Transactions Cost, Reconfigurational Innovation and Sustainable Competitive Advantages: Evidences from the Bottom of the Pyramid

Abstract

In this paper, we argued that, contrary to received wisdom, firms operating at the bottom of the economic pyramid are motivated more, by a desire to be cost competitive than, by pure philanthropy. We performed a content analysis on the reported cases of firms operating at the bottom of the pyramid using two apriori constructs. We found that cost competitiveness comes from the firms’ efforts to reduce transaction costs using a particular type of innovation which we coin as reconfigurational innovation. Reconfigurational innovation imparts competitive advantages to the firms and sustainability in their relationships with their consumers besides the possibility of replicating the advantages back into conventional markets