Disentangling the relationship between business model, absorptive capacity, differentiation strategy and performance. Evidence from a transition economy

Purpose – This paper explores the relationships between firm absorptive capacity, novel business modeldesign (NBMD), product differentiation strategy and performance in a transition economy.Design/methodology/approach – The study uses structural equation modeling (SEM) to analyze firm-leveldata from a unique sample of Albanian manufacturing and service firms.Findings – The study shows that absorptive capacity enables and shapes the NBMD that, in turn, leads toperformance gains. The authors also find that the NBMD capacity mediates the impact of realized absorptivecapacity on performance, whereas product differentiation strategy moderates the relationship between newbusiness model and performance.Research limitations/implications – All variables were measured based on a self-assessed scale leading topotential method bias. Also, based on relevant literature, the study focuses on only one type of business model(BM) design.Practical implications – Since dynamic capabilities are the foundation of NBMD, firms should investcarefully in developing such capabilities. Thus, the study results provide an integrative framework forunderstanding the role of absorptive capacity in NBMD adoption and for explaining the relationship betweenNBMD adoption and performance, an aspect that helps organizations in a dynamic environment.Originality/value – This study strives to investigate the relationships between absorptive capacity, businessmodel design, product strategies and performance by answering the call of Teece (2018) to “flesh out thedetails” of such relationships.