Abstract

This research explores how collaborative culture (CC) influences frugal innovation (FI). It enhances our understanding of the dynamics driving FI by investigating the mediating role of absorptive capacity (AC) and the moderating impact of information communication technologies (ICT). Based on multistage convenience sampling technique, the data was gathered from 432 supervisory staff employees from 260 Pakistani SMEs. Current research employed structural equation modeling to assess hypotheses within the defined research framework. The results show a positive relationship between CC and AC and various facets of FI and further AC mediates this relationship. The findings revealed that ICT strengthens the effects of AC on FI. This study contributes to theoretical and practical efforts on the Knowledge Based View, highlighting the crucial role of CC in cultivating an environment conducive to AC and innovation. The study offers insights and an innovative strategy for directors and managers in emerging nations to enhance their firms' financial intelligence capability by cultivating a collaborative culture and assimilating and leveraging internal and external knowledge. © 2025 Elsevier Ltd