CHAPTER 7

Business Model Design and Innovation

in the Process of the Expansion and
Growth of Global Enterprises
Oleksiy Osiyevskyy
and
M. Amin Zargarzadeh

Introduction
What is a business model? In its essence, a firm’s business model is a
routine for (i) creating economic value for the firm’s stakeholders and
(ii) appropriating part of this value for the firm itself and its share-
holders (Osiyevskyy, 2014; Osiyevskyy & Dewald, 2015; Zott et al.,
2011). In this definition, the term “routine” is used in a sense of the
evolutionary theory of the firm (Nelson & Winter, 1982), as a regular
behavioral pattern within an organization. In other words, a business
model is a regular sequence of activities performed by the firm that
serves two purposes. On the one hand, a business model must create
economic value for all of a firm’s stakeholders (most importantly, cus-
tomers, partners in the value chain, and employees), sufficient enough
to motivate them to interact (participate in economic transactions)
with the firm. This value creation implies that the benefits that each
stakeholder receives from the firm exceed the costs incurred. On the
other hand, the business model must ensure that a sufficient portion of
the created economic value is retained for the firm’s shareholders in the

A. A. Camillo (ed.), Global Enterprise Management

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116 M Oleksiy Osiyevskyy and M. Amin Zargarzadeh

form of profit; therefore, the total revenue received by the firm from all
economic transactions with other stakeholders must exceed the costs
incurred by the firm.
Notably, following this definition, a firm can have more than one
business model (if the value is created and appropriated in more than
one distinct way), or have no business model at all (if no regular behav-
ioral pattern for value creation and appropriation is established). As
with any other routine, a business model can become a capability
underpinning the firm’s competitive advantage (Casadesus-Masanell
& Ricart, 2010; Markides & Charitou, 2004), provided that a set of
conditions is met (e.g., the VRIN framework of Barney, 1991). In the
context of multinational enterprises (MNEs), a business model might
become a source of a firm-specific advantage (FSA) (Verbeke et al.,
2014).
Recently, the concept of business models has been gaining substan-
tial attention in the strategic management literature, as researchers and
management practitioners realize that a business model is the primary
mechanism for value creation and appropriation by firms in a free mar-
ket economy. As such, a business model should become one of the main
units of analysis in strategy scholarship. Firms compete on the basis
of business models, rather than products, market power, or unique
resources. Of course, the traditional strategic management frameworks
of rents creation (Bainian market power, Penrosian resource advantage,
and Schumpeterian rents—Powell, Lovallo and Fox [2011]) remain in
power, but it is the business model that allows capitalizing (generating
profit) on these.
Yet, whereas the recent literature provides a good understanding
of the role of business models in high-tech companies and new ven-
tures (e.g., Amit & Zott, 2001; Zott et al., 2011), the role of business
models for other types of enterprises, including established multina-
tional companies, has not been thoroughly researched. We intend to
address this gap by studying the following questions: 1) What is the
role of business models in today’s global business? 2) How can busi-
ness model design and innovation facilitate the expansion and growth
of global enterprises? 3) What are the peculiarities of business model
analysis, design, and change in multinational contexts? Drawing on
insights from evolutionary and resource-based perspectives, we pro-
vide answers to these questions, clarifying our conceptual argument
with illustrative mini-cases of global enterprises’ failing to properly
adjust their business models in multinational contexts in the process of
expansion and growth.