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Productivity growth and business model innovation

Author

Listed:
  • Wannakrairoj, Wit
  • Velu, Chander

Abstract

Organizational factors have been identified as a possible explanation for total factor productivity and hence the Solow paradox. We posit that business model innovation is a major organizational factor. However, there has not been any systematic study on how business model innovation affects productivity growth rates. We introduce a novel approach of measuring business model innovation using change in the net asset turnover ratio. The study shows that business model innovation contributes significantly to productivity growth across firms in the UK between 2003 and 2017. The study provides empirical support that business model innovation could partially explain the Solow productivity paradox.

Suggested Citation

  • Wannakrairoj, Wit & Velu, Chander, 2021. "Productivity growth and business model innovation," Economics Letters, Elsevier, vol. 199(C).
    • Handle: RePEc:eee:ecolet:v:199:y:2021:i:c:s0165176520304390
    DOI: 10.1016/j.econlet.2020.109679
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Marco Cucculelli & Riccardo Cappelli & Jasmine Mondolo, 2024. "Does market power drive business model innovation? Evidence from Italian family manufacturing firms," Small Business Economics, Springer, vol. 63(1), pages 447-475, June.
    2. Nguyet Thi Nguyen & Trang Be, 2025. "Knowledge and Productivity Paradox in an Emerging Country: Empirical Evidence From Vietnam," SAGE Open, , vol. 15(2), pages 21582440251, May.
    3. Ren, Yuheng & Zhang, Jue & Wang, Xin, 2024. "How does data factor utilization stimulate corporate total factor productivity: A discussion of the productivity paradox," International Review of Economics & Finance, Elsevier, vol. 96(PC).
    4. Hoa Thanh Phan Le & Ha Pham & Nga Thi Thu Do & Khoa Dang Duong, 2024. "Foreign direct investment, total factor productivity, and economic growth: evidence in middle-income countries," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-11, December.
    5. Marco Cucculelli & Riccardo Cappelli & Jasmine Mondolo, 2026. "Innovative business models along the industry life cycle. Does demand turbulence matter?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 16(1), pages 151-192, March.
    6. Diane Coyle, 2021. "The idea of productivity," Working Papers 003, The Productivity Institute.
    7. Liping Liu & Lichuan Cui & Qian Han & Chunyu Zhang, 2024. "The impact of digital capabilities and dynamic capabilities on business model innovation: the moderating effect of organizational inertia," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-10, December.
    8. Wen, Huwei & Wen, Changyong & Lee, Chien-Chiang, 2022. "Impact of digitalization and environmental regulation on total factor productivity," Information Economics and Policy, Elsevier, vol. 61(C).
    9. Adem, Anwar & Battisti, Giuliana & Driffield, Nigel & Schroeder, Andreas, 2026. "Choice versus necessity: understanding service diversification and firm performance in manufacturing," Journal of Business Research, Elsevier, vol. 206(C).
    10. Yu, Chengluo, 2025. "Business model innovation and total factor productivity in the digital economy," Finance Research Letters, Elsevier, vol. 86(PF).

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    More about this item

    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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