How do Dynamic Capabilities and Market Orientation Drive Ambidextrous Business Models?

Despite both business models and market orientation being relevant to value creation and firm performance, little research has investigated their relationship. Importantly, designing a business model often requires adjustments, which rests on the deployment of dynamic capabilities. Yet, we know little about the role of dynamic capabilities in fostering business model innovation. Thus, in this study we aim to understand the particular processes through which firms in general, and SMEs in particular, produce innovations to their business model in line with their market orientation. We develop process framework of business model innovation of an SME from start-up to scale-up, enabled by dynamic capabilities. More specifically, the paper clarifies the kind of dynamic capability deployment that is necessary for transforming a business model from market-driving to market-driven, and ultimately to one that reflects an ambidextrous market-orientation. Drawing on an in-depth longitudinal case study, this paper outlines that SMEs deploy dynamic capabilities that align with the SME’s type of market orientation to innovate the design and architecture of their business models.