The duality of digital and environmental orientations in the context of SMEs: Implications for innovation performance

Abstract Debate surrounding the performance outcomes of a firm’s strategic commitment to digitalization and environmental sustainability (namely, digital orientation and environmental orientation, respectively) is gathering pace. Despite progress, there remains no conclusive evidence on whether, and how digital orientation and environmental orientations enhance innovation outcomes, especially for small and medium-sized enterprises (SMEs). Therefore, this paper examines the direct and complementary effects of digital and environmental orientations on the likelihood that SMEs introduce product and/or process innovations (i.e., product and process innovation performance). The study tests its hypotheses on a sample of 369 North American SMEs. Results demonstrate that digital and environmental orientation have a positive direct effect on product and process innovation performance. Instead, the complementary effect of pursuing a dual strategy towards digitization and environmental sustainability has a negative impact on process innovation performance and is not significant for product innovation performance. These results add new insights to theory linking strategic orientation to innovation performance, with specific regard to smaller firms.