Frugal Innovation as an Environmentally Oriented Business Strategy: The Roles of Servant Leadership and Organizational Learning Capability

This study examines how firms develop frugal innovation as an environmentally oriented business strategy that combines competitiveness with lower resource intensity. Drawing on sustainable business strategy research and using degrowth as an interpretive lens rather than a causal theory, we conceptualize frugal innovation as an organizational outcome centered on core functionalities, substantial cost reduction, and shared sustainable engagement. We test the roles of servant leadership and organizational learning capability using survey data from 450 manufacturing firms in Santa Catarina, Brazil. The results show that both servant leadership and organizational learning capability are positively associated with frugal innovation, with organizational learning capability exerting the stronger direct effect. Organizational learning capability also mediates the servant leadership–frugal innovation relationship, indicating that leadership also contributes to frugal innovation when relational conditions are translated into learning routines such as experimentation, dialogue, and participative decision‐making. Multi‐group analysis indicates that the structural relationships predicting frugal innovation are broadly stable across technological intensity levels, although the servant leadership–organizational learning capability link is stronger in medium to medium‐high technology firms. The study advances research on business strategy and the environment by empirically specifying organizational learning capability as a mediating mechanism linking servant leadership to frugal innovation. It also examines the stability of these relationships across technological intensity groups in an emerging‐economy manufacturing context.