Business model innovation elements and product innovation radicalness: Central European lessons for innovation leaders and followers

Abstract

Research background: Despite the increased interest in business model innovation (BMI) in the last 20 years, the current research landscape still lacks empirical efforts aimed at investigating the underexplored link between BMI and innovation performance. This is doubly true in specific contexts like Central European countries, whereas innovation systems are weaker than in Western ones, and firms strongly depend on internal R&D activities and absorptive capacity and technology upgrades via cooperation with other countries. Purpose of the article: This study draws on the BMI theory with the aim of analyzing the effects of each individual BMI element on firms' performance in terms of creation of radical innovations vs incremental ones. Methods: The data used are from the Community Innovation Survey (CIS) 2018 - the latest micro data available to date - focusing on 16,364 firms in Central Europe, namely 5,749 Czech, 7,377 Hungarian, and 3,238 Slovakian firms. As the explained (dependent) variables are dichotomous (binary: 1 indicates the answer is yes, 0 indicates the answer is no) for all estimated models, a binary logistic regression is used in order to focus on the individual elements representing BMI and analyse their separated effects on firms' creation of radical and incremental innovations in Central Europe. Individual BMI elements are: BMI methods, logistics, communication, accounting, external relations, human resource management, and marketing. Moreover, we check for control variables such as tax credits and allowances of R&D, public funding of innovation, cooperation with other organizations on R&D or other activities, in-house R&D activities and contracted out ones, lack of finance, lack of skilled employees and internal financial resources, and size. Findings & value added: For radical innovators, practices for organising procedures and external relations are important. For incremental innovators, methods of organising work responsibility, decision making, and human resource management are significant. Surprisingly, regardless of the innovation radicality, several BMI elements are significant. This study suggests that managers should enhance strategic collaborations with external partners out of Central Europe, exploit their absorptive capacity, and increase the knowledge and experience of their employees, whilst policymakers should keep on providing tax credits and allowances for innovation activities, maintaining a supportive infrastructure and reducing administrative burdens.