‘Life after Nokia?’ Business model innovation and niche upscaling in the emerging Finnish demand response industry

Abstract

Demand response (DR) can be considered a complementary innovation with the potential to accelerate the transition towards renewable energy sources. Various business models are developing around this technology to provide value to both firms and consumers. Building on the multi-level perspective (MLP) on socio-technical change and previous studies that have introduced the concept of business models in sustainability transition research, we investigate the role of different business model innovation patterns in niche upscaling and breakthroughs. Empirically, the study relied on 25 semi-structured interviews with representatives of Finnish companies operating in the emerging DR industry. It identified three main business model innovation patterns, which are labelled as follows: 1) phoenix rise, 2) business model expansion, and 3) incumbent catch-up. The analysis of these business model innovation patterns revealed that niche–regime interaction is not fixed, but rather, can change over time from adaptive to potentially transformative according to the changes in firms’ business model. Moreover, niche–regime interaction occurs in a multidirectional rather than unidirectional way, that is, not just from niche to regime but also from regime to niche and from alternative regime to niche.