International Journal of Information Management 65 (2022) 102513

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International Journal of Information Management

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Research Article

Digital platforms and SMEs’ business model innovation: Exploring the

mediating mechanisms of capability reconfiguration
Xuemei Xie a, Yuhang Han a, *, Alistair Anderson b, Samuel Ribeiro-Navarrete c
a
School of Economics and Management, Tongji University, Shanghai 200092, China
b
Lancaster University Management School, UK
c
ESIC Business & Marketing School, Spain

A R T I C L E I N F O A B S T R A C T

Keywords: In our digital era, many small and medium-sized enterprises (SMEs) face the challenge of relying on digital
Digital platforms platforms to enhance their business model innovation. Prior research on this subject has mainly focused on the
Business model innovation interaction between SMEs and their partners through their use of digital platforms. Meanwhile, how SMEs
Capability reconfiguration
reconfigure their capabilities to promote business model innovation by adopting digital platforms has remained
Dynamic capability
an under-researched area. To address this gap, we establish a conceptual framework to explain how digital
SMEs
platforms affect SMEs’ business model innovation through capability reconfiguration, and we then test this
conceptual framework empirically by using a sample of 325 manufacturing SMEs in China. We find that digital
platforms positively affect both business model innovation and the capability reconfiguration of SMEs. We also
find that both evolutionary capability reconfiguration and substitutional capability reconfiguration mediate the
relationship between digital platforms and SMEs’ business model innovation. These findings contribute theo­
retically to the research on digital platforms and SMEs while also providing important managerial implications
for policymakers and SMEs to help firms implement digital strategies.

1. Introduction Accordingly, SMEs promote innovative business models by using various

Recent digitalization efforts have already presented unprecedented
opportunities for enterprises in almost every industry (Cozzolino, Corbo,
& Aversa, 2021; Skare & Soriano, 2020). Along with the rapid devel­
opment of digital technology, different types of digital platforms have
emerged. We define a digital platform as an extensible digital core that is
equipped with complements for third parties (De Reuver, Sorensen, &
Basole, 2018; Karhu, Gustafsson, & Lyytinen, 2018). Digital platforms
have the nature of being open, affordable, and widespread (McIntyre &
Srinivasan, 2017). Such platforms, including Apple’s iOS platform and
the SAP platform (Johnson, 2010; Mei, Zhang, & Zhu, 2021), enable
enterprises to promote innovation while eschewing more traditional
business models. A business model is defined as something that “cap­
tures the key components of a business plan, contains what the business
does and how the business makes profit” (Huarng, 2013, p. 2102).
Digital platforms can enable small and medium-sized enterprises
(SMEs) to promote innovation rapidly due to their more flexible stra­
tegies and relatively shorter decision-making times compared to large
enterprises (Cenamor & Frishammar, 2021; Mei, Zhang, & Chen, 2019).
digital types of platforms, such as industrial internet platforms or cloud
computing platforms (Cenamor, Parida, & Wincent, 2019; Hanafizadeh,
Hatami, Analoui, & Albadvi, 2021; Hosseini, Fallon, Weerakkody, &
Sivarajah, 2019). It is thus important for researchers and practitioners to
explore how SMEs have been promoting business model innovation
through their adoption of digital platforms.
From the socio-technical perspective, the notion of a digital platform
emphasizes necessary associations between platforms and organiza­
tional processes (De Reuver et al., 2018; Ghazawneh & Henfridsson,
2015; Sedera, Lokuge, Grover, Sarker, & Sarker, 2016). Previous
research on digital platforms has led to the examination of some
important issues. First, some studies have adopted the ecosystem
perspective to examine the characteristics of digital platforms, such as
platform quality (e.g., McIntyre & Srinivasan, 2017), the boundary
resource of digital platforms (e.g., Karhu et al., 2018), and platforms’
governance mechanisms (e.g., Mei et al., 2021). Second, there is
research that has focused on interactions between digital platforms and
their users at both the firm and the ecosystem level, including
platform-based alliances (e.g., Zhang et al., 2021), network effects

* Corresponding author.
E-mail address: hanyuhang@tongji.edu.cn (Y. Han).

https://doi.org/10.1016/j.ijinfomgt.2022.102513
Received 28 January 2022; Received in revised form 18 March 2022; Accepted 24 March 2022
Available online 30 March 2022
0268-4012/© 2022 Elsevier Ltd. All rights reserved.
X. Xie et al. International Journal of Information Management 65 (2022) 102513

Table 1
Review of research on digital platforms.
Author Perspective Views related to digital platforms Level Method Sample/data

Sedera et al. Contingent resource-based theory Enterprise systems; organizational innovation Firm Survey 189 firms
(2016) view
Mcintyre and Industrial organization economics; Network effects; platform quality N/A Review N/A
Srinivasan strategic and technology
(2017) management
Li et al. (2018) Dynamic capability view Digital transformation; dynamic managerial Firm Case study 7 SMEs using digital
capabilities; organizational capabilities platforms
Teece (2018) Profiting from innovation (PFI) Complementary assets; value capture N/A Review N/A
framework
Klein et al. (2020) Processual view of controversies Digital platform features; digital platforms Ecosystem Qualitative Secondary material on
innovation processes; human and nonhuman approach Google Glass
actors
Sengupta et al. Stakeholder theory Stakeholders’ stabilities and incentives; digitized Firm Case study eKutir platform (India)
(2021) business model innovation
Cozzolino et al. Platform-based ecosystem Collaboration and competition between Ecosystem Longitudinal Archival data; interview data
(2021) perspective incumbent and entrant producers in digital study
platforms
Mei et al. (2021) Digital platform innovation Governance mechanisms (for platform owners); Ecosystem Case study Aliyun platform (China)
ecosystem perspective value creation and capture
Schreieck et al. Platform ecosystems discussed in IS Organizational capabilities; platform ecosystem Ecosystem Case study SAP cloud platform
(2021) and management literature capabilities; value co-creation and capture (Germany)
Song, Li, and Yu Signaling theory Financial service providers; the supply chain Firm Empirical Archival data from the
(2021) credit of SMEs; big data analytics using digital approach cellular phone production
platforms industry

among platform partners (e.g., Hosseini et al., 2019), and collaboration
and competition between incumbents and entrants via their digital
platforms (e.g., Cozzolino et al., 2021). Third, some researchers have
recently explored how digital platforms can change enterprises’ orga­
nizational processes at the firm level, including in terms of promoting
the digitalization business model (e.g., Ritter & Pedersen, 2020),
accelerating internal digital transformation (e.g., Li, Su, Zhang, & Mao,
2018), and redesigning the process of customer relationship manage­
ment (e.g., Khanagha, Taghi, Zadeh, Mihalache, & Volberda, 2018).
Still, the prior research has mainly focused on how large enterprises
in the global market have adjusted their business models because of the
use of digital platforms, such as what has occurred at Google (e.g., Klein,
Sorensen, de Freitas, Pedron, & Elaluf-Calderwood, 2020) and at
Ericsson (e.g., Khanagha et al., 2018), while little attention has focused
on the adoption of digital platforms by SMEs. It remains unclear whether
SMEs in emerging markets can also benefit by adopting digital plat­
forms, as well as how SMEs use digital platforms to create new value in
order to improve their business models. Therefore, the core question of
the present research is the following: What is the effect of digital plat­
forms on SMEs’ business model innovation?
Furthermore, little research has identified the internal mechanisms
in the relationship between digital platforms and SMEs’ business model
innovation (De Reuver et al., 2018; Ovuakporie, Pillai, Wang, & Wei,
2021). Both digitalization and business model innovation have faced the
problem of cognitive inertia, which is defined as the “resistance to
changes that deviate from existing schemas or frames” (Reger, Gus­
tafson, Demarie, & Mullane, 1994, p. 568). Capability reconfigurations
display different forms of cognitive inertia (Berends, Smits, Reymen, &
Podoynitsyna, 2016; Bouncken, Kraus, & Roig-Tierno, 2021). Some
research has investigated the business effects of digital platforms by
seeking to understand the lens of dynamic capabilities and their function
for value creation (Jun, Nasir, & Yasir, 2021; Schreieck, Wiesche, &
Krcmar, 2021). However, the role of capability reconfiguration, which is
a critical component of dynamic capability, in promoting business
model innovation via the digital platform has not been well explained in
the literature (Hu, Wang, Feng, & Duan, 2021; Moeen & Mitchell, 2020;
Schreieck et al., 2021; Teece, 2007). According to the traditional clas­
sification of Lavie (2006), capability reconfiguration is divided into two
components: evolution, and substitution. Driven by cognitive processes,
evolutionary capability reconfiguration and substitutional capability
reconfiguration utilize different processes of the dynamic capabilities of
SMEs when adopting digital platforms; therefore, each type of reconfi­
guration employs different mediating mechanisms (Bouncken et al.,
2021; Martins, Rindova, & Greenbaum, 2015). Accordingly, this study
also examines how these two forms of capability reconfiguration affect
the relationship between digital platforms and SMEs’ business model
innovation.
In this investigation, we take one step toward addressing the research
gaps in prior studies. First, we examine the relationship between digital
platforms and SME’s business model innovation, which contributes to
the digital platform research literature by linking digital platforms and
business model innovation at the firm level. Second, we adopt the dy­
namic capability view to unpack the “black box” that exists between
digital platforms and firms’ business model innovation (Baker & Sin­
kula, 2002; Lavie, 2006; McDowell, Peake, Coder, & Harris, 2018;
Teece, 2007). In so doing, we seek to expand the boundary of the dy­
namic capability view by shedding light on the mediating mechanism of
capability reconfiguration. Third, compared to large enterprises, SMEs
have unique characteristics and advantages, leading to different capa­
bility reconfiguration mechanisms when adopting digital platforms
(Hilmersson & Hilmersson, 2020; Mei et al., 2019; Papadopoulos, Bal­
tas, & Elisavet, 2020). Thus, we also answer the call for further study on
how SMEs reconfigure their resource bases and dynamic capabilities in
emerging markets (Fabrizio et al., 2021).
2. Theory and hypotheses
2.1. Digital platforms and business model innovation
A digital platform is defined as “a technology architecture that allows
the development of its computing functionalities and allows the inte­
gration of information, computing and connectivity technology plat­
forms available to an organization” (Sedera et al., 2016, p. 4). In recent
years, many SMEs have adopted digital platforms to integrate digital
technologies into their traditional non-digital products and processes,
especially in emerging markets (Papadopoulos et al., 2020). Previous
studies have revealed that digital platforms have helped firms develop
value creation activities by improving their digital transformation pro­
cesses (Li et al., 2018; Sengupta, Narayanamurthy, Hota, Sarker, & Dey,
2021; Warner & Wäger, 2019). The most critical dimension of business
model innovation is value creation innovation, which refers to how
firms create value along the value chain based on available resources

2
X. Xie et al.
and capabilities in intra- or interorganizational processes (Achtenhagen,
Melin, & Naldi, 2013; Clauss, 2017; Ibarra, Ganzarain, & Igartua, 2018).
Digitalization makes many firms’ ambitions shift toward more inte­
grated perspectives of business model innovation (Roth, Melkonyan,
Kaivooja, Manke, & Dana, 2018). In practice, most advanced
manufacturing firms have undergone necessary digital transformations,
where new business models for “smart” products and services represent
the most radical level of business model innovation (Ibarra et al., 2018;
Zott & Amit, 2017). Although studies have started to theorize about how
digital platforms affect enterprises’ innovation activities (Cenamor &
Frishammar, 2021; Jun et al., 2021), it has yet to be fully demonstrated
at the firm level whether enterprises’ business model innovation has
benefitted from the application of digital platforms (see Table 1). As
noted by both Truant, Broccardo, and Dana (2021) and Papadopoulos
et al. (2020), when facing business challenges, SMEs need to innovate
and orient their business models to digital platforms to create greater
value.
We propose here that digital platforms can promote SMEs’ business
model innovation along the value chain, and we investigate four un­
derpinnings to demonstrate this positive relationship, specifically: (i)
new technologies and equipment, (ii) new capabilities, (iii) new part­
nerships, and (iv) new processes. First, digital platforms enable SMEs to
apply new technologies (e.g., artificial intelligence, big data, cloud
computing, and industrial robotics) and to build new connections with
existing equipment (e.g., industrial internet platforms) for achieving
business model innovation (Cenamor et al., 2019; Li, Qiu, Sha, Dou, &
Li, 2020; Liu, Soroka, Han, Jian, & Tang, 2020; Warner & Wäger, 2019).
These new technologies and equipment help SMEs develop their tech­
nology advantages and redesign their value creation activities to pro­
mote their business model innovation efficiently (Thomson, Kamalaldin,
Sjödin, & Parida, 2021).
Second, digital platforms enable SMEs to promote their business
model innovation in terms of the learning process by training employees
on how to obtain new knowledge and by establishing new human-
machine interaction capabilities (Li et al., 2020). Further, digital plat­
forms can allow SMEs to build their platform utilization capabilities,
technical capabilities, and misalignment capabilities at the firm level
(Khanagha et al., 2018; Li et al., 2018; Moeen & Mitchell, 2020). Ac­
cording to the dynamic capability view, SMEs can use new capabilities
to reconfigure their existing business models well by sensing and seizing
new opportunities, as well as by hampering various threats (Helfat &
Martin, 2014; Sengupta et al., 2021; Warner & Wäger, 2019).
Third, digital platforms can provide opportunities for SMEs to pro­
mote business model innovation by allowing them to cooperate easily
with new partners. As end users of a digital platform, SMEs can combine
physical and cyber components in manufacturing systems and establish
a flexible supply chain based on sensors and actuators, leading to the
redesign of these firms’ business models (Menon, Kärkkäinen, & Wuest,
2019; Wang, Xu, Zhang, Bao, & Zhong, 2020). By both integrating
traditional internal resources and leveraging external resources, SMEs
can communicate with external partners in their collaboration networks
more effectively, reflecting business model innovation that is driven by
the digital platforms (Cenamor et al., 2019; Hilmersson & Hilmersson,
2020; Jun et al., 2021).
Fourth, digital platforms can facilitate SMEs’ business model inno­
vation via new operational processes. Enterprises that adopt digital
platforms are likely to adjust their business processes to meet the needs
of internal and external stakeholders (Pauli, Fielt, & Matzner, 2021;
Warner & Wäger, 2019). For example, a digital advertising platform
allows SMEs to redesign their business processes and drive more inno­
vative business models by adding an automated business model for their
lower-end customers while simultaneously paying more attention to
diversifying their traditional business models for their premium cus­
tomers (Cozzolino et al., 2021).
Therefore, based on the above arguments, we propose the following
hypothesis:
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International Journal of Information Management 65 (2022) 102513
Hypothesis 1. (H1): SMEs that adopt digital platforms are more likely
to realize business model innovation than SMEs that do not adopt digital
platforms.
2.2. Digital platform and capability reconfiguration
Capability reconfiguration is a mechanism that enables firms to
overcome cognitive and operational impediments, bridge capability
gaps, and facilitate continuous evolution in dynamic environments
(Griod & Whittington, 2017). Based on prior studies (Hu et al., 2021;
Lavie, 2006; Martins et al., 2015), we identify two forms of capability
reconfiguration: evolutionary capability reconfiguration, and substitu­
tional capability reconfiguration.
Evolutionary capability reconfiguration is defined as “new in­
tuitions, knowledge, and ideas that are subject to variation-retention-
replication-selection cycles and result in modified routines” (Lavie,
2006, p. 158). Based on the theory of evolution, “genetic drift,” or
“stochastic effects on allele-frequency change due to random sampling
from the parental generation” (Hansen, 2017, p. 8), arises from variation
through random mutations, with the most beneficial mutations
remaining to drive evolutionary change; this process is known as natural
selection (Blount, Lenski, & Losos, 2018; Bruderer & Singh, 1996; Kim,
Bae, & Yang, 2014). Some studies have adopted the evolutionary
perspective to explain how organizational capabilities arise and develop
(Riviere, Bass, & Andersson, 2021; Wilden, Devinney, & Dowling, 2016;
Zeng & Mackay, 2019).
Following such studies, we propose that digital platforms affect the
evolutionary capability reconfiguration of SMEs through genetic, vari­
ation, and selection processes (see Fig. A1). First, although it is costly for
SMEs to change their routines because they are constrained by inherent
capabilities (Pauli et al., 2021; Xu & Wang, 2019), they can reconfigure
their capabilities by embracing some changes brought about by the use
of digital platforms, which can provide them with a potential source to
obtain a competitive advantage (Li et al., 2018; Teece, 2018; Warner &
Wäger, 2019). SMEs can also promote some existing capability recon­
figurations through the genetic process by applying digital platforms.
Those “genes” that carry digital capabilities are passed to the following
variation process. Second, digital platforms enable SMEs to reconfigure
the emerging capabilities that arise through random mutations. As
digital platforms evolve, the degree and complexity of SMEs’ techno­
logical variation increase exponentially, even with some unpredictable
mutations (Mei et al., 2021). Third, limited by resources and costs, SMEs
will only select capabilities that are appropriate for them when adopting
digital platforms. SMEs can benefit from some technology-related ca­
pabilities (e.g., higher processing capability) and relationship-driven
capabilities (e.g., supporting future business needs) that are estab­
lished by the interaction of digital platforms and SMEs’ operational
processes, which can contribute to reconfiguring SMEs’ inherent capa­
bilities in the selection process (Cozzolino et al., 2021; Rai & Tang,
2010; Schreieck et al., 2021; Sedera et al., 2016; Sengupta et al., 2021).
Overall, then, digital platforms can help SMEs establish their
evolutionary capability reconfiguration during the entire evolutionary
process. Thus, we propose:
Hypothesis 2a. (H2a): The adoption of digital platforms can help
SMEs promote their evolutionary capability reconfiguration.
Moreover, capability reconfiguration is also used to escape unfa­
vorable path dependencies beyond maintaining evolutionary fitness
(Berends et al., 2016; Teece, 2007; Zhou, Zhou, Feng, & Jiang, 2019). As
any outdated capability configuration is not suitable for an enterprise to
keep its competitive edge, new capabilities are required to replace those
that impede the value creation process, but, of course, not any that
duplicate the components needed for their new business model
(Bouncken et al., 2021; Lavie, 2006). Firms’ business model innovation
may begin by introducing the completely new digitally supported ac­
tivities, which can then be strengthened through the use of digital
X. Xie et al.
platforms (Zott & Amit, 2017).
In terms of business, substitutional capability reconfiguration refers
to firms that, while facing technological changes, use new capabilities to
replace obsolete capabilities by retaining existing capabilities
completely (i.e., doing more), discarding current capabilities (i.e., doing
less), or acquiring new capabilities (i.e., doing something new)
(Gatignon, Tushman, Smith, & Anderson, 2002; Karim & Capron, 2016;
Lavie, 2006). For example, a digital platform can provide SMEs oppor­
tunities to maintain alliance capabilities while simultaneously helping
them discard inefficient communication capabilities (see Fig. A2).
Therefore, SMEs and their stakeholders can efficiently obtain more
useful information to exchange with each other (Helfat & Raubitschek,
2018; McIntyre & Srinivasan, 2017; Naudé, Zaefarian, Tavani, Neghabi,
& Zaefarian, 2014). By combining conventional alliances and digital
communication capabilities, SMEs can effectively reconfigure tradi­
tional business-to-business (B2B) capabilities (Abdallah et al., 2021;
Karhu et al., 2018; Wang & Miller, 2020; Zhang et al., 2021).
Overall, SMEs can use substitutional capability reconfiguration to
adjust incumbent capabilities and to establish new capabilities. Thus, we
propose:
Hypothesis 2b. (H2b): The adoption of digital platforms can help
SMEs promote their substitutional capability reconfiguration.
2.3. The mediating effects of capability reconfiguration
Some scholars have argued that examining companies’ dynamic
capabilities provides a new perspective for understanding how firms
successfully apply digital platforms (Helfat & Martin, 2014; Schreieck
et al., 2021; Tan, Pan, Lu, & Huang, 2015). For enterprises, business
model innovation is critical for achieving sustained value creation,
accomplished by identifying, experimenting, and exploiting firms’ ca­
pabilities (Achtenhagen et al., 2013; Teece, 2018). The dynamic capa­
bility view provides a theoretical lens with which to explore the different
forms of capability reconfiguration within the value creation process
(Helfat & Raubitschek, 2018; Karim & Capron, 2016; Ovuakporie et al.,
2021; Teece, 2018). While dynamic capability shows whether the
incumbent configuration is influenced by a firm’s capabilities, capability
reconfiguration indicates how a firm’s capabilities have changed (Lavie,
2006).
From this perspective, capability reconfiguration, as a dynamic
capability, reflects the internal processes of repairing and promoting a
firm’s incumbent value creation activities under different cognitive
processes (Bouncken et al., 2021; Lavie, 2006), in which evolutionary
capability reconfiguration and substitutional capability reconfiguration
lead to varying background mechanisms between digital platforms and
SMEs’ business model innovation. Thus, for this investigation, we adopt
two major processes discussed in the cognitive psychology literature
(Bouncken et al., 2021; Gentner, 1983; Martins et al., 2015; Wisniewski,
1997): analogical reasoning, and conceptual combination. We use these
two cognitive processes to examine the mediating roles of evolutionary
capability reconfiguration and substitutional capability reconfiguration
in the relationship between digital platforms and business model inno­
vation of SMEs.
Evolutionary capability reconfiguration allows firms to adjust the
method of value creation after applying digital platforms through
analogical reasoning—a process that is defined as the “application of
structured knowledge from a familiar domain to a novel domain”
(Berends et al., 2016, p. 106). As SMEs’ business model innovation is not
quickly achieved, but rather, found through a long evolutionary process
of selection and adaptation ex post, digital platforms enable SMEs to
take their existing capabilities into new business scenarios and identify
differences and similarities between their current and previous business
situations (Bohnsack, Pinkse, & Kolk, 2014; Chesbrough, 2010; Muhic &
4
International Journal of Information Management 65 (2022) 102513
Bengtsson, 2019). For example, some SMEs on the COSMOPlat platform
(an industrial internet platform operated by the Haier Group in China)
have tried to accelerate their business model innovation via this digital
platform (Chen, Wang, Li, & Hu, 2020).
Moreover, evolutionary capability reconfiguration helps SMEs
establish their digital business models after adopting digital platforms,
allowing the firms’ stakeholders to exchange goods and services, share
information, collaborate, or socialize with little intermediation (John­
son, 2010; Schreieck et al., 2021). For example, some SMEs have
established peer-to-peer coordination to enhance operational efficiency
by adjusting their traditional communications (i.e., one-on-one offline
connections) to digital communications (i.e., multilateral online and
offline connections), which then allows them not only to receive orders
both on- and offline but also to form strategic alliances with their
partners on the platform, yielding improved productivity, communica­
tion, and research and development. This type of change has modified
the traditional B2B model into an effective digital business model. SMEs
that effectively use digital platforms can accelerate the evolution of new
capabilities and leverage their capability reconfiguration to promote
business model innovation through genetic, variation, and selection
processes. Thus, we propose:
Hypothesis 3a. (H3a): Evolutionary capability reconfiguration plays
a mediating role in the relationship between digital platforms and the
business model innovation of SMEs.
Substitutional capability reconfiguration allows firms to substitute
new digital capabilities for existing capabilities through a conceptual
combination process—“a cognitive process through which a focal/target
concept is combined with a modifier/source concept in order to create a
new concept” (Martins et al., 2015, p. 6). Unlike analogical reasoning,
conceptual combination requires the creation of a new concept (Berends
et al., 2016; Martins et al., 2015). By learning wholly new or different
knowledge bases, SMEs can entirely replace old capabilities with
emerging capabilities that are often the base for business model inno­
vation (Gatignon et al., 2002; Ovuakporie et al., 2021). For example, in
some SMEs, employees have been required to learn how to use new
digital platforms via some sort of information and communication
technology (ICT) training in order to enhance employee-driven inno­
vation (Abdallah et al., 2021; Adamides & Karacapilidis, 2018;
Bäckström & Lindberg, 2019).
With frequent data exchange and machine learning, human opera­
tors’ daily tasks have become more efficient while, simultaneously,
SMEs’ digital platforms have become more intelligent in many “smart”
factories (Golan, Cohen, & Singer, 2020; Longo, Nicoletti, & Padovano,
2017). Accordingly, a “smart” operational capability was born by
replacing traditional manual operations. In this case, the business model
with traditional production procedures was changed into a business
model with mass customization (Qi, Mao, Zhang, & Guo, 2020). Thus,
the SMEs that have undergone this process have been able to develop
new business model innovation under the mechanism of substitutional
capability reconfiguration.
We argue that SMEs can use evolutionary capability reconfiguration
to update their existing capabilities, which then allows them to be able
to respond to changing business requirements within the framework of
analogical reasoning (Khanagha et al., 2018; Moeen & Mitchell, 2020;
Warner & Wäger, 2019). Furthermore, SMEs can use substitutional
capability reconfiguration to replace obsolete capabilities and to
establish new capabilities within the framework of conceptual combi­
nation (Bohnsack et al., 2014; Zhou et al., 2019). Therefore, we propose:
Hypothesis 3b. (H3b): Substitutional capability reconfiguration plays
a mediating role in the relationship between digital platforms and the
business model innovation of SMEs.
X. Xie et al. International Journal of Information Management 65 (2022) 102513

Table 2 Table 3
Sample characteristics. Construct measurement.
Variables Categories Frequency Percent Constructs Item description Factor
(%) loading

Firm size < 20 employees 4 1.2 Digital platforms (Sedera et al., 2016; Tortorella, Vergara, Garza-Reyes, &
20–300 employees 173 53.2 Sawhney, 2020) (Cronbach’s α = 0.903; CR = 0.904; AVE
301–1000 employees 148 45.5 = 0.702)
Average annual < 3 million yuan 32 9.8 DP1. Your company connects a digital 0.821
sales 3–20 million yuan 127 39.1 platform to devices for the exchange of
20–400 million yuan 132 40.6 data, which runs smoothly on the digital
> 400 million yuan 34 10.5 platform.
Firm age < 3 years 24 7.4 DP2. Your company uses digital platforms 0.882
3–5 years 65 20.0 for multiple equipment management
6–10 years 78 24.0 processes, such as equipment energy
11–15 years 76 23.4 consumption optimization, equipment
> 15 years 82 25.2 failure treatment, predictive equipment
Firm ownership State-owned enterprise (SOEs) 46 14.2 maintenance, etc.
Private enterprises (PEs) 240 73.8 DP3. Your company uses a digital platform 0.811
Collectively run enterprises 11 3.4 to supplement existing business processes
(CREs) and expand business opportunities, such as
Foreign-invested enterprises 28 8.6 user services, marketing management,
(FIEs) supply chain management, and other
processes for dynamic business
requirements.
3. Methodology DP4. Your company uses a digital platform 0.835
to mine and apply big data to seek out
business opportunities.
3.1. Data source Evolutionary capability (Gatignon et al., 2002) (Cronbach’s α = 0.859; CR =
reconfiguration 0.862; AVE = 0.676)
In the last two decades, China has experienced rapid digital devel­ ECR1. Your company makes simple 0.765
opment and has become a critical manufacturing base for some digital adjustments to existing capabilities and
practices.
industries (Song et al., 2021; Wang, Teo, & Janssen, 2021). Utilizing
ECR2. Your company improves existing 0.846
increasing digital resources, many digital platforms have been estab­ technology to promote innovation.
lished for Chinese SMEs, such as industrial internet platforms (e.g., ECR3. Your company uses existing 0.852
COSMOPlat), thereby contributing to China’s digital growth (Mei et al., knowledge to seek out new solutions
2019). Thus, in this study, to capture the relationship between digital actively.
Substitutional capability (Gatignon et al., 2002) (Cronbach’s α = 0.897; CR =
platforms and SMEs’ business model innovation, we used the survey reconfiguration 0.897; AVE = 0.687)
method to collect data from manufacturing firms in China. SCR1. Your company explores new 0.829
To pursue our research questions, we sent surveys to SMEs that use or concepts or new fundamental principles.
have previously used digital platforms in their operations or manage­ SCR2. Your company develops new skills 0.868
and carries out a great deal of retraining.
ment processes. To ensure the suitability of our sample, we established
SCR3. Your company learns from 0.782
two necessary conditions: (i) the firms must be Chinese manufacturing completely new or different knowledge
SMEs (i.e., firms based in China with fewer than 1000 employees), and bases.
(ii) the firms must be using or have used digital platforms in the last SCR4. Your company adopts new methods 0.833
three years. The individual respondents included middle-level man­ and procedures for new business
development.
agers, senior-level managers, and project managers familiar with their Business model (Clauss, 2017) (Cronbach’s α = 0.888; CR = 0.891; AVE =
enterprises’ digitalization strategies. innovation 0.673)
We initially conducted a pretest by sending the survey to 30 man­ BMI1. Your company constantly reflects 0.872
agers. After analyzing their responses, we adjusted the content and on which new competencies need to be
established in order to adapt to changing
language of the survey items so that our final questionnaire was as
market requirements, and your employees
simple and straightforward as possible. We then distributed 700 ques­ constantly receive training in order to
tionnaires randomly among manufacturing SMEs in China, and we develop new competencies.
received 423 questionnaires back. After deleting 76 observations that BMI2. Your company keeps its technical 0.895
did not meet the two conditions described above, our final sample resources up-to-date and regularly utilizes
new technical opportunities in order to
contained 325 observations; thus, we had an effective response rate of extend your portfolio of products and
60.43. services.
Table 2 shows the characteristics of our sample. Regarding firm size, BMI3. Your company searches for new 0.742
53.2% of the SMEs had ‘20–300 employees’, while 45.5% had collaboration partners and regularly
utilizes opportunities by integrating new
‘301–1000 employees’. Regarding average annual sales, 51.1% of the
partners into your processes.
SMEs were in the category of ‘more than 20 million yuan’. In terms of BMI4. Your company improves internal 0.761
firm age, 72.6% of the SMEs had been established more than five years processes significantly, including its
prior to the survey. Moreover, 14.2% of the SMEs in our sample were business management process and its
state-owned enterprises (SOEs), 73.8% were private enterprises (PEs), product manufacturing process.

3.4% were collectively run enterprises (CREs), and 8.6% were foreign-
invested enterprises (FIEs).
3.2. Measures
We used traditional scales to measure our constructs. To ensure the
translation accuracy of the questionnaire, all statements were translated
Note. CR denotes composite reliability; AVE denotes average variance extracted.
from English into Chinese by a professional translator, and then they
were translated back into English by another translator; this translation
was then verified by three Ph.D. students. Following prior literature
(Lytras, Visvizi, Chopdar, Sarirete, & Alhalabi, 2021; Xie & Wang,
2020), all items were measured on a seven-point, Likert-type scale, with

5
X. Xie et al.
Table 4
Chi-square results and GOF indices for the measures.
Index χ2 /df RMSEA CFI IFI TLI GFI AGFI
Model GOF 1.925 0.053 0.977 0.977 0.972 0.930 0.903
Note. χ 2: chi-square, df: degrees of freedom, χ 2/df: normed chi-square, GFI:
goodness-of-fit index, AGFI: adjust goodness-of-fit index, CFI: comparative fit
index, NFI: normed fit index, RMSEA: root mean square error of approximation.
a range from ‘strongly disagree’ to ‘strongly agree’ (see Table 3).
Digital platform was used to assess the degree of application of each
firm’s digital platform(s). Following the social-technical perspective,
digital platforms involve the integration of information, computing, and
connectivity, and they reflect the associations between firms’ digital
platforms and organizational processes (De Reuver et al., 2018; Gha­
zawneh & Henfridsson, 2015; Sedera et al., 2016). Digital platforms
have changed with the development of big data, enabling companies to
strengthen their organizational learning capabilities by generating,
exchanging, and analyzing large amounts of data (Akter, Hossain, Lu, &
Shams, 2021; Tortorella et al., 2020). Using scales developed by Sedera
et al. (2016) and Tortorella et al. (2020), the SMEs’ digital platforms
were measured using four items: data exchange, equipment manage­
ment, business management, and big data application.
Evolutionary capability reconfiguration was used to measure the
degree of the evolution of existing capabilities of the firms (Lavie, 2006;
Ovuakporie et al., 2021). Unlike substitutional capability reconfigura­
tion, evolutionary capability reconfiguration is intended to capture the
growth of existing capabilities. Following the theory of evolution, SMEs
tend to reconfigure their capabilities through the genetic, variation, and
selection processes (Blount et al., 2018; Bruderer & Singh, 1996; Kim
et al., 2014). Thus, we adapted the classical scale developed by Gatignon
et al. (2002) to measure evolutionary capability reconfiguration using
three items: adjusting existing capabilities, improving existing technol­
ogy, and using existing knowledge to seek new solutions actively; these
three items represent the genetic, variation, and selection processes of a
firm’s whole evolutionary cycle.
Substitutional capability reconfiguration was used to capture the
degree to which existing capabilities at the SMEs were replaced by new
ones via emerging digital platforms (Lavie, 2006; Ovuakporie et al.,
2021). Substitution is the other form of capability reconfiguration that
does not overlap with evolution, leading some capabilities to be replaced
entirely by new capabilities (Lavie, 2006). According to Gatignon et al.
(2002), firms can use substitution as a way to reconfigure capabilities
that impede their business processes by obsolescing and overturning
existing competencies, skills, or knowledge. In this study, substitutional
capability reconfiguration was measured by four items adapted from
Gatignon et al. (2002): exploring new fundamental principles, devel­
oping new skills, learning different knowledge bases, and adopting new
methods and procedures.
Business model innovation was used to assess how the SMEs create
new value based on available resources and capabilities (Achtenhagen
et al., 2013). Value creation, as the starting point for business model
innovation, is also an essential dimension for SMEs to renew their
business models along the value chain (Clauss, 2017; Hanafizadeh et al.,
2021). We used a four-item scale adapted from Clauss (2017) to measure
SMEs’ business model innovation: adapting to market requirements,
extending product and service portfolios, searching for new collabora­
tions, and improving internal processes.
Moreover, to capture the specific effect of how digital platforms
affect SMEs’ business model innovation, we included five firm-level
control variables in our model: firm age, average annual sales, firm
size, firm ownership, and firm platform usage time. First, firm age was
measured by the number of years since the establishment of the SME
(Chen, Tsou, & Ching, 2011). Second, average annual sales was
measured by analyzing the amount of the SME’s annual sales, averaged
over three years (Bianchi, Murtinu, & Scalera, 2019; Luo, Yang, Luo, &
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International Journal of Information Management 65 (2022) 102513
Liu, 2016). Third, firm size was measured by the number of firm em­
ployees using a categorical variable (Chi, Wang, Lu, & George, 2018; Rai
& Tang, 2010; Ray, Muhanna, & Barney, 2005). Fourth, following Xie,
Wang, and Sendra (2021), we controlled for the type of firm ownership
by using a categorical variable (i.e., SOE, PE, CRE, or FIE). Finally, we
also controlled for the firm platform usage time by inputting the number
of years that each SME had used a digital platform (if less than one year,
it was counted as one year).
3.3. Reliability and validity
As shown in Table 3, both the Cronbach’s alpha and composite
reliability (CR) of each construct were higher than 0.8, indicating good
reliability (Clark & Watson, 1995; Hair, Black, Babin, Anderson, &
Tatham, 2010). In terms of validity testing, we first adopted existing
scales to help increase our content validity, and we then performed a
confirmatory factor analysis (CFA) to test the constructs’ convergent
validity and discriminant validity. The results of this work, which are
shown in Table 4, indicated that the χ 2/df was 1.925 (less than 3); the
RMSEA was 0.053 (less than 0.08); and the CFI, IFI, TLI, GFI, and AGFI
were 0.977, 0.977, 0.925, 0.930, and 0.903, respectively (all greater
than 0.9). Therefore, the fit indices for the measurement model sug­
gested a good model fit (Browne & Cudeck, 1992). Moreover, each
construct’s average variance extracted (AVE) was greater than 0.5,
implying good convergent validity. We also tested the discriminant
validity of the constructs. As shown in Table 5, we found that the square
root of the AVE for each construct was higher than its correlation with
other constructs, which indicates acceptable discriminant validity
(Fornell & Larcker, 1981).
3.4. Common method bias
To decrease the potential of common method bias (CMB), first, we
adjusted the order of variables on the questionnaire to reduce the re­
spondents’ predictions, and second, we told the respondents that their
answers would not be judged. Furthermore, due to the homology of the
data, we used two procedures to test for potential CMB. First, we con­
ducted Harman’s one-factor test on the CFA result (Harman, 1976).
Applying this test, we found that the first factor accounted for 27% of the
covariance, which is lower than the threshold of 40% for a single factor.
Second, following Mossholder, Kemery, and Wesolowski (1998), we
compared two models: (i) all indicators loaded onto one factor (χ 2/df =
5.733; CFI = 0.889; RMSEA = 0.121), and (ii) each indicator loaded onto
its own latent factor (χ 2/df = 1.925; CFI = 0.977; RMSEA = 0.053).
Here, the second model was found to be significantly superior to the first
model. Thus, taken together, the two results demonstrated that CMB did
not affect our model significantly.
4. Results
4.1. Preliminary analyses
Table 5 presents the means, deviations, and correlations of all the
variables. As predicted, we found that digital platforms and the two
forms of capability reconfiguration were positively correlated with
business model innovation (p < 0.01). We also found that digital plat­
forms were positively correlated with both evolutionary capability
reconfiguration and substitutional capability reconfiguration
(p < 0.01).
4.2. Hypotheses testing
The major findings of this study are presented in Table 6. The results
of Model 2 showed that digital platforms have a positive impact on
SMEs’ business model innovation (β = 0.679, p < 0.001), thus sup­
porting H1. This finding reveals that digital platforms can help SMEs
X. Xie et al. International Journal of Information Management 65 (2022) 102513

Table 5
Mean, standard deviations, and correlations.
Variables Mean S.D. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

1. Firm size 2.443 0.522 1.000

2. Annual sales 2.517 0.811 0.661** 1.000
3. Firm age 3.391 1.261 0.261** 0.369** 1.000
4. SOEs 0.142 0.349 0.163** 0.024 0.168** 1.000
5. PEs 0.738 0.440 -0.233** -0.070 -0.177** -0.682** 1.000
6. CREs 0.034 0.181 -0.029 -0.077 -0.045 -0.076 -0.315** 1.000
7. FIEs 0.086 0.281 0.181** 0.129* 0.096 -0.125* -0.516** -0.057 1.000
8. Platform usage 2.246 1.315 0.052 0.045 0.089 0.011 0.000 0.004 -0.016 1.000
time
9. Digital platforms 4.128 1.318 0.191** 0.241** 0.249** -0.038 -0.070 0.037 0.133* 0.126* 0.838
10. Evolutionary 4.724 1.278 0.116* 0.181** 0.227** -0.062 0.019 -0.062 0.086 0.053 0.679** 0.822
capability
reconfiguration
11. Substitutional 4.561 1.270 0.169** 0.205** 0.242** -0.019 -0.035 -0.009 0.085 0.017 0.717** 0.817** 0.829
capability
reconfiguration
12. Business model 4.558 1.300 0.170** 0.231** 0.270** -0.028 -0.038 -0.015 0.105 0.054 0.712** 0.797** 0.766** 0.673
innovation

Note. **p < 0.01; *p < 0.05. N = 325; Square root of AVE shown on the diagonal in bold. Off-diagonal elements are the correlations among constructs and control
variables.

Table 6
Regression results.
Variables Business model innovation Evolutionary capability Substitutional capability
reconfiguration reconfiguration

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9

Digital platforms 0.679*** 0.335*** 0.271*** 0.219*** 0.652*** 0.684***

(0.041) (0.046) (0.047) (0.046) (0.042) (0.040)
Evolutionary capability 0.527*** 0.282***
reconfiguration (0.046) (0.056)
Substitutional capability 0.596*** 0.403***
reconfiguration (0.047) (0.060)
Firm size 0.080 0.000 0.030 -0.044 -0.013 0.019 -0.058 0.154 0.073
(0.183) (0.134) (0.113) (0.110) (0.106) (0.182) (0.138) (0.181) (0.130)
Annual sales 0.195 0.049 0.044 0.056 0.051 0.149 0.009 0.135 -0.012
(0.120) (0.088) (0.074) (0.072) (0.070) (0.120) (0.091) (0.119) (0.086)
Firm age 0.228*** 0.097** 0.058 0.055 0.047 0.200** 0.074 0.203** 0.071
(0.060) (0.045) (0.038) (0.037) (0.036) (0.060) (0.046) (0.060) (0.043)
Platform usage time 0.028 -0.041 -0.023 0.005 0.000 0.032 -0.035 -0.007 -0.077**
(0.053) (0.039) (0.033) (0.032) (0.031) (0.053) (0.040) (0.052) (0.038)
Ownership dummies (3) Added Added Added Added Added Added Add Added Added
Constant 3.049*** 1.419*** 0.346 0.499** 0.221 3.601*** 2.037*** 3.188*** 1.545***
(0.367) (0.286) (0.259) (0.245) (0.243) (0.366) (0.294) (0.363) (0.278)
R2 0.102 0.520 0.661 0.680 0.704 0.077 0.476 0.081 0.527
Adjusted R2 0.082 0.520 0.651 0.671 0.695 0.057 0.463 0.061 0.515
F-value 5.156 42.874 68.290 74.541 74.731 3.780 35.906 3.993 44.028

Note. ***p < 0.001; **p < 0.01; *p < 0.05. Standard errors in parentheses. N = 325. Coefficient estimates of ownership dummies were not reported. Ownership
dummies were for 3 types: SOEs, CREs, and FIEs.

Table 7
Bootstrap analysis.
Mediator Indirect effects Standardized indirect effects

Effect Boot SE LLCI ULCI Effect Boot SE LLCI ULCI

Total 0.460 0.045 0.372 0.548 0.466 0.043 0.382 0.550

ECR 0.184 0.055 0.085 0.300 0.186 0.055 0.087 0.302
SCR 0.276 0.064 0.142 0.391 0.280 0.065 0.143 0.395

Note. N = 325. Bootstrap resample = 5000; Boot SE = Standard error under bootstrap analysis; CI = Confidence interval; LL = lower limit; UL = upper limit; Estimates
were calculated using the SPSS Process. ECR = Evolutionary capability reconfiguration, SCR = Substitutional capability reconfiguration.

promote their business model innovation, as they allow firms to update
their equipment, increase their employees’ training, build their part­
nerships, and improve their operational processes (Bäckström & Lind­
berg, 2019; Clauss, 2017).
Moreover, the results of Models 7 and 9 demonstrated that digital
platforms have positive impacts on both evolutionary capability
reconfiguration (β = 0.652, p < 0.001) and substitutional capability
reconfiguration (β = 0.684, p < 0.001), thereby supporting H2a and
H2b. These findings reveal that SMEs can adopt digital platforms to
reconfigure their existing capabilities by adjusting the variety of capa­
bilities, selecting suitable new capabilities, and keeping useful extant
capabilities (Lavie, 2006; Moeen & Mitchell, 2020). Alternatively, SMEs

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X. Xie et al. International Journal of Information Management 65 (2022) 102513

Table 8
Regression results for robustness check.
Variables Business model innovation Evolutionary capability Substitutional capability
reconfiguration reconfiguration

Model 10 Model 11 Model 12 Model 13 Model 14 Model 15

Digital platforms (dummy) 2.105*** 1.663*** 1.583*** 1.540*** 1.394*** (0.123) 1.495*** (0.117)
(0.087) (0.092) (0.094) (0.094)
Evolutionary capability 0.317*** 0.159**
reconfiguration (0.036) (0.050)
Substitutional capability 0.349*** 0.230***
reconfiguration (0.037) (0.052)
Firm size 0.029 (0.109) 0.042 (0.098) -0.003 (0.096) 0.014 (0.095) -0.041 (0.154) 0.091 (0.147)
Annual sales 0.081 (0.072) 0.062 (0.064) 0.067 (0.063) 0.062 (0.062) 0.061 (0.101) 0.040 (0.097)
Firm age 0.009 (0.037) -0.015 (0.033) -0.016 (0.033) -0.020 (0.032) 0.079 (0.052) 0.073 (0.050)
Platform usage time 0.075** 0.071 (0.028) 0.084 (0.028) 0.079 (0.028) 0.013 (0.044) -0.026 (0.043)
(0.032)
Ownership dummies (3) Added Added Added Added Added Added
Constant 2.613*** 1.428*** 1.447*** 1.251*** 3.742*** (0.309) 3.339*** (0.296)
(0.219) (0.237) (0.229) (0.234)
R2 0.691 0.753 0.760 0.767 0.345 0.393
Adjusted R2 0.683 0.746 0.753 0.760 0.329 0.378
F-value 88.328 106.597 110.652 103.500 20.842 25.615

Note. ***p < 0.001; **p < 0.01; *p < 0.05. N = 325. Standard errors in parentheses. Coefficient estimates of ownership dummies were not reported. Ownership
dummies were for 3 types: SOEs, CREs, and FIEs. New measurement approach of Digital platform (0 = “low-level digital platform adoption”, and 1 = “high-level digital
platform adoption”).

Table 9
Bootstrap analysis for robustness check.
Mediator Indirect effects Standardized indirect effects

Effect Boot SE LLCI ULCI Effect Boot SE LLCI ULCI

Total 0.562 0.081 0.422 0.735 0.426 0.055 0.330 0.541

ECR 0.236 0.077 0.093 0.397 0.179 0.058 0.072 0.297
SCR 0.326 0.089 0.161 0.512 0.247 0.065 0.125 0.383

Note. N = 325. Bootstrap resample = 5000; Boot SE = Standard error under bootstrap analysis; CI = Confidence interval; LL = lower limit; UL = upper limit; Estimates
were calculated using the SPSS Process. ECR = Evolutionary capability reconfiguration, SCR = Substitutional capability reconfiguration. New measurement approach
of Digital platform (0 = “low-level digital platform adoption”, and 1 = “high-level digital platform adoption”).

Fig. 1. The theoretical model.

can replace their old capability configurations by developing new skills,
learning completely new knowledge, and undertaking new methods
(Gatignon et al., 2002).
Next, we used Baron and Kenny’s causal steps approach to test the
mediating effect. We found that the first and second steps were sup­
ported in Models 2 and 9. The results of the third step in Model 3
demonstrated that digital platforms (β = 0.335, p < 0.001) and evolu­
tionary capability reconfiguration (β = 0.527, p < 0.001) promote
SMEs’ business model innovation, which indicates that evolutionary
capability reconfiguration plays a mediating role in the relationship
between digital platforms and business model innovation. Thus, H3a is
supported. Similarly, the results of Model 4 showed that digital
platforms (β = 0.271, p < 0.001) and substitutional capability reconfi­
guration (β = 0.596, p < 0.001) have positive impacts on business
model innovation, thereby providing statistically significant support for
H3b.
In addition, we used the bootstrapping method to test the mediating
effect further, which has also been done in some classical studies
(Nadkarni & Barr, 2008; Ndofor, Sirmon, & He, 2015). Following the
method developed by Hayes (2018), we used SPSS PROCESS to further
verify the mediating effects of evolutionary capability reconfiguration
and substitutional capability reconfiguration on the relationship be­
tween digital platforms and business model innovation. As shown in
Table 7, we found that the two forms of capability reconfiguration

8
X. Xie et al.
mediate the effect of digital platforms on SMEs’ business model inno­
vation; both hypothesized paths were found to be significant: (i) the
indirect effect of evolutionary capability reconfiguration was 0.184
(p < 0.05, confidence interval [CI] = [0.085, 0.300]), and (ii) the in­
direct effect of substitutional capability reconfiguration was 0.276
(p < 0.05, 95% CI = [0.142, 0.391]). Additionally, Table 7 shows that
the total indirect effect was 0.460 (p < 0.05, CI = [0.372, 0.548]). Thus,
the bootstrapping results also provided strong support for H3a and H3b.
4.3. Robustness test
We undertook an additional robustness check for our model to
further verify our main results. Following Xie and Wu (2021), we used
an alternative measurement of the independent variable. By taking
digital platforms as a dummy variable according to its median, we
divided the adoption of digital platforms by SMEs into two levels:
low-level digital platform adoption (dummy = 0), and high-level digital
platform adoption (dummy = 1). The robustness results, shown in Ta­
bles 8 and 9, demonstrated that H1, H2a, H2b, H3a, and H3b are all
supported. Therefore, the results of this robustness check were found to
be consistent with the results shown in Tables 6 and 7, thus strongly
supporting our main results.
5. Discussion
Digitalization has already pervaded many industries (Cozzolino
et al., 2021; Teece, 2018). Like other types of firms, SMEs face the
challenge of whether and how to use digital platforms for their business
activities along with the traditional value chain to improve older busi­
ness models (Bouncken et al., 2021; Papadopoulos et al., 2020). Yet,
answers to how digital platforms might improve SMEs’ business model
innovation have not yet been addressed clearly. Therefore, based on the
dynamic capability theory, we established a theoretical model in this
study to examine how digital platforms affect SMEs’ business model
innovation through capability reconfiguration.
Using survey data from 325 manufacturing firms in China, we find
that digital platforms can promote SMEs’ business model innovation.
This finding reveals that digital platforms can help firms develop value
creation activities (Li et al., 2018; Sengupta et al., 2021; Warner &
Wäger, 2019). According to Huarng (2013) and McDowell et al. (2018),
SMEs’ standard business model includes four components: the starting
point is innovation (i.e., what a business will do), which is linked to both
resources (i.e., how a business will fulfill the innovation) and the market
(i.e., who will become the target customers), and ultimately leads to
value (i.e., why a business survives). In this respect, digital platforms in
the foreseeable future might bring about a valuable opportunity for
firms to evolve from the older, static business model by tightly
combining innovations with resources, markets, and values in such a
complex environment. Therefore, it can be seen that SMEs could adopt
digital platforms as one quick way to innovate their business model.
Second, we find that digital platforms have a positive impact on the
dual capability reconfiguration process. More specifically, the findings
reveal that those SMEs that adopt digital platforms can use the evolu­
tionary capability reconfiguration to update their existing capabilities
under the three evolutionary processes (genetic, variation, and selec­
tion), and they can also use the substitutional capability reconfiguration
to replace obsolete capabilities with new capabilities. Overall, our study
is different from prior research that has stressed how organizational
capabilities come about and is developed (Riviere et al., 2021; Wilden
et al., 2016; Zeng & Mackay, 2019); our results provide us with a better
understanding of the relationship between digital platforms and capa­
bility reconfiguration.
Third, we find that SMEs can benefit from digital platforms by
quickly promoting more innovative business models through evolu­
tionary and substitutional capability reconfigurations. On the one hand,
following analogical reasoning (Berends et al., 2016), SMEs adopting
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International Journal of Information Management 65 (2022) 102513
digital platforms can update their existing capabilities to evolve their
static business model in new business scenarios. Hence, evolutionary
capability reconfiguration can provide evolving capabilities for SMEs to
link the adopted digital platforms with their business model innovation
within the dynamic environment (Huarng, 2013). On the other hand,
following the conceptual combination (Martins et al., 2015), SMEs can
utilize the substitutional capability reconfiguration to replace old ca­
pabilities with emerging capabilities. Prior work has found that firms
that engage in learning and pursue radical innovation can maintain their
competitive edge (Baker & Sinkula, 2002; Roth et al., 2018). Hence, as
one feasible way to have firms continue to learn and embrace radical
innovation activities, substitutional capability reconfiguration allows
SMEs to make use of digital platforms and transform the benefit that
such platforms bring into radical business model innovation (Gatignon
et al., 2002; Ovuakporie et al., 2021).
5.1. Theoretical contributions and implications
Our research makes three key contributions to the literature. First,
this study contributes to the emerging information management litera­
ture on digital platforms by demonstrating the positive relationship
between digital platforms and firm-level business model innovation.
Although some case studies with a focus on the interaction between
firms and their stakeholders have shown that digital platforms have
allowed firms to establish platform ecosystems(Sengupta et al., 2021;
Pauli et al., 2021), most of this research has examined value creation at
the ecosystem level rather than at the firm level. Furthermore, few
empirical analyses have specifically and clearly concentrated on the
relationship between digital platforms and firms’ business model inno­
vation. Addressing this research gap, our findings reveal that SMEs can
use digital platforms to change their operation and production processes
and new business logics that explain value creation (Jun et al., 2021;
Warner & Wäger, 2019). Overall, this study allows us to see value cre­
ation more as a process than as an outcome; this understanding is sig­
nificant since value creation is the starting point of the whole process of
firms’ business model innovation (Clauss, 2017; Hanafizadeh et al.,
2021). Hence, this investigation supplements the literature on digital
platforms research.
Second, by shedding light on the internal mechanism behind digital
platforms and business model innovation, we extend the dynamic
capability view on how digital platforms affect SMEs’ business model
innovation through capability reconfiguration. In this study, we used
Lavie (2006) classification of capability reconfiguration—divided into
evolutionary capability reconfiguration and substitutional capability
reconfiguration—to clarify an internal mechanism existing between
digital platforms and business model innovation, which, as both Papa­
dopoulos et al. (2020) and Ovuakporie et al. (2021) have noted, is a
significantly under-researched area. Our results indicate that both
evolutionary and substitutional capability reconfiguration mediate the
relationship between digital platforms and SMEs’ business model
innovation. Therefore, this study has responded to the call for further
research on the potential mediating effects of business capabilities in the
context of digital platforms (Cenamor et al., 2019; Li et al., 2018).
Moreover, according to Teece (2007), dynamic capabilities are dis­
aggregated into a capacity that can sense and seize external opportu­
nities and reconfigure internal intangible and tangible assets. Previous
studies utilizing the dynamic capability view stressed which external
antecedents affect firms when building their business models. Yet, these
studies did not open the internal “black box” that exists between digital
platforms and firms’ business model innovation (Bouncken et al., 2021;
Chowhan, 2016; Griod & Whittington, 2017; Sengupta et al., 2021). In
this respect, our findings theoretically bridge digitalization and business
model innovation from the internal perspective of reconfiguration and
expand the boundary of dynamic capabilities.
Third, we established a theoretical framework to understand the
digital transformation process of SMEs. Prior studies mainly emphasized
X. Xie et al.
how large enterprises achieve their digital transformation and discussed
which capabilities they obtain through this process, leaving the issue of
SMEs unexplored (Khanagha et al., 2018; Klein et al., 2020). Likewise,
exactly how dynamic capability might help SMEs develop their sensing,
seizing, and transforming activities in the digital era has not been
examined in prior work (Papadopoulos et al., 2020). Given that SMEs
have unique responses to the adoption of digital platforms, which are
different than those of large enterprises, scholars have called for
exploring digital platforms and their business impacts specifically on
SMEs, such as by creating a new business model (Bouncken et al., 2021;
De Reuver et al., 2018; Dwivedi et al., 2020; Li et al., 2018). Our findings
conceptualize how SMEs use their digital platforms to drive their busi­
ness model innovation through capability reconfiguration, and in this
way, our work adds to the literature on SMEs’ digital transformation
mechanism.
5.2. Implications for practice
From a practical point of view, our research offers new insights for
companies regarding how to use digital platforms effectively by dis­
cussing how SMEs can reconfigure their capabilities and efficiently
achieve business model innovation through the use of digital platforms.
First, according to our results, the use of digital platforms is a positive
solution for SMEs to promote business model innovation. To successfully
update their business models, SMEs should consider which digital
platforms they can embed in their systems and which strategies they
need to adapt to their various production and operation processes (Pauli
et al., 2021; Schreieck et al., 2021). For example, SMEs in the
manufacturing sector might choose digital platforms suited to their
existing products and equipment, such as industrial internet platforms
and intelligent manufacturing information systems, which can connect
them with needed resources and can accelerate their digital trans­
formation in the future.
Second, our findings suggest that SMEs that adopt digital platforms
should make full use of both evolutionary capability reconfiguration and
substitutional capability reconfiguration to refashion their incumbent
capabilities and to establish new digital capabilities so as to facilitate
business model innovation. On the one hand, SMEs should update some
of their existing capabilities, including their employees’ human-
computer capability and their strategic alliances capability, and effi­
ciently use their existing capabilities and infrastructure to achieve
business model innovation (Dana, Gurău, Hoy, Ramadani, & Alexander,
2021). On the other hand, SMEs should discard obsolete capabilities that
are not beneficial to extant production or service processes (e.g.,
one-on-one offline communication), and instead, they acquire new ca­
pabilities related to digitalization (e.g., platform-based cloud computing
and big data analysis capabilities) to achieve a better dynamic capability
configuration (Roth et al., 2018).
Third, our findings also indicate that adopting digital platforms is a
useful way for manufacturing firms in emerging economies to enhance
their different capability reconfigurations and promote business model
innovation (Truant et al., 2021). As Industry 4.0 is currently affecting
many manufacturing firms, the digital revolution is sweeping enter­
prises worldwide (Ibarra et al., 2018). In this vein, companies in
different industries should orient their roles (i.e., platform users,
owners, or developers) to actively use digital platforms to meet their
core requirements (Klein et al., 2020), thereby leading them to achieve
business model innovation.
This research also offers some implications for governments
attempting to develop their emerging digital economies (Jun et al.,
2021). On the one hand, policymakers should fully recognize the
importance of digital platforms for enabling SMEs to promote business
operations and reduce costs (Papadopoulos et al., 2020; Skare & Sor­
iano, 2020). For instance, according to the national “Digital China”
strategy released by China’s central government, local governments
should be implementing policies to promote the digitalization of SMEs in
10
International Journal of Information Management 65 (2022) 102513
their regions (Hao, Guo, & Wu, 2021). Although governments in
different countries and regions have taken some general actions to foster
their digital advantage (Mei et al., 2019), the governments of other
economies could learn from China’s replicable experience to promote
cutting-edge firms in the digital era. On the other hand, governments
could encourage SMEs to utilize digital platforms in their operations by
providing some financial support. For SMEs that are actively adopting
digital platforms, governments could provide these SMEs ex post sub­
sidies to cover some of their input costs. Meanwhile, to encourage more
SMEs to participate more fully in digitalization efforts, governments
could establish bonuses for SMEs that actively use digital platforms.
Furthermore, governments could work with banks to provide SMEs
low-interest or interest-free loans to help the SMEs purchase third-party
digital platforms and digital services.
5.3. Limitations and future research directions
There were three primary limitations of this study. First, we
measured business model innovation using only the value creation
dimension because we were mainly focused on the origin or starting
point of SMEs’ business model. Although value creation is considered
the most important way to update the business model of SMEs, which is
a different situation than for some large enterprises, the process of
business model innovation includes additional dimensions and per­
spectives, such as value proposition and value capture (Achtenhagen
et al., 2013; Bouncken et al., 2021; Clauss, 2017; Schreieck et al., 2021).
Therefore, future research could explore how digital platforms affect the
whole business model innovation process by assessing the differences
between SMEs and large enterprises.
The second limitation of this study was our focus on the firm-level
effect of SMEs from the perspective of the innovation ecosystem.
SMEs, of course, are just one group within a complex innovation
ecosystem with many other members and firm types. Therefore, future
research could consider how SMEs interact with other members within
the innovation ecosystem, such as via firm-firm, firm-university-insti­
tute, firm-intermediary, and firm-user cooperation networks (Xie &
Wang, 2020).
Third, our major results were derived from manufacturing firms in
China, and thus, our findings might be industry- or country-specific
(Truant et al., 2021; Wang et al., 2021). Future researchers might
wish to utilize dynamic panel datasets from other industries, and
perhaps from other emerging economies, as well, in order to expand the
boundaries of the relationships identified in the present study. We
believe that diverse data collection techniques and various types of in­
dustrial data would be useful for future investigations.
6. Conclusion
This research focused on the mechanism of how digital platforms
affect SMEs’ business model innovation by leveraging capability
reconfiguration. Overall, our findings suggest that SMEs can benefit
from the adoption of digital platforms. Our results also reveal that
evolutionary capability reconfiguration enables SMEs to use digital
platforms in value creation activities through the cognitive processes of
analogical reasoning, while substitutional capability reconfiguration
enables SMEs to adjust business model innovation through the cognitive
processes of conceptual combination. On the whole, our findings com­
plement the literature on digital platforms and their business effects by
expanding the boundary of the dynamic capability view. We hope this
study motivates further research to enrich our understanding of this
subject by using other contexts and perspectives ( Fig. 1).
Declaration of Competing Interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
X. Xie et al. International Journal of Information Management 65 (2022) 102513

the work reported in this paper. the Fundamental Research Funds for the Central Universities (Grant
number: 22120220119).
Acknowledgements
Appendix
This research was supported by the National Natural Science Foun­
dation of China (Grant number: 71922016; 71772118), Major Project of See appendix Fig. A1,Fig. A2.
National Social Science Fund of China (Grant number: 20&ZD059), and

Fig. A1. The evolutionary way of capability reconfiguration within the digital platforms.

Fig. A2. The substitutional way of capability configuration within the digital platforms.

11
X. Xie et al. International Journal of Information Management 65 (2022) 102513

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