The full conceptual paper and further related publications are available at SSRN: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1411470 An open reference list of publications on business models and sustainability issues is available here: http://literature.SSBMG.com Background information This dissertation deals with the relationships between business models, sustainability innovations, and the business case for sustainability. Its main purpose is to define theoretical and conceptual interrelations between these concepts. According theoretical foundations are developed and combined with empirical studies on the solar photovoltaic industry. This industry is particularly suitable for this kind of research because of its increasing maturity paired with public policy and market dynamics that lead to a variety of business model challenges. The overarching research question is: How can business models support the commercialisation of sustainability innovations and thus contribute to business cases for sustainability? Theoretical and conceptual foundations are developed from a systematic literature review on the role of business models for technological, organisational, and social sustainability innovations. Further, business model innovation is linked to sustainability strategies and the business case for sustainability. These foundations are applied in an in-depth case study on BP Solar. Moreover, because supportive public policies and the availability of financial capital are important preconditions for commercial success with solar innovations, the dissertation contains a comparative public policy study as well as a conjoint experiment to explore debt capital investors’ preferences for different photovoltaic business models. The main contribution of this work is the “Business Models for Sustainability Innovation” (BMfSI) framework. It is based on the idea that business models are artificial and social constructs that fulfil different functions based on social interaction and their deliberate construction. The framework emphasises the mediating function, i.e. the iterative alignment of business model elements with company-internal and external factors as well as with the characteristics of environmentally and socially beneficial innovations.

1. Business Models for Sustainability Innovation
Theoretical Foundations and the Case of Solar Energy
Florian Lüdeke-Freund
PhD Thesis Defence, Lüneburg, 13th December 2013
Committee: Prof. Dr. Stefan Schaltegger, Leuphana University Lüneburg (1st supervisor, chair)
Prof. Dr. Frank Boons, Erasmus University Rotterdam (2nd supervisor)
Prof. Dr. Ursula Weisenfeld, Leuphana University Lüneburg

2. Agenda
 Introduction and research problem
 Research approach
 “Business Models for Sustainability
Innovation” (BMfSI) framework
 The case of solar energy
 Summary of results
BMfSI framework
 Limitations and outlook
Florian Lüdeke-Freund
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3. Background and research problem
 The challenge:
Sustainable entrepreneurs have to create business cases for their
sustainability innovations
cf. Schaltegger & Wagner 2006, 2011; Hockerts & Wüstenhagen 2010
 The gap:
Lack of understanding of how business models relate to sustainability
innovations and business cases for sustainability
cf. Boons et al. 2013; Charter et al. 2008
 The question:
How can business models support the commercialisation of
sustainability innovations and thus contribute to business cases for
sustainability?
Florian Lüdeke-Freund
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4. Research approach
Question
Sustainability
innovation
?
Business model
?
Business case
for
sustainability
Methods
 Conceptual (e.g. literature review)
 Empirical and case-based (e.g. case study)
Results
 “Business Models for Sustainability Innovation” (BMfSI) framework
 Improved understanding of the business model as a mediator
between sustainability innovations and business cases for
sustainability
Florian Lüdeke-Freund
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5. Theoretical perspectives
Corporate sustainability
Focus on sustainable
entrepreneurship and
innovation-based business
cases
Innovation management
Focus on sustainability
innovations and
commercialisation barriers
cf. Boons et al. 2013; Charter &
Clark 2007; Hansen et al. 2009;
Teece 1986, 2006
Florian Lüdeke-Freund
cf. Schaltegger & Wagner 2006,
2011; Wüstenhagen & Hockerts
2010
Business
models for
sustainability
innovation
Business models
Focus on the business model
construct and its mediating
function
cf. Al-Debei & Avison 2010;
Chesbrough & Rosenbloom 2002;
Teece 2010
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6. Theoretical perspectives
Corporate sustainability
Focus on sustainable
entrepreneurship and
innovation-based business
cases
Innovation management
Focus on sustainability
innovations and
commercialisation barriers
cf. Boons et al. 2013; Charter &
Clark 2007; Hansen et al. 2009;
Teece 1986, 2006
Florian Lüdeke-Freund
cf. Schaltegger & Wagner 2006,
2011; Wüstenhagen & Hockerts
2010
Business
models for
sustainability
innovation
Business model*
Business models
Focus on the business model
construct and its mediating
function
cf. Al-Debei & Avison 2010;
Chesbrough & Rosenbloom 2002;
Teece 2010
*cf. Osterwalder & Pigneur 2011
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7. Defining a new function for the business model
How can business models support the commercialisation of sustainability
innovations and thus contribute to business cases for sustainability?
Business model
Business case
for
sustainability
Sustainability
innovation
Barriers / challenges
Discursive ambiguity
Methodological constraints
System-level change
Directional risks
Double externality problem
Radical innovation
Florian Lüdeke-Freund
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8. “Business Models for Sustainability Innovation” framework
Empirical paper 1
Conceptual paper 2
Public
policy
C
Business model
Sustainability
innovation
B
A
Business case
for
sustainability
D
Financing
Conceptual paper 1
Florian Lüdeke-Freund
Empirical paper 2
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9. “Business Models for Sustainability Innovation” framework
Business environment
Munificence
Dynamism
Public
policy
Industry
change
…
C
Company level
Business model
Sustainability
innovation
B
Business case
for
sustainability
A
D
Competition
Florian Lüdeke-Freund
Stakeholders
Financing
…
…
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10. The BMfSI framework applied to the case of solar energy
(A) The sustainability innovation interface
Business environment
Munificence
Dynamism
Public
policy
Industry
change
C
Company level
Example
BP Solar’s business model
Business model
Sustainability
innovation
B
Business case
Corollary
Thefor
constructability and
sustainability of the business
adaptability
model can compensate for
sustainability innovations’
competitive disadvantages
A
D
Competition
Florian Lüdeke-Freund
Stakeholders
…
Financing
…
…
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11. The BMfSI framework applied to the case of solar energy
(B) The business case for sustainability interface
Business environment
Munificence
Example
Dynamism
Public
policy
BP’s solar business case
Business model
B
Corollary
Competition
Florian Lüdeke-Freund
…
C
Company level
Sustainability
Business model innovation
innovation
can amplify the effects of
corporate sustainability
strategies and improve
business case drivers
Industry
change
Business case
for
sustainability
A
D
Stakeholders
Financing
…
…
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12. The BMfSI framework applied to the case of solar energy
(C) The public policy interface
Business environment
Munificence
Dynamism
Public
policy
Industry
change
C
Company level
B
Corollary
Business case
Thefor
business model can
adapt to different public
sustainability
policy environments and
combine own resources
with complementary assets
provided by public policies
A
D
Competition
Florian Lüdeke-Freund
Stakeholders
Financing
Example
BP Solar’s international
activities
Business model
Sustainability
innovation
…
…
…
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13. The BMfSI framework applied to the case of solar energy
(D) The financing interface
Business environment
Munificence
Examples
Dynamism
Public
policy
Solar project financing
BP Solar’s financial services
Business model
B
Corollary
Competition
Florian Lüdeke-Freund
…
C
Company level
Sustainability
innovation
The business model’s
financial approach can be
aligned with investors and
customers’ preferences and
lead to new value offerings
Industry
change
Business case
for
sustainability
A
D
Stakeholders
Financing
…
…
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14. Four answers to my research question
How can business models support the commercialisation of sustainability
innovations and thus contribute to business cases for sustainability?
Corollaries
How …?
Business models compensate for sustainability
innovations’ competitive disadvantages (A)
-> use business model as competitive device
Business models amplify sustainability
strategies and business case drivers (B)
-> develop and improve business case drivers
Business models combine own resources with
public policy-based complementary assets (C)
-> integrate missing resources and capabilities
Business models adapt to investors and
customers’ preferences to obtain financing (D)
-> develop and explore new financial models
Florian Lüdeke-Freund
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15. Limitations
 Technology bias, i.e. “sustainability innovation” mostly
interpreted as technological innovation
 Little attention paid to demand side issues, i.e. demand for
sustainability innovations is assumed to be given
 In a large part based on theoretical assumptions due to a lack
of complementary research
 Set of constructs and variables needs to be harmonized across
individual research projects and papers
Florian Lüdeke-Freund
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16. Outlook: “Profiting from Sustainability Innovation” as contingency theory
 The business model as a contingency factor that influences the ability to
profit from sustainability innovation
 New contingency theory based on BMfSI framework
 Theoretical framework -> “Teece reloaded”
 Contingency factor framework -> analytical model
 Large data sets -> companies developing sustainable business models
 Expected outcomes





Combine types of business models and sustainability innovations
Empirically prove business case potential of BMfSI
Measure influence of contingencies, e.g. public policies and financing
Sustainability-oriented Teecian theory
Policy and management implications for developing BMfSI
 Possible funding source: Horizon 2020 – sustainable business model track
Florian Lüdeke-Freund
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17. Thanks a lot for your attention!
Florian Lüdeke-Freund
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18. Backup
Publications contained in PhD thesis
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Conceptual paper 1
Boons, F. & Lüdeke-Freund, F. (2013): Business models for sustainable innovation:
State-of-the-art and steps towards a research agenda, Journal of Cleaner
Production, Vol. 45, 9-19.
Conceptual paper 2
Schaltegger, S.; Lüdeke-Freund, F. & Hansen, E. (2012): Business cases for
sustainability: The role of business model innovation for corporate sustainability,
Int. Journal of Innovation and Sustainable Development, Vol. 6, No. 2, 95-119.
Empirical paper 1
Hansen, E.; Lüdeke-Freund, F.; West, J. & Quan, X. (2013, in review): Beyond
technology push vs. demand pull: The evolution of solar policy in the U.S.,
Germany and China, submitted to Research Policy.
Empirical paper 2
Lüdeke-Freund, F. & Loock, M. (2011): Debt for brands: Tracking down a bias in
finan­cing photovoltaic projects in Germany, Journal of Cleaner Production, Vol.
19, No. 12, 1356-1364.
Empirical paper 3
Lüdeke-Freund, F. (2013, forthcoming): BP's solar business model: A case study on
BP's solar business case and its drivers, Int. Journal of Business Environment.
Florian Lüdeke-Freund
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19. Backup
Literature
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Boons, F.; Montalvo, C.; Quist, J. & Wagner, M. (2013): Sustainable innovation, business models and economic
performance: an overview, Journal of Cleaner Production, Vol. 45, 1–8.
Charter, M. & Clark, T. (2007): Sustainable Innovation - Key conclusions from Sustainable Innovation Conferences
2003–2006 organised by The Centre for Sustainable Design. Farnham, UK: The Centre for Sustainable Design,
University College for the Creative Arts.
Charter, M.; Gray, C.; Clark, T. & Woolman, T. (2008): Review: The role of business in realising sustainable
consumption and production, in: Tukker, A.; Charter, M.; Vezzoli, C.; Stø, E. & Andersen, M. M. (Eds.): Perspectives
on radical changes to sustainable consumption and production. System Innovation for Sustainability. Sheffield:
Greenleaf Publishing, 46–69.
Hansen, E.; Große-Dunker, F. & Reichwald, R. (2009): Sustainability Innovation Cube - A Framework to Evaluate
Sustainability-Oriented Innovations, International Journal of Innovation Management, Vol. 13, No. 4, 683–713.
Hockerts, K. & Wüstenhagen, R. (2010): Greening Goliaths versus emerging Davids — Theorizing about the role of
incumbents and new entrants in sustainable entrepreneurship, Journal of Business Venturing, Vol. 25, No. 5, 481–
492.
Osterwalder, A. & Pigneur, Y. (2011): Aligning Profit and Purpose Through Business Model Innovation, in: Palazzo,
G. & Wentland, M. (Eds.): Responsible management practices for the 21st century. Paris: Pearson, 61–76.
Schaltegger, S. & Wagner, M. (2011): Sustainable entrepreneurship and sustainability innovation: categories and
interactions, Business Strategy and the Environment, Vol. 20, No. 4, 222–237.
Schaltegger, S. & Wagner, M. (Eds.) (2006): Managing the business case for sustainability. The integration of social,
environmental and economic performance. Sheffield: Greenleaf Publishing.
Teece, D. (1986): Profiting from technological innovation: Implications for integration, collaboration, licensing and
public policy, Research Policy, Vol. 15, No. 6, 285–305.
Teece, D. (2006): Reflections on “Profiting from Innovation”, Research Policy, Vol. 35, No. 8, 1131–1146.
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