Environmental Orientation and Frugal Innovation Among Telecom Employees in Saudi Arabia: The Moderating Role of Transformational Leadership

Frugal innovation is an important area of academic research for organizations seeking to create value with limited resources. However, one important theoretical issue remains unclear: the available literature does not clarify how environmental orientations produce frugal innovation outcomes or how leadership capabilities determine this relationship within the resource-based view. Specifically, the processes by which both external and internal environmental orientations contribute to frugal innovation in resource-constrained environments, and the way transformational leadership is viewed as an intangible strategic resource, are not developed in theory. Therefore, the objective of this study is to explain the importance of frugal innovation in telecom companies in Saudi Arabia and to examine its theoretical link to the resource-based view. Furthermore, this study aims to investigate the relationship between environmental orientation and frugal innovation. Environmental orientation is estimated using both internal and external orientations. Furthermore, this study examines the moderating role of transformational leadership in the relationship between external and internal environmental orientation and frugal innovation in telecom companies in Saudi Arabia. For the empirical analysis, data were collected via a well-developed questionnaire sent to employees of three leading telecom companies: Zain, Mobily, and Saudi Telecom Company (STC). The sample size consisted of 436 employees. Furthermore, SmartPLS 4 software was used for PLS-SEM modeling to test hypotheses and assess model validity. After the data analysis, it was found that external environmental orientation has a positive and significant relationship with frugal innovation, and internal environmental orientation also shows a positive relationship. Furthermore, it was found that transformational leadership positively moderates the relationship between external and internal environmental orientations with frugal innovation in the telecommunications company. Furthermore, this study concluded that the telecommunications sector makes a significant contribution to economic development and that executives’ transformational leadership skills are an important moderator in analyzing environmental orientation and in enhancing employees’ abilities to utilize limited resources to achieve maximum benefits. This study is highly relevant to policymakers and researchers in the context of frugal innovation, in support of the organization’s objective.