How cluster initiatives support business model innovation of small and medium-sized enterprises: cases from a public university in Bolivia

While there is a pressing need for small and medium-sized enterprises (SMEs) in lower-middle-income economies, with constrained access to resources, to innovate, the mechanisms to facilitate such innovation may not always be evident to researchers and practitioners (Maclean et al., 2023). The organization of enterprises into cluster initiatives is recognized as an effective method for fostering improvement and innovation (Ketels and Memedovic, 2008; Klofsten et al., 2015; Sölvell et al., 2003). Clusters initiatives can be viewed as tools for improving regional and firm productivity and innovativeness (Navickas and Malakauskaite, 2009). One example of cluster initiatives can be found in the Cochabamba region, Bolivia with Universidad Mayor de San Simon as the leading and coordinating actor that seek to establish and elucidate strategies for fostering innovation within SMEs in the region (Acevedo, 2018).

Cluster initiatives build on the concept of clusters, that is “geographic concentrations of interconnected companies, suppliers, service providers, firms in related industries and associated institutions (e.g. universities, standards agencies and trade associations) in particular fields that compete but also cooperate” (Porter, 1998a, b, p. 197). Co-located firms in clusters may enjoy competitive advantages due to external economies of scale, as well as eased access to resources, specialized suppliers and customers (Porter, 1998a, b). While clusters may emerge spontaneously, due to market opportunities, such as the biotechnology cluster in the Copenhagen-Malmö region (Moodysson et al., 2008), the clusters in emerging and developing countries (Giacomin, 2019), in regions with declining economic performance (Delgado et al., 2014) or small and undeveloped clusters (Kowalski and Marcinkowski, 2014), often see a more managed form of clustering, called cluster initiatives, due to government policy initiatives. According to Ketels and Memedovic (2008:384) cluster initiatives can be defined as “collaborative actions by groups of companies, research and educational institutions, government agencies and others, to improve the competitiveness of a specific cluster (… for example) by raising the awareness of companies within a cluster and creating more effective platforms for interaction (… or providing) a platform for a better dialogue between the private and the public sector when making decisions about how to improve the cluster-specific business environment”. Cluster initiatives are often coordinated by an intermediary organization, such as universities, providing platforms for interaction and other services (Klofsten et al., 2015).

Prior research on cluster initiatives has delved into the factors influencing the success or failure of cluster initiatives, including government policies, networking mechanisms and knowledge spillovers (Ketels and Memedovic, 2008; Klofsten et al., 2015; Sölvell et al., 2003). Many cluster initiatives focus on development of SMEs in a specific region or industry (Karaev et al., 2007; Kowalski and Marcinkowski, 2014). Such studies have showed the positive effect of cluster initiatives on SMEs' productivity and product innovation located in higher income countries, but studies in medium and low-income countries are rare (Karaev et al., 2007; Kowalski and Marcinkowski, 2014). Moreover, few studies have investigated cluster initiatives which includes that SMEs have a potential to enhance their business performance through the implementation of innovative changes in their business models (Bashir et al., 2020; Ibarra et al., 2020; Latifi et al., 2021), nor does extant research seem to offer much advice to practitioners that work with clusters or ecosystems (Lingens, 2023). Business model innovation (BMI) may stimulate SMEs to develop their business model beyond the traditional ways of doing business as well as to stimulate development to develop more collaborative business models with other firms and actors in the region (cf. Osterwalder and Pigneur, 2010).

While prior research on cluster initiatives and how they might provide support to BMI in SMEs is scarce, research on so-called frugal innovation in resource-constrained economies (Dabić et al., 2022) might be informative for our study. This research highlights the fact that communities and SMEs often stay with a local and traditional business model (Gupta et al., 2016), utilizing local resources for incremental innovation, aiming for cost innovations and/or create affordable value innovations (Gupta et al., 2016). Lack of resources, weak institutional environments and weak innovation infrastructures create barriers for these communities and small firms to scale and more radically change their business model (Dabić et al., 2022).

The purpose of this research is to describe and analyze the benefits on BMI of SMEs due to the support activities of cluster initiatives managed by a public university in Bolivia, a country categorised as a Lower Middle-income economy, thus a resource-constrained context compared to wealthier and developed countries (World Bank, 2023). In addition, we draw implications of how cluster initiatives better can support the BMI of SMEs in a lower-middle income country like Bolivia based on our findings.

Taking into account the above stated research purpose we address the following research questions:

Our study concludes that SMEs clusters managed by a public university in Bolivia can assist in the development and enhancement of the business model of SMEs by engaging them in a variety of activities. The main benefit for the SMEs that participate in the cluster initiative's support activities is a strengthening of value creation components such as key resources and key activities in terms of support, for example for prototyping of new production equipment, supporting a technology- and resource-driven approach to BMI. However, as the cluster initiative included few activities supporting the SMEs' the development of value delivery components and no value capture components much less progress in business model development was observed here. Moreover, progress in the SME's BMI depended substantially on the owner/manager's motivation for participation in the cluster initiative's activities, and their aim for BMI of their SME. Implications include a well-defined idea of support and target groups for the cluster initiative and thus a careful selection of SMEs participating in the cluster initiative, as well as additional support activities to innovation in value delivery and value capture components of the business model, enabling the SMEs to move beyond their traditional and local business model. This would enable the cluster initiative to more fully support a resource-driven BMI process in the SMEs. The present research represents an initial contribution to what extent cluster initiatives support BMI in SMEs in lower-middle income countries as well as how it may be more efficiently organized.

This work is organized as follows: Section 2, provide a review of the pertinent literature, encompassing the principal assumptions about cluster initiatives, business models and BMI and exploring the link between cluster initiatives and the SMEs' BMI, to develop the foundation for this study. Section 3 presents the empirical background. Section 4 describes the methodological approach. Section 5 presents the detailed analysis conducted in this research, as a description and the dimensions about BM and BMI used in this study. Section 6 is dedicated to the presentation and explanation of the findings. The subsequent section delves into the discussion of our findings. Section 8 details the implication for cluster initiatives in resource constrained contexts. Finally, the last section, contains the conclusions obtained from this study.

Cluster initiatives are collaborative efforts involving conglomerates of businesses, academic and research institutions, governmental bodies and other stakeholders (Klofsten et al., 2015; Sölvell et al., 2003). Their primary aim is to enhance the competitiveness of a selected cluster. The defining feature of these initiatives is their overarching objectives, rather than specific endeavors. They can be initiated by corporations, universities or government entities (Ketels and Memedovic, 2008). Cluster initiatives operate on the premise that individual firms situated within them are strategically positioned for entrepreneurship, innovation and growth (Navickas and Malakauskaite, 2009). Participation in cluster initiatives fosters the expectation that these firms will be exposed to and take advantage of opportunities to formulate successful and competitive strategies, ultimately contributing to the prosperity of their respective countries (Klofsten et al., 2015). The involvement is viewed as beneficial, specifically due to the improved access to scarce resources and skills (Karaev et al., 2007). Such benefits arise from the inherent complementarities in the structure of cluster initiatives, fostering mutual and reciprocal exchange or acquisition among the involved actors (Kowalski and Marcinkowski, 2014). Cluster activities create value for members through structured services like collaborative research, technology transfer, strategic partnerships and staff exchanges (Günther and Meissner, 2017). Organizers, like universities, provide resources and knowledge support in order to foster innovation, stakeholder engagement and a shared vision of increasing competitiveness and innovativeness (Lupova-Henry et al., 2021). Effective management balances immediate benefits with forward-looking initiatives to meet evolving member needs (Günther and Meissner, 2017).

Prior research on cluster initiatives has identified five success factors for management of a cluster initiative (Klofsten et al., 2015). First, a well-defined idea of what member needs to support and the target group for the activities. Second, a group of inspiring and committed key individuals that act as driving forces. Third, an attractive set of activities for the members. Fourth, a critical mass of members, and lastly skillful coordination of activities and resources.

On the one hand, the preconditions in lower-middle income countries such as Bolivia for cluster formation and cluster initiatives are often not the best as the number of firms within a particular region and industry often is limited, infrastructure often underdeveloped, making transportation and communication difficult and time-consuming, and trust in society is at a relatively low level due to low incomes and high levels of corruption, as is the case for Bolivia (World Bank, 2023).

On the other hand, the potential for innovation and economic growth in Bolivian SMEs is huge as they represent 80% of the economic activity among all enterprises, generating 85% of the workforce, but contribute only approximately 35% to the GDP (Encinas and Arteaga, 2007; Ulandssekretariatet - DTDA, 2021). Thus, the need for Bolivian SMEs to innovate their products, services and business models is vital for growth of the whole Bolivian economy. One of the most important industries in the Bolivian economy is the food industry (Vila, 2022).

Innovation is necessary for organizational growth and competitiveness, but relying solely on product or process innovation is inadequate in contemporary business environments (Chesbrough, 2007). Market shifts stem from rising competition, globalization, new rivals and evolving products, altering dominant market positions (Gassmann et al., 2014). According to Zott et al. (2011) BMI complements traditional process, product and organizational innovation.

Academic literature (Bashir et al., 2020; Foss and Saebi, 2017; Wirtz and Daiser, 2018) offers extensive empirical evidence for BMI as effective for SMEs, enhancing innovation and collaboration in dynamic environments. Foss and Saebi (2017) defined BMI as designed, novel, nontrivial changes to the key elements of a firm's BM and/or the architecture linking these elements. There are several definitions of the concepts of BM and BMI (Bashir et al., 2020; Foss and Saebi, 2017, 2018; Miller et al., 2021; Ramdani et al., 2019; Wirtz and Daiser, 2018) but most would agree on a definition by Teece (2010) that a business model “Describes the design and architecture of the value creation, delivery and capture mechanisms” of a firm. The architecture and components of value creation, value delivery and value capture have been operationalized in the Business Model Canvas (BMC) by Osterwalder and Pigneur (2010).

For many researchers value creation is one of the important dimensions of BM and BMI studies (Foss and Saebi, 2017, 2018; Magretta, 2002; Miller et al., 2021; Ramdani et al., 2019; Wirtz and Daiser, 2018). Value creation consists of the value proposition, the value in the form of products and/or services the firm offer to its customers and the elements or mechanisms with which the firm creates the value proposition, that is key resources, key activities and key partners (Osterwalder and Pigneur, 2010).

The second BM value dimension is a firm's value delivery components, as described by Abdelkafi et al. (2013) “the means by which enterprises establish interactions with the customer in order to provide the value proposition”. Value delivery consists of customer segments, customer relationships and channels to communicate and deliver value to the customers (Osterwalder and Pigneur, 2010).

The third and last BM value dimension is firm's value capture, that is how the firm generates revenues, and the cost related to the value creation and value delivery dimensions (Osterwalder and Pigneur, 2010).

The three value dimensions encompass nine components that define the business model (Osterwalder and Pigneur, 2010; Keane et al., 2018). Table 1 delineates them.

In line with a modular view on BMs and BMIs (Foss and Saebi, 2017), that is viewing a BM as a configuration of BM components, a BMI happens when the enterprise modifies or improves at least one of the BM components in the value dimensions (Foss and Saebi, 2017). Thus, starting with an existing business model, the level of BMI depends on how many BM components and dimensions have been improved and if the improvement within each dimension is new only to the firm, that is incremental or evolutionary BMI, or new also to the industry, that is radical BMI (Abdelkafi et al., 2013; Foss and Saebi, 2017; Sosna et al., 2010; Teece, 2010).

Resource constraints may shape BMI, emphasizing cost-effective, efficient and sustainable solutions (Pisoni et al., 2023). Zeschky et al. (2011) observe that to succeed in a resource-constrained context, firms need to have simple and cheap manufacturing process, use available and local materials and have easy-to-use products. Research on frugal innovation has highlighted the fact that small firms and communities in resource-constrained countries mainly perform two types of innovations: cost innovations and affordable value innovations (Cai et al., 2019). Most firms in a resource-constrained country stay with a traditional, grassroots and local business model (Hossain, 2018). Some firms develop a domestic corporate business model, scaling and changing their business model to expand beyond their local markets (Hossain, 2018).

As mentioned above the link between cluster initiatives and BMI in SMEs have seen limited prior research especially in resource constrained country contexts like Bolivia. Similarly to prior research on BMI we have chosen to conceptualize a company's business model as a configuration of multiple components, that is value creation, value delivery and value capture components (Teece, 2010) and a BMI as a change in any or several of these components, that is a modular view of BMI (Foss and Saebi, 2017). A university-led cluster initiative with the aim to support the innovativeness and competitiveness of a particular cluster of firms may impact the firms' business models in different ways, that is impact some business model components more than others.

From a theoretical perspective we may differentiate between cluster activities that intend to support innovation in one or several of the business model components. Cluster activities may target changes in business model components in value creation or value delivery or value capture. Table 2 lists examples of cluster activities that intends to support changes in each of the nine business model components. If these intended changes are new to the firm, but not new to the industry, they are incremental or evolutionary changes in the business model (Foss and Saebi, 2017). If the intended changes are not only new to the firm but also to the industry we regard them as radical changes in the business model, that is they intend to disrupt the market conditions in the industry (Foss and Saebi, 2017). The examples of cluster activities in Table 2 may support both incremental and radical BMI, depending on the degree of novelty to the firm and industry.

In terms of how cluster initiatives may support BMI in SMEs in resource-constrained contexts prior research often emphasize SMEs lack of slack resources with limited time, finances and other resources to devote to development activities overall (Dabić et al., 2022). Dominant mindsets of owners and managers of SMEs, often lead to SMEs following traditional business models in their industry (Dabić et al., 2022; Hossain, 2018). On the one hand resource constrained contexts add to these problems of finding resources and challenging mindsets for development activities. On the other hand, the resource constraints may also be seen as an opportunity for developing new business models (Ananthram and Chan, 2021). In general, cluster initiatives can facilitate the participating SMEs' exploration and knowledge integration of both technologies and business practices by improving the access to scarce resources and skills (Karaev et al., 2007). However, it remains unclear how an SME striving for increasing innovativeness and competitiveness in a resource-constrained contexts achieves this in a cluster initiative (cf. Dabić et al., 2022).

Many entrepreneurs in developing countries operate within the informal sector, driven by necessity and survival strategies in response to limited alternatives (Williams and Youssef, 2015). Also, in Bolivia the informal sector dominates much of the country's economy (Arandia Arzabe et al., 2024; Castillo Machicado and Ignacio, 2020; Vila, 2022). In Bolivia, SMEs face challenges transitioning from informality to formality, impacting productivity (Dana, 2011; Vila, 2022). Different factors include regulatory discrepancies (Ferraro et al., 2011), public institution inefficiencies (Barja Daza et al., 2013) and lack of awareness about formalization benefits (Garcia-Agreda et al., 2022). Weak public institutions struggle to enforce policies (Cespedes Quiroga and Martin, 2017), and unclear guidelines lead to informal operations (Ulandssekretariatet - DTDA, 2021). These issues hinder business growth and productivity enhancement (Garcia-Agreda et al., 2022).

However, Bolivia has demonstrated relatively interesting performance in innovation inputs, particularly in increased higher education and human capital development, in recent years (Muyor-Rodríguez et al., 2021). Nevertheless, this progress has not been effectively translated into innovation or entrepreneurial outputs (Arandia Arzabe et al., 2024). Despite some advancements, Bolivia lacks a comprehensive innovation policy (Acevedo Peña et al., 2015). As Cimoli et al. (2008) highlight, the accumulation of strategic knowledge is critical for firm improvement. Understanding innovation systems and university–business relations in Bolivia is important for informed decisions on resource allocation and enhancing societal capacities in innovation and learning processes (Acevedo, 2018).

Clusters for inclusive development can serve as a practical approach to fostering collaboration and optimizing the limited resources available in universities and government programs within the context of developing countries (Acevedo, 2018). At Unit of Technology Transfer (UTT-UMSS), cluster development has been adopted as an interactive mechanism to enhance the impact of research activities at the Universidad Mayor de San Simón (UMSS) on local socio-economic development.

In 2004, UMSS established the Unit of Technology Transfer (UTT-UMSS) in which the university promotes the democratization of knowledge through productive clusters initiatives (Acevedo, 2018). UTT-UMSS is recognized as a physical and virtual space for the convergence and assembly of social, economic, productive and academic stakeholders aimed at promoting collaboration and generating synergies in influencing regional and local development processes (Acevedo, 2018).

The cluster initiative was initiated at UTT-UMSS in 2007. In the cluster initiative the participating SMEs involve dynamics of collaboration and obtain support from UTT-UMSS to develop research projects, machine design and prototyping, processes and product design, management assistance and other competences and resources. In the cluster initiative, UTT-UMSS have developed two clusters of SMEs. The oldest, most advanced and prominent SME cluster is the Food Cluster Cochabamba. The food industry is one of the most important industries of Bolivia and the Cochabamba region (McKay and Colque, 2021; Arandia Arzabe et al., 2024). Another, newer cluster, is the Green Technology Cluster, established in 2021. The two SME clusters were developed as a strategy for the university to respond the demands requested by the business sector through leveraging the capabilities of the research centers, which allows strengthening the university–industry collaboration, recognizing the different dimensions and complexity of problems, enabling open discussions and building bridges of collaboration between the heterogeneous capacities distributed (Acevedo, 2018). Food Cluster Cochabamba, comprise 120 firms, and the Green Technology Cluster, 26 firms by 2025. Table 3 provides an overview of the main activities conducted in the aforementioned clusters at UTT-UMSS.

From the start of the first cluster, most initiatives to engage with UTT-UMSS have originated from SMEs and their owners/managers seeking to develop innovative approaches to their business activities while also seeking support in specific areas and solutions to challenges encountered in their regular development. Subsequently, UTT-UMSS has played a pivotal role in strengthening these initiatives by offering a comprehensive range of support services, including technological assistance and management guidance (Table 3). To provide many of the services the UTT-UMSS facilitates connections between SMEs and various research centers within UMSS that may be relevant to the SMEs' specific needs.

Starting with mostly technological support, in terms of access to technological resources in terms of machinery, equipment and technological skills, aiming to support process and product innovation in the SMEs, experience from the facilitation and coordination of the cluster initiative at UTT-UMSS has indicated an increased demand for skills in innovation management, co-design, the creation of business value and increased collaboration between SMEs participating in the two clusters. Thus, in later years UTT-UMSS has strengthened its efforts and focus to support the SME's development of capabilities related to BMI in the cluster initiatives than previously.

Thus, UTT-UMSS currently engages in various activities aimed at influencing the innovation of SMEs' business models. These activities play an important role in different value dimensions and can be shaped in multiple ways to facilitate changes in business model components of SMEs. The intent is to drive transformation within the SMEs to move beyond their traditional and local business models.

This study utilizes a qualitative methodological approach of exploratory multiple case studies (Yin, 2009) to investigate the support of cluster initiatives for BMI of SMEs in the context of Bolivia. The case studies consist of embedded cases (Yin, 2009), that is five cases of SMEs that are part of the UMSS cluster initiative, three from the food cluster and two from the green technology cluster.

Exploratory multiple case studies incorporate key elements derived from a thorough review of relevant literature, reports and other pertinent studies related to the subject matter (Yin, 2018). The adoption of the exploratory multiple case method is beneficial for initial and exploratory analyses, particularly when the variables remain undefined and the phenomenon is not yet fully understood (Ebneyamini and Sadeghi Moghadam, 2018). Likewise, the decision to employ exploratory multiple case studies was determined by the limited research conducted within these types of contexts. Additionally, participant and unstructured observations were employed due to their systematic involvement, which enables the collection of rich qualitative data that capture the complexity of social interactions and environments. Furthermore, observations can be triangulated with other data collection methods, such as interviews, to enhance the validity and reliability of the research findings (Patton, 2015).

Regarding the sources of information used in this study, both primary and secondary data were employed. For primary data, semi-structured interviews were conducted with managers and owners of SMEs. The interview guide was developed based on the companies' participation in the mentioned clusters. The information gathered aligned with various aspects, including the role within the company, main products or services, organizational structure of the SMEs, types of external partners, relationships with the cluster initiative and the degree of involvement in various cluster activities and services. Additionally, the interviews explored what benefits the owners/managers see in taking part in cluster activities as well as how this will support their SME's innovation processes and competitiveness.

For secondary data, we utilized historical information from UTT regarding the firms and the various processes in which the SMEs are engaged. This also included publicly available information on the organizations' websites and insights gained from their participation in various projects. The secondary data complemented information derived from different meetings, collaborations with other organizations and involvement in research and development projects.

The selection process for analysing the cases of SMEs participating in the cluster initiatives at Universidad Mayor de San Simon has been based on the following criteria:

1. The existence of a clearly defined involvement in cluster initiatives at Universidad Mayor de San Simon.

2. The participation in any project in collaboration with the support of the university aiming to support BMI, as research projects, machine design and prototyping, processes and product design, management assistance or other joint development activities.

3. The availability of historical data in the university at the Unit of Technology Transfer at UMSS in the context of cluster initiatives.

Based on the aforementioned criteria, we have identified five SMEs, embedded in the two clusters, to be included in the multiple case studies. Table 4 identifies the characteristics of the enterprises participating in this study:

Regarding the interviewee's information, the participants are owners/managers of SMEs, responsible for all decision-making and implementing changes. They voluntarily joined cluster initiatives, seeing them as opportunities to form partnerships and gain business benefits. Their primary intentions were to enhance capabilities, access new markets and acquire knowledge to improve competitiveness. At the time, many interviewees were SMEs entrepreneurs facing growth challenges in Bolivia's dynamic economic landscape.

Their responsibilities included overseeing operations, making strategic decisions and playing key roles in innovation and technology adoption.

For data acquisition, informed consent was verbally obtained during recorded interviews, with durations ranging from a minimum of 45 minutes to a maximum of 75 minutes approximately, through which the research scope was presented.

Interviews were recorded to minimize data loss, in accordance with the explicit consent obtained from the interviewees. Transcriptions were executed verbatim, acquiring the interview content and serving as an initial analytical tool. Subsequently, a secondary review process was undertaken, involving attentive listening and the enhancement of interviewees statements and vocabulary. This refinement was needed by the fact that the interviews were conducted in Spanish language.

During the interview process, questions pertaining to the background and interest of the SMEs were asked in a general manner. The terms “Business Model” or “Business Model Innovation” were not introduced to avoid misunderstandings of the idea, but the questions concerned the components of the value dimensions, such as important resources, products or service offered to customers etc., were introduced and subject to inquiry. It is important to note that every enterprise has a business model, whether explicit or not (Magretta, 2002).

Data integrity and validity were validated through triangulation, combining diverse perspectives and expertise among interviewees. We supplement primary data with observation, reports and information from UTT, encompassing digital and manual data.

When faced with uncertainties, we prioritize reliable sources, particularly interview data and the owner's expertise in the participation in cluster initiatives, aligning with Leuffen et al. (2012) recommendations. Researchers independently review data, fostering discussions for a comprehensive understanding, enhancing theoretical and empirical results quality.

For the analysis, the principal idea involved was to explore what and how a cluster initiative can support BMI in SMEs, taking into account the dimensions of value and BMI components described earlier in the text. We then classified the main and specific activities (Table 5) performed within the cluster initiative at UTT-UMSS in relation with a specific BM value element and value dimension. These activities are carried out within this cluster initiative to collaborate with and support SMEs in developing their capabilities related to BMI and other areas, these activities could be seen as a potential benefit for the innovation of the SMEs business models.

The participation of different SMEs in the various activities of the cluster initiatives was classified into a BM value dimension and BM components resulting in an activity pattern along the BM value dimensions and components. This analysis allowed us to identify which BM value dimensions and components received the most and the least support activities. This analysis provided insights into how the cluster initiative may contributes to the BMI of the studied SMEs.

The development of new strategies and value offers (2b) is key to BMI for SMEs as it creates motivation and guidance for innovation of not only individual BM components and value dimensions, but also the whole architecture of the SME's BM and how it relates to the industry's traditional BMs (Teece, 2010). Strategies that respond to market demands, inclusive economic development or technological opportunities like new digital tools could impact SMEs' value propositions (Zott and Amit, 2015; Foss and Saebi, 2017).

Connection and interaction with research centers (1c) provide SMEs access to advanced knowledge, technology and expertise, supporting product, service and process innovation (Kowalski and Marcinkowski, 2014). At UMSS the various research centers have key resources for supporting development of products, services and processes, such as 3D-printers, laser cutters, laboratory equipment and so on (3c, 3d), that enable key activities such as research projects, joint development (1a, 1b) and development of new products, services or processes (3a, 3b). Research centers could also provide training, workshops and seminars (5a, 5b, 5c) for the skills that are needed to utilize and operate the various resources as well as increased knowledge in various technologies and business practices. The research centers may also assign advanced students in internships, thesis projects or volunteering students (5d, 5e) to the projects to facilitate the interaction and activities with the research centers.

Apart from the research centers UTT organize training, workshops and seminars focusing on market studies (4b), search for financing (1c), acceleration and circular initiatives (5a-5c) and cluster and innovation fairs (4a) where cluster members may exhibit their products and services as well as discuss innovation needs.

Then we used the empirical material in the five cases to categorize which activities that the SMEs had taken part in and what benefits the owners/managers had perceived in relation to the various BMI value dimensions and components. This resulted in a table (Table 6), describing the cluster activities and how they related to the SMEs' benefits to support their BMI. Within the time frame of the study, we had no possibility to ask for or observe implemented changes in the SMEs' business model, thus we had to rely on the owners/managers' view of perceived benefits. The classification of SMEs activities and benefits into BM value dimensions and components were done independently by three researchers and then compared. A couple of different classifications were identified, based on differing views on key activities and key resources. The two different classifications were discussed and agreed upon.

Employing a structured approach, the analysis explores the impact on three value dimensions: value creation, value delivery and value capture, and the nine value components, drawing on the framework proposed by Osterwalder and Pigneur (2010), Table 6 categorizes the cluster activities and benefits for the five SMEs in terms of how they relate to the BMI value dimensions and components. In the value dimensions, it can be discerned that value creation activities have the highest impact, accounting for 83% of all perceived benefits. Value delivery is impacted to a lesser extent at 11%, while value capture is impacted the least, with only a 6% of the benefits.

The key findings have been organized into nine themes; (1) focus on value creation with an emphasis on development of key resources, (2) student internships as liaisons and providers of technological knowledge, (3) beneficial university support, (4) specific support for food cluster – access to laboratory equipment and food safety registration, (5) diverse connections and collaborations, (6) the missing part – architectural BMI, (7) varied engagement in value delivery, (8) limited activity and perceived value in value capture and (9) varied participation across enterprises.

The study identifies a pronounced emphasis in the cluster activities on the value creation dimension, with a particular focus on BM components concerning key resources. Notably, 61% of the perceived benefits revolve around key resources, indicating their crucial role in the cluster initiative for fostering innovation in SMEs' business models.

Within key resources, the access to prototyping equipment (3c) stands out as a particularly valuable for the SMEs. All SMEs participating in this study received support for design and prototyping of new production equipment/machines, to upgrade their production process making production more cost efficient and/or enabling quality improvements. In the design and prototyping of new production equipment the SMEs got access to rapid prototyping resources such as 3D-printers, CAD/CAM software and competent personnel. The SMEs did not have access to such resources and skills in their own firms, thus providing them with support to innovate in their production process.

Student internships, particularly connected to the activities of machine prototype design and access to laboratory equipment and food safety support, showed to be particularly beneficial to all the SMEs. In this study, all SMEs had student interns acting as liaisons between the SME and the university, facilitating contacts and access to services, as well as providing the firm with technical knowledge in prototyping and laboratory analysis.

Training activities (5a) in design thinking and rapid prototyping was beneficial for three of the SMEs in conjunction with their prototyping projects. These three SMEs also took part in workshops (5b) involved themselves in workshops and acceleration programs focusing circular economy issues, exploring how their operations and business model could become more circular. Four of the SMEs participated in networking seminars where they had the opportunity to meet and interact with representatives of other stakeholders such as suppliers, partners and sales.

In order to be eligible for distribution in food retail chains in Bolivia food firms need to be registered in an official food safety register. This registration requires a laboratory analysis by a state certified laboratory certifying that the firm's food items are safe for human consumption as well as specifying the content in the food item. The three food firms did not have such a registration due to it being expensive and the firms until then had relied on distribution outside retail chains, that is at informal food markets. UMSS has a certified laboratory, thus two of the food firms, obtained such a registration for a subsidized fee giving them possibility to distribute their food items through retail chains in the country. The third food firms were in the process of obtaining such a registration at the end of this study. Besides opening a new distribution channel, the food SMEs also perceived benefits in added knowledge about their products and their nutritional value, that could be used in their marketing.

Key partnerships and connection with other SMEs (4c) were valuable activities for three of the SMEs. Apart from the valuable interaction with university research centers(1c), that is to access and use their prototyping and laboratory equipment, two of the SMEs also were involved in research projects to experiment with new raw materials to develop new products. Three of the SMEs looked for new logistics and distribution partners. Enterprise 1 and 4 were searching for logistics partners to collect raw material and to distribute food items respectively. Enterprise 2 searched for suppliers of certain items. As a university unit, UTT has various connections with retailers. In this regard, it is valuable to involve these connections with participating SMEs, as this can facilitate the provision of resources and foster relationships with other SMEs. Establishing such connections can enhance trust and provide a competitive advantage compared to other enterprises and retailers. This is particularly important in relation to the offerings that suppliers provide to different organizations. However, the large size and diversity of networks within the clusters makes it challenging for these initiatives to provide focused support when trying to identify specific partners. This is because the wide range of participants and activities can complicate targeted matchmaking efforts.

While all the food firms and enterprise 4 in the green technology cluster engaged in either development of new products or new raw materials, and three of the SMEs took part in workshops on circular economy and circular business models, none of the firms involved themselves in activities to change or modify their value proposition. While the aim of the cluster initiative is to support the SMEs in their pursuit of growth, innovation and increased competitiveness, implying a change in their traditional business model, the SMEs demand for a more radical change of the whole architecture of their business model was low. Instead, they preferred a more evolutionary or incremental approach to BMI. To a large degree the activities in the UTT-UMSS support were designed by the espoused needs of the firm themselves. Thus, they identified needs primarily connected to technology development, that is new production equipment and laboratory analysis, and skills and knowledge connected to these activities.

Four of the enterprises actively engaged in trade fairs (4a) and innovation fairs, reflecting the value of value delivery, representing 11% of the benefits. The trade and innovation fairs are monthly university activity creating possibility for connections and synergies between SMEs and the university, establishing connections with novel channels. All firms, except enterprise 4, took part in these events. Enterprise 4 faces challenges due to its location, highlighting the importance of geographic considerations in the effectiveness of these activities.

Three of the firms made initial attempts to search for financing for scaling up their activities. These were limited activities, as the cluster initiative could not give any substantial support to the firms when preparing for contacts with and talking to government, banks or other financiers.

Analysis of individual enterprises reveals varying degrees of involvement. Enterprise 2 emerges as the most engaged, participating in 31% of the activities, showcasing a proactive approach to BMI. Conversely, Enterprises 1, 3 and 5 exhibit participation ranging from 14% to 19%, reflecting diverse perspectives and needs.

Enterprise 1 is actively participating in a range of activities aimed at improving the overall performance of the organization, mostly involved in the improvement of production equipment with a new sesame extruder, obtaining a food safety registration and finding a new distribution partner. When summarizing the benefits on the BM value dimensions in enterprise 1, the focus is on the value creation dimension of the business model, but not with the whole architecture of their business model and not with their value proposition. Direct benefits from value delivery activities are marginal, even though the food safety registration is an indirect benefit and potentially very valuable to this food SME. However, no specific cluster activity or connection to other SMEs in the cluster were made to prepare for contacts and negotiations with retail chains during the study. The enterprise did not take part in any value capture activity. In summary, this enterprise perceived benefits in seven out of the 36 activities outlined in this study, representing approximately 19% of the involvement in cluster activities.

Enterprise 2 is the most involved SME in the cluster activities and is actively attempting to innovate its business model with the support of UTT-UMSS. Like enterprise 1 it is a food company and has mostly involved itself in the improvement of production equipment, a new hammer mill, obtaining a food safety registration and finding a new supplier. The enterprise has also taken part in business development workshops showing a more intense interest in scaling up issues of the firm. During the study period the firm has not involved itself in modifying or changing its value proposition or more deeply engaged itself in market issues. Enterprise 2 perceived benefits in 31% engagement of the cluster activities, that is 11 out of 36 activities. The active participation of enterprise 2 is influenced by the prior education of the managers/owners at UMSS university, this facilitates an easy connection with research centers and with cluster activities. Additionally, the vision of owner is to scale up and grow with the support of the university in the cluster initiative.

Enterprise 3 is, a food company like enterprise 1 and 2, has mostly taken part in the improvement of production equipment, a new wheatgrass extruder. It has also engaged in developing new products with the same raw material as they currently use. Overall, they perceived less benefits from the support activities than enterprise 1 and 2, that is in five out of 36 activities, in approximately 14% of the total activities conducted for this study.

Enterprise 4 is part of the green technology cluster. Like the other enterprises it is mostly involved in the improvement of production equipment, a new Dutch pile and taken part in business development workshops showing a more intense interest in scaling up issues of the firm, as well as workshops on circularity. However, its location in another city than UMSS, limits its active participation in various activities, perceiving benefits in seven out of the 36 activities, constituting approximately 19% of the total.

Enterprise 5 is part of the green technology cluster. Like the other enterprises it has mostly been involved in the improvement of production equipment, a new mixer and taken part in business development programs showing a more intense interest in scaling up issues of the firm, as well as workshops on circularity. Approximately 17% of the activities were perceived as beneficial, encompassing six out of the total 36 activities. Enterprise 5 is a young firm, recently founded in 2021, making it, in a relative sense, very active in the cluster activities, due to its size and young age.

The enterprises 1, 3 and 5, with the most limited participation and benefits, varying from 14% to 19% of the benefits, perceived two main challenges limiting their participation in the cluster activities: prioritized activities in their own business and different visions regarding the support from the cluster initiative. The first challenge concerns the balance between scaling up as a long-term objective and dealing with more short-term problems and goals. The latter often had to be prioritized due to limited availability of time and financial needs. The second refers to the limited capabilities that the enterprises and their managers have, making it difficult to take advantage of all the support activities. Enterprise 4 is located in another city and could only in a limited way participate in onsite activities like fairs, seminars and some trainings.

Previous research has highlighted the need for SMEs to enhance their capabilities by collaborating with other organizations (Haddad et al., 2020; Heikkilä and Heikkilä, 2017; Swasty, 2015; Zortea-Johnston et al., 2012). This collaboration is essential for defining and improving their current business models to maintain competitiveness in an environment marked by significant and frequent changes, often presenting numerous opportunities for BM adaptation and innovation (Abdelkafi et al., 2013; Foss and Saebi, 2018; Lingens, 2023; Rayna and Striukova, 2016; Teece, 2010). One way of facilitating collaborations between SMEs and other local and regional organizations in a resource-constrained contexts (Maclean et al., 2023) like Bolivia, is the formation of a cluster initiative led by a university (Klofsten et al., 2015; Sölvell et al., 2003).

From a modular view on BMI (Foss and Saebi, 2017) the findings concerning what and how cluster initiatives support BMI in SMEs reveal that value creation innovations, especially through the access to prototyping equipment with the design of machine prototypes and with access to laboratory equipment and food safety support, is a central focus for the studied SMEs, constituting 61% of the perceived benefits. Student internships play a pivotal role supporting the firms in the processes of designing machine prototypes and obtaining food safety support registration. Additionally, seminars and training activities significantly contribute to SMEs' capabilities and skills development related to prototyping and laboratory analysis.

This pattern of focus on value creation innovation in resource constrained contexts is in line with prior research that observes two kinds of main innovations in resource constrained contexts: cost innovations and affordable value innovations (Cai et al., 2019; Dabić et al., 2022). For all five SMEs in this study the cost of innovation activity, as well as how the innovation would benefit the cost of their production and adding value to their products, were the main focused benefits in the cluster activities.

Moreover, the access to advanced and flexible product development equipment, such as 3D-printers, CAD/CAM-technology, laser cutters, CNC-equipment and so on at an affordable cost is often of high value in resource-constrained contexts (Maric et al., 2016) as it allows the local firms to co-create the prototypes with university experts and student interns. This was important for all the five enterprises in this study when prototyping new production machines as their existing production lines were a mix of acquired low-cost machinery and their own developed machinery and solutions. Thus, new machinery had to be adapted to the SMEs' unique production lines.

The role of technical requirements and standards in innovation in resource-constrained contexts have mostly been studied for the innovation of low-cost and affordable medical technology (e.g. Verma, 2017) recognizing the need for affordable support from authorities and/or other specialist organizations. In this study, all the three food SMEs recognized the value of getting access to laboratory equipment and skills to obtain a food safety registration. While the registration does not guarantee distribution of the SMEs' products in the national retail chains, it qualifies them for negotiations with the retail chains and potentially opening new channels to distribute their products.

Thus, the case findings indicate the beginning of a resource-driven BMI-process (Osterwalder and Pigneur, 2010), that is the BMI process starts from changing or developing key resources and then may continue towards changing the value proposition and customer relationships, segments and/or channels. The preference for a resource-driven BMI process might be due to the participating firms feel their most urgent need is in developing their key resources, that is technology development. It might also be explained by the intermediary organization, UTT-UMSS, relative lack of supporting activities in marketing, organizational and cultural change and related issues as well as overall BMI-supporting activities.

The cluster activities related to value delivery, for example market studies, participation in fairs and value capture activities, for example seeking financing opportunities, were not recognized as particularly beneficial to the SMEs in this study. Prior research in resource-constrained contexts has observed that SMEs in such contexts often prefer local suppliers, customers and local financiers whom they can trust (Shibin et al., 2018). Thus, introducing the SMEs to potential, and for the SMEs unknown, new suppliers and customers in cluster and innovation fairs, and expect that new relations will form, might be a too high expectation. Moreover, the clusters are predominantly industry organized and not organized according to value chains or value networks. A food SME looking for new distributors would like to meet distribution firms, not other food firms. According to the same logic a food SME looking for financing opportunities would like to meet banks and other financing firms, not other food firms.

Joint innovation activity between two or several SMEs might also be hard to achieve in resource-constrained contexts, because of trust issues (Gupta et al., 2016). The low interest for joint project development in this study give evidence to such challenges, even though joint projects are an effective way of sharing costs and risks and high-lighted by previous research (Haddad et al., 2020; Heikkilä and Heikkilä, 2017; Swasty, 2015; Zortea-Johnston et al., 2012).

In terms of overall BMI, the five SMEs engaged in incremental or evolutionary BMI (Foss and Saebi, 2017), changing their BM in a piecemeal manner with the support of cluster activities. These innovations were new to the firm but not new to the industry. In terms of changing the architecture of the BM in the studied SMEs none did so during the study period. However, three of the SMEs (enterprise 2, 4 and 5) took part in business development workshops and participated in workshops on circular initiatives. While enterprise 1 and 3 seemed content keeping with a traditional business model focused on local markets and local resources, enterprises 2, 4 and 5 aimed to scale their business to a national level going beyond a business model with a local focus. This is in line with prior research on small firms and local communities in resource-constrained contexts differentiating between local grassroots innovators and domestic corporate innovators (Gupta et al., 2016).

Previous research on cluster initiatives has high-lighted five success factors for management of a cluster initiative (Klofsten et al., 2015), that is a well-defined idea of what needs to support and the target group, driving forces and commitment, attractive set of activities for the members, critical mass of members and well-organized resources. Prior research (Klofsten et al., 2015; Sölvell et al., 2003) presents mainly these initiatives as a significant opportunity for the transfer of technology (Klofsten et al., 2015; Sölvell et al., 2003) to the SMEs. In this study we confirm this main focus on technology transfer in cluster initiatives also in lower-middle income countries and a resource-driven BMI-process (Osterwalder and Pigneur, 2010) especially focusing to support changes in key resources. However, the technology transfer in this study is not about the latest high-tech, rather more basic technology transfer. Many SMEs in lower-middle income countries find technical equipment and competence expensive and lack the technical competence to utilize the technical equipment. Cluster initiatives can support SMEs to overcome these barriers. In this case, the intermediary organization UTT-UMSS, possesses a strong understanding of the technical knowledge that can be generated through collaborations with research centers and other organizations.

The selection of participating cluster firms in cluster activities needs to be careful and pre-conditions such as motivation for support, geographical proximity, available time and resources, type of needed support activities as well as a collaborative orientation need to be assessed before starting support activities. Several of the SMEs in the cluster initiatives had time and resource restrictions being immersed in various day-to-day activities and have different alignments and sizes in their composition. From a BMI-perspective it is especially important to understand if the owners/managers of the SME are content with a traditional and local business model or if the owner/manager of the SME aims to scale or change their business model in a more radical way (cf. Gupta et al., 2016). Both types of SMEs might be interesting to target for the cluster initiative but the set of activities and how they are organized might be quite different. A proposal is to divide the cluster activities into two tracks; evolutionary/incremental BMI and radical BMI.

For an SME aiming to stay with a local business model the access to technical equipment and knowledge in the cluster initiative might be satisfactory. For an SME aiming to scale or to more radically change their BM, the attractiveness of these support activities will be limited. Even though they might see value in various value creation support activities, they would also see the need for support when it comes to innovations in value delivery and value capture. While a resource-driven BMI-process might be a viable BMI process for these domestic corporate innovators (Gupta et al., 2016), the cluster initiative must provide support for innovation in value delivery and value capture. Collaborating with economic, business and management research centers can develop methodologies to influence and innovate SMEs business models, enhancing the value delivery and value capture dimension (Euchner and Ganguly, 2014; Sjödin et al., 2020) as well as integrating value chain members, such as suppliers and distributors, and financial organizations in the cluster activities.

This study investigates two research questions pertaining to the support of cluster initiatives to facilitate BMI for SMEs in Bolivia, while also exploring the associated implications.

When considering how cluster initiatives could impact the BMI of SMEs in Bolivia, it is worth noting that the support, primarily contributes to enhancing their capabilities in value creation. Especially providing access to technical equipment and knowledge is of high value for the SMEs to lower cost of innovation, lower cost of production and create affordable value innovations.

Business model research is predominantly conducted in resource-rich countries characterized by economically and politically stable structures. This highlights the need for further research in resource-limited and more informally organized countries to understand how such contexts influence companies' business models and their efforts to innovate these models (Arandia Arzabe et al., 2024). The study underscores that SMEs, due to resource constraints, often rely heavily on external collaborations to drive BMI, which not only provides them with innovative solutions but also helps in overcoming challenges linked to limited internal capacities (Amit and Zott, 2012). Thus, leveraging clusters and external innovation networks is a strategic approach for SMEs in resource-constrained contexts.

This study provides theoretical contributions to the literature on BMI in resource-constrained contexts, such as lower and middle-income economies. First, our findings suggest that cluster initiatives and their associated activities serve as mechanisms for fostering BMI among SMEs operating under resource constraints. These initiatives in this type of contexts share similarities with frugal innovation approaches (Dabić et al., 2022), particularly in how they align with contextual constraints and opportunities for innovation. Cost efficiency and affordable value innovations emerge as important factors in this process (Cai et al., 2019), as demonstrated by the case studies where SMEs perceive value in participating in cluster initiatives, especially concerning access to technical equipment for rapid prototyping and laboratory analysis. However, the extent to which SMEs benefit from such participation depends on their development stage and willingness to engage in innovation activities (Karaev et al., 2007).

Second, our research enhances the understanding of BMI in resource-constrained economies, supporting the notion that BMI in these settings follows an evolutionary or incremental trajectory (Foss and Saebi, 2017). This incremental approach is shaped by resource-driven considerations (Osterwalder and Pigneur, 2010), where cost constraints and financial savings influence how SMEs innovate. In line with prior research on cost innovations and affordable value innovations we draw the conclusion that most SMEs in resource constrained contexts would probably mostly value support for an evolutionary or incremental BMI-process (Foss and Saebi, 2017), while fewer managers/owners of SMEs would have the ambition for more radical/architectural BMI (Foss and Saebi, 2017). However, participation in cluster initiatives provides SMEs with opportunities for collaborative innovation through interactions with other firms and organizations that may foster SMEs to increase their ambitions and increase their capabilities to innovate to move beyond the traditional and local business models that dominate the lower- middle income economies.

Additionally, our study highlights an observed lack of emphasis among SMEs on the value capture and value delivery components of their business models. This may stem from limited motivation, interest or knowledge gaps that constrain entrepreneurs' understanding of these components (Parrilli, 2007). Furthermore, this cluster initiative itself appears insufficiently structured to support value delivery and value capture processes, potentially due to challenges associated with traditional academic institutions playing a role in these initiatives.

Our findings suggest that cluster initiatives could enhance innovations in value delivery components by refining their focus and recruitment processes, as SMEs tend to seek complementary rather than directly competing firms (Günther and Meissner, 2017) when intending to scale up their business. This strategic alignment fosters collaborative synergies that support BMI beyond mere competition avoidance.

Finally, our research suggests that greater engagement of research centers and interdisciplinary expertise could enhance both value delivery and value capture processes within cluster initiatives. Incorporating diverse academic and business perspectives into cluster activities could strengthen linkages between SMEs and external knowledge sources, thereby enriching BMI efforts. Specifically, increased involvement of university divisions specializing in finance, business and management may help address gaps in value capture by equipping SMEs with the competencies needed to attract financial resources and investment opportunities.

Our study has several limitations. First, it is based on five cases of SMEs participating in the cluster initiative led by UTT-UMSS in the Cochabamba region in Bolivia. The five SMEs are not representative for the two clusters, they are rather some of the more active SMEs in the two clusters. Thus, the findings are explorative and give a first impression on what and how cluster initiatives may support SMEs in their BMI-processes in this particular context. Identifying variables connected to BMI in this context that may serve as a foundation for subsequent, more comprehensive research endeavors involving a larger sample size and incorporating additional variables. Second, cluster initiatives may look very different, not only in terms of type of economy, but also in terms of type of industries involved, type of leading organization (e.g. university, regional political organization, industry associations), as well as number of active cluster members. We have studied one type of cluster initiative; it would be highly productive to explore other insights focused on SMEs to encourage and support innovative business models in diverse regions and contexts. Such studies may strengthen the findings of this study and develop a broader understanding of the phenomenon.

The authors express gratitude to the managers of the small and medium-sized enterprises for generously contributing their perspectives and invaluable insights during the case studies conducted for this study.