Frugal Innovation: A Literature Review CFIA / EADI Workshop Centre for Frugal Innovation in Africa CFIA / EADI Workshop ‘How can frugal innovation become inclusive innovation?’ 26 and 27 November 2015, ISS, The Hague Frugal Innovation: A Literature Review Iva Peša (CFIA) & André Leliveld (ASC/CFIA) Contact: i.pesa@ascleiden.nl ; leliveld@ascleiden.nl

Literature review The ‘emergence’ of frugal innovation The definition of frugal innovation The cycle of frugal innovation Frugal innovation as inclusive innovation? Conclusion: towards a research agenda Centre for Frugal Innovation in Africa

The ‘emergence’ of frugal innovation The Economist, business guru talk and academic debate Historical precedents: WW II, East Africa, India Dominant innovation trajectory: capital intensive, high-tech, exogenous to the low-income context 1970s: Appropriate Technology Movement 1980s – now: Internationalisation of innovation Global Value Chains Global diffusion of capabilities Rise of low income (BoP) and middle class consumers in Asia, Africa and Latin America Economic crisis and trade collapse in North America and Europe (2008) Polycentric innovation Changing policy context: more focus on the role of private sector and business in development (PSD) Jugaad is a Hindi word, referring to ingenuity in fixing, in making something you do not have. Making use in an inventive way of what you have to solve a problem. Centre for Frugal Innovation in Africa

The definition of frugal innovation Aspects highlighted in literature (Re)design / technology: Value sensitive design Basic functionalities Good enough quality / durability Cost and affordability User value BoP / middle class consumers / preferences Innovation environment Resource constraints Informal sector Polycentrism Working definition The (re)design of products, services and systems to make them affordable for low-income customers without sacrificing user value. Centre for Frugal Innovation in Africa

The cycle of frugal innovation Leading idea in literature: frugal innovation > product development Focus on: Contextual challenges (low income / resource constrained) Organisational collaboration that fosters frugal innovation: Role MNCs and MNC subsidiaries Polycentric networks (e.g., MNCs – local entrepreneurs, MNCs-NGOs, etc.) Bottom up (communities, informal sector, ‘prosumption’, ‘popular economies’) Role knowledge centres Business model: production, distribution, consumption, marketing Institutions: Governance and policy, including legal aspects Motivations / interests History / path dependency / institutional change Centre for Frugal Innovation in Africa

Towards an integrative approach? Centre for Frugal Innovation in Africa

Frugal innovation and inclusive innovation Definition inclusive innovation: “the development and implementation of new ideas which aspire to create opportunities that enhance social and economic wellbeing for disenfranchised members of society” (George, MacGahan & Prabhu, 2012, 663). Frugal innovation as inclusive innovation? Two assessments: Celebratory discourse on ability of international business to serve the needs of the BoP: ‘inclusive business for the poor’, ‘social business’, ‘pro-poor business’, ‘inclusive capitalism’ Role of corporate business might have adverse effects, redefining ‘the poor’ into consumers, delivering products poor people do not need, etc. Plea for more focus on locality, role of informal sector (not as part of GVCs) The role of standards: a balancing act Centre for Frugal Innovation in Africa

Towards a research agenda More empirical macro / meso / micro studies needed on: roles and interests of actors (entrepreneurs, types, consumers, knowledge) involved technological conditions for frugal innovation social, cultural and instutional contexts of frugal innovation business models transformative dimensions of frugal innovation: innovation systems, technology, economy, communities, society, capabilities, consumer behaviour, etc. Theoretical contributions to: - ethical literature focusing on early engagements in new technologies - the socio-technical systems literature - the innovation and entrepreneurship literature - the literature on inclusive business models and development - literature on economic transformation and local economic development - the emerging literature on patterns of consumption at the BoP Centre for Frugal Innovation in Africa