Scaling Frugal Innovation Based Startups to Accelerate Sustainable Development : A Minor Field Study in Cape Town, South Africa

University essay from KTH/Maskinkonstruktion (Inst.)

Abstract: With the rise of a global economy and the growing importance of emerging markets, socioeconomic and environmental issues are becoming the main driving forces for many innovation practitioners. As a result of the recognition that traditional ways of managing innovation are not sustainable and that more inclusive and accessible efforts are needed, the exploration of frugal approaches to innovation has emerged. Startups that apply frugal innovation have the potential to stimulate sustainable growth and reduce development gaps between less developed and developed countries. Yet, given their specific context, many startups face difficulties to commercialize technologies and scale to new markets. There is a need to understand how to support startups and entrepreneurs to scale up in their early stages as a means to drive sustainable growth in emergent economies. Thus, the purpose of this study is to investigate what factors influence frugal innovation-based startups’ potential to accelerate (economic, environmental, and social) sustainable development. To understand the influencing factors, an investigation of the barriers and enablers to scale up as well as the entrepreneurial behaviors in relation to their social settings, is necessary. Literature within frugal innovation was reviewed and a study was performed in Cape Town, South Africa. South Africa is a relevant research area for frugal innovation since startups have the potential to leverage resources of the high-income market to solve large problems in lowincome communities (i.e. informal settings or townships). In-depth interviews were conducted with startup representatives and stakeholders within the entrepreneurial ecosystem. The study revealed that due to the entrepreneurs’ background, they have the ability to understand customer needs and influence mindset change. Meanwhile, the entrepreneurs are dependent on social support, because they often lack self-advocacy, skills, and resources required to scale up. The importance of democratizing digital technologies as well as leverage entrepreneurial ecosystems was highlighted. The author also suggests further discussions on how sustainable impact is assessed as well as the role of power dynamics within entrepreneurial ecosystems.

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