Business models represent both the connections between key business model components (theory-building approach) as well as transformational tools for addressing change, innovation, and competitive advantage in organizations—especially in times when radical technological changes shake up whole industries [1
]. Therefore, business models serve the purpose of generating new value by envisioning new possibilities as well as by changing, challenging, and even defying existing business models inside wider socio-technical transitions [3
]. Moreover, business models can serve the purpose of facilitating an understanding about the organization by communicating, sharing, measuring, and simulating the business model [5
]. Business model extensions are a specific type of business model innovation, preceded in scale by business model component change and succeeded by the introduction of parallel business models, disrupting the existing business models [6
]. BM extensions have also been researched from the process perspective, where creation, extension, revision, and termination present BM change along its lifecycle [7
]. Similar approaches can be found in the strategic literature, where companies seek to extend the strategy in order to leverage the existing activity system for offering new products or services with a cost advantage [8
]. In order to understand business model extensions as a type of business model innovation, there is a need to define what constitutes a core SME winery activity or a core business. According to Johnson et al. [9
], the core business relies on key resources, key processes, and a profit formula. The vineyards are a key resource in any wine business, both for grape production and for wine tourism. Both indicators can therefore be used to identify a winery core business size.
It has been proven, however, that BM extensions are the most common method of venturing out but also provide below-average profits compared to business model migration to new markets or industries [10
]. There is evidence in the literature that in some cases, BM extensions contribute to the evolution of the core BM in the long run [11
]. However, how the different types of BM extensions impact the core BM has not been researched in the previous literature.
In order to address the aforementioned research gap on the impact of BM extensions on the development of core BM, the present research sets out to research the impact of the three common business model extensions in wineries on the size of core winery business. The three most common winery business model extensions are hospitality and tourism, online sales platforms, as well as a sustainability orientation. Keeping in mind the relevance of business model research for management theory, it is expected that the findings contribute both to further understanding of the business model extension process and the impact that certain business model extension types have on organizational development in terms of the size of the business and its legal form. The increased understanding of how certain business model extension types impact the business size should also help managers navigate the uncharted terrain of venturing out into the previously unknown industries with more deliberation and understanding of the transformation processes involved.
Business models research itself originated in the highly innovative, high-tech industries, later developing through research into the duality of technology and organization, while in recent years it seems to be connected to strategic research [12
]. However, rapidly changing technology and market environments necessitate a business model approach based on continuous innovation and not one-way imitation through competitive strategy [15
]. Businesses are therefore trying to determine and navigate their own direction through experimentation, R&D, and exploration of new technologies and market opportunities, sometimes even pursuing more than one business model at once [18
]. However, for existing businesses already operating on the market, this transitioning to new business models can happen in different modes [20
]. Business model extension can either be in a form of evolutionary business model innovation or an adaptive business model innovation, both identified as relevant by Foss and Saebi [22
]. Regardless of the mode, BM extensions are defined by activities that are new to the firm but already known in the industry/other industries. These BM extensions are being introduced/added to an existing BM, called the core BM of the company.
Wine business model research is a scarcely researched domain, with a modest number of contributions from a handful of authors. However, previous research has defined in detail the three major modes for extending the business model boundaries beyond the existing capabilities and knowledge in the organization. These are wine hospitality and tourism [23
], online shops and platforms [24
], and sustainability [26
The indicators used in the previous literature on wine business innovation and its impact on core winery business are quality, awards, and revenue growth, while experimentation has been identified as the major capability relevant to the evolution of winery BMs [23
]. In this sense, any activity outside of the grape growing and wine production can be suitable for BM experimentation in the wine business. Business models of small wineries focus on differentiating the value proposition, strengthening the ties to family tradition, relationship building with stakeholders, and opportunity seeking and exploiting [28
]. It is worth noting that the importance of non-financial aspects of winery business models are prevailing in small family wineries. This is in strong contrast with the corporate-type international wine groups, where finance, sales, and marketing are integrated into a corporate-style business model [29
]. There is a research gap in the previous wine business literature on business processes in the European-style, SME wineries [30
]. None of the researched wineries in the German market are organized as a large corporation, thereby pointing to the higher suitability of the non-financial aspects for researching the wine business model core and its extensions. At this point, a specific business model of wine cooperatives, which can be found in “old wine world” countries, should be better explained. Previous literature acknowledges that a wine cooperative is a separate business entity or a model, where the aspect of inter-organizational network-type ties between small producers needs to be taken into account [31
]. This aspect is especially relevant regarding more loose and complex governance modes, which differ in wine cooperatives compared to classic corporate-style hierarchies. Previous research on wine business models has identified differences in winery BMs between “old wine world” and “new wine world” countries as well as between regions. This research presents a sample of “old wine world” wineries from 13 different wine regions, not taking into account these external aspects but rather examining the inside-out perspective of business model innovation and change.
The results of the descriptive statistics are presented in the first part of the results section. They refer to the company type and vineyard size in order to better explain the company type and size first-order construct, thereby providing a further explanation of the sample characteristics. In the second part, results of the structural equation modeling are presented in order to test the research hypotheses H1–H3.
Mean vineyard size of a German winery is 31.69 ha, as presented in Table 3
. However, there are significant differences depending on the legal and organizational form of a winery. The smallest are the owner-managed wineries with a mean vineyard size of only 16.14 ha, and this is also the largest proportion of wineries. Considerably larger are wineries with professional management, where ownership and management are divided. Their mean vineyard size is 36.39 ha. Somewhat larger are the state-owned enterprises, with 56.74 ha, which also represent the smallest group out of the four types: only 19 wineries belong to this group. Cooperatives are the largest winery type in terms of vineyard size with a mean vineyard size of 256.72 ha. However, their complex structure in terms of ownership, grape production, and wine production is an interesting case of a wine business model, which is typical for European countries.
The hypotheses H1–H3, developed in the previous sections, have been tested using the structural equation modeling in AMOS v23 [61
] on the overall sample of n
= 886. The statistical significance (p
) can be obtained from Table 4
, while standardized regression values (β) are presented in Figure 3
and Table 5
. The obtained results demonstrate that winery BM extension into online selling platforms has a positive effect on wine production BM (β = 0.36, p
< 0.001), which is also statistically significant. This result leads to a conclusion that hypothesis H1 has been confirmed. Winery BM extension into hospitality and tourism has a positive effect on wine production BM (β = 0.20, p
= 0.002), but the effect is not statistically significant. This result leads to a conclusion that hypothesis H2 has been rejected. Winery BM extension into sustainability has a negative effect on wine production BM (β = −0.15, p
= 0.217), and the result is not statistically significant. This result leads to a conclusion that hypothesis H3 has been rejected.
As shown in Figure 3
, the created structural model includes the positive effects of BM Extension 1: hospitality and tourism (β = 0.20), BM Extension 2: online sales platforms (β = 0.36), and a negative effect of BM Extension 3: sustainability (β = −0.15) on the wine production BM of a winery. In addition, due to the fact that BM Extensions 1 and 2 both have a positive effect on wine production BM, while BM Extension 3 has a negative effect, it has been hypothesized that there is also a mutual effect between BM Extensions 1 and 2 (β = 0.35), which has also improved the overall model fit.
The unstandardized regression weights and statistical significance are presented in Table 4
, while standardized regression weights are presented in Table 5
. The indicators with the highest regression weights are company type (β = 0.908) as a measure of wine production BM, sustainability discourse (β = 0.891) as a measure of sustainability, vineyard size (β = 0.643) as a measure of wine production BM, and wine tours (β = 0.555) as a measure of BM Extension 1: hospitality and tourism.
The model fit indices of the structural equation model are presented in Table 6
. It can be concluded that they have improved compared to the FA. With X2
/DF = 2, CFI = 0.958, and RMSEA = 0.034, it can be concluded that the model represents a satisfactory fit.
When analyzing the path of influence in the presented model, it becomes evident that different types of BM extensions have a direct effect on the core BM of wineries. Because the wine production BM has been defined through the vineyard size and legal organization type, the results provide empirical evidence of how quantitative growth can be achieved by extending the core wine production BM. However, having in mind the negative effect of BM extension sustainability on wine production BM, it could be that perhaps further research is needed to examine the impact of BM extensions on profitability and not only winery size.
The research tests a model of the impact that three types of BM extensions have on the core BM, thereby increasing the understanding of the organizations and their business model change over time. Business models are usually dispersed at the intersections of different industries, but the impact of venturing out into “uncharted territories” has not been well-researched or documented. This research attempts to close this research gap and provide insights into the impact that these BM extensions have on the core business. It appears that in order to have a growth-oriented strategy, companies need to venture out into digital sales platforms. Hospitality and tourism have no statistically significant impact on size of the core winery business, similarly to sustainability, which calls for further research into the impact of BM extensions on other core BM aspects, such as profitability. For example, further research could research in detail the profitability of core BM and BM extensions, and whether there are spill-over effects of BM extensions on core BM in terms of profitability. Future research should also put more effort into creating indicators for better classification of business model innovation types. For example, when does a change in business model cease to be business model extension and becomes business model migration? Although this discussion is not so relevant for the agricultural industries, as the connection of the farmers with the land is usually very strong, in other industries, the question of business model extension that becomes business model migration is a very important one. The results also demonstrate that sustainability and wine and tourism represent a different type of business model extension than an online sales platform. While online sales platforms appear to impact directly the core wine production BM element, sustainability and hospitality and tourism should be further examined if in certain cases they represent a BM component change or BM migration. However, both online sales platforms and hospitality and tourism have a positive impact on core winery business size, and both can directly impact the sales of wine. On the other hand, sustainability deals more with higher value added and quality, while not having a direct impact on winery size and growth. In fact, the influence has been slightly negative on the size of the winery, although not statistically significant. Furthermore, the overall winery data regarding turnover and profitability of core business and BM extensions should be researched in more detail. It would be important for the future research to differentiate between family and non-family wineries as well as between privately owned, cooperative, and government-owned wineries. Family and non-family wineries, as well as privately owned wineries, can be further researched by deploying quantitative and possibly also SEM methodology. On the other hand, cooperatives and state-owned wineries are a rather seldom type of winery, therefore calling for a qualitative and case study approach in order to better understand their business model extensions.