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What makes firms innovate their business model? Why do they engage in innovating the way of creating, delivering and capturing value? Despite the importance of business model innovation for achieving competitive advantage, existing evidence seems to be confined to firm-level antecedents and pays little attention to the impact of industry structure. This study investigates how different stages of an industry life cycle and industry competition affect business model innovation and how such innovation in a firm?s business model translates into innovation performance. Based on a cross-industry sample of 1,242 Austrian firms, we introduce a unique measure for the degree of innovation in a firm?s business model. The results indicate that the degree of business model innovation is highest towards the beginning of an industry life cycle, i.e. in the emergent stage. Competitive pressure in an industry turns out to be negatively related to the degree of business model innovation. Moreover, we find that the degree of business model innovation, conditional on having introduced a new product/process, positively influences innovation performance. Our findings provide implications for the management of business model innovation and contribute to the ongoing dialog on the role of industry structure in business model innovation.

The internet, peer-to-peer technology and mobile devices are radically changing markets for digital media such as recorded music. Incumbent companies in these industries have severe difficulties in reacting to these changes and finding effective business models. The fundamental challenge is how to capture value from delivering digital music files which users expect to download for free. It is the consumer's capability to handle digital content that opens up possibilities for new business models where consumers are active partners helping to co-create value along with companies. Compared to the music industry, the video game industry was more successful in adapting its business models. By conducting an exploratory study among recently founded video game startups and two case studies of music technology startups, whether and how the video game industry is a vital source from which to draw analogies for the music industry will be analysed in this paper.