infonet-economy

Business model adaptation in the face of exogenous shocks such as regulation is vital for firms' long-term survival. However, we do not yet sufficiently understand what causal factors determine various types of adaptive mechanisms. In particular, researchers would benefit from understanding the role of specific spatial-temporal features of regulatory events and the focal firm's activity system properties, i.e. its resource attributes. To explain why some firms respond to regulatory shocks
differently and emerge relatively stronger, we present a model in which we link activity system adaptation to the regulation's spatial, temporal, and uncertainty properties as well as the firms' ex ante asset specificity and asset complementarity. We aim to advance a first step toward a theory of regulation and activity system change.