Leveraging frugal innovation in micro- and small enterprises at the base of the pyramid in Brazil: an analysis through the lens of dynamic capabilities

Abstract

Purpose This paper aims to analyse the factors that influence frugal innovation (FI) in micro- and small enterprises (MSEs) at the base of the pyramid (BOP) through the theoretical lens of dynamic capabilities. The input–process–output (I-P-O) framework was used as a tool to support the analysis of FI as a process. Design/methodology/approach A multiple case study was performed with 25 MSEs at the BOP in Brazil, all of which were in the food industry. Findings This study indicates that dynamic capabilities are present in enterprises that are migrating to low income and middle-class consumers, which influences their FI practices. To analyse FI in the context of MSEs at the BOP, the I-P-O framework was adapted. Enterprises that have focussed on extremely poor and subsistence markets develop more disruptive innovation, aiming to reduce the final prices they charge consumers. The primary focus of these enterprises is on maintaining ordinary capabilities. Enterprises that have focussed on low income and middle-class customers have implemented incremental innovation, adding value based on colonial tastes and close relationships with their consumers. Such a strategy demands changes in the physical facilities, use of social media and investment in quality control of these enterprises. Considerations for policymakers and institutions are also presented. Originality/value The use of a dynamic capabilities lens in such a context is a new approach and provides a relevant basis for further studies. The study has identified different approaches to FI and different sets of barriers and successful practices, both related to the target market segment, that could leverage FI. This study contributes to case studies from Brazil, spreading the research context beyond Asia.

The Role of Dynamic Capabilities Based on Digital Literacy on The Performance of Marketing Innovations for Micro, Small and Medium Enterprises

“…Environmental strategies are mostly carried out by organizations or strategic environmental analysis is part of the strategic planning component and is a process to always place the company in a strategic position, so that in its development it will always be in a favorable position (Ajibroto et al, 2018). Marketing can be defined as an overall system of business activities aimed at planning, pricing, promoting, and distributing goods and services that satisfy the needs of both existing and potential buyers (Borchardt et al, 2020). So that digital literacybased marketing competences explore more the market with the aim of exiting, while environmental strategy is more related to the production process and traversing into the company.…”

“…Marketing can also be interpreted as an overall system of business activities aimed at planning, pricing, promoting, and distributing goods and services that satisfy the needs of both existing and potential buyers (Borchardt et al, 2020). According to Ko & Liu (2016), several things can be considered in determining marketing competence.…”

Exploring the Research Regarding Frugal Innovation and Business Sustainability through Bibliometric Analysis

“…In local R&D projects, continuing innovation develops and provides insights into the production of cost-effective products. Business Borchardt, M; Pereira, G; Ferreira, AR; Soares, M; Sousa, J; Battaglia, D [129] Through the theoretical lens of dynamic capacities, this article examines the elements that drive FI in micro-and SMEs at the base of the pyramid (BOP).…”

Germinating seeds in dry soil: examining the process of frugal innovation in micro- and small-enterprises at the base of the pyramid

“…However, in the BOP literature, it is generally related to income. While there is no consensus on the exact income level below which a person is impoverished, some categorizations have been suggested: extreme poverty encompassing people living on US$1.00 per day or less; subsistence encompassing people living on US$1.00–US$3.00 per day; low-income encompassing people living on US$3.00–US$5.00 (Dembek et al , 2019; Borchardt et al , 2020b). Still, living with typical limitations of the low-income populations, there is a low middle-class.…”

“…Despite the fact that FI has received increasing attention in recent literature, there has been little discussion regarding the process of FI and the institutional contexts in which it develops (Annala et al, 2018;Borchardt et al, 2020b). Particularly in emerging economies, one of the significant gaps in the literature on FI is the lack of adequate explanations of the conditions which favor or incite FIs (Soni and Krishnan, 2014;Niroumand et al, 2020).…”