The Bottom-of-the-Pyramid (BOP) Market: Why and How Does Serving the Impoverished Segment Promote Radical Innovation?

Abstract

This article examines a counter-intuitive phenomenon that radical innovation can be developed in bottom-of-the-pyramid (BOP) market. Applying the path of least resistance theory and integrating it with the attention-based view, we develop a theoretical framework that links the firm capability of BOP market commitment to radical innovation through architectural and modular knowledge search strategies and highlights the contingency of the choice of knowledge search strategies on the two pillars of strategic orientation – customer orientation and technology orientation. Based on a survey among managers in China, one of the largest BOP markets in the world, we find that while both architectural and modular knowledge search strategies act as the operating mechanisms that drive the positive effect of BOP market commitment on radical innovation, customer orientation strengthens (weakens) the positive effect of BOP market commitment on architectural (modular) knowledge search strategy. In contrast, technology orientation weakens (does not change) the positive effect of BOP market commitment on architectural (modular) knowledge search strategy. The research results make substantial contributions to multiple research streams, including the BOP literature, studies on creativity and innovation under constraints, research on strategic orientation, and studies on radical innovation.