Scarcity, absorptive capacity, and social networking — Antecedents of self-constructed innovation in Vietnamese SMEs?

Abstract

Literature on innovation has identified specific innovation patterns under scarcity conditions. This research investigates organizational and business environment factors that could be predictors of Jugaad-driven innovation to gain insight into the mechanisms of how resource-constrained firms can innovate following an informally recognized innovation paradigm. In particular, we explore the drivers of self-constructed innovation — a form of Jugaad-driven innovation among small and medium enterprises (SMEs) in resource-constrained environments in developing countries. Using quantitative analysis of 2,929 Vietnamese SMEs, we investigate how resource scarcities, social networking, and absorptive capacity influence the emergence of self-constructed innovation. Our findings reveal that weak infrastructure plays a significant role in triggering self-constructed innovation, whereas capital and human resource constraints do not show a significant effect. Additionally, we find that strong social networking and higher absorptive capacity enhance SMEs' ability to access external knowledge and develop self-constructed innovations. The study also highlights that self-constructed innovation primarily emerges as a cost-effective, non-R&D alternative for firms facing resource limitations, reinforcing its strong connection with bricolage and frugal innovation. By examining the combined influence of external knowledge sources and internal capabilities, this study contributes to the literature on non-R&D innovation management, in particular Jugaad innovation and responds to the call for further research on innovation networks in developing economies. The findings offer valuable insights for policymakers and managers seeking to support SME innovation under resource constraints.