Business model innovation and SME performance and performance variability: The role of CEO persistence

Business model innovation and SME performance and performance variability: The role of CEO persistence

Summary

This study examines how business model innovation (BMI) affects small and medium-sized enterprises (SMEs), not only in terms of average performance but also the variability (risk) of outcomes. Drawing on dynamic capabilities and upper echelons theory, the authors test whether CEO persistence moderates these effects. Using a sample of 314 Russian SMEs and a multiplicative heteroscedasticity regression model, the results show that BMI raises mean performance but also increases performance variability; importantly, CEO persistence strengthens the performance gains and dampens the increase in variability.

Key Points

1. Business model innovation (BMI) improves average firm performance for SMEs.
2. BMI tends to increase performance variability, making outcomes less predictable.
3. CEO persistence strengthens the positive link between BMI and mean performance.
4. CEO persistence weakens the BMI–performance variability relationship, reducing risk.
5. Empirical evidence comes from 314 Russian SMEs analysed with multiplicative heteroscedasticity regression.
6. Practical takeaway: combining BMI with persistent leadership helps balance growth and stability.

Content summary

The authors frame BMI as a dynamic capability that enables SMEs to reconfigure resources and capture competitive advantage. They acknowledge BMI is a risky strategic move: while it can raise returns, it can also produce more variable performance. To explain heterogeneity in outcomes, the paper introduces CEO persistence — the tendency of a CEO to persist with strategic choices despite setbacks — as a moderator. Hypotheses propose that persistent CEOs both amplify the mean benefits of BMI and buffer firms from the variability that BMI can create. The hypotheses receive full empirical support in the Russian SME sample, and the paper discusses implications for managers and stakeholders.

Context and relevance

This article sits at the intersection of strategy and leadership research, linking BMI literature with upper echelons theory. It is relevant to SME owners, executive teams, investors and policy-makers interested in innovation-driven growth. The findings matter for current trends where SMEs must pivot their business models quickly (digitalisation, shifting customer needs) but also need to manage the volatility that such pivots bring. The research suggests leadership traits — here, persistence — are crucial in turning risky experimentation into more reliable performance gains.

Why should I read this?

Short and blunt: if you run or advise SMEs and are thinking about changing your business model, this paper explains the payoff and the danger — and tells you why having a persistent CEO matters. It’s like saying “go on, innovate — but bring a steady hand.” Saves you time by testing the trade-offs and pointing to a practical moderator (leadership persistence) that actually shifts outcomes the right way.

Source

Source: https://www.tandfonline.com/doi/full/10.1080/00472778.2024.2436978?af=R