Sociality, affordability and the reverse knowledge flow from emerging markets

In rapidly growing emerging markets that exhibit a significant amount of heterogeneity, innovation activities by multinational corporations undergo a substantial transformation. This phenomenon can be summarized by the appearance of frugal innovation (innovation for emerging markets) and reverse innovation (innovation from emerging markets to the rest of the world). Although each of them is discussed individually, there are few studies that have investigated the relationship between the two concepts. Scarce studies have investigated what kind of innovation specific to emerging markets is transferred to the multinationals’ headquarters. Using the communication theory that whether the intrinsic value of the information is the main determinant of its transfer, we consider which aspect of frugal innovation is valuable for multinational’s headquarters. We hypothesize that the sociality of the innovation is the chief value of innovation from emerging markets, and that the affordability supplementally increases the value. That is, sociality determines the fundamental level of transfer and affordability moderates positively the relationship between sociality and the level of transfer to headquarters. We examine the relationship by using the data from innovation projects for emerging markets of Japanese multinationals.