(Ruefli et al., 2000),(Vilmos et al., 2006),(Walker et al., 2002), but see some differing opinions in ( Hawawini et al., 2003),(Hawawini et al., 2005), (McNamara et al., 2005). There is also an important branch of the empirical literature that argues that it is persistence that is important, and on this measure industry effects dominate(e.g,(Denrell, 2004), (McGahan et al, 1999),(McGahan et al., 1999)) We depart from this firm versus industry debate by testing if the concept of business model might also substantively explain performance heterogeneity. The concept of business model is motivated by its common usage by business people, although, as we will show, it is also consistent with a number of theoretical antecedent When IBM CEO Louis Gerstner gave his 2001 annual analyst address about the companys new strategic initiatives, he concluded that the strategy"makes more sense given the current business environment and IBM's business model. (2001). This reference to business model is not unique to IBM Is pervasive 1. As an alleged source of success-Dell's business model stands head and shoulders above its competitors. ((Gurley, 2001)and the root of failures-IBMs] PC division had a business odel problem. ""((Spooner, 2002) Among both information technology firms and industrial ones(Bair, 2003)reports that"along with creating a new airplane [the new Boeing 7E7], we're creating a new business model for our industry From the way we involve suppliers 3. In big business annual reports-the"GE Business Model in(Welch, 2003and among analysts, venture capitalists and consultant Despite wide-spread use in the industry, the idea of a"business model"is rarely studied in academic research, except for some pioneering research focused on e-businesses(Amit et al., 2001). This lack of progress could be due to many difficulties in executing a rigorous study of business models. First, there appear to be diverse views on what a business model is. Table I summarizes some of these. Some authors define business model as something firms have. others as something that firms have in relation to other firms in a network. Some authors classify business models by type of transaction(e. g, franchising,4 (Ruefli et al., 2000), (Vilmos et al., 2006), (Walker et al., 2002), but see some differing opinions in (Hawawini et al., 2003), (Hawawini et al., 2005), (McNamara et al., 2005)). There is also an important branch of the empirical literature that argues that it is persistence that is important, and on this measure, industry effects dominate (e.g., (Denrell, 2004), (McGahan et al., 1999), (McGahan et al., 1999)). We depart from this firm versus industry debate by testing if the concept of business model might also substantively explain performance heterogeneity. The concept of business model is motivated by its common usage by business people, although, as we will show, it is also consistent with a number of theoretical antecedents. When IBM CEO Louis Gerstner gave his 2001 annual analyst address about the company’s new strategic initiatives, he concluded that the strategy “makes more sense given the current business environment and IBM's business model.”(2001). This reference to business model is not unique to IBM. It is pervasive: 1. As an alleged source of success–“Dell's business model stands head and shoulders above its competitors'.” ((Gurley, 2001))––and the root of failures––“[IBM’s] PC division ‘had a business model problem.’” ((Spooner, 2002)) 2. Among both information technology firms and industrial ones––(Bair, 2003) reports that “along with creating a new airplane [the new Boeing 7E7], we're creating a new business model for our industry. From the way we involve suppliers.” 3. In big business annual reports––the “GE Business Model” in (Welch, 2003)––and among analysts, venture capitalists, and consultants. Despite wide-spread use in the industry, the idea of a “business model” is rarely studied in academic research, except for some pioneering research focused on e-businesses (Amit et al., 2001). This lack of progress could be due to many difficulties in executing a rigorous study of business models. First, there appear to be diverse views on what a business model is. Table 1 summarizes some of these. Some authors define business model as something firms have, others as something that firms have in relation to other firms in a network. Some authors classify business models by type of transaction (e.g., franchising