Frugal innovation capabilities: conceptualization and measurement

• DOI: https://doi.org/10.13169/prometheus.37.3.0259
• Published date: 01 September 2021
• Date: 01 September 2021
• Pages: 259-285
• Author: Avinash Shivdas,Saswata Barpanda,Soumya Sivakumar,Ram Bishu

Avinash Shivdas, Saswata Barpanda, Soumya Sivakumar and Ram Bishu259

RESEARCH PAPER

Frugal innovation capabilities: conceptualization and measurement

Avinash Shivdas*a, Saswata Barpandaa, Soumya Sivakumarb and Ram Bishuc

a Department of Management, Amrita Vishwa Vidyapeetham, Amritapuri Campus, Kollam, Kerala, India

b Department of Management and Marketing, Marymount University, Arlington, Virginia, United States

c Department of Mechanical and Materials Engineering, University of Nebraska, Lincoln, United States

ABSTRACT

Firms in emerging markets are rapidly developing frugal innovation capabilities (FICs) in order to

harness the growth potential of these markets. Researchers have explored this frugal innovation

phenomenon through case studies of such firms. This nascent domain of study has been growing,

and the demand for a specialized focus on FICs and their measurement is strong. This paper aims

to satisfy the demand by conceptualizing FICs using the theoretical framework of dynamic capabil-

ity, developing a measurement scale, and empirically validating the scale to measure FICs. Data

from the medical device and automobile sectors in India were applied for this purpose. It is pro-

posed that FICs are a composite variable with four dimensions: value for money, acceptable quality,

scalability and marketability. The confirmatory factor analysis results validate these dimensions,

presenting a gateway to explore FICs and their applications.

Introduction

Emerging markets (EMs) hold within them a plethora of opportunities veiled by a highly turbulent

environment (Peng et al., 1999), underdeveloped institutions (Peng and Khoury, 2008), bureau-

cratic structures, weak intellectual property rights, unclear customer credit assessment and infra-

structural bottlenecks (Khanna and Palepu, 2010). The set of opportunities evoked is driven by the

rapid growth rates of EMs, resulting in the emergence of a large segment of upwardly mobile con-

sumers at the middle and bottom of the income pyramid (Prahalad and Lieberthal, 1998). The con-

sumer market in EMs in India is expected to reach $US 6 trillion by 2030 (Economic Times, 2019).

These consumers demand affordable products with a quality that is comparable with that of market

leaders (Zeschky et al., 2011; Bound and Thornton, 2012). De-frilled/de-featured products from

developed markets would fail to attract this unique consumer base (Govindarajan and Trimble,

2012). Thus, to capture this trillion dollar market, firms must rethink their innovation agendas.

Firms in EMs are revisiting the drawing board to develop innovative products that are

‘good enough’, customized to suit local consumer needs in terms of lower costs, portability, fewer/

different features, and ease of usage/maintenance/delivery across geographically fragmented mar-

kets. The innovative products in this distinctive class are termed ‘frugal innovations’ (Wooldridge,

2010; Ronald Berger Consultants, 2014), and a firm’s capability to deliver such innovations suc-

cessfully is its frugal innovation capability (FICs).

In addition to ‘frugal innovation’, related terms are applied to innovation in EMs – ‘Jugaad

innovation’ (Radjou et al., 2012a), ‘inclusive innovation’ (George et al., 2012), ‘low-end disruptive

innovation’ (Christensen, 1997), ‘resource-constrained innovation’ (Ray and Ray, 2010) and ‘cost

*CONTACT: avinashshivdas@gmail.com

ACCEPTING EDITOR: Steven Henderson

Prometheus 260

innovation’ (Williams and van Triest, 2009; Williamson 2010). Though there is a tendency to con-

sider frugal as equivalent to cheap, researchers have shown this to be otherwise. According to

Harris et al. (2020), frugal innovation does not indicate low quality; rather, it means providing the

best possible solution within given circumstances and constraints. Further, multinational firms

entering EMs are not able to offer products that are already being sold in mature markets and are

instead required to redesign their products and create frugal innovations in order to respond ade-

quately to the needs of EMs (Williamson, 2010; Zeschky et al., 2011). For instance, GE had to

develop a portable ultrasound machine and a handheld electrocardiogram machine for India and

China as their existing American products, even if de-featured, could not be successfully offered in

EMs (Zeschky et al., 2011). The COVID-19 pandemic has catalysed the need for frugal innova-

tions, especially in the field of medical devices. Makers Asylum, a makerspace in India, has

developed an inexpensive face shield kit priced at INR 55 ($US 0.73), one-third of the average

market price (Radjou, 2020). In fact, to combat the pandemic, EM governments are urging both

small entrepreneurs and large companies to develop low-cost ventilators, personal protective equip-

ment, and vaccines that can benefit society at large (Harris et al., 2020).

It is also observed that in order to survive in high velocity and uncertain EMs, such as

India (Pandit et al., 2018), firms have continuously to change/rejuvenate themselves, a core tenet

of dynamic capabilities theory (O’Connor, 2008). In uncertain environments, building dynamic

capabilities requires new situation-specific knowledge, risk taking by company leadership

(O’Connor and McDermott, 2004), rapid learning, rough prototyping (Veryzer, 1998) and exploring

co-development opportunities (Thongpapanl, 2005). Firms that want to exploit opportunities in

EMs recognize that the dynamic capabilities required in the current environment are different from

those developed in the past (Eisenhardt and Martin, 2000). Thus, this paper leverages the advances

in dynamic capability theory (DCT) to increase our understanding of firms’ capabilities to develop

frugal innovations. This paper not only uses the DCT framework to explore FICs, but also offers

a scale to measure FICs (see Slavec and Drnovsek, 2014).

Literature review

Frugal innovation

Frugal innovation is a resource-scarce solution that is designed and implemented in a resource-

constrained environment where the final solution, though significantly less expensive, is still good

enough to meet consumer needs (Hossain et al., 2016). Along the same lines, Agarwal et al. (2017)

define frugal innovation as a good enough quality product for resource-constrained customers.

Zechsky et al. (2014) state that frugal innovation involves higher technical novelty and market nov-

elty than good enough innovations. Tiwari and Herstatt (-2012) posit that frugal innovations seek to

create valuable offerings for their targeted customer by focusing on core functionalities, thus mini-

mizing the use of material and financial resources while fulfilling or even exceeding prescribed

quality standards. Bhatti and Ventresca (2013) adopt an input–output view and define frugal innova-

tion as ‘a means and ends to do more with less for more people’. Emphasizing the nature of frugal

innovation, Krishnan and Jha (2011) advocate that such innovation responds to limitations in

resources, whether financial, material, or institutional, and turns these constraints into advantages.

Furthermore, the authors propose that frugal innovations can lower costs by minimizing the use of

resources in development, production and delivery, or by leveraging them in new ways. Frugal

innovations that have been successful are not only lower in cost, but also outperform the alternative

and are largely scalable (Krishnan and Jha, 2011). The economic use of raw materials, reuse of

components and simpler designs in frugal products, compared with their ordinary counterparts,

ultimately have a positive impact on sustainability as well (Rao, 2013). Other researchers look at

the export capabilities of frugal innovations and define frugal innovation as an ‘innovative, low-

cost, and high-quality product originating in developing countries and exportable to the developed