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Frugal Innovation in Brazilian Multinationals
Abstract
In recent years, emerging markets have come to represent the largest share of global GDP and have made gains in economic development and political influence. In turn, emerging market companies have taken on a new level of importance in driving innovation, local development and global competition. Advancing an integrative view that captures the diversity of innovation among companies in emerging markets, this book highlights the rapid evolution of emerging markets from imitators to innovation leaders. Building upon research conducted by the Emerging Multinational Research Network (EMRN) in collaboration with several universities in North and South America, Europe and China, this rich and expansive collection includes studies of innovation in regions yet to receive focused analysis in the field. The authors also re-examine dominant theories of innovation and capability creation based on a broad range of case studies and research insights. Offering a taxonomy of emerging market innovations, this collection reveals the unique drivers, types, and outcomes of innovation in emerging markets.
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Perfumes industry has been exponentially developing due to last decade’s technological development, requiring larger investments and creative capacity from fine chemicals industry. Since creative capacity may be maximized through creation strategies and methodologies such as co-creation and design thinking, the aim of this paper is to analyze the role of design thinking in the process of co-creation among competitors. In order to achieve such aim, a unique case study was conducted in a representative enterprise in the Brazilian perfume industry, which was responsible for a triad co-creation process of a new product, involving two foreign competing companies in the fine chemicals industry. It is possible to assert that the paradigm shift with co-creation and design thinking strategies in such a knowledge and technology intensive industry maximized new products development process
Frugal innovations, i.e. affordable products and services with appropriately good quality, are getting increasingly important for securing long-term competitiveness in both, the developing world and in industry nations. Nevertheless, ensuring actual implementation of technology-driven frugal inventions remains an under-researched area. This study investigates modes and routines employed by techno-entrepreneurs from industry nations when innovating frugally. The study is based on the patent data of seven auto component sector firms from Germany with a documented history of contributing cost-effective solutions to frugal vehicles. With the help of a keyword analysis we identify the role of frugality in (patented) technical inventions. Select case studies of frugal inventions show that cost effectiveness and environmental sustainability can be often achieved by simplification of design and production process, as well as by eliminating avoidable complexity, e.g. through standardization. The study shows that frugal inventions in the investigated firms are often driven by individual inventors, while potentials of open global innovation networks are under-utilized. Furthermore, the study shows that frugality can (only) be achieved by a holistic approach that encompasses the entire value chain, including logistics and waste management. The results are potentially beneficial for techno-entrepreneurs across industry sectors and product domains.
In this article, we elaborate the emerging concept of sustainable innovation and analyze the relevance of innovation as a means to solve wicked problems and enhancing sustainable well-being. We also examine the changing conditions for innovation creation: building global knowledge hubs and local innovation ecosystems. As a result, the drivers of innovation and opportunities to utilize the untapped innovation potential of people outside traditional innovation contexts are expanded and diversified. Ultimately, the success of sustainable innovation constitutes its impact on the well-being of people and vice versa: sustainable well-being is an important source of innovation and growth. The article adds to the conceptual development of sustainable innovation and its motivation, which lies in combining competitiveness, the well-being of people, and inclusive solutions.
Purpose
The purpose of the study is to propose a conceptual model of frugal innovation and how it is linked to value creation.
Design/methodology/approach
The study was exploratory in nature whereby previous studies were explored to identify the dimensions of frugal innovation. The studies were explored from selected databases including Google Scholar and ProQuest using the key word search, “Frugal innovation”, “Jugaad innovation”, “Value creation” and “Environmental munificence”. The Review process included the studies from 1991 to 2017.
Findings
The study suggests that frugal innovation is a multidimensional construct with affordability, simplicity, quality, sustainability, resilience, management support and defeaturing as its dimensions. The study found that frugal innovation is an important predictor of value creation. The study also proposes the moderating effect of environmental munificence on the relationship between frugal innovation and value creation.
Practical implications
The study invokes entrepreneurs, academicians, and managers to be more inclined towards the bottom of the pyramid by utilizing fewer resources. The Study contributes to the strategic entrepreneurship literature by developing a conceptual framework of frugal innovation and linking it to the value creation.
Originality/value
The conceptual framework proposed is based on selected dimensions which seem to be lacking due to various conceptualizations and meanings in the literature. The study is the first of its kind which have proposed the dimensions of frugal innovation.
The purpose of this paper is to provide a broad understanding of the concept and process of sustainability-oriented innovation (SOI). It provides a useful starting point for people aiming to invest human, financial, and other resources in innovations that improve the world. While we build on the best available scholarship, our academic contribution is primarily one of synthesis and simplification. Academic and practitioner readers who are savvy either in innovation and entrepreneurship or in sustainability will find it most useful, as a bridge between these two fields.Our ideal readers might include:• An entrepreneur wanting to understand sustainability as a business opportunity• A financier aiming to invest in an SOI to diversify the portfolio• A corporate R&D group seeking to integrate sustainability into its innovation process• A corporate strategy or venture capital group considering strategic investments in SOI• A corporate sustainability group looking to support top-line growth through innovation• A public agency willing to craft regulations and policies to spur SOI• Graduate students considering entry into any of these rolesOur goal is to provide the basis for a common language and understanding of the intersection between sustainability, technology and innovation, business, and regulation.The paper is divided in four parts. The first two parts give the reader an overview of the territory and characteristics of SOI, and the process through which it happens. Having identified both the stakes and challenges associated with SOI, the third part makes the case for building Centers of Excellence dedicated to increasing the success rate of SOI. Finally, the fourth part reflects on what dimensions and questions might be considered to evaluate SOIs in their early stages in order to guide improvements or select among different SOI proposals. Ultimately, we propose a high-level decision framework that can be the starting point for further research and refinement.
The concepts of frugal and reverse innovation are recent entrants to the innovation literature. Frugal innovation conveys the important idea of innovating under circumstances of resource scarcity. Reverse innovation refers to another significant turn in thinking and practice – innovations from low-income contexts can enter wealthier markets, a major shift from the previous innovation paradigm. There are some hallmark examples of these types of innovation but the current academic literature is still limited. The purpose of this article is to study these concepts and present a conceptual framework that combines underlying drivers. We also present ideas for future research avenues.
I analyze how the study of developing country multinational companies (DMNCs) can help extend theory. The renewed interest in DMNCs has generated a ‘Goldilocks’ debate, with one camp arguing that the analysis of DMNCs is ‘hot’ and requires new theory, another camp arguing that it is ‘cold’ and no new theory is required, and a third camp arguing that it is ‘just right’ and it can be used to extend theory. I follow this third camp and argue that the unique conditions of developing countries influence the internationalization of DMNCs, creating a laboratory for extending theory. I illustrate this idea by reviewing some of the key theories and models of the multinational company and explaining how they can be extended with the study of DMNCs.
Product and service innovations aimed at resource-constrained customers in emerging markets have recently attracted much research and management attention. Despite the prominence of this topic, however, there are some misconceptions around the different innovation types in this domain that may limit managers’ ability to derive informed implications for strategy and operations. This article analyzes the different types of resource-constrained innovation—cost, good-enough, frugal, and reverse innovation—conceptualizes the distinctions between them, and discusses the implications for strategy providing a framework for managers to systematically analyze their own approaches to resource-constrained innovation and craft proper development processes. By highlighting the differences between the various types of resource-constrained innovation, this article also provides the conceptual grounds for further systematic research.
The prominence of Emerging Market Multinational Companies (EMNCs) in the global marketplace has challenged our assumptions about the nature of global competition and corresponding strategy. We use an inductive approach to conduct historical analysis of eight companies that originated from key emerging markets viz China and India. We examine the various strategies that EMNCs devise to circumvent the resource challenges faced in their home markets and develop routines and key capabilities that lead to their competitive advantage in developed nations. Our results suggest that EMNCs' foreign expansion is, on the one hand, based on their capability to acquire resources and absorb them to build their own advantage (supply-side-argument). On the other hand, it is also based on EMNCs' capability to find some market niches, i.e., entering into markets untapped by traditional MNCs (demand-side-argument). Finally, based on our analysis we propose a dynamic stages model suggesting that EMNCs' foreign expansion can be explained in three stages — licking the dirt to carve out the way; taking off with speed and strength; and around the world with excellence.
Both, the field of frugal and reverse innovation as well as the field of sustainability and its management have received tremendous interest in recent times. However, there is little literature on how both fields are related to each other and to what extent basic definitions are consistent or not. Against this background, this paper gives an overview of research in both areas and provides a view of the relationship between reverse innovation, sustainability management and performance constructs. It suggests a causal chain that puts three dimensions of sustainability management at the intersection of reverse innovation and performance. The link between reverse innovation on the hand and sustainability performance on the other hand is established through a differentiated perspective on dimensions representing different fields of sustainability management, i.e. the sustainability of resources used in value creation, the sustainability of the actual value creation processes, and the sustainability of the outcomes of value creation processes. To complete our framework, we also argue for a positive link between the three dimensions of sustainability management and a company’s market performance. Implications for theory and practice are given to foster future research in this area.
This paper takes a look at the research on Emerging country multinational enterprises (EMNEs) over the last 25 years, and argues that growth in EMNE activity over the last 10 years continues to be dominated by Asian Newly Industrialised Countries (NICs), and to a lesser extent by Brazil, Russia, India and China (the BRICS). Instead of focusing on the success stories, we ask: Why have so few emerging home countries failed to fulfil their potential as significant outward investors, and converged (at least) with the NICs? Many of the EMNEs from the non-NICs continue to reflect limited O advantages, and unless they are able to upgrade their firm-specific assets, this trend is likely to continue. We propose that - in line with extant IB theory - the extent and intensity of EMNE activity is a function of their O advantages, which in turn are largely a function of their home country L advantages. We also call into question the soundness of the idea that EMNEs are able to utilise asset-seeking foreign direct investment (FDI) to build up their O advantages. Such asset-augmentation presumes that the firms have non-location-bound firm-specific assets that have the potential to be upgraded and augmented.
This paper studies the sequence of value-added activities in the multinationalization of firms from developing countries. Analysis of twenty Latin American multinational firms, or Multilatinas, reveals three alternative sequences: start multinationalizing with marketing subsidiaries in all countries, start multinationalizing with production subsidies in all countries, or start multinationalizing with marketing subsidiaries in some countries and production subsidiaries in others. These alternative sequences are explained through the integration and extension of arguments from the incremental model of internationalization and its discussion of difficulties, and the eclectic paradigm of foreign production and its discussion of advantages. I argue that firms that benefit from a location advantage in the country of origin are more likely to start multinationalizing using marketing subsidiaries, firms that benefit from a location advantage in the host country are more likely to start multinationalizing using production subsidiaries, and firms that face difficulties in the transfer of products across countries are more likely to start multinationalizing using production subsidiaries.
Some scholars have argued that globalization will reduce the importance of local contexts. We argue instead that despite the increased frequency and intensity of interactions across local contexts, they continue to retain their distinctive differences. MNEs face growing challenges in managing the complexity of these interactions, because they must manage multiple embeddedness across heterogeneous contexts at two levels. First, at the MNE level, they must organize their networks to exploit effectively both the differences and similarities of their multiple host locations. Second, at the subsidiary level, they must balance internal embeddedness within the MNE network, with their external embeddedness in the host milieu. Balancing the subsidiary's strategic role within the MNE with its local identity and its domestic linkages can sometimes represent a trade-off. Multiple embeddedness thus creates both business opportunities and operational challenges, which are explored in this special issue.
This review article starts from the question: how does the global business system appear to a challenger firm, and how have
challenger Multinational Enterprises (MNEs) from formerly peripheral areas such as the Asia Pacific established themselves
successfully, against the sometimes fierce resistance of incumbents? To answer this question, the review develops an argument
concerning the pluralistic character of the process of globalization, as contrasted with the conventional account that sees
global processes creating uniformity and convergence. This alternative account is based on a review of the experiences of
latecomer and newcomer MNEs, particularly those from the Asia Pacific—such as Acer, Ispat International, Li & Fung and the
Hong Leong Group—that are dubbed “Dragon Multinationals.” I argue that the innovative features that these MNEs share, such
as their accelerated internationalization, strategic innovation and organizational innovation, fit particularly well with
the characteristics of the emergent global economy as one of complex inter-firm linkages. The core proposition of the review
is that this complementarity between the characteristics of the emergent global economy and latecomer and newcomer strategic
and organizational innovations is what drives the remarkable success of these Asia Pacific firms in establishing themselves
as serious international players. Such a proposition carries implications for the process of globalization as well as for
the dominant frameworks utilized in International Business. The review argues that Dragon Multinationals adopt a different
perspective to the resources accessed through internationalization, and that this requires a rethink of the criteria normally
utilized in resource-based accounts of strategy. The challenger firm internationalizing in order to access resources also
poses a challenge to the dominant OLI (ownership, locational, internalization) account of multinational advantage. Thus it
is argued that the question posed at the outset goes to the core of the IB frameworks, and thereby counts as one of the ‘big
questions’ that should guide research in IB in the 21st century.
A daunting challenge that enterprises face today is how to design and diffuse innovations to effectively tap into local demand in emerging country markets. Although extant literature focuses on the dominant innovation models of multinational enterprises from developed countries, little attention is directed to carefully examining the alternative models of innovation offered by local players from emerging markets. The aim of our study was to gain an in-depth insight toward understanding ¿what kind of innovation models effectively suit emerging markets needs"? Using the case of an indigenous enterprise, Centre for Development of Telematics from India, we demonstrate how the emphasis on developing affordable and locally sustainable products has provided an alternative model of resource-constrained innovation in the telecommunications sector. The three critical factors for innovation were identified as: entrepreneurial leadership and vision; modular designs to meet user demands of affordability, functionality, and operability through architectural innovation; and exploitation of the local knowledge base and the creation of local innovation clusters. Our study provides insights into the labor-intensive, but capital-sensitive, processes involved in shaping and managing technology development and diffusion to meet the unique demands of mass markets in emerging economies.
In this article, we present a springboard perspective to describe the internationalization of emerging market multinational corporations (EM MNEs). EM MNEs use international expansion as a springboard to acquire strategic resources and reduce their institutional and market constraints at home. In so doing, they overcome their latecomer disadvantage in the global stage via a series of aggressive, risk-taking measures by aggressively acquiring or buying critical assets from mature MNEs to compensate for their competitive weaknesses. We discuss unique traits that characterize the international expansion of EM MNEs, and the unique motivations that steer them toward internationalization. We further delineate peculiar strategies and activities undertaken by these firms in pursuit of international expansion, as well as internal and external forces that might compel or facilitate their propulsion into the global scene. We finally explain the risks and remedies associated with this international ‘springboarding’ strategy and highlight major issues meriting further investigation. Journal of International Business Studies (2007) 38, 481–498. doi:10.1057/palgrave.jibs.8400275
In recent years, as multinational corporation (MNC) subsidiaries have become more closely linked to international networks, their knowledge intensity has risen, and some of their R&D has gained a more creative role. Simultaneously, and often connectedly, many subsidiaries have acquired considerable strategic independence in all aspects of their operations, and therefore are able to exercise considerable intra-firm bargaining power to influence the distribution of the firm's resources. In this context, we suggest that intra-MNC knowledge flows are a key determinant of subsidiary bargaining power. We argue that subsidiary managers can exploit such power to pursue their own ends. Such rent-seeking behavior is implicit in much of the literature on managerialism, but our analysis suggests that such behavior can now occur in headquarters–subsidiary and subsidiary–subsidiary relations. Thus subsidiary strategic independence, designed to enhance the competitiveness of outputs (market knowledge) and inputs (asset-seeking and learning), can be corroded when the pursuit of subsidiary objectives encourages rent-seeking. Empirical analysis of a sample of high-technology subsidiaries in the UK provides strong support for the theory. We examine several avenues whereby the incentives of units within the MNC can be aligned. Journal of International Business Studies (2004) 35, 385–406. doi:10.1057/palgrave.jibs.8400093
This paper is a part of a series of analyses conducted within a BMBF-funded research project to investigate potentials of frugal innovations for Germany. One of the objectives of this project has been to identify innovation pathways that foster frugal innovations. Since auto component suppliers based in India are known to contribute significantly to the development of “affordable and good quality” vehicles, it was considered useful to conduct comparative studies of the prevalent innovation pathways in Germany with those in India. This paper is based on our investigations of innovation pathways in Indian and German auto component industries and aims to provide a coherent comparative analysis. After discussing similarities and differences in Indian and German innovation pathways, a reference model for frugal innovation pathways is outlined. The results provide insights on how certain elements of frugal innovation pathways could be implemented in Germany in order to create solutions that are affordable, fulfil the requisite quality standards and avoid unnecessary usage (wastage) of resources. Altogether, exploratory connections are identified which provide impetus for further research and can be thought-provoking for relevant business, social and political stakeholders.
This is how the late John H. Dunning, a highly distinguished scholar of international business management, has described America’s ascent as an economic powerhouse in the second half of the nineteenth century. Now, if we substitute the reference to the United States in the first sentence of the previous paragraph with “India” and imagine the time period in question to concern today’s times, we might as well feel stunned by quite a few striking parallels between the two countries and situations.
Frugal innovation is a new paradigm for appropriate design in developing markets like India. As India becomes a rising source of global innovation, the practice of frugality in innovation has become an important development in the field of innovation and technology management for academics, practitioners, and policy makers. Govindarajan and Ramamurti (2011, p. 191) write: “poor, emerging markets no longer just borrow innovations from developed countries; from time to time they also contribute innovations to the rest of the world, including developed countries.” Frugal innovation captures the economic, physical, emotional, and experiential realities of domestic markets in emerging economies by creating affordable, basic innovations that every person can use (Kumar & Puranam 2011). Frugal innovation has been examined as the India Way (Cappelli et al. 2010) and India Inside (Kumar & Puranam 2011).
Sustainable innovations are inventions providing an essential progress concerning social, economic and ecological concerns. The emergence of Base of the Pyramid markets and the growing importance of the developing economies as new sources of frugal innovations has attracted the interest of scholars and practitioners. Frugal innovation is an inclusive approach to innovation that maximizes value for customers, shareholders, and society – while significantly reducing the use of financial and natural resources in developing countries. Reverse innovations are frugal products and services successful in developing markets that make their way back to industrialized countries by creating new market segments. Therefore, both concepts are crucial for facing sustainability challenges in developing countries and may also lend insights to business models in industrialized countries. As the relationship between frugal and reverse innovation and sustainability remains largely unexplored in the literature, this study aims to fill in this gap and answer the research question: How can frugal and reverse innovation strengthen sustainable development, and how can business models in this context be systemized and described? Employing a multiple case study design, a total of 59 frugal products and services were investigated from a business models and sustainability strategy perspective from June 2014 until June 2015. The direction of innovation was distinguished between (a) from developing countries to developing countries, (b) from industrialized countries to developing countries, (c) from industrialized countries to industrialized countries, and (d) from developing countries to industrialized countries with the purpose to find differences between different directions of innovation and economies. Findings show that entrepreneurs and companies offering frugal and reverse products and services manage to combine the business model elements in an insightful manner and create economic, social and environmental value.
Affordability and sustainability, not premium pricing and abundance, are the new tenets of effective innovation. Westerners are struggling with the shift in mind-set, but a few emerging-market pioneers are showing the way: They're designing inexpensive products and manufacturing them with so little capital and on a scale so vast that their prices-1 cent for a one-minute telephone call, $2,000 for a car are the lowest in the world. Nowhere is this approach, which the authors call "Gandhian innovation," more evident than in India. Smart companies have used it to penetrate the country's burgeoning mass market. This article provides a framework to help executives understand three types of Gandhian innovation that have brought corporations success: disrupting business models, as Bharti Airtel did when it shifted its focus from average revenue per user to gross profit and expanded its market reach; modifying existing business capabilities, as Computational Research Laboratories did when it came up with a whole new supercomputer design that used standard components; and creating or sourcing new capabilities, as Lupin did when it reversed the usual drug development process to create an affordable treatment for psoriasis.
This paper reviews the status of low-cost innovation in emerging markets like India. Innovation in India has recently achieved worldwide attention, as its low-cost products made a worldwide success. This global recognition drives us to investigate the nature of low-cost innovation in India. We describe four types of low-cost innovation in emerging markets: namely Jugaad, frugal, value, and reverse innovation. We further explain their characteristics, similarities and differences. Lastly, we discuss the myths associated with these types of low-cost innovation.
The confluence of increasing urbanization with climate change, and the associated need to decarbonize the economy, is driving urgency for the global adoption and diffusion of sustainable scalable solutions. IT-enabled, multi-modal transportation, often referred to as the “new mobility”, is making inroads in developed and emerging economies alike. Local emerging market entrepreneurs as well as multinationals, seeking transformative innovation strategies to open up new markets are engaging in this rapidly growing industry. This has created an opportunity for innovative indigenous firms in emerging economies to either scale internationally on their own or partner with (often Western) multinationals to define frugal products, services, and business models that address recession-constrained Western markets. Part and parcel to this shift in global engagement is the emergence of a new product development strategy, referred to as reverse innovation (RI). Here, we seek to explore the nexus of RI and the new mobility opportunity, by explicitly recognizing the spillover effects of knowledge transfer and economic development through local firms and, more broadly, the supply chains that internationalize. In fact, some Western companies are outsourcing RI to emerging economy partner firms, thus shifting historical cost-based relationships to value-based engagements. At the core, lies a radical shift in how products and processes are designed, to include: stripping out complexity without sacrificing customer experience; a high degree of customization not through features but by re-using underlying platforms; and customization at the latest stage of the value chain so as to not disrupt materials, components, and subsystems. The potential implications of RI designs and business models on the adoption of frugal innovations in the West are explored, and paths to engaging entrepreneurs in emerging economies are highlighted.
With the publication of his best-selling books "Competitive Strategy (1980) and "Competitive Advantage (1985), Michael E. Porter of the Harvard Business School established himself as the world's leading authority on competitive advantage. Now, at a time when economic performance rather than military might will be the index of national strength, Porter builds on the seminal ideas of his earlier works to explore what makes a nation's firms and industries competitive in global markets and propels a whole nation's economy. In so doing, he presents a brilliant new paradigm which, in addition to its practical applications, may well supplant the 200-year-old concept of "comparative advantage" in economic analysis of international competitiveness. To write this important new work, Porter and his associates conducted in-country research in ten leading nations, closely studying the patterns of industry success as well as the company strategies and national policies that achieved it. The nations are Britain, Denmark, Germany, Italy, Japan, Korea, Singapore, Sweden, Switzerland, and the United States. The three leading industrial powers are included, as well as other nations intentionally varied in size, government policy toward industry, social philosophy, and geography. Porter's research identifies the fundamental determinants of national competitive advantage in an industry, and how they work together as a system. He explains the important phenomenon of "clustering," in which related groups of successful firms and industries emerge in one nation to gain leading positions in the world market. Among the over 100 industries examined are the German chemical and printing industries, Swisstextile equipment and pharmaceuticals, Swedish mining equipment and truck manufacturing, Italian fabric and home appliances, and American computer software and movies. Building on his theory of national advantage in industries and clusters, Porter identifies the stages of competitive development through which entire national economies advance and decline. Porter's finding are rich in implications for both firms and governments. He describes how a company can tap and extend its nation's advantages in international competition. He provides a blueprint for government policy to enhance national competitive advantage and also outlines the agendas in the years ahead for the nations studied. This is a work which will become the standard for all further discussions of global competition and the sources of the new wealth of nations.
Emerging economy multinationals (EMNEs) are catching up with advanced economy MNEs (AMNEs) even in emerging, high technology industries, where their knowledge-based disadvantages are most severe. We explain this phenomenon by distinguishing between output and innovation capabilities. Successful EMNEs' focus on output capabilities need not facilitate innovation catch-up. We compare the knowledge bases of an industry-leading AMNE and a fast-follower EMNE using patent data, buttressed by qualitative information. The AMNE's knowledge base is deeper and composed of more distinct technology groups than that of the EMNE. The EMNE has caught up in terms of output capabilities, but still lags in terms of innovation capabilities. Our in-depth comparative case analysis contributes to the literature on knowledge strategies and their impact on firm capabilities.
Reverse innovation commonly refers to an innovation initially launched in a developing country and later introduced to an advanced country. Adopting a linear innovation model with the four sequential phases of concept ideation, product development, primary target market introduction, and subsequent secondary market introduction, this study expands the espoused definition of reverse innovation beyond its market-introduction focus with reversals in the flow of innovation in the ideation and product development phases. Recognizing that each phase can take place in different geographical locations, the paper then introduces a typology of global innovation with 16 different types of innovation flows between advanced and emerging countries, 10 of which are reverse innovation flows. The latter are further differentiated into weak and strong reverse innovation, depending on the number of innovation phases taking place in an emerging country. This analytical framework allows recasting of current research at the intersection between innovation and international business. Of the 10 reverse innovation flows, six are new and have not been covered in the literature to date. The study addresses questions of ethnocentrism and the continuity of the flow of innovation, and discusses possible extensions of the model with respect to the number of geographical categories and phases of innovation. Four research propositions highlight areas for future investigation, especially in the context of optimizing a firm's portfolio of global innovation competence and capability. The implications for management are concerned with internal and external resistance to reverse innovation. Most significantly, while greater recognition and power of innovation in formerly subordinate organizational units is inconvenient to some, the ability to leverage the potential of reverse innovation makes a firm more likely to succeed in global innovation overall.
Purpose
– Frugal innovation is a term that has been used to describe the low-cost products and services, as well as the systems and processes adopted by organizations to develop them. The purpose of this paper is to examine the experience of multi-national companies (MNCs) in India as they adopt the philosophy of frugal innovation to develop products that are high in technology but low in terms of cost to meet the requirements of the market conditions in India, and similar low-income economies.
Design/methodology/approach
– The case study methodology was adopted to understand the experiences of the Indian subsidiaries of two MNCs, Bosch India and 3M India. Data were acquired through interviews with key decision makers, documents, and publicly available information.
Findings
– The two MNCs have increased research and development (R&D) in India and adopted the philosophy of frugal innovation which combines high technology with low costs. Based on the analysis, some propositions are presented indicating that MNCs will shift R&D to India if there are market opportunities; they will adopt the philosophy of frugal innovation to produce high technology products that are lost cost and low cost over product lifetime and will also expand to new-to-the-world innovation and finally contribute to global innovation.
Research limitations/implications
– The study is based on only two case studies and a large sample study may be required before the findings can be generalized.
Practical implications
– Other MNCs can learn from Bosch India and 3M India in terms of adopting frugal innovation practices to be successful in low-income economies.
Originality/value
– The field of frugal innovation is quite new and largely based on anecdotal accounts of successful low-cost innovation. This paper provides a more detailed account of the experiences of two well-known organizations to present propositions that may be used to conduct a large sample study.
This study aims to understand what factors allow the subsidiaries of emerging multinationals to develop innovations that are used by the parent company, that is, what factors drive reverse innovation. The respondents of the survey were Brazilian multinationals with manufacturing activities or professional services abroad. The study began with a base of 46 Brazilian multinationals operating until 2006. From this base, 30 multinationals agreed to participate in the survey. Overall, they had 93 subsidiaries. From these 93 subsidiaries, 66 foreign subsidiaries answered the questionnaire. The article uses data from these 66 subsidiaries. The hypotheses were tested through the statistical techniques of correlations and multiple linear regressions. The results confirm our five hypotheses with an explanatory power of approximately 76%. Therefore, the results show that the reverse transfer of innovation depends on the strategic orientation of the foreign subsidiary's R&D function, strong integration (communication) between the parent and its subsidiaries, the entrepreneurial orientation of the company, the subsidiary's age, and, marginally, entry via greenfield investments.
While academic debates and practical approaches to green marketing have matured over the past few decades, one central conundrum that has remained unresolved has been the trade-off between the higher prices of green products and the objectives of environmental sustainability. In general, it has been observed that green products are priced at a premium to account for their environmentally friendly consumption and use. We argue that resource-constrained product development approaches (alternatively labeled jugaad) that are observed in emerging countries such as China and India have the potential to change the traditional models of green product development. In addition to the competitive advantage that resource-constrained product development approaches provide, we suggest that these practices have sustainability and supply chain benefits. We show that the innovation process relies primarily on frugal engineering that reduces material use (thereby reducing burden on supply chain) and meets green marketing objectives at much lower, and therefore, more affordable prices. We draw out several implications for theory and practice.
The traditional American model of multinational enterprise (MNE), characterized by foreign direct investment (FDI) aimed at exploiting firm-specific capabilities developed at home and a gradual country- by-country approach of internationalization, dominated the global economy during much of the post- World War II period. In the last two decades, however, new MNEs from emerging, upper-middle-income, or oil-rich countries have followed completely different patterns of international expansion. In this paper we analyze the processes through which these firms became MNEs and to what extent we need a new theory to explain their international growth.
Recent years have seen the emergence of a paradigm of “low cost” innovations targeted at economically weaker sections of the society, seeking to align business with social welfare. In many instances, results on the ground have been, however, rather sobering as firms have generally worried that “good quality, low price” products may cannibalize into their regular business. At the same time those very customers that were intended to benefit from the new approach have tended to shy away from them fearing low quality and social stigma of using cheap products. Using multiple case studies of successful affordability-driven innovations (“frugal innovations”) from India we investigate how firms can effectively reduce market and technology uncertainty of product innovations targeted at price-sensitive customers. The key criteria to success seem to lie in reducing the overall cost of ownership and enhancing customer perception of quality and image. The case studies reveal that affordability-driven innovations are especially successful when firms turn to open global innovation networks for collaborative development in all phases of the innovation value chain.
(Note: Since I am continuously getting requests to upload this paper, I wish to suggest the interested reader to access the full issue of Die Unternehmung, available directly at the publisher's site:
http://www.unternehmung.nomos.de/fileadmin/unternehmung/doc/DU_12_03.pdf
This will help me avoid any eventual violation of copyrights held by the publisher. Second, a working paper version of this paper is very much available online for free under the title "Open Global Innovation Networks as Enablers of Frugal Innovation: Propositions Based on Evidence from India".)
This article presents a framework for the analysis of how MNCS' strategies interact with stateS' industrial strategies. It first shows how national institutional arrangements can systematically contribute to state strategic capabilities that form a basis of competitive advantage. It then examines conditions under which these arrangements and capabilities affect, or fail to affect, the international strategies and organization structures of home firms, incoming foreign direct investors, and home firmS' international customers, collaborators and competitors.
As product offerings of multinational enterprises (MNEs) continue to primarily serve the relatively well-to-do consumers in emerging economies, innovations to meet the unique affordability and acceptability criteria of masses at the base of the pyramid (BoP) continues to remain a daunting challenge. The academic literature is sparse on comprehensive in-depth studies about the intricate processes involved in shaping and managing technology development for the masses. Focusing on product innovation by Tata Motors of India with the Nano - the worlds cheapest car, our case study aims to understand how the innovators choices regarding the use of technology, product design and organizational practices for new product development enabled it to meet the challenge of innovation for Indias masses. Drawing on Christensens work on disruptive innovations, our analysis shows how frugal use of resources through a new combination of existing component technologies created a new modular product to achieve the unique priceperformance requirements demanded by the BoP. Our findings show that collaboration with suppliers for component design and their early integration in the design phase substantially lowered costs and helped eliminate unnecessary frills whilst incorporating features valued by mass markets. Our study has important managerial implications for MNEs and provides critical insights into the processes for a new blueprint for an untapped market segment in the automobile industry.
Innovation in emerging markets offers fertile ground for theory development. In recognition of the growing trend in “frugal innovation” discourse among practitioners particularly in emerging economies, we parse “frugal innovation” into "frugal" and "innovation" separately and present the underlying meanings towards understanding "frugal innovation" in historical and contemporary contexts. We further develop a theoretical model of frugal innovation by applying existing theories to emerging market contexts. We do so by merging technology innovation, institutional innovation, and social innovation literatures to argue that frugal innovation lies at the intersections of these streams. We show how using the model to understand what the space currently looks like may help to offer a consolidated and encompassing theory of frugal innovation and aid in opening a research agenda.
Purpose – The purpose of the present study is to assess India's potential as a lead market for cost-effective frugal innovations. This is of special interest since lead markets have traditionally existed in economically highly developed countries, whereas developing countries have faced negative country-of-origin effects. In the case of India a reversal of this trend may be observed, for some time. The paper aims to identify factors which are impacting India's emerging role as a fountainhead of frugal innovations. The research will have implications for locational decisions in setting up global innovation/ research and development (R&D) activities.
Design/methodology/approach – The study crystallizes the inherent characteristics of frugal innovations, their development process and market success in the domestic and overseas markets by undertaking in-depth analysis of four successful product innovations from India from multiple industries. The obtained results can be treated as critical success factors for frugal innovations. These factors are then incorporated in the “Lead market” model so that propositions about India's potential as a lead market can be formulated.
Findings – Whereas frugal innovations were so far driven primarily by affordability for the consumer and economies of scale for the manufacturer, a shift towards value proposition was discovered. Intensifying competition and growing customer aspirations are changing the character of frugal innovations and the customer is looking for factors such as attractive designs. Better-designed products, in turn, have positive impact on the lead market potential, creating a virtuous cycle. The study also discovered that frugal innovations are increasingly taking place in “open global innovation” networks and are no more a purely national or “Jugaad” affair.
Practical implications – Lead markets are a critical consideration while setting up R&D/innovation labs. Our research gives multinational corporations (MNCs) a useful instrument to assess India's lead market potential for their respective field of business. Both domestic and foreign firms can employ the model also to identify interesting adopter markets for their respective products.
Social implication – The research confirms that frugal innovations can benefit end-consumers and firms, simultaneously. It may encourage more firms to tap markets at the bottom of the economic pyramid. Intensifying competition would potentially bring even better products for the consumers.
Originality/value – Lead markets have been traditionally regarded to exist - almost by default - only in highly developed economies. Innovations emanating from developing countries, especially from their domestic firms, have been considered to be of inferior quality. This mindset caused country-of-origin barriers for non-commodity, technology-intensive exports from developing economies. This research demonstrates that lead markets can exist even in developing economies, frugal innovations can have high technological quality, and frugal innovations are increasingly created in “open global networks”.
Much of the prior research on interorganizational learning has focused on the role of absorptive capacity, a firm's ability to value, assimilate, and utilize new external knowledge. However, this definition of the construct suggests that a firm has an equal capacity to learn from all other organizations. We reconceptualize the firm-level construct absorptive capacity as a learning dyad-level construct, relative absorptive capacity. One firm's ability to learn from another firm is argued to depend on the similarity of both firms' (1) knowledge bases, (2) organizational structures and compensation policies, and (3) dominant logics. We then test the model using a sample of pharmaceutical–biotechnology R&D alliances. As predicted, the similarity of the partners' basic knowledge, lower management formalization, research centralization, compensation practices, and research communities were positively related to interorganizational learning. The relative absorptive capacity measures are also shown to have greater explanatory power than the established measure of absorptive capacity, R&D spending. © 1998 John Wiley & Sons, Ltd.
A critical new battleground is emerging in China: It's the "good-enough" market segment - home of reliable-enough products at low-enough prices to attract the cream of the country's fast-growing cohort of midlevel consumers. Traditionally, foreign multinationals have dominated China's premium segment, while a plethora of domestic companies have served the low end, often unprofitably. But as middle-class buying power increases, and the tolerance for high markups at the top end wanes, the middle market is growing quickly. Thriving in a market so big is clearly important in itself. But, argue Bain chairman Gadiesh and Bain partners Leung and Vestring, competition in this particular arena has more far-reaching implications. Companies that flourish in China's middle market today are learning valuable lessons they need to compete worldwide: Multinationals are discovering how to focus products downscale to break out of the premium tier, and domestic firms are building scale and marketing expertise to move up. Both are positioning themselves to export their China offerings to other large emerging markets such as India and Brazil - and, after that, to the developed markets. Ultimately, the authors warn, the good-enough space, where multinationals and Chinese firms are going head-to-head, is the one from which the world's leading companies will emerge. The authors describe three strategies for entering and prevailing in this strategically vital space. Multinationals can attack domestic players from above, Chinese firms operating in the low end can burrow up from below, and both can acquire their way into it. The experiences of such players as Colgate-Palmolive, GM, GE, Huawei Technologies, Haier, and Ningbo Bird show how challenging it is to gain a foothold in the middle market but also how much potential there is to use it as a springboard for global expansion.
We analyze the advantages and disadvantages of developing-country multinational enterprises (MNEs) in comparison with developed-country MNEs. Developing-country MNEs tend to be less competitive than their developed-country counterparts, partly because they suffer the disadvantage of operating in home countries with underdeveloped institutions. We argue that this disadvantage can become an advantage when both types of MNE operate in countries with “difficult” governance conditions, because developing-country MNEs are used to operating in such conditions. The empirical analysis shows that, although developing-country MNEs rarely appear among the largest MNEs in the world, they are more prevalent among the largest foreign firms in the least developed countries (LDCs), especially in LDCs with poorer regulatory quality and lower control of corruption. Journal of International Business Studies (2008) 39, 957–979. doi:10.1057/palgrave.jibs.8400390
Natura começará a usar ‘plástico verde’ nas embalagens em outubro
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A chave de inovação do Nubank: bermudas, 25 nacionalidades e 30% LGBT
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Mergulhamos na nova Embraer, que se reinventa após venda à Boeing
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Embraer consolida globalização
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Banking in Brazil is hard. Here’s how Nubank is changing that. Fast Company
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Demonstrações financeiras
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