Exploring the Frugal Innovation Process: An Empirical Study of a New Emerging Market Phenomenon

Simon Hamacher

Student thesis: Master thesis


In the recent decades the study of innovation has been subject to various paradigmatic shifts. The economic surge in emerging markets has marked the beginning of yet another fundamental shift for innovation theory and practice alike. New concepts have emerged that mirror this change - one of them coined frugal innovation. Widely proclaimed as a great theoretical fit to the idiosyncratic nature of emerging market innovation the concept has picked up momentum and has propelled itself to the forefront of the discussion. However, the process around frugal innovation has so far only received limited attention. While current research does not adequately address the topic, it is also unlikely that the existing, developed market conceptualizations of the innovation process sufficiently capture the process behind frugal innovations. Motivated to address this apparent gap the author has decided to explore the elements and dynamics of the frugal innovation process. In order to build a theoretical understanding of the frugal innovation process the author adopts a pragmatic approach inspired by Eisenhardt’s (1989) seminal work on theory-building research. Combining case study research (Yin, 2003) with Grounded Theory (GT) (Glaser & Strauss, 1967), the author establishes three case studies around the innovation process behind frugal products. The outcome is then compared to theory. Based on a synthesis of both, a final model of the frugal innovation process is proposed. The resulting process model offers great insights into the frugal innovation process. Most importantly, the model highlights the importance of consumer needs as a starting point of frugal innovation. Furthermore, rather than limiting itself to product innovation, the frugal innovation process addresses consumer needs with a tripartite scheme, that is composed of product development, complementary innovations, and efficiency enhancing measures. Finally the model highlights the flow of knowledge and resources, and establishes compassion as the core driver of the need-based and human-centric nature of the frugal innovation process. The contributions of this study are five-fold. First, the model per se represents the first attempt to conceptualize the frugal innovation process as a whole, as to date there has been no other academic work that contributes an empirically backed model of the frugal innovation process. Second, the model shows that needs constitute the foundation, which the ensuing innovation process is built upon. Third, the author has shown that the cost/quality trade-off that seems to be a prevalent topic in the relevant literature does not hold in practice, i.e. certain needs are prioritized over others. Fourth, the model shows that frugal innovation addresses consumer needs with more than just cost-cutting or product innovation and thereby helps to clarify the real meaning of frugal innovation. Fifth, the author introduces the factor of compassion as an integral element in the frugal innovation process.

EducationsMSc in Business, Language and Culture, (Graduate Programme) Final Thesis
Publication date2014
Number of pages99