Asakawa, K., Cuervo-Cazurra, A., & Un. A. 2019. Frugality-based advantage. Long Range Planning, (Forthcoming).
23 Pages Posted: 6 Jun 2019
Date Written: December 18, 2018
We analyze frugality-based advantage and explain its types and implications. The frugality-based advantage is an advantage that a firm achieves over competitors in its ability to develop and use frugal innovations, that is, innovations that overcome external resource constraints. We differentiate among three types of frugality-based advantages based on the external constraints they solve: (1) Input frugality-based advantage, which is the result of addressing restrictions in the provision of inputs needed for the production process; (2) Income frugality-based advantage, which is driven by solving limitations in the income of consumers; and (3) Infrastructure frugality-based advantage, which is the outcome of resolving constraints in the hard and soft infrastructure of the country. We explain how these three types of frugality-based advantages differ in their transferability across locations and their sustainability across time. Frugality-based advantage complements the resource-based view by explaining how the scarcity of external resources, rather than their abundance, can support the advantage of some firms.
Keywords: frugal, competitive advantage, innovation, constraints, resource-based view
JEL Classification: F23, M16, M21, O313, O35
Suggested Citation: Suggested Citation