Theorizing and Strategizing with Models: Generative Models of Business Models

Abstract

The ambiguity surrounding model-based science is exemplified by the proliferation of meanings of the term "business model". We argue that a clearer specification of the analytical, theoretical and ontological validity of models is an opportunity to learn about and understand complex organizational phenomena more systematically. We apply this to research on social entrepreneurship and pro-poor business models that has been criticized as being overly theoretical and conceptually ambiguous. Business models are presented as narratives that integrate various actors, actions, stories, and outcomes, without a clear perspective of why these elements were selected and what we can learn from them. This paper outlines an explicit modeling process as an investigative tool that enables transparent and systematic theorizing of business models. Using an illustrative case study, we develop a generative model that accounts for the social mechanisms that explain how business models achieve multiple strategic objectives and multiple dimensions of economic and social value creation.