Business Model Innovation and Social Legitimacy for Revenue Stability in Subscription Service Providers

Abstract

The rapid proliferation of the subscription economy has fundamentally transformed the mechanisms through which firms capture value and sustain long-term growth. However, despite the widespread adoption of subscription-based revenue models across various industries, many service providers struggle to achieve and maintain revenue stability. This study investigates the complex interplay between business model innovation, social legitimacy, and revenue stability within the context of subscription service providers. By conceptualizing business model innovation as a multidimensional construct encompassing value proposition, value creation, and value capture innovations, this research explores how these strategic shifts influence the predictability and consistency of recurring revenues. Furthermore, the study introduces social legitimacy as a critical mediating variable, arguing that innovative business models must secure stakeholder acceptance and societal approval to translate into stable financial outcomes. Through a comprehensive empirical analysis involving survey data from a diverse sample of subscription-based firms, the findings reveal that while business model innovation positively impacts revenue stability, this relationship is significantly mediated by the degree of social legitimacy the firm commands. The research contributes to the strategic management and marketing literature by providing a nuanced understanding of how intangible assets like legitimacy function as vital conduits for realizing the financial benefits of structural innovations. The practical implications offer guidance for managers seeking to navigate the tension between continuous innovation and the need for predictable revenue streams in highly competitive digital markets.