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Do Some Business Models Perform Better than Others?

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  • Malone, Thomas
  • Weill, Peter
  • Lai, Richard
  • D'Urso, Victoria
  • Herman, George
  • Apel, Thomas
  • Woerner, Stephanie

Abstract

This paper defines four basic business models based on what asset rights are sold (Creators, Distributors, Landlords and Brokers) and four variations of each based on what type of assets are involved (Financial, Physical, Intangible, and Human). Using this framework, we classified the business models of all 10,970 publicly traded firms in the US economy from 1998 through 2002. Some of these classifications were done manually, based on the firms' descriptions of sources of revenue in their financial reports; the rest were done automatically by a rule-based system using the same data. Based on this analysis, we first document important stylized facts about the distribution of business models in the U.S. economy. Then we analyze the firms' financial performance in three categories: market value, profitability, and operating efficiency. We find that no model outperforms others on all dimensions. Surprisingly, however, we find that some models do, indeed, have better financial performance than others. For instance, Physical Creators (which we call Manufacturers) and Physical Landlords have greater cash flow on assets, and Intellectual Landlords have poorer q's, than Physical Distributors (Wholesaler/Retailers). These findings are robust to a large number of robustness checks and alternative interpretations. We conclude with some hypotheses to explain our findings.

Suggested Citation

  • Malone, Thomas & Weill, Peter & Lai, Richard & D'Urso, Victoria & Herman, George & Apel, Thomas & Woerner, Stephanie, 2006. "Do Some Business Models Perform Better than Others?," MPRA Paper 4751, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:4751
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    Cited by:

    1. Emiliano Carlo & Fabio Fortuna & Silvia Testarmata, 2016. "Boundaries of the business model within business groups," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 20(2), pages 321-362, June.
    2. Ales Novak, 2014. "Business Model Literature Overview," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2014(1), pages 79-130.
    3. Marzanna Katarzyna Witek-Hajduk & Piotr Zaborek, 2016. "Does Business Model Affect CSR Involvement? A Survey of Polish Manufacturing and Service Companies," Sustainability, MDPI, Open Access Journal, vol. 8(2), pages 1-20, February.
    4. Michael Page, 2014. "Business models as a basis for regulation of financial reporting," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(3), pages 683-695, August.
    5. Hess, Thomas (Ed.), 2012. "Geschäftsmodelle als Thema der Wirtschaftsinformatik," Working Papers 1/2012, University of Munich, Munich School of Management, Institute for Information Systems and New Media.
    6. Pascal Barneto & Stéphane Ouvrard, 2013. "Existe-T-Il Une Relation Entre L'Information Sectorielle Et Le Tableau Des Flux De Tresorerie ?," Post-Print hal-00991963, HAL.
    7. Barneto, Pascal & Ouvrard, Stéphane, 2015. "Is the firm's business model related to segment reporting?," Research in International Business and Finance, Elsevier, vol. 35(C), pages 122-137.
    8. Daniel Zähringer & Jochen Niederberger & Knut Blind & Alexander Schletz, 2010. "Revenue creation: business models for product-related services in international markets -- the case of Zwick GmbH & Co. KG," The Service Industries Journal, Taylor & Francis Journals, vol. 31(4), pages 629-641, March.
    9. Nathalie Gonthier-Besacier & Charlotte Disle & Philippe Protin, 2015. "L'Utilite Perçue Du Concept De Business Model Par Les Analystes Financiers," Post-Print hal-01188580, HAL.

    More about this item

    Keywords

    business models; performance;

    JEL classification:

    • G0 - Financial Economics - - General
    • L00 - Industrial Organization - - General - - - General

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