Frugal Innovation at the Intersection of Formal and Informal Sectors

Frugal innovation has emerged as a vital paradigm for fostering sustainable entrepreneurship, business model reinvention, and societal transformation, particularly in resource-constrained environments. This study explores how Moroccan entrepreneurs strategically navigate the intersection of formal and informal sectors to drive business growth, social impact, and digital transformation. Through an in-depth qualitative analysis, we investigate the entrepreneurial journeys of three distinct case studies—MadNess, a social innovation incubator fostering community-driven solutions; NexTronix, a technology company that demonstrated remarkable adaptability in overcoming multiple crises, including the COVID-19 pandemic and the Al Haouz earthquake; and Aboulfeth Hamza, a digital entrepreneur who leveraged technological expertise to build scalable and financially sustainable ventures. Drawing upon sensemaking theory (Weick, 1995) and the principles of frugal innovation (Radjou & Prabhu, 2015), this research highlights how Moroccan entrepreneurs combine informal practices with formal business structures, utilizing social networks, local resource optimization, and digital tools to enhance resilience and scalability. Employing ethnographic methods, Natural Language Processing (NLP) analysis, and advanced machine learning techniques, this study systematically deciphers key entrepreneurial strategies that enable business sustainability in uncertain environments. Findings reveal that adaptability, local resource utilization, and hybrid business models are crucial in shaping resilient enterprises. The case studies illustrate how entrepreneurs dynamically reinterpret constraints as opportunities, deploying lean resource strategies, digital transformation, and community-driven innovation to create scalable solutions with societal impact. NexTronix's ability to pivot in response to crises underscores the role of agility and ecosystem collaboration in sustaining technology businesses in turbulent economies. MadNess, by contrast, demonstrates the power of grassroots innovation and the role of social capital in driving entrepreneurial success. Finally, Aboulfeth Hamza's trajectory showcases how self-taught digital expertise and financial bootstrap strategies contribute to sustainable business scaling. By integrating qualitative interview insights with computational linguistic analysis, including word frequency mapping, sentiment trajectory evaluation, PCA-based business model analysis, and knowledge graph construction, this paper provides a multi-dimensional perspective on how entrepreneurs thrive despite institutional and financial limitations. The study contributes to the global discourse on frugal innovation, sustainable development, and entrepreneurial resilience, offering valuable implications for policymakers, investors, and business leaders seeking to cultivate innovation-driven ecosystems in emerging markets. Ultimately, this research underscores the transformative potential of frugal innovation as a catalyst for economic growth, technological advancement, and inclusive entrepreneurship in the Global South.