The novelty-centered business model: a transition mechanism between exploration and exploitation in SMEs

Purpose: As the transition between exploration and exploitation is a unique challenge for SMEs, what mechanism(s) might facilitate this transition? Building on the entrepreneurship literature's entrepreneurial opportunity identification and development framework, this study hypothesizes that the novelty-centered business model (NCBM) may serve as such a mechanism. Design/methodology/approach: Based on cross-sectional survey data collected from 169 Italian SMEs in various sectors, this study tests the mediation, moderation and moderated mediation relationships using the statistical PROCESS procedure. Findings: Supporting the hypotheses that exploration and exploitation are positively associated within SMEs, that NCBM mediates this relationship and that the indirect relationship between exploration and exploitation by way of NCBM is stronger for SMEs with employees of medium to high creative human capital, the results suggest that SMEs can more effectively exploit new ideas identified in the exploration phase by developing an NCBM and accessing their creative human capital. Research limitations/implications: Although the robustness checks confirm the direction of the proposed hypotheses, given the cross-sectional nature of the dataset used, a longitudinal study would further validate the proposed framework. Practical implications: SMEs can successfully achieve the transition between exploration and exploitation by reinventing their business model to compensate for their limited resources in terms of financial or relational capital. They can further enhance their ability to reinvent their business model and, in turn, to exploit innovations by hiring and retaining employees with greater creative human capital. Originality/value: This study draws on the entrepreneurial opportunity, ambidexterity (exploration-exploitation) and business model literature to enhance our understanding of the role of the NCBM design concept (business model innovation) as a mechanism to achieve temporal ambidexterity in SMEs.