The Role of the Business Model in Capturing Value from Innovation: Evidence from Xerox Corporation's Technology Spin-Off Companies

This paper investigates the role of the business model in capturing economic value from early-stage technology, arguing that a successful model provides a heuristic logic that connects a technology's technical potential to realized value. The authors explore the intellectual roots of the concept, offer a working definition, and highlight an often-overlooked cognitive dimension: while a business model unlocks latent value, its logic also constrains the subsequent search for alternative models suited to other technologies.

Using the Xerox Corporation as evidence, the paper shows how Xerox arose by employing an effective business model to commercialize a technology that other leading companies had rejected, and how that model cast a long shadow over its later management of spin-offs from Xerox PARC. Spin-offs that succeeded did so by evolving business models substantially different from Xerox's, whereas failed ventures exhibited only limited search and learning, illustrating why the business model matters for value capture.