Driving frugal and business model innovation: How different organizational capabilities contribute to business competitiveness

In the current business landscape, organizations encounter significant challenges due to changing market trends, technological progress, and evolving customer expectations, which require them to develop various organizational skills quickly. This study examines how diverse organizational capabilities, such as business analytics (BAC), resource bricolage (RBC), and resource ingenuity (RIC), are associated with frugal innovation and business model innovation (BMI), ultimately relating to competitive performance. Employing a cross-sectional design, data were collected from 349 firms in Turkey and analyzed through structural equation modeling. The results indicate that BAC and RBC are positively related to frugal innovation and BMI, underscoring the resource recombination for operational and strategic innovation. However, a statistically insignificant relationship exists between RIC and BMI, a finding interpreted as inconclusive due to multicollinearity but which highlights a potential distinction between the capabilities required for operational ingenuity and those for strategic reconfiguration. Furthermore, frugal innovation and BMI were significant predictors of competitive performance. The study extends the dynamic capabilities theory and clarifies the concept of frugal innovation by explaining how operational and strategic innovations are linked distinctively. The study concludes with diverse insights into organizations, highlighting the need to synchronize competencies with targeted innovation strategies to ensure competitiveness.