Does Decentralization Promote Business Model Adaptation? Microscopic Evidence from Chinese Enterprises

Business model adaptation (BMA) has become a cornerstone for incumbent firms to maintain their competitive edge and preserve their market position. Despite its strategic importance, many incumbent firms struggle to implement BMA successfully. Drawing on the knowledge-based view (KBV), information process theory (IPT), and organizational adaptation theory, this study examines how decentralization influences BMA based on data from 469 Chinese incumbent enterprises. It demonstrates that decentralization has an inverted U-shaped relationship with external knowledge acquisition (EKA) and BMA, while exerting a positive effect on internal knowledge sharing (IKS). Additionally, the finding shows that IKS and EKA partially mediate the relationship between decentralization and BMA. This study underscores the inherent trade-offs in structural delegation, providing new insights into how incumbent firms can optimize their organizational design to effectively implement BMA.