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The Role of Entrepreneurial Orientation and Entrepreneurial Bricolage on Frugal Innovation and SMEs Sustainable Performance in Emerging Markets

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International Journal of Management Science and Business Administration

Volume 10, Issue 4, May 2024, Pages 19-37

The Role of Entrepreneurial Orientation and Entrepreneurial Bricolage on Frugal Innovation and SMEs Sustainable Performance in Emerging Markets

DOI: 10.18775/ijmsba.1849-5664-5419.2014.104.1002
URL: https://doi.org/10.18775/ijmsba.1849-5664-5419.2014.104.1002 

Josephat D. Sengura, Mu Renyan

 School of Management, Wuhan University of Technology, Wuhan 430070, China

 Center for Product Innovation Management of Hubei Province, Wuhan University of Technology, Wuhan 430070, China

Abstract: This study sought to investigate the impact of entrepreneurial orientation (EO) and entrepreneurial bricolage (EB) on frugal innovation (FI), and subsequently, the sustainable performance of small and medium-sized enterprises (SMEs) in emerging markets (EMs). Data were collected from 750 key decision-makers in manufacturing small and medium-sized enterprises (SMEs) in the cities of Dar es Salaam and Arusha, Tanzania, yielding a response rate of 51.47%. The data was analyzed using structural equation modeling in SmartPLS software. The results revealed that EO had a positive and significant effect on both FI and EB. Also, EB had a positive and significant effect on FI, which ultimately led to FI positively influencing SMEs’ sustainable performance. Furthermore, the study showed that EO is a strong driver of FI and SMEs’ sustainable performance when mediated by EB and FI, respectively. These findings indicate that firms operating in resource-constrained environments in EMs should emphasize the FI approach in combination with their strategic initiatives, such as EO and EB, to achieve SMEs’ sustainable performance. The theoretical and practical significance of this study is explained thoroughly. The study clarifies how entrepreneurial orientation and bricolage contribute to frugal innovation and the sustainable performance of SMEs in emerging markets. Additionally, it sheds light on a novel perspective regarding the relationship between entrepreneurial orientation, entrepreneurial bricolage, and SMEs’ sustainable performance through frugal innovation. Furthermore, the study provides a new perspective on developing countries such as Tanzania, which lacks empirical evidence on SMEs sustainable performance.

Keywords: Entrepreneurial orientation, Entrepreneurial bricolage, Frugal innovation, SMEs’ sustainable performance, Emerging market

1.Introduction

Frugal innovation (FI) has become prevalent within the business landscape due to various pressures, including local crises and uncertain contexts, particularly in emerging markets (EMs) and developing nations (Hossain, 2021; Tiwari and Bergmann, 2018). Moreover, it addresses the call for sustainable social and environmental practices in order to stay competitive (Pisoni et al., 2018; Santos et al., 2020). From the perspective of firm efficiency, FI focuses on the essential features of products and services, reducing costs while promoting sustainable participation to uphold environmental and social sustainability (Agarwal and Brem, 2017; Albert, 2019; Bhatti et al., 2018; Pansera, 2018; Weyrauch and Herstatt, 2017). Scholars have recently established a link between FI and the principles of inclusive growth and sustainability (Albert, 2019; De Marchi et al., 2022; Rosca et al., 2018), based on various theoretical frameworks including entrepreneurship, effectuation, and bricolage (Chatterjee et al., 2021; Hossain, 2022; Iqbal et al., 2020; Santos et al., 2020).

Additionally, stakeholder pressure to prioritize sustainable performance (STP) practices through the “do more with less” mentality has led “small and medium-sized enterprises” (SMEs) to opt for FI as a strategic option to balance the expectations of society, government authorities, regulatory bodies, and non-governmental organizations (Cunha et al., 2014). Manufacturing SMEs contribute significantly to global resource consumption, waste generation, and atmospheric and aquatic contamination (Ndubisi et al., 2021). Despite having a relatively minor environmental impact per business, manufacturing SMEs can still have a significant overall effect in specific sectors, surpassing that of larger companies  (Ndubisi et al., 2021). However, SMEs in EMs and less developed countries face a significant challenge in embracing sustainability (Das et al., 2020) due to their comparatively limited resources and capabilities in relation to global enterprises (Papadopoulos et al., 2020). Additionally, the COVID-19 outbreak has led to business restrictions that have disproportionately affected SMEs more than large-scale firms (Homayoun et al., 2023).

Although there have been extensive studies on the antecedents, consequences, and mediators of FI (Berndt et al., 2023; Cai et al., 2019; Hossain et al., 2022; Nassani et al., 2022), there remains a dearth of scholarly literature exploring the correlation between FI and SMEs sustainability, particularly in EMs and less-developed countries. The current body of literature lacks quantitative and empirical studies that examine how FI leads to SMEs’ sustainability. Existing studies regarding the link between FI and SME sustainability have produced inconsistent conclusions that are typically constrained to a particular environment (Albert, 2019; De Marchi et al., 2022). This confirms the necessity for increased empirical studies on the antecedents of FI that lead to SME sustainability. Accordingly, despite its association with simplicity, the implementation of FI is far from straightforward due to the distinct dimensions (core features, cost savings, and sustainable collaboration) and drivers (country’s development level, sustainable concerns, and local context) (Berndt et al., 2023). In addition, FI does not sufficiently ensure sustainability in itself (Rosca et al., 2017). Given the growing interest in FI as a research field, various perspectives are being explored. Therefore, we believe that firms’ strategic efforts, such as entrepreneurial orientation (EO) (Deslatte and Swann, 2020) and entrepreneurial bricolage (EB) (Iqbal et al., 2020), are crucial for enhancing FI, which in turn leads to SMEs’ sustainable development. Given these attributes, the following question was posed RQ: What strategic initiatives are involved in the development of FI and the attainment of SMEs STP?

 This study investigated the aforementioned inquiry using the theoretical frameworks of “the resource-based view (RBV)” and “the natural-resource-based view (NRBV).” The article’s primary goal is to demonstrate that STP-driven FI is dependent on EO, which is mediated by EB. We aim to investigate the correlation between EO, EO, FI, and SMEs’ STP in EMs. We propose that, as outlined in the hypotheses, EO and EB influence FI in distinct ways, while FI directly influences the STP of SMEs. More precisely, we suggest that the link between EO and FI is influenced by EB, whereas the connection between EO and STP is influenced by FI. Therefore, we developed and tested a theoretical model utilizing data gathered from 386 manufacturing SMEs in Tanzania to address the observed research gap. The selection of Tanzania as a study focus was driven by the necessity for increased scholarly attention in EMs in less developing countries, specifically within the African region, which currently lacks sufficient research on FI. This study significantly contributes to addressing the gap in understanding the impact of FI on SMEs and STP. Thus, this study’s contribution resides in its ability to offer a comprehensive understanding regarding the correlation concerning FI and STP (Hossain, 2021; Iqbal et al., 2020), with a focus on highlighting the significance of EO (Akomea et al., 2022; Chavez et al., 2020; Roxas et al., 2017)  and EB (Cai et al., 2019; Sivathanu and Pillai, 2019). In this manner, this study is expected to offer the first and more profound insight into the STP of SMEs in relation to EO, EB, and FI. The findings provide additional insights to business owners and managers, policymakers, practitioners, and professionals concerning FI, enabling them to formulate sound strategic choices in resource-limited settings, particularly in less developed countries with sparse empirical support.

2.Literature Review

2.1. Theoretical Background

This study is based on two fundamental theories: the RBV and the NRBV, with the goal of determining the relationship between the variables. The RBV classical theory posits that firms need to manage significant unique assets in order to achieve their objectives  (Penrose, 1959). The RBV is a commonly used framework for understanding how a company’s diverse resources can drive performance and establish a competitive advantage (Barney, 1991). RBV points out that companies can achieve a competitive advantage by effectively utilizing a bundle of resources, whether tangible or intangible (Barney, 1986). Yeşil and Doğan (2019) highlight the importance of innovation for companies to capitalize on their existing resources and attain improved performance. Hart (1995) formulated the NRBV of firms, building on the RBV, to shed light on how organizational capabilities shape a firm’s environmental strategy in a highly volatile market. Hart (1995) proposes that companies can strengthen their competitive advantage by integrating eco-friendly initiatives into their business strategies. These companies can enhance their strategic capabilities to tackle issues related to environmental contamination, product responsibility, and sustainable development, all while gaining a competitive advantage and improving overall performance (Roxas et al., 2017). Some authors have contended that they often see a rise in their operating expenses when they adopt eco-friendly practices as part of their business operations, ultimately impacting their financial performance (Roxas et al., 2017). The integration of eco-friendly actions into business operations may have a negative impact on financial performance, as it can significantly raise business expenses. Therefore, SMEs in EMs with limited resources should find a cost-effective strategy in their operations in order to achieve STP, referred to as “the triple bottom line (TBL), i.e., environmental, social, and economic performance, without impacting much on their financial performance”. Thus, in this study, we focus on three strategic capabilities: EO, EB, and FI. Through their strategic value, rarity, uniqueness, and non-substitutability, these capabilities can establish a sustainable competitive advantage, differentiating firms from their competitors (Porter and Kramer, 1985).

Conversely, FI is viewed as a type of innovation that inherently contributes to achieving STP from a social, economic, and ecological standpoint (Rosca et al., 2018). The accessibility, simplicity, and affordability of FI make it an inherently sustainable option; therefore, it is often suggested as a solution for communities with lower- incomes (Levänen et al., 2015). In addition to utilizing limited resources, FI contributes to the overall economy and STP by optimizing value chain processes, including minimizing inbound logistics (Brem and Ivens, 2013). The adoption of FI has been suggested as an appropriate strategy to address the needs of consumers in EMs with resource-constrained environments (Rao, 2013; Zeschky et al., 2014). Basu et al. (2013) argue that FI can drive progress towards sustainable solutions and global well-being. It aids in managing non-renewable resources by promoting energy and material savings, enabling green properties (Le Bas, 2016).  Moreover, previous studies show that FI can enable companies to build sustainable business models and generate sustainable impacts (Albert, 2022; Hossain, 2020). However, FI does not sufficiently ensure sustainability in itself (Rosca et al., 2017). In light of this, we believe that firms’ strategic efforts, such as EO (Chavez et al., 2020) and EB  (Iqbal et al., 2020; Santos et al., 2020), are also essential to enhancing FI, which leads to STP.

2.2. Entrepreneurial Orientation Facilitating Frugal Innovation and SMEs’ Sustainable Performance

EO derives from the strategic choice literature, which refers to a company’s internal strategies and actions that enable it to capitalize on entrepreneurial opportunities (Child, 1972; Lumpkin and Dess, 1996). EO refers to the company’s strategic stance, showcasing proactivity, innovation, and willingness to take risks (Covin and Slevin, 1989). (Chavez et al. (2020), Mohamad and Chin (2019), and Ueasangkomsate (2019) are among the scholars to provide empirical evidence supporting the positive relationship between EO and STP. Moreover, recent studies have identified a favorable correlation between EO and a company’s STP through various mechanisms such as internal learning practices (Chavez et al., 2020) and innovation performance (Hidayat et al., 2022). Furthermore, Akomea et al. (2022) found a positive link between EO and sustainable practices in fostering SME performance in EMs. As such, EO is a key capability for firms (Lumpkin and Dess, 1996). According to Courrent et al. (2018), entrepreneurship has the potential to revolutionize the utilization of natural resources and enhance societal well-being, aligning with the firm’s STP (Hall et al., 2010). The literature on entrepreneurship has emphasized the significance of having an entrepreneurial mindset in achieving success in terms of operations (Soares and Perin, 2020), adapting to the environment (Amankwah-Amoah et al., 2019), and making a positive social impact (Shepherd and Patzelt, 2011). Aragón-Correa et al. (2008) showed that the proactive element of EO contributes greatly to SMEs in promoting sustainable innovation practices. According to Zahra and Covin  (1995), incorporating EO into business strategies may offer benefits to companies functioning in challenging contexts, such as EMs or certain sectors (Kantur, 2016; Qurnain and Hidayati, 2020).

Therefore, the occurrence of critical situations like the COVID-19 pandemic, limited resources, and economic turmoil in EMs and less developed countries like Tanzania (Dubey et al., 2021; Vesci et al., 2021), along with the sustainability challenges faced by certain industries like manufacturing (Albert, 2019), may necessitate the adoption of FI solutions for SMEs to ensure their survival (Hossain, 2018).  FI It is strongly linked to business sustainability as a pivotal approach for STP (Albert, 2019; Rosca et al., 2018; Stöber et al., 2022). In the face of limited resources, intense competition, and uncertainty, firms in EMs must enhance their EO to foster FI. The challenges that SMEs in EMs face in increasing their STP through FI include distinct dimensions (core features, cost savings, and sustainable collaboration) and drivers (limited resources, economic turmoil, the COVID-19 pandemic, and sustainable concerns). These challenges also serve as a call for the implementation of Enterprise Orientation (EO) within these manufacturing SMEs in EMs. Therefore, we propose the following hypothesis:H1. Frugal innovation serves as a mediator between entrepreneurial orientation and SMEs sustainable performance.

Studies have demonstrated a strong correlation between EB and EO (Zhenduo, 2015), FI (Cai et al., 2019; Radjou and Prabhu, 2015) and STP (Iqbal et al., 2020). Salunke et al. (2013) and Ma and Yang (2022) suggest that EO plays a crucial role in driving EB. In entrepreneurially oriented firms, initiatives are frequently undertaken within limited resource environments (Hooi et al., 2016; Ma and Yang, 2022; Salunke et al., 2013). These firms rely on their EO to innovate and develop new products or services, while also utilizing entrepreneurial bricolage (Gundry et al., 2011) to effectively use the available resources. Based on resource constraints, Cai et al. (2019) contended that EB leads to FI. Bricolage enables FI for consumers in the BOP. Organizations with strong bricolage capabilities have the potential to combine both available technologies and locally available resources, resulting in the creation of value-added innovations and affordable products (Cai et al., 2019). The skill of bricolage, which involves creating something from nothing, is well suited for environments with severe resource constraints (Baker and Nelson, 2005). According to Radjou and Prabhu  (2015), this “something from nothing” concept aligns with the principle of “more with less,” which is a key tenet of FI—achieving more and better with limited resources. Several earlier studies have examined how internal capability factors can be used as mediators to boost firms’ performance and innovativeness. Several internal factors are associated with EO and firm performance, including business model innovation  (Ferreras-Méndez et al., 2021), organizational learning capability (Agarwal and Brem, 2017; Fellnhofer et al., 2014), and absorptive capacity (Patel et al., 2015). Furthermore, considering the internal factors highlighted in previous research, this study proposes EB as a mediating variable for the effect of EO on FI. The underlying motivation for this was the understanding that new ventures often face resource constraints while undertaking entrepreneurial initiatives (Elfring and Hulsink, 2003). Therefore, firms with strong EO must continually combine resources to accomplish their entrepreneurial tasks  (Baker and Nelson, 2005). Consequently, we propose the following hypothesis. H2. Entrepreneurial bricolage serves as a mediator between entrepreneurial orientation and frugal innovation. A theoretical model for this study, with each hypothesis indicated, is presented in Figure 1.

3.Research Methodology

3.1 Research Area and Design

This study involved data collected from Arusha and Dar es Salaam, two major cities in Tanzania. These two cities were selected as study locations because of their prominence in the country’s manufacturing sector (Nyello and Kalufya, 2021).  Additionally, a noteworthy number of manufacturing SMEs exist in these cities (Kiyabo and Isaga, 2020). In addition, the decision to select Tanzania was influenced by its recent emphasis on industrialization and employment opportunities to accommodate its expanding youth demographic, as well as its pivotal role in driving economic growth and transformation (Mkenda and Rand, 2020). The country attained lower-middle income status in July 2020, and it is among the top 20 rapidly growing emerging markets in the world. Manufacturing SMEs in Tanzania account for 27% of all formal SMEs in the country and contribute about 8% of GDP. Despite their contribution to growth, job creation, and poverty reduction, Tanzanian manufacturing SMEs encounter various challenges that hinder their sustainability, growth, and progress. According to the Afrobarometer report, 88% of Tanzanians are urging the Tanzanian government to limit pollution and protect the environment. In response to this, the Cleaner Production Centre of Tanzania (CPCT), which was founded in 1995, is responsible for providing services related to cleaner production, sustainable consumption, environmental management, and energy management, with a focus on SMEs  (UNIDO-UNEP Programme, n.d.). The research approach used in the study was a cross-sectional survey design, with data gathered in one instance from the designated population. The unit of analysis consisted of manufacturing SMEs in three types of sub-sectors: food, including food processing and beverages; fashion, including clothing and apparel; and furniture, including metals and plastic goods, that have actively participated in manufacturing operations for a minimum of three years. According to Quaye et al. (2017), a three-year time frame is adequate for assessing a business’s progress and success. These three sub-sectors were chosen based on their significant representation among Tanzanian manufacturing SMEs (Andreoni, 2017). The unit of analysis adopted is derived from the Tanzanian definition of SME, according to which SMEs are categorized as enterprises with no more than 100 employees (URT, 2003). A brief description of the respondents’ socio-demographic characteristics is presented in Table 1.

Figure 1: Theoretical Model with Hypotheses

3.2 Sample and Data Collection Method

This study employed an online survey to gather information from respondents between April and August 2023. Key decision-makers from Tanzanian SMEs were chosen as the main source of information in the survey, as their insights were crucial for analyzing different aspects within their organizations. The participants included CEOs, owners, and general managers; marketing managers; production and operations managers; finance managers; and human resources managers. We reached out directly to the HR or administration departments of the relevant SMEs in the cities of Dar es Salaam and Arusha, Tanzania, through phone calls, email, and in-person visits. Through these interactions with HRs and the administrative departments of the selected SMEs, we clarified the study’s objectives and sought their cooperation in distributing the online study questionnaires to the intended participants within their organizations. This study employed a judgmental sampling technique, which is a nonprobability sampling approach. The target population for the survey was taken from a compiled list of all SMEs obtained from the Business Registration and Licensing Agency (BRELA) and reinforced further by an official list obtained from small industry development organizations (SIDO) of the respected regions. During the structured data collection phase, we distributed 750 questionnaires to the respondents, resulting in 453 completed responses. Among these, 386 responses were deemed valid, representing a validity rate of 51.47%. Valid responses were selected following data-cleaning procedures to eliminate invalid entries. The questionnaire design was modified to include a randomization element to ensure that there were no carryover effects  (Macfie et al., 1989). Due to the fact that the presence of a common method variance (CMV) effect may arise when all measurements are gathered using consistent response formats, collection methods, respondent types, and timing, Consequently, after conducting Harman’s single-factor test, it was revealed that 41.20% of the variance was contributed by the first factor, which is less than 50%, as outlined in the work of MacKenzie and Podsakoff (2012).. This outcome suggests that the research findings were not significantly influenced by the Common Method Variance (CMV).

Table 1: Demographic characteristics of Manufacturing SMEs

Variables Frequency Percent
Gender
Male 243 62.95
Female 143 37.05
Total 386 100
Years of services in the current organization
1 to 3 years 113 29.27
4 to 6 years 205 53.11
more than 6 years 68 17.62
Total 386 100
Designation
Owner/CEO/General Manager 158 40.93
Finance Manager 39 10.10
Marketing Manager 74 19.17
HR Manager 35 9.07
Production/ Operations Manager 80 20.73
Total 386 100
Owner/CEO/General Manager 158 40.93
Finance Manager 39 10.10
Marketing Manager 74 19.17
HR Manager 35 9.07
Production/ Operations Manager 80 20.73
Total 386 100
Firm sub-sector in Manufacturing industry
Fashion (Textile, footwear and apparel) 125 32.38
Food (Food processing, alcoholic and non-alcoholic beverage, dairy products) 133 34.46
Furniture and fittings, plastic, chemical and metal products 128 33.16
Total 386 100
Number of years since establishment
Below 5 110 28.50
Between 5 to 10 176 45.60
Above10 100 25.91
Total 386 100
Firm location
Dar es Salaam city 248 64.25
Arusha city 138 35.75
Total 386 100

3.3 Measurement of Variables

This study used established constructs because a single instrument was considered inadequate to capture all aspects (Jiménez-Jiménez and Sanz-Valle, 2011). The questionnaire comprised two distinct sections. The first section concerned gathering demographic data, whereas the second section contained 42 questions covering all constructs of the study. A five-point Likert scale was used, with items rated from 1 to 5, with “1 being strongly disagreeing” and “5 being strongly agreeing.”

Entrepreneurial orientation (EO) is a construct that consists of ten items from three dimensions that are linked to innovation, proactiveness, and risk-taking. The construct is a first-order construct that uses the measurement tool developed by Anderson et al. (2015). Entrepreneurial bricolage (EB) is a first-order construct composed of nine items sourced from the work of Gundry et al. (2011).

Frugal innovation (FI) is a second-order reflective construct composed of ten items from three dimensions linked to sustainable shared engagement (SSE), substantial cost reduction (SCR), and core functionality (CF), which were originally introduced by Rossetto et al. (2023).

Sustainable performance (STP) is a second-order reflective construct formed by fifteen items from three dimensions linked to economic performance (ECP), social performance (SCP), and environmental performance (EVP). The construct was based on Paulraj’s (2011) framework. Data analysis was performed using the Partial Least Squares Structural Equation Modeling (PLS-SEM) approach. The approach selected in accordance with Hair et al. (2017) was considered suitable for the research goals as it involves predicting trends and testing theories.

4.Results

4.1. Evaluation of Measurement Model

The measurement model was validated by conducting a test of the literature parameters (Hair et al., 2017) . The first step was to analyze the convergent validity, internal consistent reliability, and discriminant validity of the constructs (Hair et al., 2017). The results in Table 2 show that Cronbach’s alpha (CA) and Rho_A values of all constructs exceed the threshold value of 0.7, indicating high internal consistency (Hair, Sarstedt, et al., 2017). Convergent validity was assessed by using average variance extracted (AVE), factor loading (λ), and composite reliability (CR). All the dimensions surpassed the threshold metrics > 0.5, > 0.7, and > 0.5 for AVE, CR, and factor loading, respectively (see Table 2), suggesting acceptable convergent validity (Hair et al., 2017).

The measurement model assessment was completed by performing discriminant validation between the latent variables across all dimensions (Henseler et al., 2015). For this purpose, the heterotrait-monotrait ratio of correlations (HTMT) was used. The results in  Table 3 indicate that all dimensions exhibited satisfactory discrimination between the constructs, as evidenced by their HTMT values being below 0.90 (Henseler et al., 2015). Furthermore, we conducted an assessment of the variance inflation factor (VIF), revealing that all the indicators and constructs exhibited values lower than the maximum threshold of 0.5, as shown in Table 2. This validates that the study is not affected by multicollinearity concerns (Hair et al., 2017). Hence, the constructs in this study displayed satisfactory limits for conducting the SEM analysis

                                                         Table 2: Measurement model results

Constructs Items Loading Cronbach’s rho_A CR AVE VIF
Alpha (Cα)
Entrepreneurial orientation (EO) EO1 0.816 0.942 0.943 0.942 0.644 2.703
EO2 0.792 2.576
EO3 0.803 2.743
EO4 0.852 2.931
EO5 0.764 2.604
EO6 0.739 2.457
EO7 0.756 2.485
EO8 0.887 2.804
EO9 0.803 2.371
Entrepreneurial bricolage (EB) EB1 0.792 0.939 0.940 0.939 0.630 2.619
EB2 0.793 2.418
EB3 0.807 2.825
EB4 0.758 2.873
EB5 0.729 2.175
EB6 0.752 2.855
EB7 0.821 2.716
EB8 0.836 2.666
EB9 0.849 2.498
Core functionality (CF) CF1 0.826 0.866 0.866 0.866 0.682 2.258
CF2 0.820 2.204
CF3 0.832 2.260
Substantial cost reduction (SCR) SCR1 0.796 0.896 0.897 0.896 0.682 2.503
SCR2 0.801 2.656
SCR3 0.866 2.217
SCR4 0.839 2.649
Sustainable Shared Engagement (SSE) SSE1 0.790 0.874 0.877 0.874 0.700 2.142
SSE2 0.889 2.627
SSE3 0.827 2.395
Economic Performance (ECNP) ECNP1 0.848 0.911 0.914 0.911 0.672 2.489
ECNP2 0.900 2.592
ECNP3 0.798 2.746
ECNP4 0.799 2.272
ECNP5 0.745 2.648
Environmental Performance (ENVP) ENVP1 0.783 0.894 0.894 0.894 0.628 1.889
ENVP2 0.802 2.420
ENVP3 0.830 2.386
ENVP4 0.767 2.280
ENVP5 0.777 2.262
Social Performance (SOCP) SOCP1 0.870 0.918 0.920 0.917 0.690 2.674
SOCP2 0.839 2.829
SOCP3 0.771 2.349
SOCP4 0.894 2.911
SOCP5 0.772 2.975

4.2. Structural Model

The evaluation of the structural model represents the second phase of the PLS-SEM process. We employed R-squared (R2) to measure the explanatory power of the model. The results in Table 4  reveal that EO accounted for a considerable portion of the variation in EB, with an R-square value of 50.1%. In addition, EO and EB accounted for a significant portion of the variation in FI, with an R-square value of 74.8%. Furthermore, EO, EB, and FI accounted for a significant portion of the variation in STP, with an R-square value of 78.6%. The R-square values for all variables exceed the threshold of 26%, signifying a strong level of association between exogenous and endogenous variables (Cohen, 1988). Similarly, using PLSpredict, we assessed the model’s predictive ability. Table 4 presents the results for Q-square values above zero, confirming the model’s predictive power (Chin, 1998).

BCa bootstrapping with 10,000 subsamples was used to determine the direct relationship between constructs and their level of significance. The relationships among the constructs were analyzed by employing the beta coefficient (β), p-values, and t-values. The model’s significance was determined by taking into account the p-values and t-value tests. According to Hair et al. (2017), p-value and t-value are considered statistically significant when they are ≤ 0.05 and ≥ 1.96, respectively. Table 5 shows the results for all constructs. The f-square effect is commonly measured using Cohen’s  (1988)  recommendations, which are shown in Table 5. According to Cohen  (1988), a significant f-square effect is denoted by a value equal to or exceeding 0.35; a moderate influence is indicated by a minimal value of 0.15; and a very slight effect is shown by a maximum value of 0.02. Hence, it can be asserted that the direct relations test revealed significant and medium effects in the observed results, except that the relationship between EB and STP indicated a small effect and the relationship between EO and STP indicated no effect. Furthermore, the second-order construct of FI demonstrated validity through its correlation with the first-order variables SCR (β = 0.831), CF (β = 0.818), and SSE (β = 0.739). STP also demonstrates validity through its correlation with the variables of the first-order ECNP (β = 0.811), ENVP (β = 0.894), and SOCP (β = 0.791). The results are presented in Table 5.

The direct relationship test also identified a variety of statistically significant relationships. The first relationship is observed concerning EO and FI (β = 0.587), supporting the idea that EO acts as a driving force behind FI by promoting a culture of innovation, encouraging risk-taking, and facilitating the adoption of resource-efficient practices  (Berndt et al., 2023). It can be concluded that aside from presenting opportunities for manufacturing SMEs in EMs, FI can be successful with the support of a proactive manager and the involvement of top leadership in crucial decision-making procedures. Therefore, developing a frugal mindset necessitates a change in attitudes and viewpoints (including organizational culture, practices, and behaviors) across the entire firm, from upper management to lower-level staff.

EO was also found to have a strong and positive correlation with EB (β = 0.708) and a negative relationship with STP (β = -0.093). These results align with those of prior studies (Gundry et al., 2011; Ma and Yang, 2022; Salunke et al., 2013)  that revealed a favorable correlation between EO and EB. In addition, this study confirms Hooi et al.’s (2016) assertion that entrepreneurs with a strong entrepreneurial mindset are inclined to creatively use available resources to tackle new challenges and ultimately transform themselves into bricoleurs. This relationship is crucial for fostering sustainable entrepreneurship in SMEs. Hence, the proactive and resourceful nature of EO aligns with the concept of EB, which involves the improvisational and adaptive use of available resources to address the unique challenges and opportunities present in emerging markets and less developed nations. Nevertheless, there was no positive and significant correlation between EO and STP (β = -0.093; p-value 0.576), which contradicts the conclusions made by earlier studies  (Mohamad and Chin, 2019; Ueasangkomsate, 2019). This could be due to different cultural contexts that shape the way entrepreneurs perceive opportunities, approach risk, and make strategic decisions about STP.

Regarding EB, it demonstrates a statistically significant positive correlation with FI (β = 0.343) and a negative correlation with STP (β = -0.113). This relationship is consistent with studies such as those by Cai et al. (2019), Radjou and Prabhu  (2015), and Baker and Nelson  (2005). In addition, Sharmelly and Ray (2018) claim that EBs play a significant role in reducing costs by using creative combinations of available resources in order to overcome resource constraints and develop affordable, high-quality products and services. Conversely, there was no positive and significant association between EB and STP (β = -0.113; p-value 0.189), in that way contradicting the findings of the previous authors (Abukari et al., 2024; Iqbal et al., 2020; Sivathanu and Pillai, 2019). This could be due to inadequate infrastructure, market instability, cultural norms, and Tanzanian entrepreneurs’ social attitudes, which may not always support risk-taking, experimentation, or unconventional problem-solving approaches that are critical for successful bricolage-driven STP. Furthermore, the direct association between FI and STP demonstrated statistically significant and positive outcomes (β = 1.044). This reinforces the findings of De Marchi et al. (2022), Stöber et al. (2022), Albert (2019), and Rosca et al. (2018), demonstrating a strong and positive correlation between FI and STP. It also adds to Iqbal et al.’s (2020) and Hossain’s (2018) works by providing empirical evidence of the impact of FI on STP in a distinct and unique context. Therefore, during periods of limited resources, it is crucial for decision-makers of manufacturing SMEs in EMs and less developing countries to place a strong emphasis on sustainable growth and innovation of firms through FI, alongside efforts to decrease delivery time, minimize material waste, and accelerate processes for the purpose of maximizing overall performance.

                Table 3: Discriminant validity – Heterotrait-Monotrait (HTMT)

Dimension 1 2 3 4 5 6 7 8
1
2 0.623
3 0.737 0.56
4 0.699 0.707 0.554
5 0.742 0.574 0.788 0.681
6 0.654 0.469 0.699 0.573 0.787
7 0.755 0.725 0.55 0.784 0.694 0.598
8 0.733 0.577 0.628 0.623 0.672 0.601 0.667

 

Note: 1: Core functionality; 2: Entrepreneurial bricolage; 3: Economic performance; 4: Entrepreneurial Orientation; 5: Environmental performance; 6: Social performance; 7: Substantial cost reduction; 8: Sustainable shared engagement.

Table 4: Results of Coefficient of determination (R2) and Stone-Geisser criterion (Q2)

Construct R-square Q²predict (=1-SSE/SSO) R-square adjusted
Entrepreneurial bricolage 0.501 0.441 0.499
Frugal innovation (second order) 0.748 0.541 0.746
Core functionality 0.523 0.393 0.521
Substantial cost reduction 0.673 0.515 0.672
Sustainable shared engagement 0.427 0.314 0.424
Sustainable performance (second order) 0.786 0.392 0.785
Economic performance 0.585 0.262 0.580
Environmental performance 0.627 0.387 0.622
Social performance 0.483 0.282 0.476

 

Table 5: Direct Relationship

Analyzed relationship Beta Coefficients (β) T statistics            (t-value) p-values f2
Second Order Construct (Frugal innovation)  
FI → Core functionality 0.818 29.649 0.000 10.309
FI → Substantial cost reduction 0.831 33.369 0.000 6.509
FI →   Sustainable shared engagement 0.739 14.595 0.000 3.875
 

Second Order Construct (Sustainable performance)

 
STP → Economic performance 0.811 21.094 0.000 8.661
STP → Environmental performance 0.894 40.580 0.000 33.328
STP → Social performance 0.791 20.029 0.000 8.610
 

Direct relationship test

 
EO → FI 0.587 8.339 0.000 0.682
EO → EB 0.708 16.560 0.000 1.005
EO → STP -0.093 0.560 0.576 0.012
EB → FI 0.343 4.779 0.000 0.233
EB → STP -0.113 1.315 0.189 0.024
FI → STP 1.044 5.804 0.000 1.287

4.3. Hypotheses Testing

Mediation occurs when a third variable lies between two or more interconnected variables or constructs. Mediation results can be considered valid when the p-values associated with the indirect relationship paths demonstrate significance. Additionally, mediation is categorized as complementary if the result shows significance in both the direct and indirect paths (Zhao et al., 2010).  As a result, where the direct link is not statistically significant while the indirect connection is, the mediation is regarded as complete, implying that the entire effect is solely through the indirect relationship between variables (Hair et al., 2017). The mediation results outlined in Table 6 were tested using Hair et al. (2017) procedures in accordance with the general mediation guidelines suggested by Zhao et al. (2010). In addition, the size of the mediation effects was determined by calculating the variance accounted for (VAF) (Zhao et al., 2010). In relation to hypothesis (H1), the VAF equals the indirect effect/total effect (0.613/0.694) = 0.883, suggesting that the mediation effect of FI clarifies the impact of EO on STP. Consequently, since the VAF is greater than 80% and the direct effect is insignificant, it can be concluded that FI plays a full mediation role in this relationship, supporting H1. Conversely, for hypothesis (H2), the VAF equals the indirect effect/total effect (0.243/0.830) = 0.293. Given that the VAF falls between 20% and 80%, we can conclude that EB plays a complementary mediating role in this relationship, thereby supporting H2.

In terms of hypothesis (HI), the study identifies the missing link between EO and STP. We discovered that FI serves as a full mediator in the association between EO and STP of manufacturing SMEs and less developing countries; this suggests that the mediation effect of FI in the relationship between EO and STP is indirect only. The results align with those of Chavez et al. (2020), indicating the strong role of EO in enhancing firms’ STP when linked with other organizational capabilities such as FI. Furthermore, the results of Sinaga and Candra (2022) are supplemented, showing that the effective utilization of EO can result in a sustainable competitive advantage through the innovation culture of SMEs. By leveraging EO through sustainable competitive advantage, SMEs can drive value creation, demonstrating their commitment to economic prosperity, social well-being, and environmental stewardship. This approach can lead to long-term success and resilience in EMs. Hence, managers and top decision-makers need to be proactive in identifying market opportunities, taking risks more frequently, and responding swiftly to innovation challenges to accelerate the introduction of products and services within the firm’s constraints. This approach can help to conserve resources in operational processes and potentially yield STP.

Under hypothesis (H2), EB functions as a complementary mediator between EO and FI. In line with Wang and Li (2022), our proposed hypothesis strongly supports the mediation of EB in the connection between EO and FI, which ultimately influences STP (Iqbal et al., 2020). Previous studies have found a significant mediating role of EB on EO, sustainable entrepreneurship (Hooi et al., 2016), and venture performance (Ma and Yang, 2022). However, our study uncovered a novel aspect of EB’s mediation in the relationship between EO and FI, which ultimately impacts the sustainability of SMEs’ venture performance. Furthermore, this result is consistent with the findings of recent studies (Cai et al., 2019; Sharmelly and Ray, 2018), which have demonstrated that bricolage facilitates the development of FI in EMs and less developing countries. In EMs, SMEs have been compelled to realign their priorities and optimize resources effectively, leading to the implementation of FI. Resources have become scarcer than ever, necessitating the search for innovative and efficient processes along with sustainable and effective products and services that cater to consumers’ economic constraints and needs. These measures are crucial for firms to sustain their market presence. Figure 2 provides an overview of the primary path to developing FI. In essence, EO serves as the driving factor for SMEs to pursue performance-driven FI. Nevertheless, when the EO fosters EB, FI can be optimized. The findings confirm that FI is a sophisticated form of innovation that relies on deliberate strategic initiatives in EO  (Akomea et al., 2022; Chavez et al., 2020; Roxas et al., 2017) and EB (Cai et al., 2019; Sivathanu and Pillai, 2019).

                                                          Table 6: Hypotheses Test

Hypothesis Path Beta Coefficients (β) T statistics (t-value) p-values Confidence interval Decision
0.025 0.975
H1 EO → FI → STP 0.613 3.914 0.000 0.383 0.993 Supported
H2 EO → EB → FI 0.243 5.082 0.000 0.139 0.327 Supported
 

Variance Accounted for (VAF) of the Mediator Variable for FI and EB

EO FI STP 0.613 0.694 88.3% Full mediation
EO EB FI 0.243 0.830 29.3% Partial complementary

Figure 2: Overview of the Primary Path to Developing FI

5. Implications, Conclusion and Areas for Future Research

5.1. Theoretical Implications

This study makes a substantial contribution to the current literature on EO, EB, FI, and SP within manufacturing SMEs operating in EMs by examining the relationships among these four constructs. First, by introducing EO and EB as important strategic efforts of SMEs that foster FI in achieving STP, this study has shown that EO can influence STP indirectly through FI. The study adds to the existing body of knowledge on EO and EB as antecedents of FI that influence STP, and the influence of EO on FI is strengthened when EB is incorporated. Additionally, this study builds upon a prior study (Chavez et al., 2020) that explored the relationship between EO and sustainability through internal learning practices, introducing the concept of FI in the context of achieving STP. Furthermore, the study builds on a previous study that suggests EO can foster FI (Berndt et al., 2023). This aligns with the RBV, as EO can significantly enhance SMEs’ manufacturing capabilities by fostering innovativeness, proactiveness, and risk-taking. This study, drawing on the NRBV, has shown that SMEs can utilize their entrepreneurial strategic orientation to implement sustainability practices through FI to mitigate environmental hazards and meet social needs while generating profit.

Second, this study contributes to the current understanding of FI literature by revealing a new antecedent to the FI approach. Previous studies on FI and STP have primarily concentrated on direct effect analysis (Albert, 2019), exploring the impact of sustainable leadership (Iqbal et al., 2021), and examining the types of actors developing innovation, the size of the organization, and the geographical origin of a firm (De Marchi et al., 2022; Hossain et al., 2022). Despite this, this study represents a first attempt to identify the strategic elements of a firm within the framework of EMs and the context of less developed countries. Additionally, the study adds to the existing literature on innovation models by validating the mediating influence of FI in the relationship between EO and STP, thereby bridging the previously unexplored gap between the two. Through the proper implementation and follow-up of the FI approach, EO firms can achieve superior STP. In theory, this study successfully addressed the research gap by validating the significance of FI in improving STP among manufacturing SMEs in EMs and less developed countries. The primary objective of this study was to explore the antecedents of FI in fostering STP, in contrast to previous research (Albert, 2022; De Marchi et al., 2022) that examined FI as a result variable. Drawing from the recommendations set forth by Iqbal et al. (2020), this study undertakes quantitative research to explore the mediating impact of FI on fostering STP in SMEs. As such, our research offers a significant theoretical advancement to the existing literature in this field. Lastly, previous studies have predominantly focused on the conceptual advancement of FI and its impact on sustainability, yet there is a lack of adequate empirical evidence (De Marchi et al., 2022; Rosca et al., 2018). Although FI is inherently sustainable, it does not automatically lead to SP on its own (Rosca et al., 2018). This study introduces a new perspective through EO, which aligns with EB to encourage firms to create and enhance FI capabilities, ultimately enhancing STP.

5.2. Managerial and Practical Implications

Beyond its theoretical implications, this study presents practical insights that can benefit managers and practitioners of manufacturing SMEs in emerging economies. First, the findings of this study are beneficial for practitioners contemplating pursuing FI as a strategy for fostering STP. FIs contribute to STP, so SMEs in EMs and less developed countries like Tanzania can embrace FIs as a means of achieving STP. Local SMEs in EMs with limited resources can enhance their STP by addressing economic, social, and environmental challenges, while also seizing opportunities for growth and resilience in their respective markets. In addition, it is important for managers and SME owners to recognize that EO facilitates the development of EB, which significantly influences SMEs innovativeness. SME owners, managers, and policymakers seeking to facilitate the shift toward STP in EMs must understand the basis for firms’ innovation capabilities and promote the cultivation of an entrepreneurial mindset that encompasses innovativeness, proactiveness, and risk-taking within their organizations and in all sectors. SecondSecond, SMEs in EMs can enhance the development of FI, which is characterized by using locally available raw materials, incorporating re-used materials in production, integrating recycling into business models, and producing durable and affordable products and services for low-income consumers. This, in turn, leads to STP that addresses environmental concerns, conserves resources, and aligns with circular economy princiThis study is of great significance to stakeholders, as these SMEs often face external pressure to adopt sustainable practices. To enhance and achieve STP, managers should possess skills in all three dimensions, namely, demonstrating a propensity for EB, having an entrepreneurial mindset, and embracing the definition and potential outcomes of FI. Despite the initial complexity of the FI environment, daily risks eventually become more common. As a result, managers should be prepared to make riskier decisions when implementing innovative strategies, as well as be ready to assess opportunities and determine which risks are worthwhile.

Lastly, given the mounting pressure on practitioners and policymakers to realize the United Nations Sustainable Development Goals (SDGs), the proposed framework could be used to minimize resource usage, reduce waste and CO2 emissions, fulfill the return on investment for investors, meet stakeholders’ needs, and conserve water, energy, and non-renewable materials. Policymakers and practitioners should prioritize fostering an entrepreneurial mindset and bricolage behavior to promote FI and achieve sustainable success. Hence, top management and decision-makers in manufacturing SMEs must foster supportive cultures that encourage employee initiatives to drive FI and enhance STP. Finally, suggestions are provided to inform practitioners and policymakers about the importance of EB as a key factor in FI, specifically in organizations operating in a resource-constrained environment.

6.Conclusion

The primary objective of this research is to explore the role of EO and EB on FI in achieving STP in EMs and less developed countries. We developed and empirically tested a conceptual framework using Tanzanian manufacturing SMEs as the context. The inspiration to conduct this study was driven by the insufficient amount of comprehensive research on the effect of EO on FI EMs and less developing countries, as well as inadequate research on the link between EO and STP. The findings indicate that FI is the most effective method for firms operating in EMs with scarce resources to mitigate the negative impact of their operations on the environment, as it entails the effective utilization of the available resources at hand. Only through the FI approach can EO manufacturing SMEs in EMs reduce their adverse impact and achieve STP. Despite the common belief that FI is simple, its practical application is actually quite complex. The successful execution of FI relies heavily on robust strategic efforts to handle the antecedents of EO and EB. Moreover, the findings suggest that EB behavior among manufacturing SMEs in EMs accelerates EO firms’ activities towards the development of frugal products. In summary, this research has added a distinctive perspective to the EO, FI, and STP literature while offering a roadmap for entrepreneurs and managers to foster an environmentally conscious society and solidify their legitimacy as an organization.

The results of this study should be evaluated, taking into account certain limitations that may open up avenues for future research. Initially, the study primarily examined manufacturing SMEs in selected subsectors operating solely in Tanzania, prompting considerations about the generalizability of the outcomes. This relationship may have varying effects on large enterprises and SMEs in different sub-sectors of the manufacturing industry across various EMs within LMICs. Therefore, future research endeavors should duplicate this study across SMEs and large enterprises in diverse subsectors of the manufacturing industry in other EMs and less developing countries to validate the external applicability of the findings presented in this research. Moreover, this research utilized a cross-sectional design, and it is suggested that future research employ longitudinal designs to explore the progression of the variables studied over time, potentially resulting in new insights to advance the existing knowledge base. In addition, it is advisable for future studies to use a mixed-methods approach that incorporates various qualitative methodologies to strengthen the triangulation of results and provide a more comprehensive understanding. Future research could consider implementing control variables such as firm category, firm size, firm age, manager tenure of work, and country of origin, addressing the limitations of this study and employing a multi-level approach to enhance the depth of understanding of the subject matter. As EB is not the sole crucial mediator influencing a firm’s EO, future research could provide further insights into the comprehensive influence of EO by investigating additional process variables that contribute to its influence on FI. In addition, future research could explore the impact of FI in each dimension of STP. Subsequently, the present study gathered data using a self-administered online survey form, which, despite the precautions taken, may introduce social desirability bias. Therefore, in future research, data collection from diverse respondents and sources should be considered to mitigate this bias.

Acknowledgments:

My greatest appreciation extends to my supervisor, Professor Mu Renyan for his endless guidance and support. The authors express their gratitude to all survey respondents for their insightful responses

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