Firm capabilities, business model design and performance of SMEs

Purpose The purpose of this paper is to investigate the relationships between firm capabilities, business model (BM) design, and firm performance. Design/methodology/approach The study provides a quantitative assessment of the proposed model using a sample of 411 small- and medium-sized enterprises. Heckman’s sample selection model is employed as an econometric framework. Findings The outcomes demonstrate that the adoption of a given BM is endogenous with respect to firm capabilities, different capabilities spur the adoption of different BM, and that different BM designs have variable impacts on firm performance. Research limitations/implications Some investigated variables were operationalized using proxies, and firm performance was measured based on a self-assessed scale. Practical implications Since different types of capabilities are at the bases of different BM designs that eventually reverberate on firm performance, SMEs should carefully balance their financial resources invested in the development of capabilities. Originality/value This study represents one of the first attempts to investigate the relationships between firm capabilities, BM design, and firm performance.