"Dynamic Business Paradigm Fit and Firm Performance : An Interactive Approach"

Abstract

This paper advocates the necessity to connect the customers` needs in a market (demand side) and the firm competence (supply side) a firm can utilize to meet the customers` needs from an interactive point of view, not from the Newtonian standpoint. With the construct of dynamic fit and the definition of Business Paradigm by 2-dimension multi-level model that embraces the customer needs and the firm competence to satisfy them, I derive some propositions about the relationships between firm performance and innovation through which dynamic business paradigm fit can be obtained based on the premises that the superior financial results will come when a firm produces and/or provides the product(s) customers very want at the lowest costs. The wealth created by a firm during a given period of time depends upon the dynamic business paradigm fit that can be an indicator for customer satisfaction. No empirical testing for the propositions has been done in this paper. This paper points out that in what situation, where, and what type of innovation should be pursed for firm success, while Schumpeter (1934) emphasized the importance of innovation in economic growth.