Artificial Intelligence as Enabler of Frugal Innovation: Analyzing the Tensions With Paradox Theory

ABSTRACT The deployment of Artificial Intelligence (AI) in developing countries is increasingly seen as a powerful driver of Frugal Innovation (FI), offering the potential to address pressing social and environmental issues. However, this convergence of sophisticated, high‐cost technology with resource‐constrained environments represents a significant strategic change for organizations, creating inherent paradoxical tensions that are not yet well understood. This study addresses this gap by exploring the paradoxical tensions that emerge when AI enables FI. Using paradox theory as an analytical lens, we conducted a qualitative analysis of 11 case studies of organizations implementing AI‐driven frugal innovations across sectors such as healthcare, agriculture, and transport. Our findings reveal a typology of performing (e.g., cost vs. quality), organizing (e.g., autonomy vs. coordination), and learning (e.g., local needs vs. global expertise) tensions, as well as several combined paradoxes. Theoretically, this research extends paradox theory to the novel context of high‐tech frugal innovation. Practically, it provides managers with a framework for diagnosing challenges and adopting a “both/and” mindset for leading the strategic change required to successfully implement AI in resource‐scarce settings.