Small Industrial Companies and Frugal Innovation: A Case Study in the State of Alagoas/Brazil

The goal of this research is to show how the frugal innovation concept is perceived and run on product and process strategies in small industrial companies in the state of Alagoas, in the Northeastern Brazilian Region, the state with the least favored social indicators in the country. Frugal innovation shows itself as a new approach to technological solutions focused on solving local problems in emerging markets. Frugal innovation can be considered as a summarized concept encompassing other concepts related to low costs innovations in resource-scarce environments, according to Bhatti and Ventresca (2013), Brem and Wolfram (2014), and Hossain (2018). For this exploratory and cross-sectional research, data was collected in September 2018 through questionnaire application to 25 small industrial entrepreneurs from a selected universe of 80 entrepreneurs in the state of Alagoas. The data was made available for this research by the Federation of Industries of Alagoas (FIEA). Descriptive statistics and multidimensional scaling were used to capture the characteristics and perception of these entrepreneurs about: (a) target market; (b) product strategy; (c) the perception of the entrepreneur concerning their product. The main findings show that the companies surveyed do not perceive the low-income customer in the specific market in which they operate, considering that about 2/3 of the surveyed companies expressed that they supply the upper and middle classes market and that they do not have to be engaged in solving emerging problems of the lower-class market. From the perception map, a methodology called Enterprise Positioning Matrix was developed that shows qualified business standards and practices from the quadrants of the perception map. The matrix shows four general characteristics developed by the companies: technological software; technological differentiation; technological hardware; local adaptation. The contribution of this research to the knowledge field of frugal innovation is to enlighten why not all companies in the context of scarcity develop solutions oriented to the local market conditions. So, the contribution that comes up with this research can facilitate to emerge new methodologies and business-oriented solutions to develop and manage frugal innovation capabilities.