We develop a multi-level theory of business model innovation (BMI) that explains business model dynamics within established firms, integrating the processes happening at the individual, collective and organizational levels. Existing organizational level approaches portray BMIs as a firm-level phenomenon, but do not specify how they emerge and evolve over time, while micro-foundational approaches illuminate actors’ contributions but reduce BMI to a cognitive process at the level of individual managers. Our framework integrates these contrasting approaches, conceptualizing BMI as a complex process happening at three interrelated levels (micro-, meso- and macro-), and provides a set of propositions delineating the mechanisms and conditions where individual cognitive models (managerial schemata) are translated into organizational changes (routine reconfiguration). A set of theoretical propositions derived from this view offers a new ground for understanding how BMIs can lead to firm-level value creation and capture.