LAUSR

Abstract Due to the growing public quest for environmental protection, small and medium-sized manufacturing enterprises (SMMEs) are under pressure to adopt eco-innovation to improve their operations. However, whether and how eco-innovation efforts can bring performance improvements may rely on the implementation level of eco-innovation and other traditional environmental management (TEM) practices. Drawing on the contingency theory, we develop and empirically test a model which proposes the existence of different firm clusters of SMMEs based on their eco-innovation implementation levels and that the performance improvement associated with eco-innovation practices is contingent on the firm clusters and TEM practices (i.e., internal source reduction, external compliance and communication, and internal management and control). Using survey data collected from 382 SMMEs in China, our cluster analytic results reveal two firm clusters of SMMEs characterized by three types of eco-innovation (technology, management, and marketing) implementation. From the results, we observed eco-innovation adopters involving 225 SMMEs (58.9% of the sample). The rest of 157 SMMEs (41.1% of the sample) are labeled as eco-innovation planners. T-test results show that the implementation levels of eco-innovation and TEM practices, as well as environmental and economic performance improvements, are different between eco-innovation planners and adopters. Results from hierarchical regression analyses further show that implementing certain eco-innovation practices jointly with TEM practices is beneficial for performance improvements. External compliance and communication are helpful for management innovation to bring environmental performance among eco-innovation planners, but it can be detrimental to environmental image together with marketing innovation. For eco-innovation adopters, internal source reduction is helpful for both technology and management innovation to deliver environmental performance. Technology innovation and internal source reduction can jointly bring economic performance improvement among eco-innovation planners, but such joint efforts can weaken the economic performance improvement for eco-innovation adopters. Our paper contributes knowledge on the role of eco-innovation to bring performance gains among SMMEs in China, a major manufacturing hub in Asia servicing global production demands. We also examine the performance contingencies of eco-innovation with TEM practices in the SMMEs, providing practical implications for them to improve operations, as well as policy insights for governments to promote the performance benefits of eco-innovation, particularly targeting for the smaller-sized manufacturers in the industry.