Experimenting to innovate: the frugal journey of small and medium-sized enterprises

Purpose This paper aims to examine the relationships between transformational leadership (TL), experimentation, frugal innovation and the organizational performance of small and medium-sized enterprises (SMEs) in the manufacturing sector. Design/methodology/approach This empirical study analyzed data from 231 SMEs in the manufacturing sector of Santa Catarina, Brazil. A questionnaire survey was used to collect the data. To examine the hypotheses, the study used partial least squares structural equation modeling. Findings The findings indicate that higher perceived transformational leadership is positively associated with higher reported experimentation and frugal innovation, and that SMEs with higher scores on these constructs report higher perceived organizational performance. This study provides empirical evidence on the association between TL and frugal innovation in resource-constrained SMEs and situates these findings within leadership-oriented innovation research in emerging-economy contexts. Practical implications For SME managers, the associations observed suggest that leadership practices aligned with TL may be compatible with experimentation-oriented routines and resource-efficient innovation in similar contexts. For policymakers, the results indicate that leadership-development initiatives could be examined as one potential complement to broader innovation-support programs in resource-constrained SMEs environments. Originality/value This paper offers an incremental, context-specific contribution to frugal innovation research in SMEs settings by conceptualizing experimentation as a micro-level mechanism that links TL to frugal innovation, empirically testing the sequential pathway TL → experimentation → frugal innovation → perceived organizational performance in Brazilian manufacturing SMEs within a single structural model and providing context-specific evidence from an emerging-economy manufacturing context using a higher-order measure of frugal innovation capability. These findings and implications are context-specific and should be interpreted in light of the cross-sectional, self-reported nature of the data.