To achieve business model resilience and manage through unforeseeable circumstances optimal decision-making is crucial (Radic et al., 2022). Yet, when innovating business models, organizations are often faced with great complexity and uncertainty which may hinder the optimal decision-making process (Schneckenberg et al., 2016; Massa, Tucci & Viscusi, 2018; Casadesus-Masanell & Ricart, 2010; McGrath, 2010; Tversky & Kahneman, 1974). A theory that could help to explain this process as well as potentially provide solutions is bounded rationality (Simon 1955; Simon 1987). Bounded rationality comprises cognitive biases and heuristics, that is thinking shortcuts which simplify the process of decision making (Tversky & Kahneman, 1974). In simple routine scenarios these mechanisms serve as an advantage, yet when confronted with complex and uncertain tasks, the default heuristic techniques may collapse and obstruct taking rational and optimal decision (Tversky & Kahneman, 1974). This risk is relevant in the context of business model innovation for sustainability so a process that combines sustainability and BMI – two concepts considered as complex and uncertain (Wanzenböck et al., 2020; Rittel & Weber, 1973; Schneckenberg et al., 2016; Massa, Tucci & Viscusi, 2018). While the individual cognitive perspective can offer vital insights on how decision-making affects the BMIfS process and outcome, this level of analysis remains understudied (Ringvold et al., 2022). This study adopts the cognitive perspective to explore the role that bounded rationality plays in BMIfS. This paper aims to understand the cognitive patterns that innovators follow to cope with uncertainty and complexity within the process of BMIfS.
business model innovation for sustainability, complexity, uncertainty, cognitive biases, bounded rationality