The innovation paradox: the role of knowledge heterogeneity in frugal innovation

With the worsening environmental crisis and the rapid advancement of Industry 4.0, more enterprises are recognizing the importance of sustainable development, yet practical challenges remain. To better understand how internal knowledge sources and knowledge heterogeneity impact firms’ sustainable performance through frugal innovation, this study investigates the moderating role of internal and external knowledge heterogeneity and the mediating role of frugal innovation, drawing on organizational learning theory and contingency theory. The findings reveal that (1) internal and external knowledge sources positively influence sustainable performance; (2) frugal innovation mediates the relationship between these knowledge sources and sustainable performance; and (3) the moderating effect of internal and external knowledge heterogeneity is not significant. The study explores the reasons behind this non-significant finding and offers theoretical and empirical insights into how companies can effectively leverage knowledge resources and innovation strategies in the context of a green economy.