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DOI: 10.1002/tie.22157

RESEARCH ARTICLE

How entrepreneurship ecosystem influences the development

of frugal innovation and informal entrepreneurship

Paul Agu Igwe | Kenny Odunukan | Mahfuzur Rahman |

David Gamariel Rugara | Chinedu Ochinanwata

Lincoln International Business School,

University of Lincoln, Lincoln, UK
Correspondence
Paul Agu Igwe, Lincoln International Business
School, University of Lincoln, Brayford Pool,
Lincoln LN6 7TS, UK.
Email: pigwe@lincoln.ac.uk
Abstract
This article critically analyses how the entrepreneurial ecosystem and institutional
environment influences the development of frugal innovation and informal entrepre-
neurship. There is a dearth of empirical research on African entrepreneurship ecosys-
tems and complementors that produce innovations in the informal sector. We
address this gap, by examining why and how informal businesses operate and evolve.
Based on a qualitative approach, interviewing 20 business owners in Nigeria, two
focus groups meeting with 5 and 7 business associations leaders, respectively, we
examine the role of institutional environments, how entrepreneurs operate and over-
come the barriers to entrepreneurship. The results reveal a model of determinants of
frugal innovation and informal entrepreneurship ecosystem comprising formal/infor-
mal rules, access to market, and family as important elements that act as a means to
effective knowledge flows, networking, capital, and resources sharing.

KEYWORDS
African entrepreneurship, entrepreneurial ecosystem, frugal innovation, informal enterprise,
institutional theory

1 | I N T RO DU CT I O N boundaries (inflows) to accelerate internal innovation (Nambisan

Entrepreneurship is not only seen as a way to drive economic develop-
ment but also changes in society (Ratten & Dana, 2019). In this paper,
we examine the entrepreneurial ecosystem (EE), the role of institutional
environments, and frugal innovation from “Entrepreneurship as Prac-
tice” (EAP) perspective. Institutional environment comprising political,
economic, legal, and cultural structures often defines the entrepreneur-
ial capacity of a nation (Agbloyor, Gyeke-Dako, Kuipo, & Abor, 2016;
White, Kitimbo, & Rees, 2018; Williams & Vorley, 2015). The last two
decades have witnessed tremendous innovations and technological
advancement in developing economies. These changes range from new
forms of open innovations (OI) (Eckhardt, Ciuchta, & Carpenter, 2018;
Nambisan, Siegel, & Kenney, 2018), digital platforms, mobile transac-
tions (Tiwana, 2013), social enterprises (Ratten & Dana, 2019), new
ways of forming networks, and new social ecology of entrepreneurs
(Carroll & Khessina, 2005). The OI paradigm explains that firms are
increasingly sourcing knowledge and technologies from outside their
et al., 2018).
EE comprises the interacting components of entrepreneurial systems,
which foster new firm creation in a specific regional context (Mack &
Mayer, 2015). The EE model consists of six main elements, which are:
Policy, Finance, Culture, Support, Human Capital, and Markets
(D. Isenberg, 2011). Platforms are dependent on the EE of complementors
that produce innovations (West, 2014). Notably, the Organization for
Economic Co-operation and Development (OECD, 2017) reveals that the
environment for innovation has changed and the importance of new and
small businesses to the innovation process has increased. Bessant and
Tidd (2013) support this argument based on some findings, which
appeared to suggest that, when adjusted for size, small-firm's innovations
made more new products than larger firms, in contrast to findings, which
appear to favor large firms. Some studies describe the pattern and pro-
cesses that lead to the development of products and services through
active collaboration between formal and informal actors (Knorringa, Pesa,
Leliveld, & van Beers, 2016). Frugal innovation represents a new frame of

Thunderbird Int. Bus. Rev. 2020;62:475–488. wileyonlinelibrary.com/journal/tie © 2020 Wiley Periodicals LLC. 475

476
mind: one that sees resource constraints not as a liability but as an oppor-
tunity and one that favors agility over efficiency (Radjou & Prabhu, 2014).
The institutional framework that prevails in developing economies
is fundamental to shaping entrepreneurial orientation, new venture
creation, and ultimately, growth (Williams & Vorley, 2015). Hence, this
study adopts the “institutional theory” (North, 1990) to examine how
informal businesses operate in a developing world context and how
entrepreneurs in the study area access resources such as knowledge,
financing, and the barriers to entrepreneurship? It is important to cap-
ture these mechanisms, which support entrepreneurship (Gartner,
Stam, Thompson, & Verduyn, 2016).
These phenomena are important and worthy of study in their own
right; besides, there are many reasons why we focus on frugal innova-
tion in the economy of a developing World. First, it is important to
understand how changes in the local economy are playing out across
different spatial levels of economies. Never have so much of entrepre-
neurs' decision-making, strategies, and success been at the mercy of an
external entity as is evident in the current globalized economy
(Nambisan et al., 2018). Second, there is a paucity of research on Afri-
can entrepreneurship (Igwe & Icha-Ituma, 2020). The fact that research
focusing on entrepreneurship and small business practices in the African
continent is less prominent, especially in the mainstream entrepreneur-
ship journals (George, Corbishley, Khayesi, Haas, & Tihanyi, 2016; Jones
et al., 2018) makes this study even more crucial. Third, entrepreneurs in
emerging economies face resource constraint (Hansen & Schaumburg-
Müller, 2010) as a result many businesses remain small and/or informal
(Igwe, Madichie, & Newbery, 2019). Fourth, despite so many studies in
the field of frugal innovation in many contexts, there is only one study
(Meagher, 2018) that examines it in the context of the informal African
economy. Prior entrepreneurship research focuses on the effect of social
networks and informal economy (Meagher, 2010) and cluster develop-
ment (Madichie & Nkamnebe, 2010). Also, as far as we know, there are no
studies that take an approach of examining frugal innovation from “EAP”
perspective in the informal sector. Gartner et al. (2016) posit that “practice
theory” is now gaining popularity as a valid means to understand how peo-
ple do things on an individual level, a collective level, and the actions that
navigate the space in between these two.
The remainder of the article is structured as follows. Next, we
explore the literature on frugal innovation, features of the informal
economy, EE, institutional regulatory framework, and the research
context. This is followed by the methodology, a summary of the find-
ings, and discussion. Finally, we conclude with practical and policy
implications and limitations of the study.
2 | LITERATURE REVIEW
2.1 | Frugal innovation
Entrepreneurship is not only seen as a way to drive economic growth
but also changes in society (Ratten & Dana, 2019). Arguably, frugal
innovation has emerged as a novel approach to improving the economic
inclusion of the poor and marginalized population (Meagher, 2016).
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IGWE ET AL.
Since its emergence, the use of frugal innovation as a research inquiry
has proliferated across the social sciences and within different academic
fields such as business, healthcare sciences, and technology. Initially,
attention was focused primarily on how organizations seek to provide
customers with technically sophisticated products and services
(Zeschky, Winterhalter, & Gassmann, 2014) and strive to create good-
quality solutions that deliver the greatest value to customers at the low-
est cost. Similarly, it has been used to represent how organizations
develop local technology, mobile money transfer service innovation
(Wooder & Baker, 2012), cost reduction (Kharas, 2010), and frugal prod-
ucts (Howard, 2011). There have been suggestions that it is driven by
resource constraints imposed by business environment (Sehgal,
Dehoff, & Panneer, 2010), inclusive forms of development (Knorringa
et al., 2016), institutional innovation, and social innovation
(Bhatti, 2012). Previous studies have shown that enterprise's critical
resources may extend beyond the traditional boundaries, with the focal
enterprise drawing upon the resources of other firms and institutions
through networks (Corral de Zubielqui, Jones, & Statsenko, 2015).
Hansen and Schaumburg-Müller (2010) note that business activity
in developing countries is attracting growing interest in both business
studies and development studies. Several conceptual frameworks
attempt to distinguish frugal innovation from other types of innovation.
Presenting a typology of frugal innovation Soni and Krishnan (2014)
introduce three types. The first, they described as frugal innovation as a
mindset or way of life. The second, as a process, and third, as an out-
come of products or services. However, Meagher (2018) believe that it
is more than just “getting the prices right” for poor customers, as frugal
innovation seeks to improve welfare and promote agency among
lower-income groups through the collaborative development of high-
quality, low-cost goods, and services.
From the literature review, it is clear that frugal innovation involves
formal and informal actors. As Meagher (2016) stated, these fervent dec-
larations of interdependence between formal and informal innovators
are accompanied by a persistent tendency to ignore the realities of infor-
mal economies as organized systems with distinctive economic interests
and dynamics of accumulation. These contributions underline the extent
of the “informal economy” and the need to understand it better
(Meagher, 2018; Ram, Edwards, Jones, & Villares-Varela, 2017). Besides,
this is important in bridging the gap between sustainable theory and sus-
tainable business practices (Issa, 2010). Societal factors are sometimes
assumed in entrepreneurship research and not specifically studied in
detail (Ratten & Dana, 2019). Therefore, the current study is grounded
on the notion that the relevance of society needs to be examined in
terms of entrepreneurship and connotations of entrepreneurial behaviors
(Dana, Ratten, & Honyenuga, 2018; Ratten & Dana, 2019).
2.2 | Informal economy
The mainstream entrepreneurship and management scholarship have
traditionally had little to say about the topic of the informal economy
(Ram et al., 2017). The informal economy consists of economic activities
and units that are not registered with the state and workers who do not

IGWE ET AL.
receive social protection through their work, both wage-employed and
self-employed according to the OECD (2017). The importance of the
informal sector in most African economies stems from the opportunities
it offers to the most vulnerable populations such as the poorest house-
holds, women, and youths (African Development Bank [ADB], 2013). In
Kenya, the National Bureau of Statistics estimates that, as of 2014, the
informal sector represents 82.7% of employment (World Bank, 2016).
According to ADB (2013), the informal sector contributes about 55% of
Sub-Saharan Africa's GDP and 80% of the labor force and 9 in 10 Afri-
can rural and urban workers have informal jobs.
Ram et al. (2017) go on to explain informality as the product of exclu-
sion from all but the lowest yielding markets, which tends to marginalize
the smallest firms, creating a need for cost-cutting, which is often achieved
through informal practices. The attributes of informality include having
fewer than five employees, being unregistered, usually unlicensed, and
typically do not pay taxes (Igwe et al., 2019). The extent to which entre-
preneurship is socially productive and contributes to economic growth
depends on the formal and informal institutional context in which it occurs
(Williams & Vorley, 2015). In explaining the extent of informal activities,
Ram et al. (2017) indicate that much informal activity takes the form of
self-employment as last resort survival for marginalized workers, who use
their firms trading activities to evade all manner of regulatory costs.
Petersen and Charman (2018) explored the relationship between
family and informal businesses through three thematic areas, namely,
social protection, employment opportunity, and business strategy.
Petersen and Charman (2018) suggest that economic survival in informal
settlements requires strong family, neighborhood, and cultural bonds and
networks. It is estimated that nearly eight out of ten employed persons in
Sub-Saharan Africa were in vulnerable forms of employment
(International Labour Organization [ILO], 2015). This statement has been
collaborated by other studies which argued that most of the informal
business activities in developing countries have been because of “neces-
sity entrepreneurship” (push-factor) rather than “opportunity” (pull-factor)
(Global Entrepreneurship Monitor, 2017). “Opportunity entrepreneurs”
refers to those who start a business because they spot an opportunity in
the market which they want to pursue and the necessity entrepreneurs
refer to those who start a business as they do not have another means of
generating income (Igwe et al., 2019). In sub-Saharan Africa, 74% of
women's employment is informal and was regarded as female vulnerable
employment, in contrast with 61% for men (ILO, 2015). OECD (2017)
stress that given the sheer size and the important contributions of the
informal economy in Africa and elsewhere, protecting the earnings and
promoting the livelihoods of urban informal workers will be key to realiz-
ing Sustainable Development Goals. Despite the important role of the
informal sector in fostering growth and creating jobs in Africa, little atten-
tion has been paid to it (ADB, 2013).
2.3 | Entrepreneurial ecosystem
There has been growth in societal entrepreneurship which is defined
as innovation and proactive business activity that has societal implica-
tions (Ratten & Dana, 2019). Although there are numerous models,
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477
two renowned EE models are popularly known as “University-based
Entrepreneurial ecosystem” (Fetters et al., 2010) and
D. Isenberg (2011) “Entrepreneurial ecosystem.” These models
describe the environment and institutional factors that support or hin-
der entrepreneurship growth. The EE University-based (Fetters
et al., 2010) model assumes that the university is a multidimensional
enterprise that is designed to foster entrepreneurial thinking and
action to support networking with relevant internal and external
stakeholders. However, it does not take into account the informal
economy and noneducational institutions, which is part of the focus
of this study (Volkmann et al., 2009).
D. J. Isenberg (2010) and D. Isenberg (2011) EE model focused
more on institutional forces and economic development. The model
assumes that high growth entrepreneurship is based on a combination
of external elements (which encourage or hinder entrepreneurship
growth) that constitutes the entrepreneurial system
(D. Isenberg, 2011) which is created by a virtuous cycle (Maroufkhani,
Wagner, Khairuzzaman, & Ismail, 2018). It further argues that regions
and institutions with favorable EE produce the greatest numbers of
entrepreneurs and have the most positive attitude toward entrepre-
neurship. D. J. Isenberg (2010) noted that that there is no exact for-
mula for the creation of such an ecosystem, but that public policy
facilitation should follow some principles when building an EE. Based
on that premise, D. Isenberg (2011) formulated a six-dimensional
model of EE that include Policy, Finance, Culture, Support, Human
Capital, and Markets to assess the external forces that support or
affect entrepreneurial growth (Mack & Mayer, 2015; Maroufkhani
et al., 2018; Stam & Spigel, 2017).
In most countries, entrepreneurship has been brought to the fore-
front of economic and policy discussion (Ratten & Dana, 2019). Some
economic policies in some economies are much more models of state-
led development. To promote economic growth and entrepreneurship,
national governments design supporting programs of various kinds
(Igwe & Kanyembo, 2019). According to Ratten and Dana (2019), the
difference between societal and other forms of entrepreneurship is
the deployment of resources around an issue that affects society at
large. Feldman and Lowe (2017) argued that among institutions, the
public policy is arguably the best-equipped actor in the economy, with
the necessary long-term perspective, enough command of resources
to make large-scale investments in infrastructure and education, and
the ability to coordinate economic systems in support of innovation
effectively. Unfortunately, many governments take a misguided
approach to building EEs (Friedman, 2011; Igwe, Newbery, Amoncar,
White, & Madichie, 2018).
There are indications that governments in developing countries
have invested numerous resources in establishing policies intended to
uplift entrepreneurship (Oni & Daniya, 2012), however, several bar-
riers to business development persist (Igwe & Icha-Ituma, 2020).
These obstacles add to the usual challenges that entrepreneurs face
such as the lack of skilled labor, lack of market information, the time it
takes to obtain permits, etc. (Igwe et al., 2018). Another key factor of
the EE model is culture (Ajekwe & Ibiamke, 2017; Anggadwita,
Ramadani, & Ratten, 2017). Culture represents society attitudes and

478
norms. Culture has been found to have a positive relationship with
entrepreneurship growth and entrepreneurial behaviors (Igwe
et al., 2018; Ratten, 2017). Therefore, cultural theories of entrepre-
neurship define traditional and modernistic practices in different
regions.
Several studies attribute access to funding and finance as the key
influential factor to the growth of entrepreneurial firms (Igwe
et al., 2018; Mendy & Rahman, 2019). In many developing countries,
entrepreneurs and firms raise smaller amounts of finance and are reli-
ant on personal and family sources of financing. In Kenya, for example,
business loans are usually very limited in volume, have high-interest
rates, and are mostly short-term (Mwobobia, 2012). In Nigeria, the
formal financial services exclude about 65% of the economically
active population (Central Bank of Nigeria, 2005). Arguably, access to
capital depends heavily on the institutional structure prevalent in an
environment (Igwe et al., 2018). Despite these challenges, some entre-
preneurs prevail and there are high entrepreneurial activities in many
African countries (Global Entrepreneurship Monitor [GEM], 2017).
2.4 | Institutional framework
Institutions, according to North (1990) are formal and informal rules
that govern individual behavior and together with social, cultural ele-
ments determine individual behavior (Anggadwita et al., 2017). Formal
institutions can be defined as the rules and regulations written down
or formally accepted to guide the economic and legal framework of a
society, while informal institutions include the traditions, customs,
societal norms, culture, and unwritten codes of conduct (Williams &
Vorley, 2015). A well-functioning institution is needed to foster pro-
ductive entrepreneurial development and growth. More so, supportive
institutional environments help build the foundations for innovative
and productive entrepreneurship (Aidis, 2017). In the context of pro-
ductivity and growth, it is well acknowledged that good policies and
supports foster entrepreneurship and innovation. More so, institution
(formal and informal rules) that defines the “rules of the game” deter-
mines whether individuals elect to pursue entrepreneurial activity
(Williams & Vorley, 2015).
Where institutions are weak or poorly devised, they can hamper
growth and become detrimental to entrepreneurship growth
(Williams & Vorley, 2015). In a healthy functioning ecosystem, various
forms of capital, including human, natural, social enable the flow of
smooth business processes, enhancing productivity, and enriching the
system to produce multiplier effects. Some studies suggest that inter-
nal and external (ecosystem) enablers are necessary for the interplay
between innovation and small and medium enterprises (SMEs) growth
(Love & Roper, 2015). Entrepreneurship always occurs in a cultural
context; hence, understanding the informal institutions is critical to
fostering entrepreneurial activity (Williams & Vorley, 2015).
The term “institutional void” (Mair, Marti, & Ventresca, 2012)
describes an environment lacking institutions such as business regula-
tions, a banking and financial system, legal systems, etc. These
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IGWE ET AL.
regulative factors are both barriers to formal business creation and
catalysts for entrepreneurship in the developing world (Igwe
et al., 2018). The OECD (2018) developed a framework that showed
that conducive business environment, including institutional and regu-
latory settings, is essential to incentivize risk-taking and experimenta-
tion by entrepreneurs and foster SMEs growth. Favorable institutional
regulatory framework develops in many ways such as availability of
credit services, low interest on loans, efficient market, availability of
property law, and favorable exporting (Bridge & O'Neill, 2013). In their
study, Williams and Vorley (2015) maintain that extant research sug-
gests that formal institutions governing the economic environment in
transition economies impose costly bureaucratic burdens on entrepre-
neurs, increasing uncertainty as well as operational and transaction
costs.
This study examines the Nigerian institutional and EE. Nigeria has
the highest population in Africa with about 200 million and arguably,
the largest African economy. The country has seven major regions
(North West, North East, North Central, Middle Belt, South West,
South–South and South-East). Each region has its customs, traditions,
culture, languages, ethnic groups, and tribes. The focus of this study is
South-Eastern Nigeria, a region to the Igbos with a population of
approximately 32 million (CIA World Factbook, 2016). Hence, the
objective of this study is to identify the institutional environment that
dictates frugal innovation, informal activities, and local entrepreneur-
ship in South-Eastern Nigeria.
Specifically, we provide answers to the following questions: What
motivates the population to start a business and why do people make
the decision to become self-employed? How do entrepreneurs in the
study area access resources (such as knowledge, skills, mentors, and
financing) to start, develop, and grow their ventures? What are the
various forms of frugal innovations and informal entrepreneurship
practices? What sort of institutional rules and regulations appears to
impede or facilitate entrepreneurs who want to engage in frugal inno-
vation or entrepreneurship? To explore these questions, we chose a
qualitative and ethnographic research approach. It has been suggested
that in places where institutions are unavailable or insufficient in guid-
ing actors' behavior (Mair et al., 2012), entrepreneurship prevail
despite the barriers and challenges. The choice of this location repre-
sents a typical environment where harsh economic and institutional
climate prevails, and subsistence and informal initiatives are high
(Kilani & Iheanacho, 2016; Madichie & Nkamnebe, 2010).
3 | METHODOLOGY
The spatial and contextual complexity of entrepreneurship research
requires suitable research methods (Crowther, Orefice, &
Beard, 2018). Blair (2015) suggests that it is important for researchers
to have an epistemological framework. The qualitative methodology
encourages the exploration of a phenomenon by understanding the
processes in their complexity (Sutton & Austin, 2015). Merino,
Lavissière, and Mandják (2018) propose that qualitative approach is

IGWE ET AL.
particularly suited to phenomena that have not been studied much in
the past. Given that this study is among the few to examine the fun-
damentals of frugal innovation, informal economy, and local entrepre-
neurship, we adopt this method. An ethnographic approach is
adopted, reflecting the subjectivist views of the authors and the belief
that research should be designed to reveal a richer and more holistic
picture (Crowther et al., 2018). Hence, the qualitative approach was
based on fieldwork, observation, interviews, and focus group meet-
ings. These approaches are grounded in our interpretivist view: under-
standing the world through our interaction with others,
acknowledging dynamic relationship with the data, and accepting our
place within the research (Blair, 2015). A purposeful and convenience
sampling procedure was (Suri, 2011) used to select experienced busi-
ness owners who were available and expressed their intention to par-
ticipate in the research. This approach enabled us to interview
20 informal business owners (15 men and 5 women). All the partici-
pants own/operate an informal (unregistered) business and have more
than 10 years of business experiences. Also, participants were rec-
ruited from 3 major cities.
By adopting qualitative research methods, employing semi-
structured interviews we gain information on the perceptions of the
business owners and market leaders. The nature of semistructured
interviews meant that several issues not on the research questions
were raised by some respondents, which were relevant and subse-
quently, explored further. The interviews were recorded with respon-
dent consent and transcribed, before thematically analyzing and coding
the data to explore emergent themes. We carefully followed the ethical
procedures by obtaining consent from all participants. The interviews
lasted between 30 to 80 minutes. Participants were asked to choose
the suitable venues for the interview and focus meetings. Before the
interviews, participants were informed about the aim and objectives of
the research. They were also informed that they had the option of with-
drawing from the interview at any time. To ensure confidentiality, all
the names of the participants have been removed from the publications
and replaced with pseudo (false) names.
Immediately after the interviews, responses were transcribed.
The transcripts of the responses were printed out and coded manu-
ally. Two focus groups (one with 5 executive members of local busi-
ness associations and the other with 7 market association leaders)
were used to verify, further explore interview responses, and clarifica-
tions (Monahan & Fisher, 2010). As such, interview transcripts were
printed out and handed out to the participants to confirm or amend
their responses where necessary. The focus group participants were
drawn from the 20 business owners initially interviewed. In addition
to the interviews, observations and field notes were taken during
visits to the businesses. Also, the local research assistants enabled the
building of trust, which is essential for capturing rich data. These
sources provided rich data for this study. All the transcripts were
printed out and coded using “thematic analysis” (Guest, MacQueen, &
Namey, 2012) to identify dominant themes that best fit the research
questions. Emergent coding and recoding were performed in an
attempt to help find meaning within qualitative data (Blair, 2015).
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479
These themes have been presented alongside some observations and
field notes as the findings.
4 | ANALYSIS AND FINDINGS
The thematic analysis identified the main elements of the EE, frugal
innovations, and informal entrepreneurial activity in Eastern Nigeria.
The key themes that emerged from the interviews indicate the effect
of formal and informal rules, access to market, access to resources,
and enterprise culture.
4.1 | Enterprising families and culture
Some of the participants revealed their motivations to start a business
and why individuals decide to become self-employed despite the chal-
lenges of operating a business. Some of the participants identify sev-
eral reasons or factors that led them to choose to become
entrepreneurs (within “opportunity” and “necessity” debates). Michael
maintains that,
In my case, it is opportunity-driven, the passion to cre-
ate jobs and to make money
Another business owner emphasizes that he sees himself as someone
that wants to be his own' boss, develop, and grown own business. He
explained that he sees himself as someone who wants to expand his
capacity;
When you are under someone you will not be able to
expand your capacity, you will be tied to whatever the
person wants you to do (James)
Another business owner notes that when you are working for others,
they can tap your abilities. You are limited to use your initiatives and
sometimes personal initiatives may be unaccepted. He further
explained that being own boss enables one to see the outcome of
his/her capacity and gains of hard work.
We the Easterners see opportunities; we pursue it and
work hard to make it successfully (Peter)
Majority of the participants state that their motivation was
necessity-driven than opportunity-driven. Many participants claimed
that this might be the case with many business owners as people
take into business due to lack of options and ethnic/tribal discrimi-
nation in the employment system in Nigeria. As a female business
owner states,
I was driven by ‘necessity’ as I was tired of looking for
a job and not getting any income support from

480
government and relations. I didn't want to get involved
in criminal activities (Stella)
Some entrepreneurs have been driven into starting a business due to
the loss of their previous jobs. Participants believe that the harsh eco-
nomic environment in Nigeria has been forcing many companies to
reduce staff and some has been closing. When Helen lost her job, she
could not find another job. She decided to start an event planning
business. Since then, she has enjoyed being the master of her own
business. Helen maintains that;
I think what makes Easterners start a business in Nigeria
is the harsh economic, cultural and political challenges
Some business owners explained that many young people finish
studies and there is no job. Hence, when they raise little money,
they start their own business. Furthermore, Igbo people have a
passion for business, and families support their siblings to go into
business. Therefore, the family is an important element in the EE
model;
Even when you don't have your own' capital and banks
are unwilling to lend, family members are always there to
lend and help young ones to start from somewhere
(Sunny)
Arguably, entrepreneurship is mainly driven by high unemployment
in society. Although this could be seen as a disadvantage in some
context, many young people are motivated to start a business to
avoid being trapped in the unemployment system;
Nobody wants to stay unemployed or dependent, most
people want to do something to create a livelihood
and better their life (Peter)
Also, many of the entrepreneurs are motivated by the lifestyle and
social choices of entrepreneurship by engaging in less risky ventures.
Another business owner, Moses states,
I started this business as a fun thing, I was not so serious
at the initial time, but gradually I started seeing the profit.
Now I take it seriously as a business and means of
livelihood
Indeed, families and the society have high support and value for entrepre-
neurship. Some of the participants described how their families
supported, nurtured, and encouraged them to start business ventures.
Many were encouraged to go into apprenticeship as early as 15 years.
Other learnt the trade through assisting their parents in their family busi-
nesses. Overall, the society recognizes businessmen as good career
choices and many believe in entrepreneurship as a means for better
prosperity,
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IGWE ET AL.
The society encourages young people to go into busi-
ness and families nurture and prepare their children to
take into business as a means for wealth generation
and financial security (Gabby)
4.2 | Access to resources and frugal innovation
South-Eastern Nigeria is known to have developed an entrepreneurial
culture and success and, often found in the private sector, specializing
in trades across Nigeria (Kilani & Iheanacho, 2016; Meagher, 2010).
Explaining, Moses stresses that one factor that helped many Igbo to
develop an entrepreneurial mindset and entrepreneurial culture is the
informal apprenticeship scheme that is common in eastern Nigeria (Igbo
traders and business owners). The apprenticeship scheme enables busi-
ness education, training, and investment in human capital and business
start-ups;
The Igbos has mastered the use of apprenticeship to
encourage of young people and a generation to put their
youthful energy to learn the trade, develop business and
social network, make a living and be successful (Moses)
Arguably, this is an example of frugal innovation. As Moses who was a
beneficiary of the apprenticeship scheme explained. The Igbos have
mastered the act of business and start-up creation through the
“Nwaboye scheme” (apprenticeship). Initially, he started his business
as fun, but when he realized that he could make a living from it, he
signed up with a family relation who was already doing the kind of
business he has an interest. He “served his master” (meaning learning
the trade) for 4 years without being paid. During the 4 years, he only
received stipends to cater for his feeding and basic needs. At the end
of the 4 years, his “master” assisted him with an initial capital and
rented a shop for him to start his own business. Now, he has 3 shops
in different locations as a fashion designer. The apprenticeship
scheme provides more than just training and access to capital;
Through the apprenticeship and traders' associations,
we create a network of customers, suppliers and dis-
tributors to maintain strong network ties for the busi-
ness (Nathan)
We found that many trade associations have emerged in
response to the need of the market and business challenges such cost
of importation, transportation, and high cost of production equipment.
In many cases, business owners create a union in the form of coopera-
tive to overcome the business challenge, share information, have
influence over the supply chain and price of their products. During
the field trip and observation, we noticed that several business units
had many workers helping the business owners. When we inquired,
we discovered that many of those helping out or we assumed that
were employees were not but apprentices. One unique feature about

IGWE ET AL.
this scheme is that it is not government supported or sponsored but
purely a local and informal initiative which has proven to be successful
and a means of generating business start-ups among the Igbos.
Frugal innovation develops in many forms in society through
social networks and local interactions. As explained by some of the
participants, business owners form various associations and clubs.
They come together to contribute and generate capital, knowledge,
and information to assist members to develop or expand their busi-
ness. Sometimes, capital is contributed to purchase high-cost machin-
ery by groups and ideas are shared through social interactions. In this
context, social media and mobile phone technology has been the most
critical factor driving local and frugal innovations;
With mobile phone technology and social media Apps
such as Facebook and WhatsApp, communications has
been made a lot easier for us. Ideas and information
are shared among a group so quickly (James)
Another form of frugal innovation among the Igbos is the “Esusu” or
informal financial contribution club. Although this is a traditional rotat-
ing savings and credit association that has flourished in West Africa
for generations, this has been re-invented in so many ways by the
business and ordinary members of the Igbo communities. The incen-
tive of participating in “Esusu” is the forced savings that it encourages
financial assistance. Participants (Precious, Samuel and Philip)
explained the various forms of Esusu among business owners and
community members. This is where a group of individuals come
together to form an association. They contribute money and levies
among the members.
The Esusu money is available to members and non-
members who want to borrow money for business pur-
poses (Precious)
During the interviews, some participants explained that the interest
is fixed at rates lower than what is obtainable other formal and informal
sources to make the funds attractive to members and nonmember who
need fund to invest in their business. Another takes the form where
12 people come together to form an Esusu. Each month a fixed amount
is contributed by all members and in turn every month, one member
collects the contribution for personal or business use. Hence, members
put aside money every month to benefit from a lump-sum payment in
the future. Subscribing members contribute a fixed amount monthly.
The accumulated funds are usually then assigned to
each member of the group in rotation until all have
benefitted from the pool of funds (Philip)
The “Esusu” system serves to fill the void created by lack of
access to credit especially lack access to finance which has been
reported as a major barrier to businesses by some of the study partici-
pants. This is an example of frugal innovation serving to mitigate the
problems associated to access to finance especially among the poor
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481
who lack information and the collateral required by formal banking
institutions and major money lenders. More so, formal financial insti-
tutions find serving poor risky and expensive (Khavul, 2010). As a
result, households have traditionally patronized informal credit lenders
some of whom charge higher interest rates and give short-term credit.
4.3 | Access to markets and frugal innovation
South-Eastern Nigeria is known to have clusters of markets in many
cities in Nigeria, which attracts traders from all over Nigeria. Onitsha,
Nnewi, and Aba are the three largest markets in Eastern Nigeria. “Aba
and Onitsha Made” is a popular slogan in Nigeria referring to locally
made products that copy International brands. Also, the two cities are
home to manufacturers of textiles, pharmaceuticals, soap, plastics,
cement, footwear, and cosmetics, etc. Both cities and urban centers
are dominated by artisans producing products such as shoes, belts,
wears, bags, clothing, and other leather products. As Joe explained:
The popularity of Aba handicrafts throughout Nigeria man-
ifests in the notion which is common throughout Nigeria
as ‘Aba Made’ which is synonymous with counterfeit
The copycat economy is another form of frugal innovation, infor-
mal, and artisan entrepreneurship that is popular among the Igbos. As
a result, a dynamic economic sector thrives in the major cities and
urban centers. Take, for example, Nnewi another city in the eastern
specializing in auto-parts manufacturing;
Today Nnewi is regarded as the African equivalent of
Taiwan. Also, second hand refurbished products by
artisans thrives in Nnewi (Joe)
The importance of the artisan economy has started to be recognized
in the policy domain. This type of entrepreneurship is widely acknowl-
edged as an engine for poverty reduction and economic development
(Foote, 2015). If you are looking for innovative ways to help develop-
ing countries flourish, artisans are a terrific place to begin, maintained
U.S. Secretary of State John Kerry while speaking at a forum at the
State Department about the impact that artisans have on communi-
ties and the global economy (Foote, 2015). The major cities and urban
centers in Eastern Nigeria are characterized by low entry require-
ments in terms of capital and professional qualifications; the small
scale of operations; skills often acquired outside of formal education;
and labor-intensive methods of production and adapted technology.
These are typical features of the informal economy.
4.4 | Formal and informal rules and business
environmental barriers
Previous studies show that Igbos of South-Eastern Nigeria feel mar-
ginalized and discriminated since the Civil War (1967–1970) where

482
the “Eastern region” attempted to proclaim independence from Nige-
ria as the Republic of Biafra (Korieh, 2016; Olakunle,
Iseolorunkanmi, & Segun, 2016). However, Igbos have developed
effective mechanisms that enabled them to develop transgenerational
business successes and legacies (Igwe et al., 2018; Meagher, 2010).
During the focus group meetings, five participants (Moses, Nathan,
Joe, Samuel & Judith) explained how the Igbos have through the infor-
mal apprenticeship scheme created enabling environment that allows
many generations (past and current) to overcome the institutional dis-
advantage. They note that through extended and community
approach, easterners have been able to develop a model that enables
them to overcome the unfavorable business environment that is com-
mon in Nigeria such as lack of access to finance and lack of education
and skills development among young people. Many of the participants
were of the view that the environment people do their business mat-
ters a lot. Some participants gave examples of the environment
related to economic and socio-cultural issues supporting or inhibiting
their business operations. For instance, Simon maintains,
We have a lot of challenges with government, harsh
competitions and gross taxations over business earnings
Instead of government supporting the business community to grow
their businesses, they are always bringing different taxes and levies
according to some of the participants;
Every day, they send their revenue and tax collectors
to come and be harassing and extorting money from
business owners (Grace)
There is also a high level of insecurity and kidnapping of successful
business owners. These circumstances have led some of the business
owners thinking of moving their businesses to other locations. For
example, those in the urban centers are thinking of moving out to
rural locations to avoid government interference and levies. While
some business owners are thinking of moving to bigger cities to con-
tinue to operate as informal or illegal enterprise and be able to avoid
government interferences. Another female entrepreneur Grace states,
We need a fairground where we can operate without
interferences, where we can reach more customers.
We are looking to relocate to navigate the business
environment
During the focus group meeting, we asked participants why many
business owners prefer or choose to operate in the informal sector.
Some explained that the supporting environment is lacking and as
such, there is no incentive and encouragement to register the busi-
nesses. Registering the business, many of the participants remarked
will bring financial scrutiny and demand for taxes and levies;
All the government does is to enact legislation impos-
ing different taxes and levies. Look at our bad roads,
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IGWE ET AL.
there is power outage every day and sometimes there
is no electricity for some days. If you want a loan/
credit, nowhere to get it (George)
The general comments were that many of the government policies do not
support a friendly environment for doing business some of the business
owners maintained. Some expressed the experiences that they undergo
with government agents and touts who enforce or collect the levies;
They will harass you and intimidate you and if you can-
not pay, they take some of your expensive goods or
seal up your shop (Helen)
The government attitude towards informal trade is not
good. They think these businesses are illegal and peo-
ple who run it are all crooks (Nathan)
Lack of access to credit and loan affects SMEs a lot. As one of the
business owners explained, with a lack of available funds, the business
cannot obtain and execute certain contracts. Some business owners
maintain that availability of credit facilities such as loan provides a
good safety net for small business. Another challenge that business
owners mentioned is insurance.
The problem we have with insurance companies is that
they hardly pay and hence people do not trust them any-
more to insure their businesses or properties (Simon)
Nobody trusts insurance companies in this country, some business
owners stressed. Besides, there is no good regulatory body that regu-
lates the insurance companies and ensures they do not deceive their
clients. Besides the formal institutions and rules that mitigate against
business performance and growth, there are the informal rules which
some participant described affect them.
There are cultural, social and family pressures on busi-
ness people (Grace)
Family pressure has an impact on business owners. As explained by
some of the participants, some family can be a source of assistance to
the business, while some can be a source of interference.
My husband plays a good role in this business, he
encourages me, he gives me advises and gives me
financial support (Precious)
However, some family members can distract or interfere with your busi-
ness or limit the growth business by taking the proceed from the business
or placing excessive financial demand, explained some of the participants.
When you employ family members and they did not
have the same motives and objectives, they will reap
us off (Jonathan)

IGWE ET AL.
As explained earlier, due to the absence of institutional support sys-
tem, many belong to an association where they come together to
solve or provide solutions to basic problems and challenges. Although
it has a positive effect, there is also a negative effect;
The meeting takes most of my time and I need the time
to take care of my business and my family, but the
association is very important (Cordelia)
Linked to culture and informal institutions, there are gender, cul-
tural, religious, and traditional barriers that prevent some people from
engaging in business ventures or growing their business. Nigeria is a
developing country where women are seen as not equal to women as
explained by one a female business owner (Judith);
Entrepreneurship is supposed to be for all, not only for
men, not only for women
Gender discrimination is high in society and culture support and cre-
ates gendered roles. As a result, there are rules on what kind of jobs
or businesses that men and women can do or not. Men tend to domi-
nate in society and make women feel inferior. Sometimes, women feel
intimidated and harassed.
Sexual harassment is something realistic and takes
place in the market, offices and public places (Grace)
There are a lot of women entrepreneurs out there but they are strug-
gling with their businesses compared to men according to the female
business owner. Grace goes on to explain that some men will demand
to see your husband before they do business with you.
To overcome the challenge most women use men as a
frontier in their business and gradually take time to
declare the business their own (Grace)
In some cases, there are gender issues affecting customers' choices. I
sew men and women clothes maintained one business owner. She fur-
ther explains that sometimes some male customers will come and
once they see that I have no males to sow their clothes, they will
leave.
The culture and tradition make many to believe and
stick to gender stereotype. People believe that certain
gender cannot do certain businesses, work or jobs
(Helen)
In many communities, women are not allowed to own
assets such as land, building or businesses. Even when
married women start and operate a business, the hus-
band can control and take decisions about the business
without consulting the wife (Judith)
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483
These are informal rules and traditions that are associated with entre-
preneurship and business development. As entrepreneurship becomes
more valued, it gains legitimation and the growth of entrepreneurial
attitudes, ambition, and perspectives and so, serves to reinforce the
emergence of a pro-entrepreneurship culture (Williams &
Vorley, 2015).
5 | DI SCU SSION
While informality is extremely influential in driving organization crea-
tion and development; the situationally specific influences are some-
what clouded by institutional factors, EE, and cultural factors.
However, more entrepreneurs are focusing on how their activities
influence other parts of society and the mechanism that adds social
value (Ratten & Dana, 2019). There have been several interests in
EAP perspective (Gartner et al., 2016; Keating, Geiger, &
McLoughlin, 2014). There have been calls for entrepreneurship
research that embeds a process and contextual approach (Ratten &
Dana, 2019). The findings from the current study indicate that frugal
innovation acts as a means of effective knowledge flows, information
sharing, networking, and resources sharing. There are several forms of
frugal innovation such as informal apprenticeship scheme, informal
financial system, and informal sector dominated by copycat and arti-
sans producing products such as shoes, belts, wears, bags, clothing,
and other leather products.
However, there are economic, social, and cultural factors
supporting or acting as a barrier to frugal innovation, business opera-
tions, and performance. Entrepreneurship research has predominately
focused on firm-level conceptions of success and the personal factors
that help predict them but has stopped short of investigating what it
means to entrepreneurs (Angel, Jenkins, & Stephens, 2018). As previ-
ously explained, institutional voids represent environments in which
extant institutions are unavailable or insufficient in guiding actors'
behavior (Mair et al., 2012). Under these conditions, actors embed
within networks of connected ties (e.g., Esusu) which provide access
to information, support, and capital as revealed in this study. In this
context, as harsh economic and institutional climate prevails informal
initiatives have become one of the most critical platforms, where local
people perceive opportunities, come together to support members'
initiatives and explore opportunities. As Gartner et al., (2016, p. 813)
put it that “EAP, an entrepreneurship practitioner carries patterns of
bodily behaviour, but also certain routinized ways of understanding,
knowing how and desiring, for and about, entrepreneurship”.
Family is an important element of the informal EE. In many devel-
oping countries, the extended family is a long established institution
which provides its members with sophisticated social security system,
an economic support to meet their basic needs for food, shelter, and
clothing, and a wide circle of relatives on whom to fall back in times of
crisis, unemployment, sickness, poverty, old age, and bereavement
(Petersen & Charman, 2018). Business owners from Eastern Nigeria
through frugal innovation have found ways to overcome the

484
economic and socio-cultural barrier that affect entrepreneurial inten-
tion, motivation, and behavior. They have created enterprising com-
munities such as Aba and Onitsha where artisans' activities thrive.
However, there are barriers that business owners face which make
them trapped into a small scale of operations; skills often acquired
outside of formal education; production takes the form of labor-
intensive and adapted new technology is rare. These are typical fea-
tures of the informal economy in major regions of Nigeria. Other fea-
tures include customs, tradition, informal rules, and unfavorable
market competition ad over-reliance on locally available resources and
lack of access to market information, bad roads, poor transport net-
work, and lack of communication systems that connect local busi-
nesses to national/international markets.
The business environment has created informal activities and
since average earnings are low, there are high levels of poverty. Also,
there is gender segmentation and women are disadvantaged in many
aspects. Studies have shown that women are disadvantaged in mar-
kets for entrepreneurial resources when compared to men
(Uzuegbunam & Uzuegbunam, 2018). They are also affected by rela-
tive poverty and powerlessness values (Lockyer & George, 2012). To
bridge the gender disadvantage and poverty gap between men and
women, the support given to women plays a crucial role. In this study,
an informal apprenticeship system was one of the key factors that
have enabled the Igbos in Eastern Nigeria to develop entrepreneurial
culture, business education, and training. These have implications
given the high rate of youth unemployment and lack of skills as
reported in many studies (Okolie, Eneje, Nwosu, & Mlanga, 2019;
Pitan, 2016).
The role of government is crucial in the entrepreneurship ecosys-
tem (D. J. Isenberg, 2010). Evidence point to lack of adequate sup-
ports and unfavorable regulations, which discourage people who want
FIGURE 1 Frugal innovation and informal entrepreneurship ecosystem
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IGWE ET AL.
to start businesses or those who want to increase their businesses.
On the surface, entrepreneurship looks healthier in Nigeria according
to the GEM (2017) reports; however, most of the activities are
“necessity driven.” As Isenberg EE model (2010) suggests, government
roles are important in the provision of favorable policies (rules of the
game), making access to finance feasible, regulating the culture, prov-
ing support, improving human Capital, and providing access to mar-
kets. Also, the government needs to support the local innovation
development and assist the business to advance their technology.
There is a growing interest in the informal sector in developing
countries, mainly due to the high rate of poverty and unemployment.
As part of its contributions, this study provides evidence of what
motivates people to start a business and how they obtain resources to
start, develop, and grow their ventures. Also, it examined the various
forms of frugal innovations and informal entrepreneurship practices
and institutional rules and resources that appear to impede or facili-
tate entrepreneurship. Studies based on African informal economy
and frugal innovation management are rare (Meagher, 2016,
Meagher, 2018); hence, we make contributions to the literature on
African entrepreneurship. In explaining informal activities, Ram
et al. (2017) emphasized that there is need to explore the origin of
informality and the interplay between firms' resources and the oppor-
tunity structure in which firms operate. This notion can usefully
address important questions that Bruton et al. (2012, p. 9) stressed
are neglected which include: are “some individuals […] excluded from
formal opportunities due to cultural/societal biases […] and pushed
into informality?” (cited in Ram et al., 2017, p. 365). Although this
study's focus was the informal sector, most of the discussion and find-
ings also affect small and medium businesses in the formal sector.
The theoretical contribution of this paper incorporates the deter-
minants of frugal innovation and informal entrepreneurship

IGWE ET AL.
ecosystem. The entire process and potential outcomes have been
delineated as shown in Figure 1. Indeed, entrepreneurship has posi-
tive implications for societal and economic growth (Bullough, Renko, &
Abdelzaher, 2017). However, entrepreneurship development requires
the collaborative power of innovative business practices, characteris-
tics, and partnerships that encourage community participation
(Ratten, 2014). This is useful, as it enables needs and resources to be
shared so they can become better in the marketplace (Ratten, 2014).
From the findings, informal entrepreneurship develops through access
to market, access to resources, and influence of formal rules and cul-
ture. In addition, families play a crucial role in supporting and develop-
ing entrepreneurs in the society. However, informal entrepreneurship
is enhanced or hindered through advancement in technology such as
mobile technology and social media. In the current context, frugal
innovation develops into entrepreneurial capability leading to capital
resources, effective knowledge and resource sharing, and improved
local products and services (Figure 1).
6 | C O N C L U S I O N , IM P L I C A T I O N S , A N D
LIMITATIONS
This research examined the motivations, experiences, and perspec-
tives of entrepreneurs and determinants of informal entrepreneur-
ship and frugal innovations. In a healthy functioning EE, various
forms of economic and social environment enable the flow and
smooth operations of businesses, along paths that are productive
and enriching to the system of which they are apart. The findings
reveal the elements of informality, frugality, innovation, culture,
and ecosystem that enable or inhibit local entrepreneurship
practices.
In terms of EAP perspective (Gartner et al., 2016), there is a need
for policies to support informal businesses that abound in cities and
urban centers to encourage entrepreneurship growth, employment,
and productivity. Such policies such as access to finance, access to
market, and vocational/apprenticeship training will lead to favorable
entrepreneurship ecosystem required for poverty reduction in Africa.
Arguably, informal entrepreneurship has employment and poverty
implications in Nigeria, given that youth unemployment rate is about
38% (Trading Economics, 2018).
Finally, despite the qualitative method that we adopted and its
merits, there are limitations to the study related to the number of par-
ticipants, data saturation, and the scope of the study, which is Eastern
Nigeria. However, this study provides a foundation for future study
and we call on scholars to undertake similar studies in different parts
of Nigeria and other African environments in the light of entrepre-
neurship growth and internationalization of African firms (Ibeh, Wil-
son, & Chizema, 2012).
ORCID
Paul Agu Igwe https://orcid.org/0000-0003-3624-1861
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AUTHOR BIOGRAPHIES
Paul Agu Igwe (pigwe@lincoln.ac.uk) is a Senior Lecturer and Pro-
gram Coordinator for BA Business & Enterprise Development at
the Lincoln International Business School (LIBS), University of Lin-
coln, United Kingdom. He is member of UNESCO Chair on Sus-
tainable Foresight at LIBS. He is a fellow of the Chartered
Institute of Management and Higher Education Academy. His
research interest and expertise include Entrepreneurship, rural
entrepreneurship, management learning, teaching pedagogy, and
career development. He has published in many top ranked
journals on entrepreneurship, international business, environment,
and education.
Kenny Odunukan (kodunukan@lincoln.ac.uk) is an Associate Lec-
turer at Lincoln International Business School, University of Lin-
coln, United Kingdom. He obtained in PhD from University of
Lincoln in 2019. His research interests include, entrepreneurship,
international business, and rural economy.
Mahfuzur Rahman (marahman@lincoln.ac.uk) is a Senior Lecturer
in International Business at the University of Lincoln, United King-
dom. His current academic and research interests are in the area
of entrepreneurship and innovation with a focus on sustainability.
Investigating the potential environment friendly manufacturing,
such as adoption of textile enzyme, for a sustainable future moti-
vates his most recent research works. He is an active team mem-
ber of the University of Lincoln UNESCO Chair on Responsible
Foresight for Sustainable Development. Dr Rahman has published
in internationally refereed journals, presented his research at a
range of international conferences, and has contributed to num-
ber of research projects.
David Rugara (drugara@lincoln.ac.uk) is the Head of International
and Associate Professor in Management at Lincoln International
Business School, University of Lincoln, United Kingdom. David
interests include research in Corporate Social Responsibility,
International Entrepreneurship, and Internationalization of firms
and Corporate Reputations.
 15206874, 2020, 5, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/tie.22157 by Newcastle University, Wiley Online Library on [09/11/2022]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
488 IGWE ET AL.

Chinedu Ochinanwata (18712599@students.lincoln.ac.uk) is PhD

How to cite this article: Igwe PA, Odunukan K, Rahman M,
student of Management at Lincoln International Business School,
Rugara DG, Ochinanwata C. How entrepreneurship ecosystem
University of Lincoln, United Kingdom. His PhD research focuses
influences the development of frugal innovation and informal
on Digital platform ecosystem, Digital entrepreneurship, platform
entrepreneurship. Thunderbird Int. Bus. Rev. 2020;62:475–488.
technology, Blockchain, and Digital economy.
https://doi.org/10.1002/tie.22157