Investigating the link between eco-innovation ambidexterity and performances in low-end markets: does frugal innovation matter?

The requirements of sustainable development compel companies to invest in the renewal of their products and production processes. However, companies approach this need differently, as the factors that stimulate virtuous behavior can vary. The choices of companies are also influenced by the characteristics of the external context in terms of availability of resources to support the innovation processes and type of customers. This study investigates the impact of eco-innovation ambidexterity—balancing exploitative and explorative eco-innovation—on operational and financial performance in manufacturing firms operating in low-end markets, traditionally characterized by lower-than-average product pricing. It also examines the moderating role of frugal innovation orientation in this relationship. Specifically, by applying the ordinary least squares regressions, we focus on a sample of manufacturing SMEs placed in Romania. The history of transition from a planned economy country and the high incidence of SMEs makes Romania an exemplary low-end market to show the mentioned dynamics. The findings reveal that eco-innovation ambidexterity positively influences operational performance, while no significant effect is observed for financial performance. Furthermore, frugal innovation orientation strengthens the relationship between eco-innovation ambidexterity and operational performance, while its moderating effect on financial performance remains inconclusive. The results show the importance of eco-innovation ambidexterity as a dynamic capability for SMEs operating under resource constraints, offering theoretical insights into the innovation–performance relationship. Furthermore, the study offers guidance for managers seeking to balance sustainability with competitiveness in low-end markets.