Value Creation through Frugal Innovation, Innovation Capability and Knowledge Sharing in a Circular Economy

Abstract

This study aims to examine the direct effect of innovation capability on value creation. The mediating role of frugal innovation and the moderating role of knowledge sharing are also explored between innovation capability and value creation link. This exploratory study uses quantitative and cross-sectional data collected through questionnaires. Structural equation modelling (SEM) was used to examine the hypothesis. Findings show a significant positive impact of innovation capability on value creation. Results proved that frugal innovation mediates the relations between innovation capability and value creation. Knowledge sharing strengthens the association between innovation capability and value creation in their association. Our research provides a framework for the sustainable advancement of SMEs in a circular economy and recommends that they increase the value creation of the products/services through frugal innovation based on the innovation capabilities. Moreover, knowledge-sharing practices speed up the interplay between innovation capability and value creation in the circular economy.