Innovating with Limited Resources: The Antecedents and Consequences of Frugal Innovation

Abstract

Frugal innovation is a resource scarce solution for emerging market firms. Based upon the resource-constrained innovation perspective, this research theoretically explores and empirically examines the drivers and consequences of frugal innovation. The results of a firm-level survey show that two types of frugal innovation (cost innovation and affordable value innovation) positively affect the performance of emerging-market firms. We also address the issues of how emerging-market firms deal with institutional, technological, and market constraints in emerging markets, and we show how these constraints drive frugal innovation. We find that emerging-market firms with higher levels of capability for institutional leverage and bricolage, and firms that face perceived dysfunctional competition, tend to generate more affordable, value-added new products. Overall, these findings have important implications for emerging-market firms seeking to conduct frugal innovation in resource-constrained emerging markets.