Driving Sustainable Performance Among Micro-Entrepreneurs: The Interplay of Mental Model Disruption, Entrepreneurial Knowledge and Frugal Innovation

This study investigates the factors driving frugal innovation and its impact on sustainable performance in fashion micro-entrepreneurs in Indonesia. It examines how mental model disruption and entrepreneurial knowledge drive frugal innovation, with the business ecosystem moderating the relationship. It also evaluates how frugal innovation directly affects sustainable performance. Data were collected from 340 micro-entrepreneurs through structured questionnaires and analyzed using SmartPLS. The findings reveal that mental model disruption significantly enhances frugal innovation, entrepreneurs who can challenge and transform existing mindsets are better equipped to develop cost-effective and resource-efficient innovations. Entrepreneurial knowledge also has a significant positive effect on frugal innovation, indicating that a deep understanding of market dynamics and resource utilization strengthens the capacity to develop innovative solutions that are both economical and effective. The study also confirms that the business ecosystem significantly moderates the relationship between mental model disruption and frugal innovation. Finally, frugal innovation has a significant positive impact on sustainable performance in achieving economic efficiency, social inclusivity, and environmental sustainability.