Do Some Business Models Perform Better than Others?

This is a long read download paper (37 pages) —  it is a reprint from 2011 and gives you great definition and knowledge into the basics of business models across a range of kind of model and within large companies.   Information provides takeaways how-to and even how-not-to for the small business owner.  Leadership and governance


This paper defines four basic business models based on what asset rights are sold (Creators, Distributors, Landlords and Brokers) and four variations of each based on what type of assets are involved (Financial, Physical, Intangible, and Human). Using this framework, we classified the business models of all 10,970 publicly traded firms in the US economy from 1998 through 2002. Some of these classifications were done manually, based on the firms’ descriptions of sources of revenue in their financial reports; the rest were done automatically by a rule-based system using the same data. Based on this analysis, we first document important stylized facts about the distribution of business models in the U.S. economy. Then we analyze the firms’ financial performance in three categories: market value, profitability, and operating efficiency. We find that no model outperforms others on all dimensions. Surprisingly, however, we find that some models do, indeed, have better financial performance than others. For instance, Physical Creators (which we call Manufacturers) and Physical Landlords have greater cash flow on assets, and Intellectual Landlords have poorer q’s, than Physical Distributors (Wholesaler/Retailers). These findings are robust to a large number of robustness checks and alternative interpretations. We conclude with some hypotheses to explain our findings.

via Do Some Business Models Perform Better than Others? by Thomas Malone, Peter Weill, Richard Lai, Victoria D’Urso, George Herman, Thomas Apel , Stephanie Woerner :: SSRN.  vua MIT Sloan Management


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