Creating Social Value Through Innovation: The Roles of Social Innovation Orientation, Frugal Innovation, and Reverse Engineering

ABSTRACT Despite growing scholarly interest in social innovation, limited research explains how and under what conditions social innovation orientation is associated with corporate social performance. This study develops and tests a moderated mediation model in which frugal innovation is proposed to transmit the association between enacted social innovation orientation and corporate social performance, and reverse engineering is proposed to condition the second stage of this pathway. Using three‐wave survey data from 260 manufacturing SMEs in Vietnam, we find that enacted social innovation orientation is positively associated with frugal innovation, which in turn is positively associated with corporate social performance, measured as managers' aggregated perceptions of customer‐, employee‐, and community‐related outcomes. The results are consistent with an indirect association through frugal innovation alongside a remaining direct association. Moreover, the association between frugal innovation and corporate social performance is stronger when reverse engineering is high, and the indirect association is correspondingly stronger at higher levels of reverse engineering. Because the data are observational and come from single informants, the findings indicate temporal associations rather than causal effects.