Integrating Business Model Innovation and Corporate Governance in Family-Owned SMEs: A Dynamic Capability Perspective

In recent years, business model innovation has been the focus of a growing debate involving both scholars and practitiones. A business model has been conceptualised as a system of interdependent activities enabling a firm—in concert with its partners—to create, and capture a share of, value. In family-owned SMEs, the involvement of family members in ownership and/or managerial roles may exert a substantial influence on the firm’s business model and its innovation trajectories. Family members are often closely linked to strategic decision-making, addressing and evaluating desired goals, managing resources, or developing the necessary organisational capabilities. Investigating how unique family characteristics translate into dynamic capabilities may shed light on how small family firms innovate their busi- ness models and create sustainable value over time. The innovation of a business model is the result of dynamic capabilities). Recent efforts have explored the ways in which firms establish organisational processes enabling them to integrate, build, and reconfigure internal and external competences, thus leading to dynamic capabilities. However, there is a lack of theoretical understanding and empirical evidence on the role of corporate governance in the development of dynamic capabilities in the context of SMEs and family firms. This study attempts to fill this gap by using a resource-based view (RBV) of the firm, as well as building upon recent research addressing the enterprise dimension of corporate governance. It addresses how corporate governance practices may influence resource management, thus leading to dynamic capabilities. It employs a single revelatory case to investigate the process by which a family-owned SME in possession of an exclusive material transformed its resource base and built firm-specific know-how which enabled the development of dynamic capabilities. The research focuses on the interconnection of these processes with corporate governance practices, and how appropriate variations led to business model innovation.