Integrating a business model perspective into transition theory: The example of new mobility services

Environmental Innovation and Societal Transitions 27 (2018) 16–31

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Original Research Paper

Integrating a business model perspective into transition theory: The example of new mobility services

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Steven Sarasini , Marcus Linder RISE Viktoria, Lindholmspiren 3A, 41756, Gothenburg, Sweden

AR TI CLE I NF O

AB S T R A CT

Keywords: Business model Sustainability transitions Mobility services Technological innovation systems Multi-level perspective

Business model innovation is increasingly seen as a means to promote sustainable forms of production and consumption, having been linked to technological innovations in electric vehicles and the circular economy. Business models are an organisational phenomenon that concern focal firms and their networks. However, there is no theory of the firm in transition theory, such that the role of business model innovation in wider transformative processes is unclear. This paper aims to redress this issue by combining a business model perspective with core concepts and constructs from transition theory. We elucidate sources of change and inertia that issue from new and existing business models, illustrating our arguments by focusing on mobility services, which have the potential to radically transform road transportation via new business models. We derive new lines of inquiry that can be used to examine the dynamics of business model innovation in the context of sustainability transitions.

1. Introduction Business model innovation (BMI) is increasingly recognised as a vital component of societal transitions towards sustainability (Bocken et al., 2014; Bocken and Short, 2016; Boons and Lüdeke-Freund, 2013; Schaltegger et al., 2016; , 2012; Stubbs and Cocklin, 2008). For example, BMI can facilitate the diffusion of sustainable energy technologies to new markets, geographies and new types of users (Drury et al., 2012; Jolly et al., 2012). Several works have noted that BMI may unlock the economic potential of electric vehicle technology and assist in its adoption (e.g. Budde Christensen et al., 2012; Costain et al., 2012; Weiller et al., 2015). BMI has also been cited as a key enabler of a transition to a circular economy (Linder and Williander, 2015; Tukker, 2015). Examining the dynamics of BMI and the role of business models in wider processes of societal change using existing transition theories is problematic for at least two reasons. First, existing transition theories lack a theory of the firm, despite firms being regarded as a key performative actor in, for instance, innovation system approaches (Farla et al., 2012; Markard and Truffer, 2008a,b). Despite a lack of a common definition of business models, the latter are viewed by some scholars as mechanisms or ‘mediating devices’ that capture the value of firms’ innovative technology by connecting it to customer needs (e.g. Chesbrough and Rosenbloom, 2002; Teece, 2010). That is, business models are “conceptually placed between a firm’s input resources and market outcomes” (Zott et al., 2011: 1034). Hence whilst the business model concept cannot be regarded as an exhaustive theory of the firm (Baden-Fuller and Mangematin, 2013), it can be used as a descriptor of some firm-level activities, focusing on the creation and distribution of value (Baden-Fuller and Morgan, 2010). Second, BMI may be characterised as a complement to traditional classes of product and process innovations (Zott et al., 2011). As a type of organisational innovation that is often intertwined with technology, BMI is nonetheless analytically distinct from

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Corresponding author. E-mail address: [email protected] (S. Sarasini).

http://dx.doi.org/10.1016/j.eist.2017.09.004 Received 6 October 2016; Received in revised form 16 August 2017; Accepted 28 September 2017 Available online 12 October 2017 2210-4224/ © 2017 Elsevier B.V. All rights reserved.

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technological innovation (Teece, 2010). Yet transition theories such as technological innovation systems are geared towards examining innovations of a more artefactual-technological nature, based on analyses on a set of key ‘functions’ that are critical to systemic change (Bergek et al., 2008a; Hekkert et al., 2007). Similarly, the multi-level perspective (MLP) is a heuristic device for analysing systemic socio-technical change (Geels, 2004, 2002). Whilst the MLP can in principle account for a broader range of social phenomena, the core concept of a socio-technical regime evolved from that of a technological regime (Rip and Kemp, 1998), and studies that utilise the MLP also tend to focus on the development and diffusion of new artefactual technologies (e.g. Geels, 2006a,b; Geels and Kemp 2007). Other theories, such as large technical systems (Hughes, 1987) and strategic niche management (Kemp et al., 1998a; Schot and Geels, 2008) also have a strong focus on technologies as artefacts, such that transitions which rely heavily upon organisational innovations appear to have been overlooked. Given these shortcomings, in this paper we aim to integrate insights from the literature on business models into existing theories for analysing the dynamics of sociotechnical transitions. Although this literature is too young to provide a single, coherent business model perspective or theory, it does comprise different streams of research which describe functionalities of business models and their associated processes/activities (Zott et al., 2011), which can potentially add to the heuristic utilities of existing transition theories. That is, transition researchers and practitioners alike can benefit from an understanding of the role of new and existing business models, and the dynamics of BMI, in broader processes of systemic transformation, with the aim of elucidating how sustainable transitions based on new business models may be governed. To this end, we pose the following research question: How can the integration of a business model perspective into transition theory elicit new lines of inquiry regarding the dynamics of sustainable transitions? With regard to transition theory, we explore ways in which a business model perspective can be combined with transition theory to facilitate analyses of the dynamics of sociotechnical change. We also derive new lines of inquiry that can guide future scholarship. The synthesis presented in this paper is intended as an ‘evolving framework’ that can later be modified and refined via “critical evaluation of emerging constructs against ongoing observations” (Suddaby, 2006: 236) using qualitative and abductive methodologies (Dubois and Gadde, 2014). As a first step in this abductive approach, we refer to BMI in the field of mobility services as an illustrative example of an emergent sustainability transition. Many other sustainability issues may be resolved via BMI and could thus have been used for illustrative purposes. We elected to focus on mobility services because they are an example of an emergent and disruptive innovation that is increasingly seen as a way to sustainably transform a given socio-technical system (road transport) via new business models. That is, mobility services can facilitate a radical shift towards sustainable urban management, improvements in energy efficiency and urban air quality, and greater use of renewable fuels (Burrows and Bradburn 2014; Lerner et al., 2011). Despite our focus on mobility services, the synthesis outlined in this paper is intended for more generic use in cases where transitions are contingent upon BMI, and in cases where transitions are hindered by existing business models. In the next section we examine the lack of a firm-level perspective in transition theory before introducing mobility services and discuss their potential to form the basis of a sustainability transition. In section three we outline new lines of inquiry and a set of research questions that can be used to examine the dynamics of a transitions contingent upon BMI. Section four concludes, focusing on implications for governance. 2. The lack of a firm-level perspective in transition theories Transition theories have been used to examine systemic shifts within large technical systems whose overarching purpose is energy supply (e.g. Geels and Raven 2006), transportation (e.g. Geels 2012) and the provision of other societal utilities (e.g. Geels 2006b; van der Brugge et al., 2005). Markard et al. (2012) identify four main theories within transition studies: technological innovation systems (TIS) (e.g. Bergek et al., 2008a; Hekkert et al., 2007), the multi-level perspective (MLP) (e.g. Geels, 2002), strategic niche management (SNM) (e.g. Kemp et al., 1998a) and transition management (TM) (e.g. Kemp et al., 2007; Loorbach, 2010, 2002). These perspectives utilise a common set of concepts and constructs such as sociotechnical systems, niches and regimes to study the dynamics of sustainable transitions, albeit in different ways and for different purposes. Whilst we observe the conceptual differences among transition theories and the way they are applied, we focus on synthesising core concepts and constructs from transition theories with a business model perspective. We delimit the study in this fashion because integrating the entire literature on business models with different applications of transition theory would imply the synthesis of two exceptionally diverse fields of research, which is beyond the scope of a single paper. One common aim among transition theories is to elucidate prescriptive implications regarding how sustainable transformations can be governed or ‘managed’. SNM, for instance, focuses primarily on the governance of technological transformations via public policies that promote niche-level activities such as learning, networking and visioning (Kemp et al., 1998a; Schot and Geels, 2008). SNM, TM and the MLP share the notion of a niche as a protected space where experimentation with radical innovations can eventually bring about changes to sociotechnical regimes – another construct that is shared among transition theories (Kemp and Rotmans, 2005). Transition theories examine what may broadly be described as different sources of systemic inertia and change. We focus on these two aspects of the transformative process by referring to sources of inertia as structures, elements and forces that serve to create stability, lock-in, path dependence and which act as barriers and obstacles to change. By sources of change, we refer to elements, forces, activities and processes that contribute to transformation via technological and organisational innovations. The concept of a sociotechnical (ST) regime is one source of inertia, and refers to the “semi-coherent set of rules” and structures that govern the engineers, users, policymakers, suppliers, scientists, financial actors, and other societal groups that produce and maintain technological systems (Geels 2002: 1260). That is, regimes encompass different dimensions, such as technology, science, policy, user practices, markets, the cultural and symbolic meaning of technology, and industry networks (Geels, 2007a, 2007b, 2002). 17

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The trajectories of each dimension align within regimes to obfuscate radical innovation and maintain the existing order (Geels, 2005a). Other sources of inertia issue from incumbent firms, especially when they view radical change as a threat to their vested interests. In such situations, incumbents can use their power and resources to resist change and maintain their positions (Augenstein and Palzkill, 2015; Geels, 2011; Markard et al., 2012). Given the inertial properties of regimes, transition theories posit that landscape pressures and niche-level activities combine to act as sources of change. In situations where regimes are subjected to landscape pressures, ‘windows of opportunity’ are created (Geels, 2002). The combination of landscape pressures and niche-level activities, such as experimentation with radical innovations, the creation of social networks, and the articulation of expectations and visions (Geels and Schot, 2010), can eventually result in radical transformations, or ‘transition pathways’ (Smith et al., 2005; Geels 2006a; Geels and Schot 2007; Geels 2007a; Geels and Kemp 2007). Niche-level activities are the main focus of the SNM approach, but also feature in TM and the MLP. Similarly, innovation system scholars have identified a set of ‘functions’ that support the development, diffusion and use of technological innovations (Edquist 2004; Edquist 2005). These include activities such as research, development and demonstration, entrepreneurial experimentation, market formation and the creation of positive externalities that foster the growth of new technological systems (Bergek et al., 2008a,b; Hekkert et al., 2007; Chaminade and Edquist 2006). Whilst IS approaches adopt a different nomenclature, the concepts in many cases refer to similar phenomena, such as the importance of experimentation with radical innovations as a key fundament of systemic transformation. Transition theories focus on sources of inertia and sources of change to differing degrees. The functional approach taken by some IS approaches, for example, ascribes success to system performance (Markard et al., 2012). That is, there is a lack of consideration for systemic factors that restrict and constrain technological transitions (sources of inertia). IS approaches obscure, for instance, user perspectives (Geels, 2004) that are critical to the analysis of behavioural changes that lead to sustainable reorientations of existing technological systems. In practice this means that IS cannot adequately account for complex sources of inertia within systems such as road transport, as reflected in cultural understandings of ‘automobility’ or ‘motorism’ (Geels, 2012, 2002; Urry, 2004), or technoinstitutional lock-in (Unruh, 2002, 2000). Markard and Truffer (2008a) seek to rectify this problem by combining the TIS approach with the MLP into a single framework. Whilst this synthesis represents a valuable contribution with regard to two previously separate streams of research, one significant shortcoming is the lack of consideration for the way in which firms influence dynamics of broader systemic transformations. One major shortcoming of transition theories such as the MLP and innovation systems (IS) is that although they recognise firms as performative actors, they do not include what may be regarded as a robust theory of the firm.1 Whilst this is likely due to a focus on interfirm dynamics within innovative actor-networks, a lack of consideration for firm-level processes is surprising given the overarching aim within IS – namely to examine the antecedents and determinants of innovation (Edquist, 2004). This is noted by Markard and Truffer (2008b; see also Farla et al., 2012), who argue that transition theories overlook the “micro-level of innovating actors” (444), and posit that there is a need to consider “the contributions of individual strategies to innovation system dynamics…more explicitly” (448). There are several business and management theories that one could potentially draw upon to redress this lack of a firm-level perspective. The literature on corporate social responsibility (CSR), for instance, has pushed the agenda for business to engage with sustainability issues on a moral and ethical basis and has also developed strategies that the private sector can harness to generate economic gains from improved engagement with ecological and social issues, using concepts such as ‘triple bottom line’ and ‘sustainable entrepreneurship’ (Anderson et al., 2010; Bryant and Wilson, 1998; Elkington, 1998, 1997; Hart, 1997; Shepherd and Patzelt, 2011). Another alternative is stakeholder theory, which encourages proactive stakeholder engagement as a means to boost financial performance (Mitchell et al., 1997), and which also adopts a prescriptive approach based on morally defensible firm behaviour (Donaldson and Preston, 1995). A further alternative is neoinstitutional theory, which has been applied to examine corporate environmental engagement in the context of different firm-external institutional pressures (Hoffman, 1999; Kolk and Levy, 2001; Sarasini and Jacob, 2014). These theories may have important contributions to make regarding the governance of sustainability transitions. However, their focus is not primarily on innovation. For this reason we believe that the integration of a business model innovation perspective is a more pressing issue. One other way to consider the role of firms in sustainable transitions is to explore the potential for business models to act as an enabler of or an obstacle to change. As noted in the introduction, business models link firm-level activities with market outcomes (Baden-Fuller and Mangematin, 2013; Baden-Fuller and Morgan, 2010; Zott et al., 2011) and can play an important role in the adoption and diffusion of technology. For example, Jolly et al. (2012) examine the importance of business model innovation for different types of upscaling2 with regard to solar photovoltaics in India. Similarly, Drury et al. (2012) show that business models based on third-party ownership can facilitate the upscaling of solar photovoltaics, providing new demographic groups (in California) with access to the technology. Johnson and Suskewicz (2009) argue that BMI is a critical element of systemic transformations that can eradicate the use of fossil fuels. Together, these studies suggest that BMI can potentially have broad-ranging impacts in wider processes of sociotechnical change. Recognising this potential, scholars have started to construct analytical frameworks that combine business model perspectives

1 It must be noted, however, that some transition management scholars have sought to integrate a business perspective into broader theories of sociotechnical change (e.g. Loorbach et al., 2010; Loorbach and Wijsman, 2013). 2 Upscaling (or scalability) can be defined as the capacity or potential for a particular business model to expand effectively and efficiently by reaching larger numbers of customers and new markets (Jolly et al., 2012).

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with transition theories. Bolton and Hannon (2016) combine the approach that describes business models as activity systems (Zott and Amit, 2010) with transition theories to examine combined heat and power and district heating the UK. Their analysis enriches the business model perspective by drawing on large technical systems to demonstrate that business model developers must act towards the market and in political spheres as a means to promote the deployment of their technologies. Bolton and Hannon also draw upon the MLP to elucidate structural factors that can hinder BMI. The authors further demonstrate how a business model perspective can elucidate sources of sociotechnical change that have thus far been missing from sustainability transitions, but also show that new business models cannot act as a base for sociotechnical transformations without major reforms to political, regulatory and market structures. Similarly, Bidmon and Knab (2014) show that how business models can act as a source of change given their role in the commercialisation of new technology. In addition, Bidmon and Knab (2014) also show how business models can act as a source of inertia that was previously overlooked within the MLP. One further reason to examine the role of firms in sustainable transitions is related to issues of governance. In the field of environmental governance, one can observe a shift in the understanding of governance from a traditionally state-led, or governmentoriented activity (based on regulatory interventions, legislation and public policy) to a broader, multi-stakeholder activity that involves actors from the public sector, industry and civil society (Driessen et al., 2012; Glasbergen, 1998). Whilst some applications of transition theory maintain a narrower focus on governance in terms of public policies that can support the development and diffusion of environmental technologies (see, for example: Jacobsson and Lauber, 2006; Kemp et al., 1998a; Schot and Geels, 2008), others embrace the ‘government-to-governance shift’ (Hysing, 2009; Jordan, 2008) noted above. TM, for instance, embraces the complexities of sustainable transitions, which can occur over periods of several decades, by adopting a multi-stakeholder approach that recognises the transformational influence of a broader set of actors, among them private enterprises (Loorbach, 2010; Loorbach and Wijsman, 2013). TM advocates a governance model based on four types of activities. Strategic activities creation of adaptable, long-term visions that acknowledge the complexities of societal problems using tools such as backcasting. Strategic activities are collaborative, interorganisational (or multi-stakeholder) processes which aim to ensure that long-term visions are shared and embedded among collectives. By contrast, tactical activities serve to link individual actor strategies to the shared long-term visions created via strategic activities, aiming to overcome short-termism within different societal sectors (e.g. politics, business). They also aim to tackle the difficulties in implementing solutions by acknowledging complex sources of inertia within regimes, and directing activities such as corporate political action and lobbying towards the reformation of such structures. Operational activities aim to link everyday activities such as innovative experiments to long-term visions, broader policies and change agendas. Reflexive activities include the ongoing monitoring, assessment and evaluation of policies and practices as a means to revise overarching visions and plans where necessary (Kemp and, 2007; Loorbach, 2010; , 2007; Rauschmayer et al., 2015; Rotmans and Loorbach, 2008; Voß et al., 2009; Loorbach and Wijsman, 2013). When exploring the role of BMI vis-à-vis the dynamics of sustainable transitions, we argue that it is important to consider the resultant implications concerning governance, particularly with regard to transition management. 2.1. Mobility services – a sustainable transition in the making Mobility services are increasingly seen as a means to shift towards a more sustainable transport system, and are linked to better urban management; improvements in energy efficiency and urban air quality; greater use of renewable fuels; reduced congestion and improved accessibility (Greenblatt and Saxena, 2015; Greenblatt and Shaheen, 2015; Rydén and Morin, 2005). Some mobility services, such as taxi services and public transport, have existed for a long time. Others, such as car and ride sharing have undergone rapid growth in the last decade following the emergence of ICT-enabled business models (Cohen and Kietzmann, 2014). A more recent development is the emergence of combined or integrated mobility services that facilitate intermodal travel, commonly referred as “Mobility as a Service” (MaaS). MaaS aims to provide an alternative to private vehicle ownership by combining different types of mobility services as part of a single, seamless offering that is made available to users via subscription-based smartphone applications (Beutel et al., 2014; Goldman and Gorham, 2006; Sochor et al., 2015b). In this paper, we focus on mobility services, and MaaS in particular, as an illustrative case of a sustainable transition in the making. This choice was made because the development and diffusion of MaaS relies heavily on BMI and because MaaS is gaining increasing attention as a means to resolve transport-related sustainability problems (Sarasini et al., 2016). Moreover, MaaS must overcome a range of institutional barriers to deployment and requires new forms of collaboration between different types of actors from the private and public sectors (Mukhtar-Landgren et al., 2016). Examining the dynamics of innovation associated with MaaS is thus an interesting topic for the field of transition studies. In the next section, we examine ways in which a business model perspective can be used as a basis for analysing the dynamics of a sustainability transition towards the widespread adoption of mobility services, with particular attention given to MaaS. We seek to identify ways in which a business model perspective can serve to enrich theory by creating a set of research questions that can be used to examine the dynamics of transitions that have BMI as a fundamental lynchpin. 3. Integrating a business model perspective into transition theory The term ‘business model’, despite widespread use, lacks a common definition. In a well-cited review of the business model literature, Zott et al. (2011: 1020) argue that the main reason for a lack of conceptual clarity is that research on business models is only starting to reach maturity, having developed “largely in silos”. Notwithstanding, Zott et al. (2011) observe three streams of research on business models. The first is concerned with the use of ICT to create, capture and deliver value via a new set of channels 19

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(e-commerce). This stream of research has focused on, among other things, creating typologies and taxonomies of e-business models. The second is concerned with the interplay between business models and corporate strategy, and has focused on the influence of business models on firm performance, noting that business models link individual firms to business networks. Here, business models have been characterised as ‘activity systems’, which are defined as: “the content, structure, and governance of transactions designed so as to create value through the exploitation of business opportunities” (Zott and Amit, 2010: 219). The third stream is concerned with technology and innovation management, and characterises business models as “the organizational and financial architecture of the business” (Teece, 2010: 173). From this perspective, a business model is seen as a mechanism or device for commercialising technology, and is thus “a vehicle for innovation as well as a subject of innovation” (Zott et al., 2011: 1034, emphasis is original). The creation of a coherent business model theory, framework or concept that resolves the divergences which issue from each of these streams of research is beyond the scope of this paper. Instead, we draw on four themes that emerge from the business model literature (Zott et al., 2011): 1. 2. 3. 4.

Business models are a distinct concept and a useful unit of analysis, representable through typologies and taxonomies; Business models can be used in analyses of firm performance; Business models are boundary spanning in that they comprise linkages between focal firms and their networks; A business model perspective is a vehicle for innovation and a subject of innovation.

In what follows, we treat these four themes as the basis a business model perspective and derive insights from a selection of the literature that focuses on these themes. By integrating this perspective into transition theory, we generate new lines of inquiry, using insights from research on mobility services to exemplify our arguments. 3.1. Strategic and reflexive activities – the role of different types of business models As noted in section two, strategic activities are a cornerstone of transition management (Kemp and, 2007; Loorbach, 2010; , 2007; Rauschmayer et al., 2015; Rotmans and Loorbach, 2008; Voß et al., 2009; Loorbach and Wijsman, 2013). During strategic activities, it is important to decide on a set of priorities regarding the types of innovations that will bring about sustainable transitions. BMI can play a critical role in commercialising sustainable technologies (see Section 3.2.). However, BMI can in some instances result in more sustainable outcomes, without any major technological innovation. Or, put differently, different business models that utilise the same set of technologies can result in different sustainability impacts. One example is that of ride sharing versus taxi rental. Both utilise ICT (e.g. smartphones, GPS technology) and both require vehicles. However, ride sharing improves vehicle occupancy, with the effect of reduced emissions per traveller and reduced congestion. To the extent that business models can bring about sustainability gains without concurrent technological innovations, it is important to consider the role of BMI from a governance perspective.3 To this end, we propose that a business model perspective can be utilised to inform strategic and reflexive governance activities. A first step is to create typologies of business models that can bring about sustainability gains (as part of strategic activities). A second step is to use typologies as the basis for different types of assessment (as part of reflexive activities). Regarding the first step, as noted by Zott et al. (2011), a business model perspective can provide a means to derive taxonomies and typologies (i.e. describe the content) of different business model variants (see also Baden-Fuller and Morgan, 2010; Lambert and Davidson, 2013). Generally, a business model is regarded as a device for creating and capturing value, and for delivering that value to customers (Chesbrough, 2010; Johnson et al., 2008; Osterwalder and Pigneur, 2010; Teece, 2010; Zott et al., 2011; Zott and Amit, 2010). The Osterwalder (2004) ‘canvas’ is one means to categorise different business model types, and describes nine constituent ‘building blocks’. These include: a value proposition (i.e. a product or service that is offered to customers), a customer interface, supply chain relationships, a financial model (i.e. a cost and revenue structure that distributes benefits across business model stakeholders), partners, distribution channels and other key resources and processes (Osterwalder, 2004; see also: Bocken et al., 2014; Johnson et al., 2008; Zott et al., 2011). The canvas can be used to provide a snapshot (i.e. a static view) of the content and structure of the business model, and the way in which it is governed (Zott and Amit, 2010). This type of analysis can be used to describe typologies of innovative business models that occur as experiments at the niche level. The second step is to evaluate the potential for different experimental business models to fulfil sustainability goals. The static view of a business model described above can be used to benchmark different types of business models by assessing their performance (Demil and Lecocq, 2010; Lambert and Davidson, 2013). Here performance can refer to the profitability of the business model; willingness to pay for different types offerings; sources of financing and other key resources; and ‘who does what’ in value networks. Performance can also relate to sustainability criteria. In short, this perspective can be used to examine the different types of value generated by a given business model. Depending on the willingness of firms to share sensitive information (e.g. via information sharing or public accounting), scholars and practitioners can gauge an idea of business models’ scalability, quite early in niche evolution. The term scalability refers to the growth potential of a business model, and is defined as the “ability to increase revenues faster than the corresponding cost base” (Stampfl et al., 2013: 229). The scalability of a business model is one measure of its transformative potential. Further, performance (or value) can extended to include the sustainability of the business model. Bocken et al. (2014: 44) argue that a sustainable business model is one that considers environment and society as ‘key stakeholders’, and define sustainable business 3

The same applies to BMI that serves to commercialise sustainable technology, but this is dealt with in the next section.

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model innovations as those which “create significant positive and/or significantly reduced negative impacts for the environment and/ or society, through changes in the way the organisation and its value-network create, deliver value and capture value (i.e. create economic value) or change their value propositions” (see also Schaltegger et al., 2016; Schaltegger et al., 2012; deke-Freund 2013). The sustainability performance of different types of service-based business models has been evaluated, although somewhat sparsely, in the literature on product-service systems (see Tukker, 2015 for an overview). Product-services can be delineated into three categories: product-, use- and result-oriented business models. Use- and result-oriented business models are thought to have the greatest potential to bring about positive sustainability impacts (Tukker, 2004; Tukker and Tischner, 2006). Mobility services such as car sharing, for instance, are classed as use-oriented business models (Tukker, 2015) and have been shown to reduce ecological impacts by around 30% (Heiskanen and Jalas, 2003). Frameworks that evaluate and assess business models’ sustainability and commercial value (e.g. Bocken et al., 2015; Foxon et al., 2015; Upward, 2013; Roy and Cheruvu, 2009) can provide insights regarding their potential to upscale (diffuse) and shift existing socio-technical regimes onto more sustainable paths. Assessment frameworks can play an important role in strategic activities such as the creation of visions, and can also form the basis of the continuous learning processes that underpin reflexive activities within TM (Loorbach, 2007). As an illustration, one novel feature of mobility service business models is that they focus on a new type of value proposition, where users consume services (e.g. car sharing) rather than products (e.g. cars) (Williams, 2007). Broadly, three categories of value propositions exist in this field: monomodal, multimodal and intermodal mobility service offerings. A monomodal mobility service utilises a single transport mode to fulfil users’ transport needs (e.g. taxi services, peer-to-peer services and vehicle sharing schemes). A multimodal service allows users to select which transport mode will be used to complete a trip (e.g. a bus, tram or train as part of a public transport service). An intermodal (MaaS) service combines transport modes within a single trip (e.g. bicycle, bus, car) (Lisson et al., 2015). A further distinction refers to the level at which different features are integrated within MaaS business models (Kamargianni et al., 2016). Within each of these categories, several business model variants exist. Monomodal mobility services such as bicycle sharing initiatives, which are useful for solving the ‘last mile’ problem (Liu et al., 2012), have been provided by governments, quasi-governmental transport agencies, universities, advertising companies, and both non- and for-profit companies (Cohen and Kietzmann, 2014; Demaio, 2009; Shaheen et al., 2010). With regard to car sharing, which is a growing phenomenon globally, initiatives varyingly provide access to vehicles that are part of public or privately owned networks, serving different customer segments realised via B2B, B2C and C2C configurations (Spickermann et al., 2014). Studies have shown that different ‘models of provision’ for vehicle sharing schemes are coupled to different types of benefits and drawbacks, including jurisdictional factors, accessibility, capabilities, liabilities, capital and operating costs, and profitability (Demaio, 2009). Although they are still in an emergent phase, MaaS business models can be initiated by entrepreneurs and start-ups, by public transport operators, or via public-private partnerships. The question of ‘who does what’ is important in determining the overall aim of the business model because trade-offs may exist between, for instance, profitability and sustainability (Holmberg et al., 2015). Furthermore, private and/or public actors can own the assets (i.e. vehicles) made available to users via MaaS business models. That is, firms can provide access to vehicles via car clubs, similar to the way public transport operators provide access to busses, trams and trains. Alternatively, private individuals can provide access to vehicles via peer-to-peer services such as Uber. Again, these distinctions can play an important role for the viability and sustainability of the business model (Holmberg et al., 2015). One critical feature with regard to the sustainability of mobility services is user adoption and behaviour. That is, MaaS aims to provide users with access to different transport modes as an attempt to reduce the need for personal car ownership. However, the provision of such a service could potentially result in modal shifts towards less sustainable modes (e.g. from public transport to cars), resulting in increased transport emissions and congestion. The limited evidence available does suggest that a high level of integration within the business model can bring about more sustainable forms of travel behaviour (Karlsson et al., 2016; König et al., 2016; Sochor et al., 2016a, 2016b, 2015a, 2015b, 2015c, 2014a, 2014b; Strömberg et al., 2016). It is important to note that these positive impacts are achieved using existing technologies. To summarise, MaaS could potentially transform the transport system using existing technologies. That is, it represents a case whereby radical business model innovation can serve to bring about positive sustainability impacts and transform practices without any significant technological innovations. In cases where new business models possess this sort of potential, it is important that transition managers are able to prioritise and assess niche-level experimentation via strategic and reflexive activities. By treating business models as a distinct concept and a unit of analysis, it is possible to identify different types of business model innovations within a given field. Typologies can be used as a basis for both strategic and reflexive governance activities, via the use of a set of suitable criteria, including commercial viability, scalability, ecological and social sustainability, and so on. These criteria can be used to create long-term visions, and to underpin learning via assessment and evaluations. These lines of inquiry are summarised by the following research question: Research question #1: How can transition managers utilise the business model concept to inform strategic and reflexive activities that aim to support transitions based on non-technological innovations? 3.2. Business models and technological innovation In order to further assess the role of BMI in sustainable transitions, it is important to consider the relationship between business models and technology. Technologies and business models are linked, but are distinctly separate concepts (Baden-Fuller and Mangematin, 2013). Some scholars have focused on the business model as a firm-level mediating device that harnesses the economic 21

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value inherent in a given technology and delivers it to customers in terms of a product or service (e.g. Chesbrough 2010; Chesbrough and Rosenbloom 2002). Scholars see new technologies as useless without a functioning business model: “the inherent value of a technology is latent until it is commercialized” (Björkdahl, 2009: 1470). The often cited case to highlight this point is that of Xerox Corporation, whereby a new, technologically superior photocopier was developed but could not be commercialised without a radically new business model (Chesbrough and Rosenbloom, 2002). Following these insights, others have noted that BMI can spur the adoption of new technology (e.g. Bohnsack et al., 2014; Kley et al., 2011; Trimi and Berbegal-Mirabent 2012; Doganova and EyquemRenault 2009; Calia et al., 2007; Chesbrough 2007a, 2007b). As noted, MaaS can deliver positive sustainability outcomes by improving resource utilisation rates and increasing vehicle occupancy – using the existing vehicle stock. However, as is the case for the entire transport system, it is crucial that MaaS increasingly utilises vehicle technologies such as hybrid and electric drives, biofuels, fuel cells, and autonomous and connected vehicle technologies in a manner that can further reduce ecological impacts (Alessandrini et al., 2014; Wadud et al., 2016). Several scholars argue that new business models can unlock the potential of electric vehicle technology and assist in its adoption (e.g. Weiller et al., 2015; Budde Christensen et al., 2012; Costain et al., 2012). Moreover, in cities where MaaS becomes widely adopted, technology developers could gain access to a large and diverse set of users for piloting and demonstrating new vehicle technologies such as hydrogen fuel cells. The development and diffusion of new business models can also play a key role in the formation of markets for new technologies, as noted by IS scholars (Bergek et al., 2008a; Hekkert et al., 2007). Linking these types of activities to broader visions and policy agendas is a critical part of the operational activities described by transition management (Loorbach, 2007). A business model perspective extends beyond the use of product-based technologies such as electric drives. By creating new business models, firms can harness the economic value of different classes of technology. That is, the economic value of technology is linked to that encompassed in products and within manufacturing processes to deliver products and services (Mason and Spring, 2011). With regard to manufacturing, a transition to product-service business models such as MaaS can create incentives to increase resource efficiency the production phase of vehicles. That is, product-service business models create incentives to increase material recirculation and extend product lifespans according to the principles of a circular economy (Tukker, 2015). Such business models entail that service providers retain ownership of any durables, equipment or materials that are required to deliver the service in question, creating incentives to maximise product durability and reusability (Tukker, 2015; Bonciu, 2014; Stahel, 2006; Lowe, 2005). In a circular economy, manufacturers can recirculate materials by reusing, remanufacturing or recycling products or components and materials therein as part of a ‘circular business model’ (Bocken and Short 2016; Linder and Williander 2015; Bakker et al., 2014; Schulte 2013). In practice this implies radical changes to the way products are designed and to value networks, and manufacturers must adjust their business models such that they can derive profits from decreased volume sales (Bakker et al., 2014; Beuren et al., 2013; Kuo et al., 2010). Despite the range of barriers and risks associated with circular business models, manufacturers can reap the benefits of cost savings and improved environmental performance in the production phase (Devisscher and Mont, 2015; Tukker, 2004; Tukker and Tischner, 2006). The use of ICT and sensor technologies has also been noted as a key enabler of circular business models (Tukker, 2015). BMI is also important for harnessing infrastructural or ‘general-purpose’ technologies such as ICT (Björkdahl, 2009; Gambardella and McGahan, 2010; Mason and Spring, 2011; Zott et al., 2011). In order to function ‘seamlessly’, MaaS requires the integration of different features such as ticketing and payments, season ticket ownership and the provision of a single, online interface that provides access to a range of transport modes (Kamargianni et al., 2016). Here ICT is a key enabling technology, and companies such as Ericsson and Xerox are currently experimenting with ICT platforms that can form the basis of MaaS offerings.4 ICT also creates new business opportunities linked to the collection and utilisation of real-time data from users, vehicles and other sensor-based technologies (Motta et al., 2015). The deployment of ICT in mobility services such as MaaS demonstrates the way in which business model innovations can co-evolve to harness technologies from different industry sectors, as noted some future-oriented studies. Spickermann et al. (2014), for example, shows that industry experts foresee that future urban transport systems will converge around new MaaS business models that harness technological innovations from the mobility, energy and ICT sectors. Others have noted the potential for sustainability gains via the integration of passenger travel and urban logistics in MaaS-based services (Sarasini et al., 2016). According to Zott et al. (2011), different classes of technology (i.e. product, production and infrastructural/general-purpose technologies) can be harnessed via ‘open business models’ that embrace the principles of open innovation and collaborative entrepreneurship (see also Chesbrough 2010, 2007b, 2003; Miles et al., 2006; Berglund and Sandström, 2013). Open business models utilise partners’ technologies, knowledge, information and ideas as an enabler of BMI, and they “may prompt additional business model innovation in complementary markets as a consequence of the reconfiguration of downstream activities and capabilities” (Zott et al., 2011: 15; see also Gambardella and McGahan, 2010). Moreover, open business models can be organised as collaborative communities (Boudreau and Lakhani, 2009) where actors collude as part of an innovation network. Within such networks, successful BMI rests on the ability of hub firms to create and facilitate knowledge sharing, appropriability regimes and network stability (Berglund and Sandström, 2013; Palo and Tähtinen,2013). In other words, open business models could play a significant role in coevolutionary change processes (Geels, 2002; see also Loorbach et al., 2010) and in the emergence of positive externalities (Bergek et al., 2008a,b; Hekkert et al., 2007). To summarise, linking the potential for open business models to harness different classes of technology can be seen from the perspective of TM as a key strategic activity. That is, by framing open business model innovations as a basis for co-evolutionary

4

See Mobility as a Service from Ericsson's Perspective and The New Mobility: Using Big Data to Get Around Simply and Sustainably. Accessed 11th July 2016.

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changes that can bring together environmentally benign product technologies (e.g. electric vehicles), process innovations (material recirculation) and infrastructural technologies (energy supply, ICT), it is possible to link actor strategies to broader political goals such as decarbonisation, waste management and digitalisation. By linking open BMI to technology in this way, strategic activities can mobilise resources and support within (i.e. legitimise) a particular field. To capture these lines of inquiry, we pose the following research question: Research Question #2: How can strategic activities be designed to mobilise support for business model innovations that aim to commercialise different classes of technology? 3.3. Business model innovation and entrepreneurial experimentation As noted in the previous section, mobility services are seen as a significant innovation opportunity. This is partly due to digitalisation and the application of ICT technology in the transport sector (Burrows and Bradburn, 2014; Motta et al., 2015). It is also due to the development of new business models that capture the value inherent in collaborative consumption; multi- and intermodal travel; and big data analytics. Several actors from the private and public sectors, including automakers, are now experimenting with mobility services in an attempt to capitalise on these opportunities and to diversify their business models (Firnkorn and Müller, 2012). Transition theories place emphasis on entrepreneurial activities as sources of change that can support the development and diffusion of innovations. IS scholars refer to such activities using the term ‘entrepreneurial experimentation’, which traditionally focuses on piloting, testing and demonstrating the potential of new technology as a means to transform “new knowledge, networks, and markets into concrete actions to generate – and take advantage of – new business opportunities” (Hekkert et al., 2007: 421; see also Bergek et al., 2008a,b; Chaminade and Edquist 2006). Entrepreneurial experimentation serves to demonstrate the potential of new technology to a range of different stakeholders (Hekkert et al., 2007). Through demonstrative experiments, new market entrants can also introduce new capabilities, ideas, products and processes in an innovation system (Chaminade and Edquist, 2006). Similarly, SNM, TM and the MLP defines niches as ‘protected spaces’ that are incubated from market forces and which facilitate various forms of learning to allow radical innovations to take root (Rosenberg 1976; Schot 1998; Lundvall 1988; von Hippel 1988). Niches also provide the opportunity to create social networks such as user-producer relationships that support innovations (Kemp et al., 2001, 1998b). A business model perspective can be used to examine some of the firm-level experimental processes that serve to refine a particular innovation prior to its commercialisation. By examining BMI as a subject of innovation, it is possible to elucidate the way in which firms create new value propositions, new types of user-producer relationships, and new value chain networks in more detail. Business models are typically developed in an experimental fashion, whereby hypotheses are generated, tested, and reformulated as part of a non-linear, iterative process (McGrath 2010; Schneider and Spieth, 2013; Mason and Spring 2011; Sosna et al., 2010). That is, a firm that aims to develop a new business model typically generates a new value proposition, evaluates the way in which it fulfils user needs, and assesses their willingness to pay for the value proposition as a means to refine and further develop it (Blank, 2007). BMI is also a means to develop new value chain partnerships, according to the same iterative, experimental process (Sosna et al., 2010). As noted, business models can be conceptualised as activity systems. The activity system approach focuses on three dimensions of a business model − content, structure and governance. Content refers to what activities are performed; structure refers to how activities are linked; and governance refers to who performs the activities (Zott and Amit 2010; see also Berglund and Sandström 2013; Matthyssens et al., 2006). Hence BMI consists of “adding new activities, linking activities in novel ways or changing which party performs an activity” (Amit and Zott, 2012: 45). Since BMI is an experimental, iterative process, it can facilitate double-loop learning (i.e. the accumulation of facts and data alongside changes to cognitive frames and assumptions) (Sosna et al., 2010) that typically features at the niche level (Schot and Geels, 2008). Since business models extend beyond the boundaries of a single firm, radical BMI can require changes to other firms’ business models (Klang and Hacklin, 2013). Hence transformation occurs when business models co-evolve in order to disrupt extant regimes (Bidmon and Knab, 2014). Business models have also been described as narrative devices that promote collective sense making (Doganova and EyquemRenault, 2009) among different members of a collaborative community. As narrative devices, “business models aim at providing evidence for the feasibility of an innovative project and at gaining the interest of third parties by mobilising the repertoires of both proof and persuasion, and the logic and rhetoric elements that they include” (Doganova and Eyquem-Renault, 2009: 1568). Hence this performative function of a business model is key to the attraction of finances and the creation of legitimacy among key stakeholders. In other words, it is strikingly similar to the functions of a niche. When entrepreneurs securing investment capital, for instance, they are able to test innovative business models at a loss, such that they are protected from downstream market forces. The invested capital covers for a lack of cash flow during business model experimentation, and also confers investors’ reputations and networks on the firm in question (Proksch et al., 2017; Sapienza et al., 1996). In other words BMI includes the micro-level mobilisation of resources and the creation of legitimacy, similar to the functions of an innovation system (Bergek et al., 2008a,b; Hekkert et al., 2007). Further, the formulation of so-called ‘business model hypotheses’ (Blank, 2007), while perhaps more structured and detailed, clearly corresponds to the articulation of expectations and visions within niches (Geels and Schot, 2010). The subsequent structured testing of business model hypotheses details many of the most important operational activities noted in TM (Loorbach, 2010). This is regardless of whether the business model in question serves to commercialise new technologies or new product-services such as MaaS. 23

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Given these insights, one may question whether business models, or BMI, are niche-level phenomena. Bidmon and Knab (2014; see also Huijben and Verbong, 2013) situate business models in the space between niches and regimes in the MLP. However, the precommercial phase of BMI (i.e. the phase during which business modellers experiment with different elements of a business model) refers to a set of activities that can be situated within niches. Once a business model is commercialised and must bring home profit, however, it is no longer situated at the niche level since it is no longer within a protected space. Seen this way, BMI is a process that links the niche and regime levels. That is, a business model perspective can elucidate firm-level sources of change that were previously missing from transition theory, and illustrate the way in which firms and their networks change and co-evolve. Examining the dynamics of BMI can thus elucidate a set of drivers and barriers to innovation that have hitherto been missing from transition theories, and serve to identify the links between niches to regimes in a more robust manner. In other words, a business model perspective can further elucidate why some niche-level innovations succeed whereas others fail (see Geels and Raven, 2006). To summarise, integrating a dynamic view of firms as actors who continually experiment with their business models has two main benefits for transition theory. First, we gain a more robust understanding of the dynamics of innovation at the firm level. This can contribute to reflexive activities that serve to inform the dialectic between governance and practice. Second, framing BMI in terms of entrepreneurial experimentation can assist in operational activities, such as the selection of experiments noted in SNM (Kemp et al., 1998a). The aim, from a transition management perspective, is to link everyday entrepreneurial efforts to long-term visions, broader agendas and political goals (Kemp and Loorbach, 2007; Loorbach, 2010). To summarise these lines of inquiry, we outline the following research questions: Research question #3: How can a business model perspective inform operational and reflexive governance activities that focus on the dynamics of niche-level experimentation?

3.4. Tactical activities and business models To further explore the dynamics of BMI experimentation, it is useful to consider the full range of activities that firms can engage in at the niche level. It has been noted that entrepreneurs struggle to effect institutional changes that are key to the scalability of sustainable business models (Jolly et al., 2012). Further, a business model perspective overlooks some sources of change that are taken up in transition theories. Although a business model perspective cannot account for non-market strategies,5 transition theory is well equipped to examine these types of niche-level activities. In addition to operating as protected spaces where actors can experiment with radical innovations, niches are sites within which actors create visions and expectations regarding future trajectories (Geels, 2005a,b); and experiment with new regulatory structures (tactical activities) (Schot and Geels, 2008). Geels and Raven (2006) examine the dynamics of niche-level developments to illustrate why some niche developments succeed and others fail. The three functions of a niche (building social networks, learning and articulation processes, articulation of expectations and visions) are each critical to the dialectic process of linking local niche developments to wider ‘global networks’ and ‘emerging fields or communities’ that focus on a particular socio-technical configuration or emerging technological trajectory. Since a business model perspective does not account for the processes of linking niche developments to global networks and emerging fields or communities, a useful way forward is to draw on insights from transition theory as a means to furnish business modellers with the knowledge and capabilities required to bring their radical ideas and innovations to fruition. This is especially pertinent if one considers the fact that business models are designed with two objectives in mind: profitability and scalability (Sosna et al., 2010; Teece 2010; Morris et al., 2005, 2006). There is some evidence to suggest that BMI which aims to maximise the opportunities afforded by existing regulatory conditions can provoke debates on the legitimacy of those conditions, such that BMI can indirectly result in institutional innovations (Huijben et al., 2016). Seen this way, BMI can act as both a market and a non-market strategy. In the field of mobility services, studies have highlighted that non-market strategies are important when experimenting with new business models. Here entrepreneurs must consider a range of stakeholder perspectives when seeking to demonstrate the legitimacy of MaaS, particularly with regard to “close cooperation between public and private actors” (Sochor et al., 2015b). This is partly because MaaS relies upon a mix of public and private transport service providers; requires new forms of public-private collaboration; and because a legitimate MaaS service must fulfil national and local transport policy goals (Sarasini et al., 2016). Hence in addition to demonstrating the commercial viability of MaaS, entrepreneurs must demonstrate the legitimacy of their innovations in terms of wider social and political expectations. In some cases, regulatory barriers to collaboration exist between public and private sector actors (Mukhtar-Landgren et al., 2016). Here tactical activities, as espoused by TM, can both advocate and trial new institutional arrangements which address barriers to BMI. Whilst institutional arrangements constitute a well-documented barrier to sustainable transitions, existing business models are a further source of inertia that has been overlooked. A business model is an instantiation of a business strategy (Boons and LüdekeFreund, 2013; Casadesus-Masanell and Ricart, 2010; Shafer et al., 2005) that encompasses the ‘core logic’ with which companies create and capture value (Chesbrough and Rosenbloom, 2002; Osterwalder and Pigneur, 2010; Teece, 2010; Zott et al., 2011). The ‘core logic’ encompassed within a business model is not confined to a single firm. Rather, it extends to business networks and markets, providing “a shared understanding of routinized action as embedded in collective cognitive and symbolic structures of shared 5 The term ‘non-market strategy’ refers to a broad set of firm-level activities beyond the marketplace that can promote competitive advantage, including those which seek to change the institutional landscape (e.g. corporate political actions) and partnerships with actors that shape public opinion (e.g. think tanks, environmental NGOs) (Baron, 2013). A non-market strategy may be seen as a firm-level tactical activity.

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knowledge” (Mason and Spring, 2011: 1039). Others have elucidated the way that business models coordinate and structure activities between different actors in interfirm networks (Berglund and Sandström, 2013; Boons and Lüdeke-Freund, 2013; Chesbrough and Schwartz, 2007; Doganova and Eyquem-Renault, 2009; Mason and Spring, 2011). BMI is an ongoing process of organisational change (Bucherer et al., 2012), linked to the way in which companies continually search for “new ways to generate revenues and define value propositions for customers, suppliers, and partners” (Casadesus-Masanell and Zhu, 2013: 464). That is, even established business models are dynamic and subject to continual incremental improvements (Mason and Spring, 2011; Mason and Leek, 2008; Shafer et al., 2005). Yet despite these dynamic qualities, there are several barriers to radical BMI. The core logic of a business model (‘how we do business’) is one such barrier, in that it structures sense-making activities, influencing the way companies perceive ideas (Chesbrough, 2010; Doz and Kosonen, 2010) and can thus prevent companies from recognising new business models altogether (Chesbrough and Rosenbloom, 2002). Bidmon and Knab (2014: 6) extend this notion using the term ‘dominant business model logic’, namely “the generic scheme of value creation and capture shared by actors in an industry” (see also Sabatier et al., 2010; Baden-Fuller and Morgan 2010). This distinction highlights the way in which institutionalised business model logics can act as a source of inertia within regimes, in that they are aligned to other system elements such as user preferences and regulation. As noted in transition theories, regimes are supported by structural elements (e.g. regulations and policies, production systems, physical infrastructures, maintenance and distribution networks, financial models, cultural and symbolic discourses) (Geels, 2004, 2002). Change is inhibited by the combination of these structural elements, hence the term ‘techno-institutional lock-in’ (Unruh, 2002, 2000; Urry, 2004). The dominant business model logic is one of these elements, “regarded as an integral part of the current socio-technical regime” (Bidmon and Knab, 2014: 6). Dominant business model logics can act as a source of inertia in different ways. MaaS is an example of a potentially disruptive innovation that challenges the dominant logic associated of the existing transport regime (focused on automobility), in that it encourages customers to purchase services instead of products (Williams, 2007). These dominant and alternative business model logics currently exist simultaneously as institutional logics within the regime associated with road transport, albeit with different degrees of institutionalisation and structuration (see Fuenfschilling and Truffer, 2014). In such cases, where radical innovations threaten vested interests (e.g. mobility services could perceivably result in reduced sales for the automotive industry), incumbents can use their power and resources to resist change and maintain their positions (Augenstein and Palzkill, 2015; Geels, 2011; Markard et al., 2012). A further source of inertia owes to the fact that a successful business model tends towards stability over time, based on a set of well-established contracts and organisational routines, such that it can act as a core rigidity both within and between firms (Doz and Kosonen, 2010). Since BMI spans firm boundaries, value networks must be reconfigured (Matthyssens et al., 2006; Zott and Amit, 2010). No single firm or manager has the discretion to implement such changes, such that BMI is linked to significant coordination challenges (Berglund and Sandström, 2013). This is especially so when BMIs are so radical that they necessitate changes to other companies’ business models (Klang and Hacklin, 2013). BMI in the field of MaaS requires new forms of cooperation between transport service providers that serve to integrate their mobility offerings (Sarasini et al., 2016; Sochor et al., 2015b). Whilst it is not presently clear who will take responsibility for the creation and management of MaaS value networks (Holmberg et al., 2015), whoever takes this role will face significant challenges in coordinating the activities and interests of public and private sector organisations and stakeholders (Spickermann et al., 2014). Existing business models can pose further barriers to change at the level of individual firms. One such barrier relates to the types of firm-internal competition that can arise when a new technology requires a new type of business model (Amit and Zott, 2001; Christensen, 1997). Since business models and technology are linked, existing business models “can also constitute a lock-in that hinders technology shifts” (Tongur and Engwall 2014: 527; see also Christensen 2006; Tripsas and Gavetti 2000). A further firminternal barrier is the scarcity of organisational resources and capabilities, which can restrict companies from experimenting with new business models (Sosna et al., 2010). This is especially problematic when new and existing business models are not complementary (Sund et al., 2014). To summarise, there are several documented sources of inertia to BMI. Some sources of inertia are linked to formal institutional arrangements, whereas others issue from firm-level and interfirm structures that become established as business models solidify and stabilise. From a governance perspective, the existence of these sources of inertia necessitates a set of tactical activities which serve to remove barriers to BMI by carefully linking practice and experimentation with the formation of new interfirm networks and new institutional arrangements. In practice, tactical activities may include, but are not limited to, experiments with new regulatory structures, corporate political action, the creation of advocacy coalitions, and so on. The type of tactical activities performed must be tailored to the issue at hand, and also be linked to practical, innovative experiments with new business models. Also, these types of activities must be dynamic and performed reflexively as transitions unfold. Hence we pose the following research question Research question #4: What types of tactical activities can help to overcome sources of inertia to radical business model innovation? 4. Conclusion This paper seeks to redress the lack of a firm-level perspective within transition theories by conceptualising business models, which encompass both firms and parts of their external networks, as sources of change and inertia within sociotechnical systems. We treated business models from both static and dynamic perspectives. A static view can be used to characterise different types of business model innovations that may bring about systemic change. A dynamic view sees BMI as a process that is separate and distinct 25

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Table 1 New lines of inquiry based on the synthesis of business model perspectives and transition theory. Research question

Rationale

Research question #1: How can transition managers utilise the business model concept to inform strategic and reflexive activities that aim to support transitions based on non-technological innovations?

Business models are a distinct unit of analysis Strategic and reflexive governance activities should focus on identifying and assessing scalable business models that generate value for both customers and society Business models are mediating devices that can unlock the latent value of different classes of sustainable technology BMI can play a key role in helping sustainable technologies transcend niches and transform regimes Business models are a subject of innovation BMI is a distinct type of entrepreneurial experimentation BMI involves firms and their networks and supports double-loop learning Understanding the dynamics of BMI can elucidate why some niche-level innovations succeed whereas others fail Transition theory provides insights regarding the creation of legitimacy and the mobilisation of resources for radical BMI BMI is subject to a set of firm- and intrafirm-level barriers to radical innovation Existing business models are a firm- and intrafirm-level source of inertia within sociotechnical regimes

Research Question #2: How can strategic activities help to mobilise support for business model innovations that aim to commercialise different classes of technology? Research question #3: How can a business model perspective inform operational and reflexive governance activities that focus on the dynamics of niche-level experimentation?

Research question #4: What types of tactical activities can help to overcome sources of inertia to radical business model innovation?

from technology, but is critical to entrepreneurial experimentation and the commercialisation of new technology, and can potentially function as a lynchpin for co-evolutionary processes. We reasoned that new business models, as a source of change, are situated within and beyond niches. To upscale sustainable business models, entrepreneurs must experiment with new market and non-market strategies (tactical activities) in order to demonstrate the viability, sustainability and legitimacy of their innovations. We also argued that extant business models are a source of inertia within existing sociotechnical regimes and described a set of firm-internal barriers to radical BMI. By combining insights from sustainability transitions and business model perspectives, we posit that scholars can assist in the transformative process by practitioners with the knowledge and resources they require as part of an action research agenda. Hence we used these insights to derive new lines of inquiry that can inform the governance of sustainable transitions (Kemp and Loorbach, 2007; Loorbach, 2010, 2007), based on a more nuanced understanding that encompasses the role and function of business models and BMI in wider processes of sociotechnical change. These lines of inquiry are summarised in Table 1. The lines of inquiry outlined here are intended for generic use in cases where sustainable transitions are contingent upon radical BMI. In practice these lines of inquiry are applicable to cases such as product-service systems, the circular economy, and, as we demonstrated, new mobility services such as MaaS. The latter has the potential to radically transform the road transport system and direct it onto a more sustainable path. However, the nature of MaaS is such that its sustainability rests upon significant changes to user behaviour, which both influence and are influenced by business models. Hence business modellers that are pursuant of sustainable MaaS business models offerings are faced with two significant challenges – they must overcome significant barriers to BMI as part of their market strategies, and they must contribute to the creation of visions and expectations that can motivate a diverse set of stakeholders (not least users!) as part of strategic and tactical activities. The research agenda outlined in this paper must also be complemented with theories that capture the level of individual actors such as customers and end users, since the latter must likely modify their consumption patterns and behaviour in order for transitions to be truly sustainable (Shove and Walker, 2010). Here practice theories may be an appropriate complement to the framework outlined in this paper (Reckwitz, 2002). With regard to the governance of transitions, the lines of inquiry derived in this paper are intended to encompass a multistakeholder approach that acknowledges the influence of the public sector and particularly private enterprises in bring about systemic change. We envisage that the institutional conditions required to support sustainable BMI will vary according to the societal problem/s and the sociotechnical systems in question. Regarding the agency of firms in sustainable transitions, previous research notes that policy is a key driver of corporate environmental engagement (e.g. Kolk and Levy, 2001). This is especially the case with regard to issues such as climate change, where the implementation of low-carbon technologies appears to rest on climate policies with stringent targets and expedient carbon pricing (e.g. Sarasini and Jacob, 2014). As summarised below, we have discussed whether BMI can deliver sustainability gains where there is a lack of policies that create a compelling business case for environmental change. The generic set of barriers to BMI identified in this paper do not address sustainability specifically, but rather focus on insights drawn from the business model literature. Previous work on sustainable BMI has only paid lip service to the importance of policy and regulation (e.g. Bocken et al., 2014; Bocken and Short, 2016). Notwithstanding, there is evidence to suggest that regulatory incentives may play a key role in reducing the costs of sustainable technologies, regardless of the role of new business models. Huijben et al. (2016), for example, show that regulatory conditions directly influence the cost-revenue structure (i.e. profitability) of solar PV business models, where favourable conditions can lead to sustainable BMI within niches. Although business models that utilise innovative ways to finance capital costs (e.g. pay per use) can help to overcome this type of barrier, the commercialisation of solar PV appears to require regulatory support (Strupeit and Palm, 2016). However, BMI should in some cases be able to deliver sustainability gains in the absence of supporting public policies. The Ellen MacArthur Foundation, for instance, makes a compelling case for a transition to a circular economy that would increase profit 26

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margins across several manufacturing industries (EMF, 2013). With regard to mobility services, if business models are designed to encourage car sharing, then emission savings can theoretically be made without any need for government intervention, since car sharing reduces the operating costs of a given mobility service. Ride sharing (i.e. raised vehicle occupancy) can be encouraged among users in a number of ways, using dynamic pricing or other price-based incentives, nudging and gameification, for example. This type of business model, which focuses on “reducing absolute demand by influencing and mitigating consumption behaviour” has been depicted as ‘sufficiency-driven’ (Bocken and Short, 2016: 42). Reducing emissions by replacing gasoline-powered vehicles with hybrid or electric drives within a car-sharing scheme is potentially a more challenging issue. Generally, investments in low-carbon technologies such as electric drives are subject to the same types of capital costs as those incurred for private use, which is one of the main arguments for support via other regulatory incentives (e.g. subsidies for low-carbon vehicles). However, due to higher average vehicle utilisation, operators of mobility services face stronger incentives than private owners to reduce the operating costs of their fleets, such that the capital costs of electric drives can be offset if they prove to be more cost-efficient than gasoline-powered vehicles from a total-cost-of-use perspective. Given that mobility services serve to distribute capital costs between several partners and users, this is not an entirely unlikely proposition. As shown in the well-cited Xerox case (Chesbrough and Rosenbloom, 2002), a business model can act as a mediating device in the commercialisation of new technology, even when the technology in question is more costly than existing alternatives. In other words, new business models can serve to “create a fit between technology characteristics and (new) commercialization approaches that can succeed on both given and new markets” (Boons and Lüdeke-Freund, 2013: 14). In cases where policy interventions are required, traditional bonus-malus policies and regulations (i.e. those which institute rewards and/or punitive measures as a means to promote positive environmental outcomes) may not result in truly sustainable business models. Instead, motivational policy interventions (e.g. informational policies, eco-labelling) are seen as a more adequate means to bring about sustainable BMI, whereby value is created for a range of societal actors that transcend business and the expedient and singular pursuit of profit (Al-Saleh and Mahroum, 2014). Notwithstanding, the role and types of policy interventions that can stimulate sustainable business models is a topic that requires further investigation. Acknowledgements This study is part of a four-year research programme entitled SHIFT (Sustainable Horizons in Future Transport). The authors are grateful to Nordic Energy Research for funding this programme. We are also grateful to the two anonymous reviewers for providing insightful comments. References Al-Saleh, Y., Mahroum, S., 2014. A critical review of the interplay between policy instruments and business models: greening the built environment a case in point. J. Clean. 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