Achieving novelty and efficiency in business model design: Striking a balance between IT exploration and exploitation

Digitalization is encouraging an increasing number of firms to design their business models based on information technology (IT) for exploring business opportunities. This study examines the effect of the balance (imbalance) between IT exploration and exploitation on novelty-centered business model design (NBMD) and efficiency-centered business model design (EBMD). Using matched data from the IT-related executive and chief executive officer of 183 firms, this study finds that IT exploration is positively related to NBMD and EBMD and that IT exploitation is positively related to only EBMD. NBMD and EBMD are significantly related to firm performance. Polynomial regression and response surface analysis reveal that NBMD and EBMD first decline and then rise with the increase in the level of balance between IT exploration and exploitation. NBMD declines but EBMD rises with the increase in the level of imbalance between IT exploration and exploitation. This study contributes to the understanding on leveraging IT capability to influence the business model design and firm performance.