Key capabilities for frugal innovation in developed economies: insights into the current transition towards sustainability

Abstract

Frugal innovation has become a requirement for success in resource-scarce environments, a situation that the COVID-19 pandemic has exacerbated. In this context, the literature has developed several frugal innovation approaches for promoting sustainability, but there is no a widely accepted theory nor a predominant paradigm given the incipient and relatively new nature of a research domain that requires further studies. There is also a high potential for under-exploited markets, represented by low-income consumers who no longer concentrate on developing countries and where there is a cumulative number of consumers with minimal spending capacity, rising income distribution inequality, and the increasing polarization of wealth and risk of poverty. This paper contributes to the literature by examining from a Resource-Based View perspective, the critical role of two key organizational capabilities, namely market-focused learning and organizational ambidexterity, to develop firms’ innovation capability in low-end markets due to the unique characteristics of these markets. In doing so, the study employs partial least squares structural equation modeling (PLS-SEM) with a sample of 190 manufacturing firms to provide empirical support to our theoretical predictions that establish that: (1) market-focused learning capability drives organizational ambidexterity, (2) market-focused learning capability and organizational ambidexterity foster organizational innovation capability, which, ultimately, affects cash flow, and (3) market-focused learning capability has a stronger effect on organizational innovation capability in low-end markets. Contrary to our expectations, organizational ambidexterity has a stronger impact on organizational innovation capability in non-low-end markets, considering that this is the first step to shed light on this issue.

Value Creation through Frugal Innovation, Innovation Capability and Knowledge Sharing in a Circular Economy

“…This study determined the knowledge-sharing impact on the SMEs' value creation process. Knowledge sharing has been linked to innovative performance, whereas their moderating role can critically affect the firm's knowledge derivation and value creation abilities [43].…”

“…This study recognised the intervening function of frugal innovation between the innovation capabilities and the value creation process of the product and services. Innovation capability helps in the creation of innovative ideas, procedures and methods for acquiring the latest information and knowledge required for the innovation activities and processes of a firm [43]. Through a frugal innovation mechanism, firms can use the information received from different sources to support innovation activities to increase the value creation of the product and services [44].…”

“…Innovation capability facilitates the development of innovative actions/ideas, which provide more incredible speed and proficiency in the innovation processes for increasing the value creation of the product and services in the firm [41]. Though sometimes firms have sufficient resources to perform innovative activities, frugal innovation is the mechanism by which firms reduce costs and increase the value creation of their products/services [43].…”

How Enterprises Achieve Frugal Innovation: A Configurational Study Based on the Model of Organizational Symbiosis

“…The unique characteristics of the Chinese market, such as government support for innovation and a consumer base that rapidly adapts to change [20], provide a distinctive setting for frugal innovation. However, frugal innovation is not limited to developing countries [21]. Although the specific conditions of each country may affect the performance and impact of innovation, the fundamental principles and practices of frugal innovation can be disseminated across cultures and economic systems.…”

Thriving in Constraints: Exploring the Interplay of Human Capital, Social Capital, and Financial Constraints in Frugal Innovation within Family Businesses

“…Frugal innovation, a strategy catering to low-income consumers with limited resources, aligns with the needs of family businesses (Hossain, 2016). It benefits social and economic sustainability and taps into an untapped market, potentially increasing sales (Clausen andFichter, 2019, as cited in Lopez-Sanchez &Santos-Vijande, 2022). Frugal innovation is a practical strategy in a developing country like the Philippines, which has a rapidly expanding economy and a skilled workforce, to effectively cater to low-income consumers' needs (United Nations Industrial Development Organization, n.d.).…”