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The Business Model Transparency Paradox in Innovative Growth Ventures: Trade-offs between Competitive Advantages and Agency Costs

  • Jeaneth M. Johansson EMAIL logo and Malin Malmstrom
Published/Copyright: April 16, 2013

Abstract

Innovative ventures aiming for rapid growth will require substantial financial capital. Accessing external financial capital requires a high business model transparency, potentially weakening the competitive advantages of the venture. The transparency of the business model can be better understood in terms of two complementary research paradigms: resource-based theory and agency theory. The theories drive transparency in opposite directions and produce a business model transparency paradox that explains the challenges of achieving growth.Acknowledging the implications from one theory can lead to harmful practical implications regarding the challenge of business model transparency and cause a risk of unintended consequence and in the worst case venture failure. A conceptual model and aligned propositions are outlined for comprehensive understanding of the trade-offs suggested by the two theories for ongoing venture exploitation of innovation and growth. An inverted u-shaped function on business model transparency based on a combination of the two theories is proposed for achieving optimal opportunities for venture growth. This conceptual article contributes with implications on financial gaps, business model management, and entrepreneurship education.

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  1. All the authors contributed equally to this work

  2. 1

    Growth can, for instance, be viewed as increase in sales and/or employment (Ahrens 1998; Wiklund 1999) and innovation as the discovery, development, improvement, adoption, and commercialization of new processes and products (see e.g., Dosi 1998, 1122; Teece, Pisano, and Shuen 1997).

Published Online: 2013-04-16

© 2013 by Walter de Gruyter Berlin / Boston

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