Frugal Innovation: An Effective Approach to Address Global Conscious Consumption Patterns in the Context of Sustainable Development

ABSTRACT Frugal innovation is increasingly recognized as a catalyst for sustainable development, offering optimized quality, affordable solutions to resource‐constrained customers while aligning with global trends in conscious consumption. This study investigates how institutional leverage capability, sustainability orientation, and strategic flexibility drive frugal innovation—an area of growing importance for both academia and industry. Grounded in the dynamic capabilities framework, this research examines the impacts of institutional leverage capability, sustainability orientation, and strategic flexibility on fostering frugal innovation. Data were collected from 400 Colombian small and medium‐sized enterprises (SMEs) and analyzed using structural equation modeling with SPSS and STATA software. The findings reveal that these organizational capabilities are critical drivers of frugal innovation. These results provide actionable insights for managers seeking to integrate frugal principles into their innovation strategies and contribute to the academic discourse on frugal innovation and dynamic capabilities.