A study of Chinese enterprises’ business models to determine the impact of dynamic capabilities on innovation and performance

Abstract

Small and medium-sized enterprises (SMEs) can gain a competitive advantage by implementing business model innovation (BMI), which is characterized as irreversible changes to a company’s business model. However, BMI is often associated with high risk, uncertainty, and ambiguity. In this study, the effectiveness of BMI on improving SME performance is examined using structural equation modeling (SEM) based on data collected from 330 Chinese SMEs. The purpose of this paper is to examine how enterprise risk management (ERM), organizational agility (OA), and entrepreneurial orientation (EO) affect SME performance. The results reveal that ERM, OA, and EO all have a positive impact on efficiency-centered BMI and SME performance; efficiency-centered BMI mediates this pathway. Building on dynamic capabilities theory, this paper combines ERM, OA, and EO into one framework to assess their impact on SME performance. Additionally, a case study is presented to provide suggestions for making decisions about BMI implementation.