Social Innovation in Emerging Economies: A Resource-Based View Perspective

Social Innovation in Emerging Economies:

A Resource-Based View Perspective

Rather than following the traditional RBV, which considers

supply (resources) as the point of departure for innovation,

emerging economies can achieve substantial innovation with

limited resources by analyzing demand (user needs) in their

design of a suitable and innovative strategy.

Irena Descubes

ESC Rennes School of Business1

Jean-Philippe Timsit

ESC Rennes School of Business

Yann Truong

ESC Rennes School of Business

1 Corresponding author : Irena Descubes, ESC Rennes School of Business, Rennes-France, [email protected], phone: +33(0)299334841, fax: +33(0)299330824

mailto:[email protected]

Social Innovations in Emerging Economies

J.E.L. classification codes: O12, O31, R58

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Key points:

In emerging countries, the RBV approach to innovation has to be

rethought to allow for these countries’ often limited resources

for achieving innovation.

A new perspective on the RBV would shift the innovation

approach from emphasizing supply (resources) to placing weight

on demand (user needs),

The case of a public transport innovation in the city of

Curitiba, Brazil, illustrates this new perspective and

redefines the social perception of an effective public

transport system.

This shift in emphasis of the innovation approach—from

resources to user needs—can be adapted by emerging economies to

implement innovations.

Keywords: social innovation, emerging economies, resource-based

view, strategic urban development

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Introduction

The development process in emerging economies challenges some

established theories in strategic management research (Meyer,

Estrin, Sumon Kumar, & Peng, 2009). In the innovation

literature, the resource-based view (RBV) is oriented toward

mobilizing resources and capabilities to achieve innovative

performance (Amit & Schoemaker, 1993; Barney, 1991; Penrose,

1959), which implies that the RBV resonates mostly with

developed economies where extensive resources are available to

firms for achieving innovation (Teece, Pisano, & Shuen, 1997).

However, emerging economies require a different approach, as

they often have limited resources to allocate to innovation

(Chacar & Vissa, 2005; Milana & Chen, 2012). Therefore, one

challenge would be to investigate the conditions under which

the RBV can be applied to the context of emerging economies

(Chari & David, 2012). In other words, we ask the question: How

can emerging economies achieve innovation with limited

resources? Given the rising importance of emerging countries in

the global landscape, this research question addresses an

important gap in the literature regarding the interface between

strategy and innovation in the context of emerging economies.

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Few studies appear in the current literature in this specific

but important area.

In developed economies, increasingly savvy and

cooperative, co-creative, and co-productive consumers force

researchers to reconsider the classical producer technology-

based innovation model. In contrast, in developing economies,

innovations assume a different life cycle, mostly based on

incremental or discontinuous customer preference changes

(Tripsas, 1997). Lower-cost and simpler or more convenient

products or services that meet the needs of underserved or new

customer segments prove to be “just good enough” innovations.

They do not require the extensive investment necessary for

radical innovations, yet they do drive a truly sustainable

social change through business innovation deeply rooted in the

given user community. In emerging economies, social betterment

cannot be driven by the development of increasingly

sophisticated products or services for a limited number of

users, as this emphasis excludes the needs of a far broader

community.

In this paper, we focus on the downstream value in a given

system (Porter, 1985). We believe that by carefully observing

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community needs and viewing them as opportunities, businesses

can develop new markets (King & Tucci, 2002) and build an

innovation-based competitive advantage (Van de Ven, 1986) while

solving long-lasting social problems in emerging economies. We

understand the notion of competitive advantage as representing

“the difference between the economic value a firm is able to

create and the economic value its rivals are able to create”

(Barney, 1996).

Building on the RBV, we propose that innovative solutions

can be achieved with limited resources by adopting a different

approach to innovation—that is, by shifting the analysis from

supply to demand in the RBV framework (Peteraf, 1993). We use

the case of the public transport system in the Brazilian city

of Curitiba to support our contention. Instead of building an

expensive and resource-intensive underground transport system,

the city’s urban planning team analyzed the commuting needs of

the local population and built on the city’s existing lanes to

replicate an underground system, thus addressing the same needs

using different resources. The approach employed an analysis of

demand (user needs) and the necessary resources to address this

demand effectively. This approach contrasts with the

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traditional RBV perspective, which sees innovation from the

supply point of view (Barney, Wright, & Ketchen, 2001;

Wernerfelt, 1984).

The Curitiba case is also interesting in that it includes

a social dimension to innovation, which is one of the most

frequently used approaches to innovation in emerging economies.

The following sections provide a background to the research,

present the methodology, introduce and analyze the case of the

public transport system in Curitiba, and conclude with a

discussion of the findings.

Background to the research

A rather counterintuitive model, based on value creation driven

by a sufficiently large demand, proposes that firms entering

new markets with “just enough good generalist offers” are not

stuck in the middle (Porter, 1985), but rather can “dominate

from the middle” (Adner and Zemsky, 2006: 220). This

entrepreneurial approach to the RBV returns to a certain extent

to the founding work of Penrose (1959) and Drucker (1954).

Penrose (1959: 80) considered that demand was “something [that

entrepreneurial firms] ought to be able to do something about,”

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and Drucker (1954: 37) claimed that “the customer is the

foundation of a business.”

In the context of emerging economies, we support the

slightly provocative stance of Adner and Zemsky (2006), which

is based on the discrepant quality requirements and decreasing

marginal utility of proposed services, by asking the following

question: Can the RBV be used to evaluate collective human

activities, such as urban development and prospective strategic

planning? The question raises an important issue, as between

1995 and 2005 the urban population of developing countries grew

by 165,000 people every day (GHO). Yet presently urban

population growth is slowing in developing countries, from an

annual rate of roughly 4% from 1950–1975 to a projected 1.55%

per year from 2025–2050. By 2050, a total of 5.2 billion people

should be living in cities and megacities.2

Urban development is a planned, thoroughly participative

process that involves multiple stakeholders, such as the mayor,

the city council, the city’s inhabitants, construction

companies, and other service providers. The inherent interest

2 A megacity is defined as a city with a population of more than 10 million (UN HABITAT).

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of all parties is to pursue a sustainable plan based on a

steady long-term consumer value creation.

We hereby propose to evaluate the RBV’s validity by

analyzing the case of public transport in the city of Curitiba

in Brazil. By focusing on one of the best known “just good

enough” innovations—the Curitiba local public transportation

system—we adopt the demand side of the RBV. The study is based

on the hypothesis that the Curitiba plan’s strategic urban

development efficiency and effectiveness are determined by both

the local market factors, such as demand and heterogeneity, and

the design features of the local public transportation system.

It can therefore be thoroughly analyzed and disseminated as a

best practice, adaptable to other local communities and

different public services.

Method

Following Eisenhardt’s (1989) seminal contribution, we used a

case study to conceptualize an empirical phenomenon for theory

building. We conducted the study by analyzing historical and

archival data to understand the evolution of the Curitiba

transportation system, from its creation to its actual

implementation. The historical analysis method is appropriate

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for analyzing both a phenomenon and a context to understand how

they co-evolve over time (Chandler, 1972; Miller & Chen, 1994).

Drawing on several types of data from different sources yielded

a richer and more solid data analysis and theoretical

development.

We selected the Curitiba case on the basis of a

theoretical foundation. Even though the city was poor and had

very limited resources compared to other cities of the same

size, over several years it successfully deployed a substantial

social innovation, which can be conceived as counterintuitive

on theoretical bases. To understand both the evolution of the

transportation system and the evolution of the context, we then

built the protocol and, through a historical study, evaluated

the systematic urban culture development of Curitiba since

1854. We collected a substantial amount of archival data, such

as maps, city histories, and newspapers articles, and performed

a content analysis of these data, highlighting passages for

critical analysis to enable the identification of phrases,

sentences, or paragraphs that constituted units of meaning. We

formulated assumptions founded on the data analysis and went

back to the literature, a process that ultimately resulted in a

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theoretical analysis of the phenomenon, based on the strategy

and innovation framework but in an urban and social context.

From urban development to development of a genuine urban

culture

Curitiba’s urban development dates from 1854, the year when

this ancient colonial town became the capital city of Paranà,

one of the 27 states of Brazil. The new capital city attracted

many immigrants from Europe, mainly Germans and Italians. Since

those days, the population has multiplied 200-fold, and today

is almost 1.8 million. Of significance for our study is that

85% of this population growth has occurred since the 1950s.

How could a provincial small town have absorbed such a

rapid growth of population? How did the stakeholders manage to

make the city one of the most economically viable and

ecologically sustainable Latin American hubs? The demand side

of the RBV can explain this success through an understanding of

strategic locally adapted urban and road development.

The Agache Plan (1941–1960): Foundation of Curitiba’s urban

culture

Even though planned urbanization efforts had existed before

1940, only the fully developed and comprehensive plan of the

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French urbanist Alfred Agache gave the city of Curitiba its

current geographic configuration and fostered its development.

Before 1940, the city’s layout had an orthogonal shape,

comprising streets with perpendicular intersections. Under the

Agache plan, radial, polycentric, and functional city

development replaced this design. The architect in chief and

his team believed that the city could not manage its

development properly without thorough and careful “zone”

planning within the city. Each zone within the city was

dedicated to a particular activity. The plan also took into

consideration the future growth of the city’s population. For

these reasons, the Agache plan can be regarded as the

foundation of Curitiba’s urban culture as well as a catalyst

for the urban intelligence and social innovativeness of the

city’s decision makers.

The Wilhelm Plan (1964–1970): Sustainable and structured urban

development

As in many other rapidly expanding cities in Brazil at the

beginning of the 1960s, housing and public facilities became

increasingly scarce. The most crippling problem related to

traffic, which in the congested and oversaturated city center

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became extremely difficult to manage. Although the city

government decided to widen the main street in the city, this

measure did not solve the traffic jams and instead resulted in

partial destruction of the city’s historical heritage.

Therefore, when the mayor, Ivo Arzua Pereira, was approached by

the urbanists Jorge Wilhelm and Isac Milder, he immediately

supported the proposal of a futurist urban development scheme,

inspired by the utopian project of Arturo Soria y Mata.

In the Wilhelm plan, the two structural axes forming an

“X” shape enabled the future development of Curitiba along the

historical northeast–southwest line. The plan was based on

several innovative principles, such as the hierarchy of passing

lanes, the polycentrality of city districts, the expansion of

green spaces such as public parks, and the deployment of

pedestrian zones. The objective of the plan was to create an

incomparable urban landscape. From the RBV perspective, another

important innovative aspect was the fact that the plan was

based on preliminary socio-economic studies that had been

ordered by the “owner” of the urban development—the city

council, led by Pereira. The plan carefully specified how

public space would be used, what hierarchy would be established

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within the road system, and, of special importance, how the

public transportation system would be integrated into the whole

urban development system. This planned approach has been

continued to today by the city’s Agency for Research and Urban

Development (APPUC3).

RIT: Integration of public transportation into urban

development

Since 1966, the city of Curitiba has put into service an

integrated transportation system (ITS), which offers a

standalone example of a social innovation adapted to the

context of an emerging economy with limited resources.

In devising their public transportation plan, the decision

makers brought together the viewpoints on two features of

growth that were often considered contradictory and in

opposition to each other: road and urban development. The plan

reconciles the needs of both the city as a whole and the

individual streets and blocks of houses. The intelligent and

planned division of space has driven a truly sustainable social

change in the Curitiba community—a change that is particularly

3 APPUC has become IPPUC (Institute de Pesquisa e Planajamento Urbano de Curitiba).

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reflected in types of housing, accessibility to the city

through public transport, and considerations of urban density.

Under the Wilhelm plan, the lanes were assigned specific

roles and were built first. They were divided into categories

according to the various means of transportation that would use

them and the speed at which traffic would be allowed to go. The

types of housing facilities to be built in specific city zones

were then carefully planned so as to contribute to the

efficient use of the transportation system. In developed

countries, the process occurs mostly in reverse: first the

housing blocks are built and only then is the transportation

system implemented, often in a manner that results in social

and spatial segregation. These effects have been avoided in

Curitiba, where the transportation system was ready to use at

the same time as the road system surrounding the housing

facilities. As a result, the population was not subject to a

potential lack of contact with the existing parts of the city

and was inclined to use the public transportation as the

benefits of its use were clearly apparent.

Furthermore, the ITS consists of differentiated bus lines

(routes) that are not designed on the basis of the residential

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areas to be served but rather on the basis of the line (route)

function within the whole transportation network (see Figure

1).

[Please insert Figure 1 here]

Figure 1: Integrated Transportation System (CTS) inCuritiba (source: MIT, http://colabradio.mit.edu/curitiba-

transportation-as-the-medium-for-integration/)

The transport routes traced in red in Figure 1 refer to

the links between the city center and external axes of the city

with a heavy urban development, where the population is quite

dense. The gray nodes correspond to the terminals of urban

integration that ensure either a multimodal switch between

express buses and so-called buses of direct integration (gray

circle) or the switch between express buses and buses of

transportation between residential areas (green parts of

circles). “Feed-in” routes (orange) connect remote suburban

areas with the city system through the terminals of

metropolitan integration. The ITS system can find its analogy

in hydrology: wherever you are in the city, a catchment-like

service exists. Like water from rain and small streams and

rivers, flowing into a large river, people from less dense and

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http://colabradio.mit.edu/curitiba-transportation-as-the-medium-for-integration/

http://colabradio.mit.edu/curitiba-transportation-as-the-medium-for-integration/


more remote areas travel via express routes toward the city

center. Because of the integration routes the entire system is

wholly connected, so that one can access it at any point of the

metropolitan area. The hubs between integration and express

routes are very efficient and user-friendly (specific colors

differentiate express and integration routes) and the ticketing

practices encourage riders to use the ITS since the tickets are

valid even when interconnecting.

The ternary system: Implementation of bus rapid system in

Curitiba

As previously discussed, the road system in Curitiba is

designed to accommodate separate urban districts’ layout to

allow for the best possible implementation of the

transportation system. The roads in the Curitiba metropolitan

area are used in different ways, which results in a certain

hierarchy in the city and influences urban density. The

importance ranking of roads within the transportation system

led to a ternary road system devised by the IPPUC.

In the heart of the ITS and at its first level is a double

lane for express buses (the Bus Rapid System, or BRS). Each

central BRS lane is bordered by two slow lanes dedicated to

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personal cars (second level). Along these slow lanes are tall

residential buildings of more than 15 floors each, which

provide housing for large populations. The third level of the

transportation system is situated behind these buildings and

consists of rapid lanes that provide access to residential

areas with individual housing facilities (smaller blocks of

apartments, houses, etc.).

Furthermore, the roads that have been built since the

1970s were planned for a specific use. From the beginning, a

thorough and steady planning effort has considered potential

combinations of the existing system with another system that

could be put in place in the future. This approach can be

understood and interpreted as an intelligent use of available

resources that create nurturing conditions for social

innovation. This system reflects a very fine-tuned

understanding of the dialectic between roads and urban

development: the denser the population, the better the city’s

public transportation must be. This example of social

betterment and innovation in the economic context of the

Brazilian emerging economy extends to the needs of the broader

community.

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The above low-cost and convenient transportation system

proves to be a “just good enough” innovation in that it solves

a mobility problem without necessarily requiring a lot of

public money to be spent on an underground system, which might

have been a little more efficient but certainly would have been

much more costly for the Curitiba community. The city planners

and decision makers have invented a BRS system based on the

principles underlying a subway system: people can commute

rapidly and in large numbers by using double- or even triple-

articulated vehicles that stop each 400 meters.

This innovation, which has been duplicated in other

rapidly developing cities with scarce public resources, such as

Quito, Bogota, and Jakarta, is based on the demand-based view.

The city of Curitiba had insufficient financial and

organizational resources to build a fully fledged underground

system. The city decision makers made a thorough analysis of

available resources and discovered that they owned powerful

buses, large roads and lanes that serve the city center and

suburbs, and excellent human resources with a high level of

technical knowledge. They first conducted a strategic

evaluation of available resources (Teece et al., 1997) and then

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devised the best available technical solution with a strategic

intent (Hamel & Prahalad, 1989) to allow the greatest possible

number of citizens to commute easily and quickly within the

metropolitan area. This solution, which was lower-cost and

simple to implement, met underserved or new customer segments’

needs and proved to be a “just good enough” innovation. It did

not require the extensive investment necessary for an

underground subway system, yet it contributed to a truly

sustainable social change in the Curitiba community.

Conclusion

In this research, we analyzed the development of the public

transport system in the Brazilian city of Curitiba to support

our contention that emerging economies can achieve substantial

innovation with limited resources. The city replicated an

underground system by improving an existing infrastructure,

hence avoiding the massive investment that is traditionally

linked to creating a conventional subway system in developed

countries (Ramadani & Gerguri, 2011). The study’s key finding

is that the urban planning team focused on user needs to design

a suitable strategy to address this demand with limited

resources. This approach differs from that of the traditional

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resource-based view, which considers supply (resources to

produce a particular new product or service) as the point of

departure for innovation.

The main limitation of this research is that it is case-

based, restricting the generalizability of its findings.

Nonetheless, other cities in developing economies have

replicated this approach to public transport with success,

which supports the possibility that Curitiba’s approach may be

applicable in other emerging countries. Given the large gap in

the literature that addresses both strategy and innovation,

especially in the context of emerging economies, future

research could investigate a greater number of conditions under

which current theories can be applied to these economies. For

example, an interesting research question would be to

investigate how emerging economies can generate additional

resources to address the greater challenge of innovating

globally, given the increasing interdependency of economies.

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Irena Descubes is Assistant Professor of Marketing and

Manager of CHEDD at ESC Rennes School of Business. Her research

is driven by her interest in sustainable economic transition

and societal change. Her work has been published in the Journal

of Euromarketing.

Jean-Philippe Timsit is Assistant Professor in strategic

management at ESC Rennes School of Business. His research

interests include competitive advantage, strategic management

of innovation, and new product development.

Yann Truong is Associate Professor of Marketing and Head

of the Center for Technology and Innovation Management (CTIM)

at ESC Rennes School of Business. His research interests

include environmental innovation, marketing of innovation,

business model innovation, and new product development. His

work has been published in the Journal of Product Innovation

Management, Industrial Marketing Management, the European Journal of

Marketing, and the International Journal of Market Research, as well as in

other outlets.

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Social Innovation in Emerging Economies: A Resource-Based View Perspective

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