Business models in rail infrastructure: explaining innovation

Abstract

Policy decisions about the UK railway industry often draw on models and frameworks that treat technology and organisational processes as static and unchanging. As a result, policy makers often have limited understanding of how changes in policy will influence organisational knowledge, learning and the allocation of risk that subsequently affects innovation and system development. This paper applies a business model lens, focused on the mechanisms firms use to create and capture value, to connect policy decisions to subsequent changes in the organisation and industrial structure of the UK railway sector. By analysing innovation-related activity across several different governance structures, the paper highlights how policy impacts in network-based infrastructure sectors are mediated by business strategy, sometimes leading to unintended outcomes. The findings suggest that policy to improve the performance should focus upon coordination rather than just ownership. The application of a business model approach to complement existing economic and policy models in system analysis for policy decisions is advocated.