Incumbent response to business model innovation: The role of CEO opportunity framing

Abstract

Research SummaryWe explore how CEO sensegiving through framing influences incumbent firm response to business model innovation. Our historical analysis of Borders and Barnes & Noble (B&N) in the US bookselling industry after the entry of Amazon.com reveals that although both CEOs framed Amazon's entry as an opportunity, they did so in strikingly different ways. Their opportunity framing differed on four dimensions—intensity, concreteness, future orientation, and inclusiveness—closely associated with specific patterns in the respective incumbent's response: separation between the old and new business model for Borders and blending of the old and new models for B&N. Our study highlights the role of multidimensional and sustained opportunity framing for blending actions contributing to business model innovation in established firms over time.Managerial SummaryWhat role do CEOs play in how established firms react to new entrants with innovative business models? We examined how the CEOs at B&N and Borders framed the opportunity provided by the new online business model introduced by Amazon and found significant differences in their framing that influenced how the two firms adapted to it. The more intense, concrete, future‐oriented, and inclusive framing by B&N's top managers contributed to a successful blending of the traditional store‐based and the new online model, while at Borders the business models were kept separate. Our study shows the importance of multidimensional and sustained framing of digital opportunities over time for the successful integration of new business models.