2.2 Theoretical vs. empirical distinction
The second possible basis for grouping/organising the literature on business models is dichotomy between theoretical/mainly descriptive papers vs. empirical papers. In spite of all the discussion about business models, however, there have been very few large-scale systematic empirical studies of them. We do not know, for instance, how common different kinds of business models are in the economy and whether some business models have better financial performance than others (Malone et al., 2006). Actually we are aware of only a few econometric studies, so it should not come as a surprise that majority of business model literature is theoretical and of the descriptive nature. The most important empirical studies are shortly presented below.
Amit and Zott (2001) look at how the fit of business model themes (novelty- versus efficiency-centered) and product-market strategy (differentiation versus low-cost, and timing of entry) affect firm performance, as measured by market value. Using a sample of Internet-related firms that have gone public between 1996 and 2000, they find that the novelty-centered business model fits all their types of product-market strategies, but the efficiency-centered business model fits only a low-cost product-market strategy.
Malone et al. (2006) study is different from the mentioned Amit and Zott (2001) study on a number of dimensions. First, they look at large US-listed firms rather than Internet-related ones that have just gone public. Second, they use a different definition of business model that captures what firms do and how they create value. Their definition is basically a typological definition based on two fundamental dimensions of what a business does. One dimension is the type of assets involved-i.e., what products or services have been created for appropriation. They distinguish among four important asset types: physical, financial, intangible, and human. The second dimension is type of rights being sold-i.e., how value is appropriated and on that basis they consider four types of asset rights: Creator, Distributor, Landlord, and Broker. The combination of these two dimensions - what type of asset is involved and what asset rights are being sold - leads to sixteen business models, which are shown in Table 1 below.
Last empirical paper presented in our paper is a survey conducted by George and Bock (2011). The survey asked two open-ended questions: *What is a business model?* and *What is your company's business model?* The questions were purposefully kept simple and placed at the start of the survey in order to obtain a *tabula rasa* response. Survey responses were affected by the available writing space and the written direction to *explain in 1 or 2 sentences.* The survey was administered to 182 senior managers of Indian firms who attended executive education programs between Winter 2008 and Spring 2009.
Managerial discourse demonstrated that the business model is a relevant construct despite the concern expressed by managers that they'd *never tried to define it before* or *could not explain it clearly.* More than 90 % of the survey participants attempted to answer the question *What is a business model?* and also provided a response to the question *What is your firm's business model?* (George and Bock, 2011).
Managerial responses reveal that a business model is an organization-level phenomenon, an architecture or design that incorporates subsystems and processes to accomplish a specific purpose. It is not equivalent to that purpose, nor is it the reason that the organization exists. It is not a process. The business model is not fully explained by a firm's revenue model, though aspects overlap. Practitioners apply both resource-based and transactive elements to the business model. Finally, the business model does not subsume nor is it subsumed by corporate strategy (George and Bock, 2011).