2011 63 8.623.000​ ​€ 
i7 
Multinational​ ​corporation 1892 287.000 127.000.000.000​ ​€ 
s8 Manufacturing​ ​electric​ ​machinery 2009 30 3.138.000​ ​€ 
6 
When conducting the interviews, the interview guideline was fine-tuned as more           
experience was gained throughout the study. The questions in the guideline explored the             
business model changes in the history of the companies and the reasons and rationale why               
companies have held two business models simultaneously and how have they practically            
organized​ ​these​ ​business​ ​models​ ​in​ ​the​ ​company​ ​and​ ​for​ ​what​ ​reason. 
In order to approach companies, we referred to secondary data sources to find suitable              
interview partners. The final dataset consisted of 28 interviews of 15 companies. All             
interviews​ ​were​ ​recorded,​ ​transcribed​ ​into​ ​text​ ​and​ ​analysed​ ​with​ ​Nvivo​ ​11​ ​software. 
4​ ​Findings 
In figure 1 and figure 2 the companies have been presented in a matrix, where horizontal                
axis describes whether the company is exploiting its existing business model or exploring             
new business model. The vertical axis describes if these exploitation and exploration            
activities are made inside the company or in a separately managed unit or in a               
spinoff-company. 
Figure​ ​1​​ ​Startup​ ​positioning​ ​in​ ​the​ ​exploitation-exploration​ ​/​ ​internal-external​ ​matrix 
The companies in figure 1 are presented so that the first circle describes the position the                
company had in the beginning. Their initial business model. The second and in some              
cases third dashed circle describes to which part of the matrix the follow-up iterations of               
the business model have landed. The positions of the companies in the matrix are not               
scaled​ ​and​ ​the ​ ​length​ ​of​ ​arrows​ ​doesn’t​ ​have​ ​any​ ​emphasis​ ​or​ ​meaning.  
s1 made two radical changes in their value proposition and revenue model. s2 began as a                
university spin-off and made two major changes in its business model. s3 began as              
outsourced service provider, but built product business simultaneously on the side. s4            
provided software consultancy, but invested in other startups both money and           
development resources at the same time. s5 provides technology to grow food products             
and simultaneously sells food products on a webstore. s6 provides b2b services to other              
companies and occasionally makes experiments of different business models that could           
enhance their business. s7 began as a b2c social media platform, but after mediocre              
success​ ​changed​ ​the​ ​business​ ​totally ​ ​into ​ ​providing ​ ​translation ​ ​services​ ​in​ ​b2b ​ ​market. 
Figure 2 Incumbent positioning in the exploitation-exploration /        
internal-external​ ​matrix 
8 
Similarly to figure 1, figure 2 also presents the positioning of companies in the matrix.               
The​ ​positioning​ ​is​ ​not​ ​relative,​ ​just​ ​presenting​ ​in​ ​which​ ​quadrant​ ​the​ ​company​ ​has​ ​been. 
i1 sold software consultancy for many years. Then the company broadened its service             
provision into training, design and consulting. Later still they began investing in startups             
and managing a venture fund that provided both money and free software consultancy for              
companies in it. i2 is a venerable media company that decided to build internal startups to                
manage changing industry environment. i3 is a telco that has an associated company that              
builds new services that are later integrated into the parent company. i4 provides b2b              
software and it has experimented with different business models in its internationalization            
process. i5 provides learning materials to schools and it develops, pilots and eventually             
integrates digital games into its learning material offering. i6 provides quality assurance            
services for companies, but it has a spin-off company that build real time quality              
measurement. i7 is a global multinational corporation (MNC) operating in different           
industries. The Finnish subsidiary (among several others) has an internal startup program            
that is used to build new businesses coming from within the company. i8 is a company                
building electric drivetrains to heavy industry use. They have tried different business            
models,​ ​but​ ​are​ ​now​ ​stabilizing​ ​their​ ​business. 
From the ambidexterity and business model literature we found out that (1) structural             
business model ambidexterity builds on internal exploitation of a business model           
combined with external exploration of new business models (Tushman & O’Reilly, 1996;            
Raisch & Birkinshaw, 2008); (2) cyclical business model ambidexterity comes from           
temporal changes between internal exploitation of an existing business model and internal            
exploration of new business models (Simsek et al., 2009); and (3) contextual business             
models come from running internal exploitation of existing business models and internal            
exploration​ ​of​ ​new​ ​business​ ​models​ ​by​ ​the​ ​same​ ​people​ ​(Gibson​ ​&​ ​Birkinshaw,​ ​2004).  
Established companies lean towards structural ambidexterity in business model         
innovation, because they have the resources and capabilities for running several business            
units (Khanaga et al. 2014). For startups this is not possible in most cases. Startups are by                 
nature contextually ambidextrous as those are smaller companies “where everyone needs           
to​ ​do​ ​everything”. 
Table​ ​​ ​3​ ​​​ ​Business​ ​model​ ​ambidexterity​ ​typology 
Ambidexterity​ ​mode Business​ ​model​ ​ambidexterity​ ​application Companies 
Structural 
ambidexterity 
a. Creation of parallel structures for    
exploration​ ​and​ ​exploitation
b. Emergence of spin-off from exploration    
activities
c. From​ ​spin-off​ ​to​ ​internal​ ​exploration
s3,​ ​​ ​i2,​ ​i7 
s4,​ ​i1,​ ​i3,​ ​i6 
s2 
Cyclical 
ambidexterity 
d. Cyclically alternating exploration and   
exploitation​ ​activities
e. Rotation of different business models    
within​ ​exploration​ ​activities
s6 
i4,​ ​i5 
Contextual 
ambidexterity 
f. Simultaneous internal exploration  
actions​ ​by​ ​the​ ​same​ ​unit
g. Changing business model after exploring    
new​ ​pivots​ ​for​ ​business
s5 
s1,​ ​s7 
Table 3 presents the suggested typology for different business model ambidexterity           
applications. Our data, albeit a bit limited, consisted of a wide variety of companies and               
different ways of business model changes. We found evidence from all three modes of              
ambidexterity and identified a total of seven business model ambidexterity applications.           
Group a consists of companies that are creating parallel structures within the company             
and building new business models in a separately managed unit inside the company.             
Group b includes companies that have separated the building of new business models into              
a spin-off company or a startup they have invested in. This group is the largest of all                 
groups and we found it interesting that the existing literature has not given this group any                
attention. ​Group c is a case where the company has initiated as a spin-off from another                
organization as an independent startup and has moved into exploring their business model.             
Group d ​consists of companies that carry out business model experiments in exploration             
mode and then come back to exploiting the adjusted business model. ​Group e is formed               
from companies that have developed a stable business model either in exploitation or             
exploration mode and have experimented with new business model opportunities before           
integrating the functioning parts into existing model. ​Group f includes companies that            
build their business model in the exploration mode and simultaneously build parallel            
business model on the side. ​Group g are the classic startups that have built a business                
model in the exploration mode and later pivot to a completely new one, possibly more               
often​ ​than​ ​once.  
As previous literature indicated, structural business model ambidexterity was most popular           
among the incumbent companies. There were three startups that utilized this method of             
developing and changing business models, which was unexpected. Major finding in this            
study came from the separation of internal startups or separately managed units within the              
company (group a) and spin-off companies (group b) as equally potent alternatives in             
structural business model ambidexterity. We also found different applications of business           
model ambidexterity in cyclical ambidexterity mode and contextual ambidexterity mode,          
as​ ​presented​ ​in​ ​the​ ​previous​ ​paragraph. 
10 
5.​ ​Discussion​ ​and​ ​conclusions
Although business models have existed as long as there has been business, the turbulent              
and fast-changing business environment of today require companies to concentrate on           
their core competences but at the same time, they need to pay attention to the possible                
future opportunities. In the changing business environment companies need to be           
constantly innovating their business model in order to stay competitive. Despite the vast             
number of articles published on organizational ambidexterity during the last decade in the             
context of innovation, literature on how it has been carried out with dual business models               
(Markides (2013) or more, is still scarce. Especially the empirical investigations in the             
field​ ​are​ ​lacking​ ​(for​ ​exceptions​ ​see​ ​Khanagan​ ​et​ ​al​ ​(2014);​ ​Winterhalter​ ​et​ ​al.,​ ​2016).  
We suggest a typology that relies on the ambidexterity literature and propose it to explain               
the different business model innovations. In this study, we observed that companies            
divided their exploration and exploitation activities into different business models by           
structurally separating those, sequentially or together in parallel. Gibson and Birkinshaw           
(2004) suggested that structural ambidexterity can be achieved by “developing structural           
mechanisms to cope with the competing demands faced by the organization for alignment             
and adaptability” (p. 211). Past studies have shown examples of what these structural             
mechanisms should be like. Our findings illustrate the context of business models and             
bring to light that the companies, both start-ups and incumbent firms, engage in radically              
explorative operations through spin-off emergence, which is in line with Christensen’s           
(1998) proposition that disruptive innovations require a completely separate unit in order            
to be manifested. Similarly, Porter (1996) argued that most companies attempting to            
compete with dual strategies will likely fail, yet admitting that companies that seek for              
growth by expanding within their industry can best bear the risks to strategy by putting up                
stand-alone​ ​units​ ​that​ ​have​ ​their​ ​own​ ​brand​ ​names​ ​and​ ​activities.  
We find that the companies pursue structural business model ambidexterity, however, not            
in the manner that it has been described in the past research. In their study of design                 
firms, Jansen, Andriopoulos and Tushman (2013) discovered that the most successful           
firms first facilitated exploration and exploitation via structural ambidexterity mode, then           
switching to contextual ambidexterity, and finally back to structural ambidexterity in a            
longer period of time. Markides and Charitou (2004) suggested that separation of business             
models can be the favoured strategy when the new market (exploration) is a) strategically              
very different from the existing business not only strategically different from the existing             
business (exploitation), and b) in difficult tradeoffs and conflicts with the existing            
markets. In this study we find also other reasons for developing new business models. In               
addition to the difference of the market itself, our study shows that the business model               
innovations can be also due to identification of new business opportunities that are             
difficult ​ ​to​ ​reach​ ​within​ ​the​ ​current​ ​operations ​ ​and ​ ​business​ ​model.  
Similarly, we observed “business model vacillation”, which can occur in a much more             
complex way than the mere rotation between exploration and exploitation. For instance,            
some companies quickly discarded their previous business models as soon as the new             
business model showed enough promise. Markides and Charitou (2004) propose that           
when the new market is strategically similar to the existing business, but the two face               
serious conflicts, a valuable solution may be a separation of the activities for the              
necessary period of time and thereafter merge the concepts so as to minimize the              
disruption from the conflicts. This is true with some cases in our study (s6, i3 and i4), but                  
not ​ ​all. 
Markides and Charitou (2004) suggested that when the new market is fundamentally            
different from the existing business, but the two are not substantially conflicting, it might              
be better to first build the new business inside the organization so as to leverage the firm’s                 
existing assets and experience (and learn about the dynamics of the new market) before              
separating it into an independent unit. In contrast, no separation of exploration and             
exploitation is necessary when the new market is very similar to the existing business and               
presents few conflicts that need managing (Markides & Charitou, 2004). In such a case,              
embracing the new business model through the firm’s existing organizational          
infrastructure ​ ​can​ ​be​ ​considered​ ​as​ ​the​ ​superior​ ​strategy. 
Our contribution to the existing literature is threefold. First, we have identified the             
exploitation (current business model related activities) and exploration (new business          
model experimentation activities) in order to answer the research question ​how ​do firms             
hold dual business models through experimentation of new business models while           
keeping​ ​the ​ ​existing​ ​model​ ​operative.  
Second, our empirical study provides evidence about different mechanisms how          
companies facilitate the co-existence of the twin business models and insights on the             
rationales why managers choose to opt for those mechanisms. Although prior research has             
provided insights on business model innovation, research on facilitation of exploration           
and​ ​exploitation​ ​activities​ ​with​ ​the​ ​different​ ​business​ ​models ​ ​is ​ ​still​ ​scarce.  
Third, this study extends the current knowledge and literature stream about business            
model experimentation in organizational ambidexterity context. It also makes a          
contribution to illustrating the differences in the innovation processes of mature and            
start-up​ ​companies. 
12 
6.​ ​Practical​ ​implications
All companies need to be constantly ready to innovate with their business models.             
Companies can benefit directly from the outcomes of this research by reflecting their own              
business to the case companies and increasing their understanding of different business            
model ambidexterity applications. There are many different ways of building and running            
separate business models and for companies it is important to understand the best solution              
in​ ​their​ ​own​ ​case.​ ​This​ ​paper​ ​will​ ​bring​ ​information​ ​into​ ​this​ ​process. 
This study paves the path towards understanding how companies can benefit from            
systematic business model ambidexterity and continuous development of new business          
models​ ​to​ ​stay​ ​competitive​ ​in​ ​the​ ​ever​ ​changing​ ​business​ ​environment. 
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Publication IV 
Rissanen, T., Asemokha, A., Torkkeli, L., and Saarenketo, S. 
Business model experimentation with internationalizing SME’s: Evidence from 
Finland 
Proceedings of 22nd McGill – International Entrepreneurship Conference, August 22nd-
24th, Halmstad, Sweden 

1 
 
 Business Model Experimentation with Internationalizing SME’s: Evidence 
from Finland 
Tommi Rissanen, Agnes Asemokha, Lasse Torkkeli & Sami Saarenketo 
LUT School of Business and Management 
Abstract  
Business model experimentation is an increasingly popular research topic in business model            
literature. There are few studies analysing business model experimentation in the context of             
internationalizing SME’s, however. The objective of this paper is to identify different ways of              
conducting business model experimentation in internationalizing SME’s. We approach the          
problem by looking at experimentation with international business models of 12 Finnish            
SMEs. We studied the companies’ business model experimentation from three viewpoints: (1)            
innovation and change; (2) entrepreneurial aspirations; and (3) internationalization and          
growth. As a result, we found four different approaches to experimenting with international             
business models. The upstart startups are making pivots to find a sustainable business model              
in the home market to replicate that in the international markets. The lean global startups are                
technology-oriented born-global companies building their business in the lean startup manner,           
and cautious late-bloomers have found success in their home market and have built a new               
venture for internationalizing to experiment with new business models while protecting their            
existing business. Seasoned buccaneers are born global startups that have been able to             
radically change their business model to find international growth. For practitioners the study             
opens up different approaches to experimenting with international business models. For           
academics the research combines different research streams for further investigation. 
 
2 
 
1. Introduction 
Business model experimentation is a method for discovery-driven dynamic innovation of           
business model with unknown assumptions by testing and clarifying the results (Chesbrough            
2010; McGrath 2010). The aim of the study is to increase understanding on business model               
experimentation in internationalizing small- and medium-sized enterprises (SMEs). So far, the           
role of business model experimentation in SME internationalization literature has received           
scant research attention (Onetti et al. 2012; Sainio et al. 2011). This is notable as we live in                  
the age of globalization and digitalization where time and geographical space no longer play              
as significant role in the competitiveness of new ventures as they used to (Onetti et al. 2012).                 
In other to thrive, managers are faced with the challenge of experimenting with their business               
models to meet up with the external and internal challenges (Doz & Kosonen 2010; Balboni,               
B., & Bortoluzzi 2015; Hennart 2014). 
  
The business literature is yet to generate a unifying definition and consensus to the meaning               
of business models and how they apply to entrepreneurial theoretical perspectives (Johnson et             
al., 2008; Morris et al., 2005; Malmström et al., 2014). Nonetheless, studies suggest that              
business models hold potential to establish further development in international          
entrepreneurship theory (Morris et al., 2005; Zott & Amit, 2001; Onetti et al., 2012). Our               
purpose is to provide further understanding to the effects of business model experimentation             
in internationalizing firms, especially from entrepreneurial perspective ( ​Mitchell et al., 2002 ​;          
Morris et al., 2005; Onetti et al., 2012; Clauss 2017; Sainio et al., 2011; Hennart 2014). We                 
are studying high-tech companies’ internationalization as they have the need to rapidly            
capitalize their competitive advantage in the international market (Crick & Crick, 2014; Child             
3 
 
et al, 2017; Onetti et al., 2012).  
  
We continue as follows: The next section provides a review of literature on business models               
in general, and on business model experimentation in particular. From there we continue to              
discussing what literature would expect to be the role of business model experimentation in              
international entrepreneurship and internationalization of SMEs. Then the research         
methodology and the cases used in the empirical analysis are described, followed by the              
analysis itself. We conclude with discussing the merits of the results and their implications on               
theory and practice. 
 
2. Business Models 
Recently, management research has received a lot of attention on ​business models on both              
academic and practical level. The term business model has become a commonly mentioned             
terminology in various domains within and outside of business management (Shafer et al.,             
2005; Osterwalder & Pigneur, 2010; Zott & Amit, 2010). Research on business models also              
show that the general lack of consensus in the conceptualization of business models may be               
attributed to the diversified views of the concept in various industrial perspectives (Shafer et              
al, 2005). 
 
A cross-theoretical perspective of business models is based on the perception that business             
models do not exist in isolation instead can be seen as a unifying unit of analysis that                 
emphasizes how value is created and captured from various sources (Amit & Zott, 2001;              
Morris et al., 2005; Malmström et al., 2014). Johnson et al. (2005) propose that an effective                
4 
 
business model embodies customer value proposition, profit formula, key resources, and key            
processes as key elements which combine to create and deliver value. Clauss (2017) reviewed              
the business model innovation literature from the years 2002 to 2014 and came up with three                
business model innovation dimensions: value creation, value proposition and value capture.           
All of these dimensions include a number of components that form a total of 10               
sub-constructs (Clauss, 2017). The sub-constructs are presented in table 1. 
Table 1. Sub-constructs of business model dimensions (Adapted from Clauss 2017) 
 Value creation Value proposition Value capture 
 
 
 
Sub-constructs 
Capabilities Offering Revenue models 
Technology Customers and markets Cost structure 
Partnerships Channels  
Processes Customer relationships  
 
Although business model elements are independent of each other, changes in an individual             
element tend to impact other elements. Thus, a complementary evaluation of business model             
elements is essential for an effective business model (Johnson et al., 2005). 
 
2.1. Business Model Experimentation 
Business model experimentation is a unique approach to business model innovation. It can 
also be seen as a way to discover the most effective models of allocating resources in the 
market, considering competitive environment constraints (McGrath, 2010). Several 
researchers see experimentation as a trial-and-error process following the single-loop and 
double-loop learning. (Argyris, 1976; Sosna et al., 2010; Trimi & Berbegal-Mirabent, 2012). 
5 
 
Most companies begin experimenting and innovating with their business model only after 
their existing business model has been disrupted as a reactive rather than proactive process 
(Chesbrough, 2010). 
 
Experimentation is used in preparing and reacting to unexpected changes that occur in the              
process of replicating the business model into international markets. Sosna et al. (2010)             
separate the business model experimentation and exploration phase from the exploitation           
phase where international growth is achieved with the refined and tested business model.             
However, they also see further trial-and-error processes as vital also in the exploitation phase              
to execute rapid international growth with changing environment. 
 
2.2. Viewpoints to experimenting with international business models 
Regardless of the abundance in firm resources and capabilities, some firms struggle and fail              
vehemently and poorly planned or managed business models have been attributed to the             
possible shortcomings of such ventures (Morris et al., 2005; Malmström et al., 2014; Mitchell              
et al., 2002). Extant literature argues that sustained value creation presumes abilities to            
change the existing business model (Achtenhagen et al. 2013) as either external or internal              
forces can trigger or even demand changes in the business model (Torkkeli et al. 2015; Wirtz                
et al. 2015). Thus, being able to exert change and experiment with business models can be                
critical for the long-term success of an enterprise, and may even require organizational             
capabilities to innovate across different parts of the business model design (see Clauss, 2017).              
our viewpoints firm and entrepreneurial activities that trigger business model experimentation           
are further explained below. 
6 
 
2.2.1. Innovation and Change 
Johnson et al. (2008) draw attention to factors which affect business models and may trigger               
change. These factors are (1) opportunity to challenge competition of expensive competitive            
products through provision of cheaper and competitive products using disruptive innovation;           
(2) capitalization and leveraging on brand and technology advantage; and (3) capitalizing on             
new market opportunity where there is little or no competition. The first factor can be               
interpreted from a startup’s point of view as the making of a pivot. Pivot is an iterative loop                  
that takes a startup back to defining the customer needs if it can’t validate its business model                 
with adequate number of paying customers (Blank, 2007). It drives the startup into finding              
disruptive innovation with enough interest from customers. Second factor means using the            
company’s competitive advantage in technology or brand to enable business model change.            
This is not typically possible for startups, but incumbent companies can use a new venture as                
a vehicle for experimenting a new business model safely and utilising their brand and              
technological advantage. Third factor is interpreted as taking the existing business model into             
new markets to experiment with a new offering there. These three factors have been used in                
the analysis to understand the different motives for changing company business model with             
experimentation. 
 
2.2.2. Entrepreneurial Aspiration 
Studies on SME international business models that identify three different types of            
international business model entrepreneurs the traditional adaptive, the technology exploiter          
and the ambidextrous exploiter (Child et al. 2017). Stating that the traditional market-adaptive             
are those who do not invest in innovation, but make efforts to readily and rapidly change their                 
7 
 
business model when needed. Secondly, the technology-exploiter who invests more on R&D            
and builds competitive advantage by exploiting its technological prowess; and thirdly           
ambidextrous explorer, who combines exploitation of the current business model with           
exploration of new business models in the international market. 
  
Girotra and Netessine (2014) emphasize the importance of managers’ role in business model             
experimentation as a process linked to the cognitive maps of managers’ perception of             
environmental conditions added with their own prior knowledge and experience. Thus, there            
are managerial competencies that can be identified as a requirement for conducting business             
model experimentation in a company. The quality and success of an entrepreneurial business             
model should mirror unique value in the nature of offerings produced and delivered, in order               
to achieve uncontested market space and sustainable competitive advantage (Magretta 2002;           
Busenitz & Barney, 1997; Osterwalder and Pigneur 2010; Malmström et al., 2014). 
 
Moreso, managers also tend to struggle to leverage on core competences and achieve             
sustainable growth (Johnson et al., 2005) due to insufficient knowledge of their existing             
business models also due to the changing dynamics of business model development processes             
(Busenitz & Barney, 1997; Magretta, 2002). Hence in order to breach inadequacies in             
internationalization of business models entrepreneurs may in fact make extensive efforts in            
modifying their internal and external operations and processes to realize optimal functionality            
business models in foreign markets (Child et al 2017; Foss and Saebi 2017).  
 
2.2.3. Internationalization and growth 
8 
 
Various discussions have been raised on fragmentation and diversification in views in            
business model literature especially in regards to explaining how changes to business models             
and impact firm activity (Wirtz et al 2016). In other words, it is still unclear how business                 
models are used to measure SME growth and internationationalization activities (Wirtz et al             
2016; Foss and Saebi 2017; Child et al.2017;). However, we acknowledge that the type of               
business model adopted by a firm is highly dependent on the intensity and extent of the                
business owner’s ambition as well the implications of venture (Morris et al 2005). Thus, the               
level of entrepreneurial aspirations may impact the design business model may conform to             
(Malmström et al., 2014; Morris et al., 2005; Johnson et al., 2008). Therefore, firms who are                
more proactive tend to have a significantly different business model compared to firms who              
are less proactive. Dunford et al. (2010) see business model replication as a basis for               
internationalizing a company.  
 
Child et al. (2017) highlight that the business model an internationalizing SME is likely to               
adopt in the foreign market is highly dependable on the level of development of it’s home                
economy. They also claim that the industry of the company has a major contextual effect on                
the choice of business model used in the international markets. For born global firms the               
balance between the novelty and efficiency is extremely important considering the limitations            
of their resources (Johansson & Abrahamsson, 2014). Sainio et al. (2011) studied value             
creation of internationalizing firms and suggest that business model construct provides an            
alternative value creation process based approach to internationalization as opposed to           
managing disparate international activities and functions. 
 
9 
 
Rasmussen & Tanev (2015) also made a distinction between lean global and lean to global               
startups. Lean global startups are born global companies that have combined the lean startup              
strategy with born global strategy from the inception of the company. Lean to global              
companies on the other hand have first established themselves on their home market in the               
lean startup way and later explored rapid internationalization in the born global manner. 
 
3. Research Methodology  
To explore the phenomenon empirically, we chose to apply qualitative methodology as it is              
particularly suitable for theory development (Yin, 2009). Specifically, we employed the case            
study method (Eisenhardt, 1989), as it is particularly fitting for research aiming to describe              
and increase understanding in-depth of the focal research phenomenon (Woodside & Wilson,            
2003). This approach is suitable for this context due to the goal of better understanding the                
researched area, of which little is understood previously. Our aim is to open new research               
opportunities and distinguish the relationship between internationalization and business model          
experimentation.  
 
We selected 12 case companies using purposive sampling. The selection for this study was              
done from a sample of 20 interviewed companies that had previously been selected using              
purposive sampling to represent business model experimentation in high-tech companies. The           
selection of the 12 companies for this study was based on the companies’ internationalization              
activities using business model experimentation in changing, building or adapting their           
business model. Interviews were semi-structured and the questions evolved on the events of             
experimentation with the company’s business model in events of change such as            
10 
 
internationalization. The companies were all either startup companies or SME’s. Startup           
companies are defined here as SME-sized companies that are less than five years old. All               
companies originated from Finland and were in an industry that requires high level of              
technology, eg. IT, media and food technology.  
Table 2. Background information on the case companies 
 
From the financial data on the case companies we can see that six of them is making profit                  
and six are not. The ones that are on the negative are all small startups building their business                  
and going to international markets from the beginning is very difficult and costly. The              
incumbents are not large companies, but SME’s that are operating or have operated in the lean                
startup manner in building their business. 
 
3.1. Analysis 
For analysis we drew from the theoretical study the different viewpoint to business model 
experimentation to understand better the differences between companies in their 
experimentation activities while going to international markets. Our sample included six 
11 
 
startup companies and six incumbent companies. We analysed these companies from three 
angles: (1) the type of experimentation they conducted (Johnson et al., 2008; Blank, 2007); 
(2) the international business model they adopted (Child et al., 2017); and (3) the 
internationalization strategy they used (Rasmussen & Tanev, 2015). The categorizations and 
explanations of different categories are presented in table 3. 
Table 3. Criteria for the analysis categories. 
Experiment 
type Pivot A completely new business model to experiment with 
 New venture 
New unit or company that is used to experiment with a new 
business model 
 New offering 
New business opportunity in which to experiment with the 
existing offering 
Int. business 
model Market adaptive 
Securing value through rapid market adaptation rather than 
innovation 
 
Technology 
exploiter Exploiting technological innovation in the international market 
 
Ambidextrous 
explorer Exploring new business models in the international markets 
Int. Growth 
strategy Lean to global 
Lean startup company first validates its business model in the 
domestic market and then goes into rapid internationalization 
 Lean global 
Lean startup company that provides its products and services 
globally from the beginning 
 
From the literature review we identified three different ways of doing experiments in             
companies (Johnson et al., 2008; Blank, 2007), three international business models (Child et             
al., 2017) and two international growth strategies (Rasmussen & Tanev, 2015). We            
acknowledge that there are more categories in each of these factors, but with the case               
companies, these are the relevant ones in their cases. Also, we claim that this provides the                
most accurate results to our research question. 
 
12 
 
4. Results 
There were notable differences between the companies. The result of the analysis is presented              
in table 4. The category companies fall in are presented in columns 2-5. Based on the                
categories the companies are divided into groups of similar companies.  
 
Table 4. Analysis results 
Company Experiment type Int BM Int growth strat. Group 
Startup 1 Pivot Market lean to global 1 
Startup 2 Pivot Tech lean global 4 
Startup 3 Pivot Market lean to global 1 
Startup 4 Pivot Explorer lean global 4b 
Startup 5 New offering Market lean global 2a 
Startup 6 New offering Tech lean global 2 
Incumbent 1 New venture Explorer lean to global 3 
Incumbent 2 New offering Tech lean global 2 
Incumbent 3 New venture Explorer lean to global 3 
Incumbent 4 New offering Tech lean to global 2b 
Incumbent 5 New venture Explorer lean to global 3 
Incumbent 6 New offering Market lean to global 1b 
 
We found four different groups of companies in our cases.  
Group 1: Upstart startups  
These companies had made a major pivot with their business model and were building their               
business in the lean startup mode in the local market before going to international market to                
fill a market gap there. They are small, agile startups that do not have the resources or                 
capabilities for going straight into international markets. Companies in this group are trying             
hard to find a sustainable business model that can take them into international success. Their               
13 
 
future is yet unseen. 
 
Group 2: Lean global startups 
This group of companies approached new markets with a new offering using technological             
innovation to provide competitive advantage. They went straight to international markets and            
interestingly both early stage startups and incumbent startups belonged in this group. We             
included one startup that had market adaptive international business model and one incumbent             
startup that had lean to global international growth strategy as they were otherwise very              
similar to the group 2 companies. These companies represent closely the ones identified by              
Rasmussen & Tanev (2015) as lean born global startups. 
 
Group 3: Cautious late-bloomers  
consisted of incumbent startup companies that had built a successful business in domestic             
market and were now exploring new business opportunities in the international market. These             
companies built a new venture for these activities so that they could continue their existing               
business using the proven business model. They have found the recipe for success and are               
willing to test their wings in the international markets, but are not ready to put all eggs in the                   
same basket, but instead make business model experimentation in a separate unit that they can               
afford to make mistakes with and still reap comfortable revenues with the proven business              
model. 
 
 
Group 4: Seasoned buccaneers 
14 
 
The last group was formed by two lean global startups who had made a major pivot with their                  
business model. The other of these companies was leaning to technological innovation in their              
international business model while the other explored a new one. These companies were             
operating in the international market since their inception, but had run into difficulties with              
their business model. Instead of folding they made a major revision in their business model               
and continued growing in the international markets. This maneuver requires a lot of skill,              
experience and luck. 
 
Internationalization and fast growth requires agility to change business model and this result             
supports the previous studies by Sosna et al. (2010) and Johnson et al. (2008).  
 
5. Discussion and conclusions 
The objective of this study was to increase understanding on how business model 
experimentation is done in internationalizing firms. We decided to look at the different ways 
internationalizing companies can conduct business model experimentation (Johnson et al., 
2008), study the way companies see their market situation and finally investigate the 
international growth strategy of companies. We found four distinctive ways of combining 
business model experimentation with international growth. The results were combining the 
results of different previous studies and were in many ways aligned with the previous results. 
We confirm Johnson’s (2008) results of identifying three factors that can trigger change in the 
business model even though we named the factors slightly differently. We also found the 
three international business models defined by Child et al. (2017) in the sample of our case 
companies. Finally, we confirm Rasmussen & Tanev (2015) separation of lean global startup 
15 
 
and lean to global startup. In fact, we found further elements defining lean global startups: 
they are exploiting technological innovation in building a new offering to the international 
markets.  
 
The obvious limitations of our study is that the sample is coming from a single country and 
single industry. According to Child et al. (2017) the level of home economy development and 
industry are key contextual factors affecting the choice of international business model. In our 
study these factors were same for all the companies.  
 
There are several interesting areas for future research. Firstly, comparative analysis of the 
different international growth strategies of companies would further increase the 
understanding of business model experimentation in the internationalization context. 
Secondly, studying companies from different countries would provide better view to the effect 
of home country factor in business models of internationalizing companies. Finally, it would 
be interesting to analyze differences in companies’ performance using different international 
business models and different approaches to business model experimentation. 
 
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Publication V 
Yli-Huumo, J., Rissanen T., Maglyas, A., Smolander, K., and Sainio, L.M. 
The relationship between business model experimentation and technical debt 
In: 
In: Fernandes, J. M., Machado, R. J., and Wnuk, K. (Eds.)., Proceedings of 6th 
International Conference of Software Business, June 10th-12th 2015, Braga, Portugal, 
pp. 17-29. Cham: Springer. 

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ACTA UNIVERSITATIS LAPPEENRANTAENSIS 
814. CHILD, MICHAEL. Transition towards long-term sustainability of the Finnish energy
system. 2018. Diss.
815. NUTAKOR, CHARLES. An experimental and theoretical investigation of power losses in
planetary gearboxes. 2018. Diss.
816. KONSTI-LAAKSO, SUVI. Co-creation, brokering and innovation networks: A model for
innovating with users. 2018. Diss.
817. HURSKAINEN, VESA-VILLE. Dynamic analysis of flexible multibody systems using
finite elements based on the absolute nodal coordinate formulation. 2018. Diss.
818. VASILYEV, FEDOR. Model-based design and optimisation of hydrometallurgical liquid-
liquid extraction processes. 2018. Diss.
819. DEMESA, ABAYNEH. Towards sustainable production of value-added chemicals and
materials from lignocellulosic biomass: carboxylic acids and cellulose nanocrystals.
2018. Diss.
820. SIKANEN, EERIK. Dynamic analysis of rotating systems including contact and thermal-
induced effects. 2018. Diss.
821. LIND, LOTTA. Identifying working capital models in value chains: Towards a generic
framework. 2018. Diss.
822. IMMONEN, KIRSI. Ligno-cellulose fibre poly(lactic acid) interfaces in biocomposites.
2018. Diss.
823. YLÄ-KUJALA, ANTTI. Inter-organizational mediums: current state and underlying
potential. 2018. Diss.
824. ZAFARI, SAHAR. Segmentation of partially overlapping convex objects in silhouette
images. 2018. Diss.
825. MÄLKKI, HELENA. Identifying needs and ways to integrate sustainability into energy
degree programmes. 2018. Diss.
826. JUNTUNEN, RAIMO. LCL filter designs for paraller-connected grid inverters. 2018.
Diss.
827. RANAEI, SAMIRA. Quantitative approaches for detecting emerging technologies. 2018.
Diss.
828. METSO, LASSE. Information-based industrial maintenance - an ecosystem perspective.
2018. Diss.
829. SAREN, ANDREY. Twin boundary dynamics in magnetic shape memory alloy Ni-Mn-
Ga five-layered modulated martensite. 2018. Diss.
830. BELONOGOVA, NADEZDA. Active residential customer in a flexible energy system - a
methodology to determine the customer behaviour in a multi-objective environment.
2018. Diss.
831. KALLIOLA, SIMO. Modified chitosan nanoparticles at liquid-liquid interface for
applications in oil-spill treatment. 2018. Diss.
832. GEYDT, PAVEL. Atomic Force Microscopy of electrical, mechanical and piezo
properties of nanowires. 2018. Diss.
833. KARELL, VILLE. Essays on stock market anomalies. 2018. Diss.
834. KURONEN, TONI. Moving object analysis and trajectory processing with applications in
human-computer interaction and chemical processes. 2018. Diss.
835. UNT, ANNA. Fiber laser and hybrid welding of T-joint in structural steels. 2018. Diss.
836. KHAKUREL, JAYDEN. Enhancing the adoption of quantified self-tracking wearable
devices. 2018. Diss.
837. SOININEN, HANNE. Improving the environmental safety of ash from bioenergy
production plants. 2018. Diss.
838. GOLMAEI, SEYEDMOHAMMAD. Novel treatment methods for green liquor dregs and
enhancing circular economy in kraft pulp mills. 2018. Diss.
839. GERAMI TEHRANI, MOHAMMAD. Mechanical design guidelines of an electric vehicle
powertrain. 2019. Diss.
840. MUSIIENKO, DENYS. Ni-Mn-Ga magnetic shape memory alloy for precise high-speed
actuation in micro-magneto-mechanical systems. 2019. Diss.
841. BELIAEVA, TATIANA. Complementarity and contextualization of firm-level strategic
orientations. 2019. Diss.
842. EFIMOV-SOINI, NIKOLAI. Ideation stage in computer-aided design. 2019. Diss.
843. BUZUKU, SHQIPE. Enhancement of decision-making in complex organizations: A
systems engineering approach. 2019. Diss.
844. SHCHERBACHEVA, ANNA. Agent-based modelling for epidemiological applications.
2019. Diss.
845. YLIJOKI, OSSI. Big data - towards data-driven business. 2019. Diss.
846. KOISTINEN, KATARIINA. Actors in sustainability transitions. 2019. Diss.
847. GRADOV, DMITRY.  Experimentally validated numerical modelling of reacting
multiphase flows in stirred tank reactors. 2019. Diss.
848. ALMPANOPOULOU, ARGYRO. Knowledge ecosystem formation: an institutional and
organisational perspective. 2019. Diss.
849. AMELI, ALIREZA. Supercritical CO2 numerical modelling and turbomachinery design.
2019. Diss.
850. RENEV, IVAN. Automation of the conceptual design process in construction industry
using ideas generation techniques. 2019. Diss.
851. AVRAMENKO, ANNA. CFD-based optimization for wind turbine locations in a wind
park. 2019. Diss.

852 
PERSPECTIVES ON
 BUSIN
ESS M
ODEL EXPERIM
EN
TATION
 IN
 IN
TERN
ATION
ALIZIN
G 
 
HIGH-TECH COM
PAN
IES
Tom
m
i Rissanen
ISBN 978-952-335-368-8
ISBN 978-952-335-369-5 (PDF)
ISSN-L 1456-4491
ISSN 1456-4491
Lappeenranta 2019