When does a freemium business model lead to high performance? - A qualitative comparative analysis based on fuzzy Sets.

ABSTRACT

Existing research has neglected to explain why freemium business models lead to differentiated performance or what accounts for the difference in their revenue models. This study investigates how the configuration effect of freemium business models promotes performance and explores the different ways through which freemium business models, their dynamic capabilities, and environmental uncertainty interact to achieve high performance. The fuzzy set qualitative comparative analysis (fsQCA) approach was used to test the conceptual model with data from 45 freemium business model apps. From empirical evidence on the relationship between freemium business models, dynamic capabilities, and environmental uncertainty, the study finds that (1) bundled and fragmented freemium business models are fundamental performance drivers. However, they work only in combination with dynamic capabilities and environmental uncertainty. Moreover, the bundled and fragmented freemium business models have complementary rather than substitution relationships. (2) For companies with bundled and fragmented freemium business models, high sensing and seizing capabilities are critical to achieving high performance. A high bundled freemium business model, high sensing capability, and a lack of fragmented freemium business models and seizing capability can lead to high performance, regardless of reconfiguration capabilities and environmental uncertainty. (3) Under high environmental uncertainty, offering fragmented freemium business models with or without a bundled freemium business model will lead to high performance if they have high sensing, seizing, and reconfiguring capabilities. This study can provide systematic decision support for achieving high performance through freemium business models and the configuration of dynamic capabilities under environmental uncertainty.