How and when adversity breeds ingenuity in an emerging market: Environmental threats, co-innovation, and frugal innovation

Despite burgeoning research on frugal innovation, there is limited understanding of how environmental threats shape frugal innovation, the mechanisms underlying this relationship and its boundary conditions. To address these gaps, we propose a moderated mediation model based on the strategy tripod perspective to examine the impact of environmental threats on frugal innovation through the mediating mechanism of co-innovation capability. Moreover, we investigate how legal incompleteness can moderate this relationship. We tested our model empirically with data from 301 manufacturing firms in an emerging market of Ghana, using a time-lagged research design. The results of our analysis largely support the proposed hypotheses in the model, revealing a more nuanced understanding of the indirect impact of environmental threats on frugal product innovation to contribute to the existing body of knowledge in the field of innovation.