How entrepreneurship ecosystem influences the development of frugal innovation and informal entrepreneurship

• Date: 01 September 2020
• Author: Paul Agu Igwe,David Gamariel Rugara,Mahfuzur Rahman,Chinedu Ochinanwata,Kenny Odunukan
• DOI: http://doi.org/10.1002/tie.22157
• Published date: 01 September 2020

RESEARCH ARTICLE

How entrepreneurship ecosystem influences the development

of frugal innovation and informal entrepreneurship

Paul Agu Igwe | Kenny Odunukan | Mahfuzur Rahman |

David Gamariel Rugara | Chinedu Ochinanwata

Lincoln International Business School,

University of Lincoln, Lincoln, UK

Correspondence

Paul Agu Igwe, Lincoln International Business

School, University of Lincoln, Brayford Pool,

Lincoln LN6 7TS, UK.

Email: pigwe@lincoln.ac.uk

Abstract

This article critically analyses how the entrepreneurial ecosystem and institutional

environment influences the development of frugal innovation and informal entrepre-

neurship. There is a dearth of empirical research on African entrepreneurship ecosys-

tems and complementors that produce innovations in the informal sector. We

address this gap, by examining why and how informal businesses operate and evolve.

Based on a qualitative approach, interviewing 20 business owners in Nigeria, two

focus groups meeting with 5 and 7 business associations leaders, respectively, we

examine the role of institutional environments, how entrepreneurs operate and over-

come the barriers to entrepreneurship. The results reveal a model of determinants of

frugal innovation and informal entrepreneurship ecosystem comprising formal/infor-

mal rules, access to market, and family as important elements that act as a means to

effective knowledge flows, networking, capital, and resources sharing.

KEYWORDS

African entrepreneurship, entrepreneurial ecosystem, frugal innovation, informal enterprise,

institutional theory

1|INTRODUCTION

Entrepreneurship is not only seen as a way to driveeconomic develop-

ment but also changes in society (Ratten & Dana, 2019). In this paper,

we examine theentrepreneurial ecosystem(EE), the role of institutional

environments, and frugal innovation from “Entrepreneurship as Prac-

tice”(EAP) perspective. Institutional environment comprising political,

economic, legal,and cultural structures oftendefines the entrepreneur-

ial capacity of a nation (Agbloyor, Gyeke-Dako, Kuipo, & Abor, 2016;

White, Kitimbo, & Rees, 2018; Williams & Vorley, 2015). The last two

decades have witnessed tremendous innovations and technological

advancementin developing economies. These changesrange from new

forms of open innovations (OI) (Eckhardt, Ciuchta, & Carpenter, 2018;

Nambisan, Siegel, & Kenney, 2018), digital platforms, mobile transac-

tions (Tiwana, 2013), social enterprises (Ratten & Dana, 2019), new

ways of forming networks, and new social ecology of entrepreneurs

(Carroll & Khessina, 2005). The OI paradigm explains that firms are

increasingly sourcing knowledge and technologies from outside their

boundaries (inflows) to accelerate internal innovation (Nambisan

et al., 2018).

EE comprises the interacting components of entrepreneurial systems,

which foster new firm creation in a specific regional context (Mack &

Mayer, 2015). The EE model consists of six main elements, which are:

Policy, Finance, Culture, Support, Human Capital, and Markets

(D. Isenberg, 2011). Platforms are dependent on the EE of complementors

that produce innovations (West, 2014). Notably, the Organization for

Economic Co-operation and Development (OECD, 2017) reveals that the

environment for innovation has changed and the importance of new and

small businesses to the innovation process has increased. Bessant and

Tidd (2013) support this argument based on some findings, which

appeared to suggest that, when adjusted for size, small-firm's innovations

made more new products than larger firms, in contrast to findings, which

appear to favor large firms. Some studies describe the pattern and pro-

cesses that lead to the development of products and services through

active collaboration between formal and informal actors (Knorringa, Pesa,

Leliveld, & van Beers, 2016). Frugal innovation represents a new frame of

DOI: 10.1002/tie.22157

Thunderbird Int. Bus. Rev. 2020;62:475–488. wileyonlinelibrary.com/journal/tie © 2020 Wiley Periodicals LLC. 475