Designing Business Models of Tomorrow: Exploring the Expansion of Cleantech-as-a-Service through an Agile approach

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Designing Business Models of Tomorrow Master Thesis

Author: Sofia Gudmundsson & Anaïs Andréa Marie Lachini

Supervisor: Susanne Sandberg

Exploring the Expansion of Cleantech-as-a-Service through an Agile Approach

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Abstract

Background: Three mega trends are profoundly changing today’s market dynamics;

climate change, digitalization, and globalization. The increasing interconnectivity and omnipresence of digital technologies are blurring the boundaries of the physical and virtual reality, implying a shift in how digital companies create value and internationalize. Also, new policies and higher customer demand in greener and smarter technologies have created new opportunities for value creation to develop cleaner technologies that foster the growth of clean-technology firms. To be competitive and persist in a sustainable and digital economy, firms must be able to cope with changing market conditions. Strategic agility can support to avoid rigidity and benefit from change, which is fostered by strong dynamic capabilities.

Knowledge gaps: The study aims to address shortcomings of digital sustainability business models and specifically characterize the emerging sector of sustainable software companies offering Cleantech-as-a-Service applications. The international potential of these ventures recognizes the need to elaborate on internationalization drivers. The globally competitive environment enforces the need to be strategically agile, whereby applying agile principles to an international context can bring a comprehensive view of internationalizing digital sustainability ventures’ critical capabilities and business model characteristics. The study will also assert the role of collaborative ecosystems in an entrepreneurial internationalization.

Purpose: This study will explore the emergence of Cleantech-as-a-Service and investigate how these digital entrepreneurs achieve strategic agility in global pivoting and competitive environments. Our exploratory research aims to apply agile principles to entrepreneurial internationalization strategies, where we through six in-depth interviews will discover the role of digital cleantech firms’ dynamic business models, capabilities, and ecosystems when entering a foreign market.

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Theoretical framework: The conceptual frame of references is based on two major sections where the first considers the context of digital and sustainable firms and exhibits the essences of digital and sustainable business model designs and how to sustain competitiveness through the interrelation of dynamic capabilities and strategic agility. In the second section the study brings forward theory supporting the exploration of an agile internationalization for digital firms, such as virtual markets and ecosystems. The key theoretical forthcomings are summarized into a conceptual framework that combines the role and interplay of entrepreneurs, business models, as well as networks and ecosystems on the basis of strategic agility and dynamic capabilities, that jointly foster an agile and virtual internationalization.

Methodology: The interpretive research used an explorative and abductive approach to perform a qualitative multiple case design. The empirical study was based on six Cleantech-as-a-Service companies where in-depth semi-structured interviews were conducted with the informants of significant positions. The thematic and content data analysis supported the identification of common patterns and themes through coding which guided the subsequent analysis chapter.

Findings: Our study revealed characteristics and success factors of Cleantech-as-a- Service ventures operating on global volatile markets, which adopt a leagile approach.

The findings supported a definition of the concept but also identified the dynamic capabilities and flexible business models leveraged to sustain international competitive agility. The key agile capabilities relate to networking, experimenting, and learning whereas business model characteristics confer resiliency, interdependency, and efficiency.

Keywords

Digital Entrepreneurship (DE), Digital Business Model (DBM), Born Digitals (BDs), Digital Sustainability, Sustainable Software, Dynamic Capabilities, Agility, Agile internationalization, Cleantech, Ecosystems

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Acknowledgments

The writing of a master thesis is a challenging and liberating accomplishment driven by back-and-forth positive minds and doubts. This experience was an uncertain and learning path where we have grown and gained from this journey together.

First and foremost, we want to address our gratitude to all persons having directly or indirectly contributed to the completion of our thesis. We are thankful towards our relatives and friends for their support, understanding, and patience.

We would like to thank our supervisor Dr. Susanne Sandberg for her kindness, guidance, precious advice, and feedback enabling the quality of our work. We also thank Pr. Per Servais and our fellow classmates for their valuable recommendations and discussions during the seminar.

Also, we would like to express our gratitude to our company cases’ participants for their time and attention that have provided rich and insightful information without whom this thesis could not have come to a successful conclusion.

These acknowledgements mark the closure of a 5-month work and the beginning of a new chapter in our lives.

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Sofia Gudmundsson Anaïs Andréa Marie Lachini

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During our two-year master program, we have multiple times turned to the course literature to read Hans Jansson's (2020) book “International business strategy in complex markets” and used it for our assignments. His research identifies three waves of internationalization, referring to the globalization of firms during different time epochs. It ranges from the internationalization of European multinational corporations to the US during the first half of the 19th century, to the inclusion of Asian countries into the world economy starting in the 1960s, until “the golden age of international business” around the millennium (p. 29), focused on liberalization of economies and integration of both mature and emerging markets. Early on in our degree project we thought it could be interesting to acknowledge a fourth wave, as we found that Hans Jansson’ theory neglects an entrepreneurial economy perspective (Audretsch and Thurik, 2004) and contemporary entrepreneurial internationalization theories (e.g.

Cahen and Borini, 2020; Monaghan, Tippmann and Coviello, 2020), mainly focusing on a traditional mode of internationalization of big multinational corporations.

Accompanied by a fourth industrial revolution which has introduced several disrupting technologies, new genres of companies and industries with high technology and knowledge-based activity are changing market conditions, business environments, and societies as whole (Schwab, 2016; Trento, Bannò and D’Allura, 2018). Consequently, we aim to recognize this shift, where the fourth wave of internationalization refers to the virtual expansion of contemporary ventures that provide full digital offers and intent to secure a sustainable approach.

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1. Introduction

The subsequent part aims to introduce and understand the context, knowledge gaps, and orientation of the research exploring the novel concept of Cleantech-as-a-Service ventures within an interconnected world shaped by digital technologies and sustainability concerns.

1.1 Background

No One Is Too Small to Make a Difference, is a collection of speeches by the young Swedish environmental activist, Greta Thunberg. In 2018, she started the movement

“Fridays for Future”, which rapidly received international attention and aligned people around the world to drive climate action. The “Greta effect” will also impact this study in how ordinary people can spur extraordinary change (Sabherwal and van der Linden, 2021). Together with climate change, this thesis will also acknowledge digitalization and globalization as mega trends that are transforming market dynamics and the business landscape (Guillén and Ontiveros, 2016). These three global turning points will be theoretically anchored to three major areas of business management literature; digital entrepreneurship, sustainability entrepreneurship, and international entrepreneurship, which will be recognized by their correlation and reciprocity. This study intends to bridge these academic standpoints and use the joint idiosyncratic lens to disclose characteristics of internationalizing digital sustainability ventures.

Since the 1990s, we have lived in an interconnected world in which digital technologies are omnipresent and are constantly transforming the business landscape where new ventures arise and transform the role of internationalization (Autio, 2017). The advancements have provided new opportunities and capabilities of firms as well as reduced boundaries for international trade (Wittkop, Zulauf and Wagner, 2018), which lead companies to operate in more open environments and thus become more easily reachable (Vadana, Torkkeli, Kuivalainen and Saarenketo, 2019). Increased adoption of disrupting technologies also increases rivalry in all industries, resulting in the creation of

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new business models. Digital technologies favour the formation of new business ventures and digital start-ups which are implementing novel technologies as a crucial part of their business model and activities (Elia, Margherita and Passiante, 2020). The economy is becoming more digitized but also more collaborative (Guillén and Ontiveros, 2016).

Indeed, “the arising technology paradigm is leveraging the potential of collaboration and collective intelligence to design and launch more robust and sustainable entrepreneurial initiatives'' (Elia, Margherita and Passiante, 2020, p.1).

The emergence of high-tech firms or “born digitals'' are conceiving new ways of producing and delivering services. They mainly operate on virtual markets through the creation of digital values (Brouthers, Geisser and Rothlauf, 2016; Wittkop et al., 2018; Chen, Shaheer, Yi and Li, 2019; Cahen and Borini, 2020). Moreover, the abundance of digital innovation penetrating the markets is challenging the internationalization process by influencing its speed from years to only a few weeks (Shaheer and Li, 2020; Westerlund, 2020). These companies are characterized by business models that support a higher degree of digitalization, which has proven to ease the process of global market entries (Vadana, Torkkeli, Kuivalainen and Saarenketo, 2020). The concept is derived from born global theories which are firms who leverage their innovativeness, knowledge, and capabilities to succeed on foreign markets (Cavusgil and Knight, 2015). Born global firms tend to experience a rapid expansion into new niche markets (Knight and Cavusgil, 1996; Madsen and Servais, 1997; Cannone and Ughetto, 2014), in contrast to traditional perspectives where companies are suggested to internationalize like “rings in the water”, with an incremental process (e.g., Johanson and Vahlne, 1977). The new practices and shifts into the society lead to the emergence of innovative ways of thinking and representations of the business world giving rise to new concepts and theories.

The dynamic business environment involves companies to swiftly adapt and respond to market changes, consequently, the expectations towards corporate responsibility and sustainability has become critical (Dao, Langella and Carbo, 2011). Sustainability encompasses three dimensions: social, environmental, and economic performance where the society’s goal is to find a balance between them (Dao, Langella and Carbo, 2011).

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Moreover, sustainability became an important stake taken into consideration by worldwide institutions since the United Nations has established 17 goals linked to sustainability to be achieved by 2030. According to Bican and Brem (2020), digital solutions play a crucial role in the achievement of these objectives as economic and environmental concerns are at the core of future’s challenges. Moreover, higher environmental regulations implemented by governments and institutions force firms to adopt a sustainable approach that otherwise are subjected to sanctions (Rugman and Verbeke, 1998; Gray, 2015). Environmental issues also engender new regulations, technological solutions, and a shift in the costumer behaviours (Brinkman, Hoffman and Oppenheim, 2008). Environmental and societal issues has gained higher concern in today’s society which entailed businesses to incorporate sustainability into their business strategy (Spiliakos, 2018).

A survey realized by McKinsey, acknowledged that 70 percent of the participated companies implemented sustainability governance (McKinsey, 2017). The survey also conceded that technology played a significant role in the adoption of a sustainable approach. Indeed, technology is seen as a hopeful solution to solve the sustainability problems that the world encounters (Guillén and Ontiveros, 2016) and it is empowering organizations to enhance their capabilities towards sustainability concerns (Dao, Langella and Carbo, 2011). New policies and higher customer demand in greener and smarter technologies have created new opportunities for value creation to develop cleaner technologies that foster the growth of clean-technology firms (Jensen, Lööf and Stephan, 2020). For this research we consider Cleantech firms as green companies that through their environmental technologies are “commercializing clean energy technologies or business models, including those developing, integrating, deploying, or financing new materials, hardware, or software focused on energy generation, storage, distribution, and efficiency” (Gaddy, Sivaram, Jones and Wayman, 2017, p.386). In particular, we will focus on the increasing number of software based firms that provide sustainable products, which value proposition “aims to create reliable, long-lasting software that meets the needs of users while reducing environmental impacts” (Amsel, Ibrahim, Malik and

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Tomlinson, 2011, p. 976). According to Rashid and Khan (2015) there is a need to explore the interplay of sustainable and agile principles in order to avail a green agile software development. Agile methods intend to reduce risks and maximize productivity in a software development process through collaborative efforts, which key principles are outlined in the Agile Manifesto developed by 17 software developers in 2001 (Beck et al., 2001). The philosophy was created with a focus on software development, but scholars are exploring other contexts of appropriateness and the role it can play in companies’

everyday operations (Fernandez and Fernandez, 2008).

The considerations previously mentioned imply that to be competitive and persist in a sustainable and digital economy, firms must be able to cope with changing market conditions. Change management can be viewed as the umbrella on how firms cope with high-velocity environments where this study will focus on two of its subcategories;

dynamic capabilities and strategic agility and illustrate how they jointly can drive firms to be resilient and volatile in fast-paced digital environments. There has been a great shift in how business is conducted, where thriving companies are no longer the big multinationals that outcompete the small ones - instead, it is the fastest ones that conquer the slow ones (Reineke and Hinz, 2018).

The turbulent business environment challenges firms' capability to quickly respond to change by using its prior and posterior knowledge (Xu and Koivumäki, 2019; Ghezzi and Cavallo, 2020). To escape rigidity and capitalize on change, strategic agility has been proposed by strategic management research (Hagen, Zucchella and Ghauri, 2019), and implies being in a constant state of transformation which is fostered by strong dynamic capabilities to oppose deep uncertainty (Teece, Peteraf and Leih, 2016). Teece et al., (2016) and Teece (2018) asserts change as a necessity to maintain competitiveness, where firms should not only adapt but also create change, “that is favorable to customers and unfavorable to competitors” (Teece et al., 2016, p.18). In addition, firms may have to redesign strategies, business models, and mobilize resources to respond to shifting environments, which also are enabled by strong dynamic capabilities “in the sense that a dynamically capable organization will be able to rapidly implement, test, and refine new

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and revised business models” (Teece, 2018, p.45). Strategic agility, dynamic capabilities, and business models are interrelated where they enable coherence between strategy, structure, and the business environment (Teece, Pisano and Shuen, 1997; Teece et al., 2016; Teece, 2018).

1.2 Problem Discussion

We have in the previous section introduced and discussed three megatrends, but how are these interrelated, and which one triggers the other? According to a majority of scholars, technology advancements are the main driver of change for sustainability (Seele and Lock, 2017; George, Merrill and Schillebeeckx, 2020) and internationalization (Coviello, Kano and Liesch, 2017; Monaghan et al., 2020). However, technology should not be equated as the solution but rather as an enabler of developments. Accordingly, Vadana et al., (2019) findings concerning the internationalization of born digital firms surprisingly found that the degree of digitalization of value chain activities did not have direct influence on their internalization but rather on their business models. Based upon Hennart (2014), Vadana et al., (2019, 2020) concede that the born digitals’ behaviour might essentially be defined by its business model. These firms are seen as “rapidly internationalizing because of the degree of digitalization integrated into their business model from inception” (Vadana et al., 2019, p.212), consequently Vadana et al., (2019) call for further research about this topic. The business model is constantly evolving and so the theories about it, nowadays newer kinds of business models are appearing fitting contemporary firms and therefore we could talk about a “digital” and/or “sustainable” business model.

New firms are getting more acquainted to combine digital transformation and innovation into their business model to create added value in the market (Bican and Brem, 2020).

Digital transformation is the way in which “a firm employs digital technologies, to develop a new digital business model that helps to create and appropriate more value for the firm” (Verhoef, Broekhuizen, Bart, Bhattacharya, Qi Dong, Fabian and Haenlein, 2021, p.889) . Competitiveness depends on the ability to align and adapt businesses’

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competences, strategies, structures, and business models with fast-changing demands and industries (Berman, 2012; Vieru, Bourdeau, Bernier and Yapo, 2015)

Among the forces that drive changes, sustainability issues are acknowledged as crucial to companies’ long-term success and existence (Dao, Langella and Carbo, 2011). In today’s business climate, new technology and innovation are not enough on their own to secure a sustainable growth, where the transition from economic growth towards the inclusion of environmental aspects, requires new approaches and sometimes radical changes to business. To cope with the 2030 Agenda for Sustainable Development, firms must reassess practices and recreate processes and operations to incorporate the sustainability goals in their core strategy (Levi Jaksic, Marinkovic and Rakicevic, 2014). The interest for environmental concerns and green technology keeps growing and attracts companies, new ventures, and investors to the clean-tech industry. However, research on entrepreneurial clean technology firms is limited despite increasing global climate challenges (Bjornali, Giones and Billstrom, 2017).

According to a report from Accenture (2021), European firms are already considering and prioritizing sustainability concerns and technologies into their strategies. Indeed, 52% of the European firms discussed sustainability and 47% of them talked about technologies.

European companies acknowledge their technological advantage regarding green technologies coupled with digital resilience they would be the key enablers to create a sustainable world. Nevertheless, only 5% of the companies consider technologies and sustainability in convergence, they tend to see them separately. Few firms use the strength of digital technologies to propel sustainability, therefore there is a need to develop a sustainable business model enabled by the technology (Accenture, 2021). This is also acknowledged by George et al., (2020) who explore how digital technologies can support the battle against climate change and foster sustainable development - further, they suggest future research to focus on the characteristics of digital sustainability business models, a knowledge gap we intend to address.

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Cleantech is prevalent across a broad range of industry sectors where its main focus has been on complex technologies such advanced manufacturing and materials, energy efficiency, biofuels and more (European Commission, 2011; Giudici, Guerini and Rossi- Lamastra, 2019). Even though new ventures in cleantech are increasing, Jensen et al., (2020) findings show that less than five percent is occupied by software sectors. This implies a rather young segment of cleantech which has not received any attention in research, even though they serve an important purpose by endorsing the need for sustainable software. In this study, the authors will address this sector of cleantech by recognizing the expansion of software solutions, as the demand for Software-as-a-Service (SaaS) applications continues to grow (Loukis, Janssen and Mintchev, 2019). However, our attention will be towards sustainable software which is an emerging paradigm, designed to reduce negative environmental impact (Venters, Jay, Lau, Griffiths, Holmes, Ward, Austin, Dibsdale and Xu, 2014). According to Venters et al., (2014) software sustainability is a multifaceted complex conception including a range of perspectives and dimensions, which needs further academic recognition. Considering this, the research will explore Cleantech-as-a-Service, a new concept and type of business that can help drive environmental innovation and sustainable development.

New ventures have to cope with uncertainty arising from a newly founded business with resource limitations as well as the complexity derived from a dynamic international environment. The simultaneous occurrence of the liabilities of newness, smallness, and foreignness can therefore profoundly restrict the expansion of start-ups (Hagen et al., 2019). Still, international entrepreneurship theory proves that these vulnerable firms are able to achieve early and fast growth on an international arena (e.g. Oviatt and McDougall, 1994; Knight and Cavusgil, 2004). This phenomenon makes it interesting to assess whether such small, new, and internationalizing ventures are resistant or even leverage such conditions through the development of certain business model characteristics and capabilities. According to Warner and Wäger (2019), competitiveness hinges on the balance between the exploitation of existing capabilities and the exploration and building of new capabilities. In particular, it has been reported that in hyper-competitive landscapes

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firms need to build strong dynamic capabilities and master agility to rapidly create, implement, and transform business models to remain competitive in the emergent digital economy (Achtenhagen, Melin and Naldi, 2013; Teece et al., 2016; Teece, 2018; Hagen et al., 2019). Strategic agility can support the management of uncertainty and risk (Sambamurthy, Bharadwaj and Grover, 2003), however previous research has primarily focused on its relation to transformation and renewal of large and mature corporations (e.g. Arbussa, Bikfalvi and Marquès, 2017; Nemkova, 2017), whereas our contribution will provide insights of agility in small entrepreneurial companies. As such, entrepreneurship, innovation, and internationalization are profoundly interrelated (Onetti, Zucchella, Jones and McDougall-Covin, 2012), therefore they cannot be dissociated and are crucial concepts to be studied to understand the capabilities enabling the internationalization of new-technology firms such as Cleantech-as-a-Service. The international potential of cleantech-based start-ups is also addressed by Bjornali and Ellingsen (2014), who suggest drivers of their internationalization to be recognized in further research.

The authors of this study find some of the major theories of modern International Entrepreneurship to neglect the advanced digital technologies that digital companies derive value and advantage from Cahen and Borini (2020) and Monaghan et al., (2020), where they rather consider internationalization of new ventures through a physical entry mode, either by export or FDI (such as establishing subsidiaries, acquisitions or joint venture), as presented in born global (Cavusgil and Knight, 2015) and international new venture (INV) theories (Oviatt and McDougall, 1994). The arguments made by Johanson and Vahlne (1977) in terms of the Uppsala model have been consistently refined to acknowledge contemporary issues of the business landscape (Johanson and Vahlne, 1990, 2003, 2006, 2009; Vahlne and Johanson, 2017, 2020). In 2017, the authors presented several features that characterize the modern firm, “process rather than structure oriented, network rather than a stand-alone unit, business exchange rather than production, proactive and entrepreneurial rather than passive, heterarchical (decentralized), rather than hierarchical” (p. 3). Oddly, the technological intensity is not

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included as a defining feature of the modern firm’s environment. Given how technological advancements have transformed international business constructs, the Uppsala model has been criticized for its adaptability to today’s digital business climate and virtual context (Coviello et al., 2017). Moreover, studies on born digitals and digital sustainability in an international context are still at an embryonic stage and scholars call for further research (Nambisan, 2017; George et al., 2020; Monaghan et al., 2020).

Reineke and Hinz’s (2018) research of an agile internationalization model for small to medium sized enterprises (SMEs) have inspired the focal point of this study. They apply the principles of agile software development to international strategies of manufacturing SMEs and elucidate the importance of a fast iterative development process, collaboration with different stakeholders, business model suitability, and global networks. The devotion of this study is to further cultivate this embryonic concept by applying the ideas in a new context of clean technology firms. These digital sustainability actors are opposing a global problem which solely cannot create global impact, therefore they often collaborate with stakeholders and align in ecosystems where they together seek to promote the common sustainable development goals (George et al., 2020). Cavusgil and Knight (2015) assert more research on the role of ecosystems when growing young innovative companies and how it may support their expansion efforts. Hence, it will be a central question for this thesis, together with the role of dynamic business models and capabilities that can foster international competitive agility of Cleantech-as-a-Service ventures.

1.3 Research Questions

Considering the knowledge gaps raised in the previous section this study aims to address the following research questions:

How do Cleantech-as-a-Service ventures create international competitive agility?

a) Which business model characteristics and capabilities help to spur value creation in foreign markets?

b) How do ecosystems advance an agile internationalization?

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1.4 Purpose of the Research

This study will explore the emergence of Cleantech-as-a-Service and investigate how these digital entrepreneurs achieve strategic agility in global pivoting and competitive environments. Our exploratory research aims to apply agile principles to entrepreneurial internationalization strategies, where we through six in-depth interviews will discover the role of digital cleantech firms’ dynamic business models, capabilities, and ecosystems when entering a foreign market.

1.5 Delimitations

An organization can be sustainable from different manners, the corporate sustainability relies on three fundamental dimensions that are environmental, social, and economic perspectives. It should be noted that this study emphasises on the environmental aspect of the firms’ sustainability. Moreover, the sector of clean-technologies firms is quite broad and diverse including several types of companies and heavy industries towards the optimisation of natural resources such as the energy and power sectors. Considering the diversity of clean-technology firms and their specialisations, the authors underline that the study only focuses on clean-tech companies providing a software that aims to decrease the environmental impacts of the firms using it.

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2. Theoretical Framework

The following chapter introduces the key and major theories contributing to the elaboration of the concept of Cleantech-as-a-Service ventures understanding its context, environment, and attributes. It highlights the role of the business model, agile approach, dynamic capabilities, entrepreneurship, and networks towards the establishment of a virtual internationalization.

2.1 The Context of Digital & Sustainable Firms 2.1.1 Innovative Business Models & Entrepreneurs

The business model is commonly described as the representation of how businesses create, capture, and deliver value all along their activities (Osterwalder and Pigneur, 2010; Teece, 2010; Remane, Hanelt, Nickerson and Kolbe, 2017; Wittkop et al., 2018). It is an architecture that defines “the manner by which the enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit” (Teece, 2010, p.172). The three main elements are value creation, value proposition, and value capture and those dimensions encompass underlying activities (Clauss, 2017). Therefore, the value creation relies on establishing new capabilities, partnerships, technologies, and structures whereas the value proposition fulfils the customer needs and symbolises what the company offers its customers (Osterwalder and Pigneur, 2010), it suggests developing new offerings, channels, markets, and new customer relationships (Clauss, 2017). As for the value capture it gathers a new revenue model and new pricing strategy (Clauss, 2017).

Understanding how to seize value from innovation is an important factor to design a BM (Teece, 2010). The BM and its components have to be aligned and coherent (Teece, 2018), consequently “a good business model yields value propositions that are compelling to customers, achieves advantageous cost and risk structures, and enables significant value capture by the business that generates and delivers products and services'' (Teece, 2010, p.174).

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Digitalization has disrupted and transformed the entrepreneurial environment by challenging the discovery of new opportunities and the practices to exploit them. Digital technologies proclaimed a new era in entrepreneurship where digitization and new technologies have reduced the boundaries and allowed a higher degree of flexibility (Nambisan, 2017). Indeed, digital technologies are seen as an enabler of entrepreneurial activities (von Briel, Davidsson and Recker, 2018) engendering a new breed of entrepreneurs that are utilizing internet and digital tools to create new ventures (Giones and Brem, 2017; Elia et al., 2020). Digital solutions and platforms have a unique structure shaping the experimentation and discoveries of new ideas and opportunities. Digital products have the characteristics to be editable, open, and have infinite expansibility which is to say that the solutions “can be modified or updated continuously and systematically […] they are not contained within a single source or institution […] and can be built on endlessly, limited only by processing and networking capabilities”

(Nambisan, 2017, p.1041). Digitization offers greater possibilities to the entrepreneurs to experiment and test their ideas while designing their business models (Nambisan, 2017).

Therefore, business model (BM) and digital entrepreneurship (DE) are complementary as the flexibility attributed by the digital technologies provide a coordination for the digital value creation (Sahut, Iandoli and Teulon, 2019). DE refers to the ability to create new ventures or to transform a current business via the use of new digital technologies that deliver an economic and social value (Sahut, Iandoli and Teulon, 2019; Elia, Margherita and Passiante, 2020). Indeed, it becomes easier for entrepreneurs to progressively expand the breadth of their offerings and to discover new opportunities (Nambisan, 2017).

Considering that the business model concept is linked to the exploitation of new opportunities (DaSilva and Trkman, 2014), a suitable business model is required in order to extract value from exponential technologies. Digitalization represents the use of digital technologies to improve a business model which in turn can provide new value capture and value creating opportunities (Li, Badr and Biennier, 2012; Vadana et al., 2019, 2020).

A business model is considered as digital if changes in digital technologies have provoked profound alterations in the manner in which the business is being run and revenues are

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being generated (Veit, Clemons, Benlian, Buxmann, Hess, Kundisch, Leimeister, Loos and Spann, 2014; Remane et al., 2017). Consequently, a digital BM is characterized by the fact that the offer can be duplicated for a marginal cost of zero (Veit et al., 2014;

Remane et al., 2017), its value is determined by its utilization and that it relies on “digital platforms to balance benefits among an ecosystem with multiple organizations and individuals involved” (Remane et al., 2017, p.42). However, for Bican and Brem (2020) there is no clear definition of a digital business model as it relies on the firm’s core values and therefore it should be individually adapted “depending on each firm’s unique value propositions and leadership character” (p. 10). Born digital firms depend on digital infrastructure to “accrue communication, collaboration and/or computing capabilities, capabilities that allow the firm to both create and sell its offering online through a digital business model” (Monaghan, Tippmann and Coviello, 2020, p.13).

The technology sector and software industry continue to be revolutionized by novel cloud computing and subscription-based business models. Several born digital firms offer Software as a Service (SaaS) applications, implying a web-based solution which is accessed through the cloud (Ge and Huang, 2014). The BM of software firms diverge from other kinds of firms because of the intangible character and the short product life cycle of the software products (Ojala and Tyrväinen, 2007). Software development is a complex process, nonetheless as it is performed in an environment of constant change and uncertainty, which according to Tate (2005) can result in unsustainable software artifacts.

Therefore, a sustainable development infused by agility can mitigate such challenges, concerning the balance between short- and long-term anticipation and adaptation.

2.1.1.1 Agile Business Modelling

The agile manifesto established in 2001 is considered the basis of agile software development and aims to move away from rigid processes to become more responsive and adaptable. Particular emphasis is placed on principles that ensure successful software development despite constant changes in the requirements and challenges such as competitive pressure, which highlights collaboration, adaptiveness, simplicity, efficiency,

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and durability (Beck et al., 2001; Highsmith and Cockburn, 2001; Fernandez and Fernandez, 2008). Agility also involves the capacity of the firms to employ their prior knowledge while learning from current experiences to provide high-quality products, hence the approach is associated with “flexibility, velocity, learning and response to change and leanness” (Ghezzi and Cavallo, 2020, p. 521). Consequently, agility marks a new approach of creating business models and “running a business to meet challenges, empowering a company with market-driven innovative capability, which will be the main source of competitive advantage of the future” (Xu and Koivumäki, 2019, p. 310). Initial business models are often adapted and modified, companies begin with a preliminary business model that will “in response to certain triggers (typically external) - plan, design, test and re-test alternative business model variants until they find the one that best suits their objectives'' (Sosna, Trevinyo-Rodríguez and Velamuri, 2010, p.384).

A digital business model is characterised by its agility and high responsiveness to quickly adapt in an uncertain fast-paced and changing environment (Xu and Koivumäki, 2019;

Ghezzi and Cavallo, 2020), therefore Monaghan et al., (2020) acknowledge that a digital BM confer flexibility and scalability to born digital firms. An agile approach is also associated and closely linked by the lean start-up approach (Xu and Koivumäki, 2019;

Ghezzi and Cavallo, 2020). The lean start-up approach genuinely suits software and digital new ventures and reveals its role in the digital entrepreneurship (Balocco, Cavallo, Ghezzi and Berbegal-Mirabent, 2019). However, a lack of distinction has been noticed between lean and agile practices, agile is by nature tactical therefore decisions regarding agility are made from a top managerial level and is part the organizational strategy while lean has a top-down approach and is “applied from an upper management perspective, with the objective being the optimisation of activity across the whole entire organisation” (Wang, Conboy and Cawley, 2012, p.1289). The lean thinking emanates from the agile development leading to the “leagile” approach (Ghezzi and Cavallo, 2020) and to the lean business model concept implying that firms should quickly combine their existing resources and offer new solutions in an experimental way (Balocco et al., 2019). The lean business model relies on three pillars that are experimentation, customer feedback, and

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iterative design (Balocco et al., 2019), which aims to reduce the risk of failing fast by going through a “trial-error” learning (Xu and Koivumäki, 2019). The trial-and-error learning relies on experimenting and retaining the activities that generate the anticipated outcomes and discarding the ones that are not effective. The goal is to try out ideas in order to detect and correct the faults during the process that engenders learning (Sosna et al., 2010). Agility and lean thinking could also be associated with green principles, acknowledging that a lean approach has positive effects on firms’ environmental sustainability by reducing waste, energy consumption and emissions (Caldera, Desha and Dawes, 2017).

2.1.1.2 Digital Sustainability

The increasing demand for environmentally friendly products has presented new market opportunities for digital entrepreneurs to develop cleaner and more resource-efficient technologies (Jensen et al., 2020). Sustainable entrepreneurs are those “who start a business to serve both self-interests and collective interests by addressing unmet social and environmental needs”(Hoogendoorn, van der Zwan and Thurik, 2019, p.1).

Furthermore, by including a technological dimension the role of sustainable technologies and innovation is enhanced. Sustainable technology entrepreneurship is concerned with new, green and sustainable solutions for new technology that can meet the goals of the sustainable development agenda (Levi Jaksic et al., 2014). Seele and Lock (2017) recognize digitalization as the main driver for sustainable changes, as it can help increase sustainability in the environmental, social and economic spheres. Confirmatory, George et al., (2020) research points out the increasing crowd of entrepreneurial actors exploiting digital technologies to confront critical sustainability issues. Further, they define digital sustainability as “the organizational activities that seek to advance the sustainable development goals through creative deployment of technologies that create, use, transmit, or source electronic data” (p. 2).

A sustainable business model incorporates a “pro-active multi stakeholder management, the creation of monetary and non-monetary value for a broad range of stakeholders, and

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holds a long-term perspective” (Geissdoerfer, Vladimirova and Evans, 2018, p.403-404).

As a BM is dynamic, it is subject to evolve, change and innovate (Balocco et al., 2019).

However, the sustainable BM innovation could lead to a failure and engender conflicts involving managers as the firm is not able to identify the suitable BM for new innovations (Geissdoerfer, Vladimirova and Evans, 2018). The sustainability of digital business models is nonetheless mitigated as it mainly relies on the activities operated by the firms and its context, that is to say if the digital offer positively or negatively impacts the environment (Bican and Brem, 2020). Naumann, Rayment, Nolan, Forest, Gill, Infrastructure and Forest, (2011) confer that green software has positive effects on sustainable development. Software products are generally environmentally friendly and resource efficient, as they are not subjected to depletion nor waste and emission releases (Kern, Hilty, Guldner, Maksimov, Filler, Gröger and Naumann, 2018). The most commonly used technologies supporting digital sustainability activities include artificial intelligence and machine learning (AI/ML), blockchain, Big Data Analytics, mobile applications and others (George et al., 2020).

Cleantech firms provide through their technologies advantages that have a direct or an indirect positive impact on environmental sustainability (Trapp and Kanbach, 2021). A sustainable business model aims to create value “through offering high value products and services, while reducing costs and concurrently reducing harmful environmental impact” (Trapp and Kanbach, 2021, p.4). The value proposition of a sustainable BM exceeds the dimension of purely delivering a straightforward value to the customers, in addition it creates a value that simultaneously combines the economic and ecological dimensions (Boons and Lüdeke-Freund, 2013; Trapp and Kanbach, 2021). Consequently, the BM model of clean tech firms seeks to generate a green value creation, capture, and delivery while offering a combination of an economic and ecological value (Trapp and Kanbach, 2021). Bocken, Short, Rana and Evans (2014) and Ritala, Huotari, Bocken, Albareda and Puumalainen (2018) identified sustainable business model archetypes where among them maximise material productivity and energy efficiency could suit the most cleantech-as-a-service ventures as the core values rely on providing a service aiming to

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use or generate less resources, waste, or emissions. Based on those articles, Trapp and Kanbach (2021) have identified twelve BM archetypes for green technology firms that rely on the type of technology used to generate value and which kind of effects the business model aims to address (see figure below). Upon those twelve archetypes, the dimensions and purposes of the core green values will vary depending on the category of green business model that the firms belong to.

Figure 1: The greentech business model archetypes (Trapp and Kanbach, 2021, p.6)

2.1.1.3 Interdependent Value Creation

George et al., (2020) conceptualization of digital sustainability concerns the achievement of the sustainable development goals through aggregated activities within a larger ecosystem. Digital sustainability actors are often affiliated in ecosystem architectures, where they jointly pursue common sustainable development goals. A digital sustainability ecosystem is underpinned by low-cost scalability of exponential technologies as its collaborative nature and open source structures allow software to be shared and source codes to be modified and incorporated into other projects (George et al., 2020). The

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conception is derived from Zott and Amit’s (2010) business model approach and Adner's (2017) “ecosystem-as-structure” approach, both which take an activity-centric view. Zott and Amit (2010) view the business model as an activity system that consists of three design elements; content (the activities performed, i.e., the value proposition), structure (how the activities interact) and governance (who execute the activities). An activity is the engagement of resources by any stakeholder of the business model, “to serve a specific purpose toward the fulfillment of the overall objective” (p. 217). The authors also highlight the boundary-spanning nature of business models, or an “open business model”

which allow activities to be performed by external parties and support the obtaining of resources, capabilities, new ideas and technologies. The idea of interdependent value creation across organizations and activities corresponds to Adner´s (2017) ecosystem construct. His structuralist approach is underpinned by interdependent activities underlying a value proposition, which will require collaboration between a multilateral set of partners to be realized.

An alternative construct to interdependence is open innovation, which according to Adner (2017) differs from the ecosystem construct as multilateral coordination is not a part of its scope. Instead, he states that creation and exchange are the key concerns where organizations’ innovation pipelines and processes are highly responsive and receptive to any external knowledge sources. The adoption of open innovation processes is known to augment a firm’s internal efforts to drive innovation and enhancing agility “by enriching and speeding up new product development to meet nascent market opportunities” (Teece, 2016, p. 25).

In today’s innovation landscape companies are reconsidering the way they generate new ideas and introduce them into the markets, where the adoption of an open innovation model is increasing (Chesbrough, 2003). Open innovation is defined by the intentional use of internal and external knowledge to boost the internal innovation and develop new market opportunities (Chesbrough, 2003; De Fabrício, Da Silva, Simões, Galegale and Akabane, 2015). It enables to counter the lack of knowledge of firms by collaborating and seeking knowledge outside the firms. Consequently this openness makes the organization

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more agile and flexible but also compels them to reassess their strategies and processes (De Fabrício et al., 2015).

Innovations that transform the value creation and delivery imply a change and a modification in the traditional business model (Herrero, Armellini and Solar-Pelletier, 2020). The companies become more collaborative and the pooling of knowledge enhances the value creation (Chesbrough and Appleyard, 2007). The purpose is to optimize collaborative innovation whereby external collaboration is crucial to enhance the innovation capabilities of the firms but also to accelerate the offer availability on the market. This openness nonetheless requires firms to have absorptive capabilities but also being organized and having skills in identifying and selecting the key partners (Leroux, Muller, Plottu and Widehem, 2014). A firm that aims to follow an open innovation approach requires to operate substantial strategic and relational changes. Consequently, the opening of the innovation process implies reappraising the business model as the way of creating and capturing value is affected by the new integrated resources and competences (Leroux et al., 2014).

2.1.2 Sustaining Competitive Agility

Companies operate in evolving and globally competitive environments influenced by external factors that compel them to change, therefore organizations have to adapt or change to remain competitive in the market(s) in which they operate (Herrero, Armellini and Solar-Pelletier, 2020). Digital transformation is to be separated from traditional forms of strategic changes as digital technologies have profoundly increased the speed of change processes which enforce a volatile, complex, and uncertain environment (Loonam, Eaves, Kumar and Parry, 2018; Schoemaker, Heaton and Teece, 2018). Recently, Warner and Wäger (2019) provided clarity in how mature firms build dynamic capabilities for digital transformation which they acknowledge as a continuous process of adopting and using new digital technologies, where strategic agility is considered the core mechanism for the strategic renewal of an organization's 1) business model, 2) collaborative approach, and eventually the 3) culture. Being strategically agile enables organizations to respond faster

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to change (Doz, 2020) and is defined by Teece et al. (2016, p. 17) as “the capacity of an organization to efficiently and effectively redeploy/redirect its resources to value creating and value protecting (and capturing) higher-yield activities as internal and external circumstances warrant”. In addition, Doz and Kosonen (2010) propose three forces of strategic agility, these are 1) strategic sensitivity (Attentive and responsive to strategic situations), 2) Leadership unity (Implementation of bold collective decisions) and, 3) Resource fluidity (Effective resource mobilization).

Thus, strong dynamic capabilities are essential to advance strategic agility, enabling the firm to oppose deep uncertainties generated by dynamic environments (Teece, 2016). In addition, Teece (2018) acknowledges that high-order dynamic capabilities also play a significant role in relation to business model design and transformation. As such, this underlines the importance of exploring the connection between business models, dynamic capabilities, and agility in strategic management research.

The dynamic capabilities (DC) framework is often used to assess strategic change and how organizations respond to fast technology and/or market changes (Teece et al., 1997;

Teece, 2018). The concept was developed by Teece, Pisano and Shuen (1990) and is an extension of the resource-based view (RBV) by understanding how valuable, rare, difficult to imitate, and imperfectly substitutable resources are created (Barney, 2001) and can be adapted in changing environments to sustain competitive advantage (Ambrosini and Bowman, 2009). RBV does not consider the dynamic external environment and hence the role of strategic management, which refer to “adapting, integrating and reconfiguring internal and external organizational skills, resources and functional competencies toward the changing environment” (Teece and Pisano, 1994, p.537).

The development of DC hinges on internal organizational factors, also referred to as microfoundations (Kevill, Trehan and Easterby-Smith, 2017; Bendig, Strese, Flatten, da Costa and Brettel, 2018). These are composed by certain skills, processes, structures, and activities and have direct influence on the capacity to “1) sense and shape opportunities and threats, 2) to seize opportunities, and 3) to maintain competitiveness through

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enhancing, combining, protecting, and when necessary, reconfiguring the firm’s intangible and tangible assets” (Teece, 2007, p. 1319).

The first process of building DC is sensing, which is underpinned by activities akin with scanning, learning, and interpretation (Teece, 2010). Similarly, Roy and Khokle (2016) explain the process in terms of assessment, awareness, and integration of the information related to environmental change. Further, Teece (2007) explicates the role of sensing activities which involves discovering and exploring latent customer demands and technological possibilities, responding to competitors and developing industries and markets. Digital infrastructures can support the prediction of new digitalization trends, where for example big data and IoT platforms can help collect and analyze large-scale information (Warner and Wäger, 2019). Warner and Wäger’s (2019) also suggests a digitally based sensing capability which can support firms in scanning for technological trends and competitors, formulating digital strategies, and establishing a long-term digital vision.

Dąbrowska, Lopez‐Vega and Ritala (2019) argue that companies tend to drift towards exploitation at the expense of exploration, where organizational ambidexterity is suggested, referring to firms that both exploit existing capabilities and explore new operation and innovation approaches. Exploitation and exploration often correspond with the level of openness of innovation - where a dynamic mode of ambidexterity involves exploitative and explorative initiatives in various parts of the organization and with external stakeholders. An open innovation culture starts by empowering the employees and conveying an open innovation mindset and behavior to permeate the organization (ibid). An organization that provides autonomy to induce individual commitment is more likely to discover unexpected opportunities (Nonaka, 1994).

Seizing capabilities concerns activities that “focus on the implementation of that opportunity, which has been identified as conducive to competitive advantage” (Khan, Daddi and Iraldo, 2020, p.1480). To address opportunities, Teece (2007) elucidates the capacity to make strategic investment decisions, for example through developing new

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products and services. Seizing also involves the creation and/or transformation of business models, the motivation of employees, and the cooperation with stakeholders (Teece, 2007;

Helfat and Peteraf, 2015). Similarly, Kindström, Kowalkowski and Sandberg, (2013) found external interactions and co-development with customers and other partners to be of benefit in the seizing process, also accentuated in agile practices (Birkinshaw, 2018).

Given the disruptive nature of digitalization, Warner and Wäger (2019) argue that strategic agility for rapid acknowledgment of unexpected opportunities and threats can be obtained through the development of digital seizing capabilities, which considers, among other things, the usage of digital innovation labs, the scale up of innovative business models and the reallocation of resources. Consequently, they assert that “new digital technologies such as cloud computing and social media are changing the very nature of seizing capabilities” (p. 327).

A majority of scholars agree that seizing can be hindered by a formal organizational structure and hierarchy, where it is suggested that such organizational arrangements are to be modernized (Kindström et al., 2013; Wang, Li and Ding, 2018; Warner and Wäger, 2019). Entrepreneurship in organizations is closely linked to its culture and structure, where both Nonaka (1994) and Dąbrowska, Lopez‐Vega and Ritala (2019) condescends traditional top-down managerial structures as it will not stimulate or engage innovation processes. They suggest a leadership style characterized by collaborative relationships which can promote concurrent activity organized by autonomous teams, preferably with cross-functionality. Similarly, Warner and Wäger’s (2019) process model reveals factors that trigger, enable, and hinder the building of dynamic capabilities, where internal enablers are cross-functional teams, fast decision making, and executive support.

The final stage in the process of building dynamic capabilities is to manage an evolving market and potential threats where firms depend on the ability to reconfigure or transform its resource base to sustain competitive advantage over time. Such capabilities are rooted in a firm’s routines that enable the renewal of assets and competencies to meet the new prerequisites (Teece, 2007). Similarly, Roy and Khokle (2016) emphasize the importance of internal alteration in terms of management and alignment of competences and resources

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for organizations to handle changing environments. An effective capability realignment and change process can advantageously institutionalize cross-functional teams (Roy and Khokle, 2016). The micro foundations related to digital transforming involves stakeholder interaction and collaboration, team-based structures, and internal digital knowledge acceleration (Warner and Wäger, 2019). In addition, Dąbrowska, Lopez‐Vega and Ritala (2019) argue that an open innovation culture can support organizational renewal, where firms “open up its boundaries to external ideas and technologies and involve different collaboration partners in different stages of the innovation process” (p. 8).

For born digital firms, skilled human capital is the most prioritized asset as it can help to outperform large competitors by developing critical capabilities, even if they might lack other tangible resources (Achtenhagen et al., 2013; Coviello et al., 2017). This is because certain combinations of competences and skills are difficult to imitate, resulting in rare and valuable resources (Barney, 2001). Critical capabilities emerge from complex strategic choices on how business activities should be managed and “enable a company to shape, adapt, and renew business models to create value in a sustainable way”

(Achtenhagen et al., 2013, p.429). Achtenhagen et al., (2013, p. 431) integrated framework showcases three critical capabilities required to successfully engage in business model innovation (BMI), these are (1) an orientation towards experimenting with and exploiting new business opportunities; (2) a balanced use of resources; and (3) achieving coherence between leadership, culture, and employee commitment. The combination of these three capabilities, their activities, and strategizing actions can according to the authors reinforce sustained value creation.

Several scholars view BMI and DC as key aspects to address both digital transformation and sustainability challenges (e.g. Remane et al., 2017; Warner and Wäger, 2019; George et al., 2020). The dynamic technological progress triggers changes in societal behaviours and structures, which in turn enforce new or modified business models (Remane et al., 2017; Kotarba, 2018; Warner and Wäger, 2019). Warner and Wäger (2019) identify three major external triggers which will spur the building of dynamic capabilities, these are disruptive digital competitors, changing consumer behaviours, and disruptive digital

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technologies. The propagation of digital technologies engender drastic changes in the companies’ core activities which imply fundamental alterations in the business model core values (Linde, Sjödin, Parida and Gebauer, 2020). The development of newer technologies offer the opportunity to transform the manner in how value is created but also facilitate the development and maintenance of stakeholder relationships (Wittkop et al., 2018).

Moreover, developing a digital business model will involve creating new sorts of capabilities in order to deliver the value created (Linde et al., 2020). It is a valuable tool to assist decision making in the digital sustainability environment (Wittkop et al., 2018;

George et al., 2020).

2.2 Exploring an Agile Internationalization of Digital Firms 2.2.1 International Business Model Design

International entrepreneurship intends to generate added value through international activities and is characterized by its proactiveness, exploitation, and risk-seeking behavior (McDougall and Oviatt, 2000; Oviatt and McDougall, 2005). Autio (2017) points out internationalization as a strategic tool to build competitive advantage in companies’

business models. The reason for this is the exposition to various markets and different competitive environments. The author portrays internationalization as a learning- and experimentation-driven process, highlighting capabilities related to continuous learning, business model experimentation, cross-border exploitation, all supported by a strong digital infrastructure.

Dunford, Palmer and Benveniste (2010) discuss the capability of business model replication as important especially in early and rapid internationalization settings.

Accordingly, Child, Hsieh, Elbanna, Karmowska, Marinova, Puthusserry, Tsai, Narooz and Zhang (2017) found SMEs to adopt different international business models which they refer to as 1) traditional market-adaptive, 2) technology-exploiter, and 3) ambidextrous explorer. The first design belongs to firms who have a rather low technological innovation and instead secures value through rapid market responsiveness, where flexibility and speed were regarded as core competitive strengths. These firms tend

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to modify their current offerings, use direct export channels, and leverage network linkages with customers and suppliers when entering foreign markets. The technology- exploiter shares some features with the first design, such as having a low level of exploration and viewing customers as the primary source to internationalize. However, they can leverage innovation capabilities to exploit existing technology and knowledge within the firm. In addition, the offerings are mainly commercialized through the internet.

Lastly, the ambidextrous explorer emphasizes innovation as a core capability and competitive strength, combining both exploitation and exploration. This business model type uses both direct and indirect channels as well as customers and partners to assist new market entries. Contextual factors such as industry, level of home economy development, and decision-maker international experience will also influence the choice of an international business model (Child et al., 2017).

Digitalization challenges internationalization theories in different ways, first it improves the firm’s communication capabilities and allows a greater coordination of geographically dispersed activities. Moreover, it provides higher flexibility, reduces the cross-border information asymmetries but also encourages business model innovations enabling firms to reinvent and implement novel concepts (Autio and Zander, 2016). Digital infrastructures enable new ventures to be flexible on international markets in terms of testing alternative value propositions and alternative ways of how to interact and collaborate with customers, suppliers, and partners (Autio, 2017; Nambisan, 2017).

Further, Vadana et al., (2019) argue that digital firms’ business models encompass a high level of digitalization where primary activities of the value chain can be digitized, which in turn can facilitate internationalization efforts. (Gabrielsson, Fraccastoro, Ojala and Rollins, 2021) study highlights the increasing number of businesses that inherit characteristics from both born global and born digital practices, where digital innovations create new approaches for new ventures’ international business endeavours. Their conceptualization of digital entrepreneurial internationalizers (DEIs) refers to firms which

“products or services are based on digital artifacts and whose identification, evaluation, and exploitation of opportunities through value chain activities can be digitalized, and the