Nexus of ambidexterity and frugal innovation for enhanced ESG performance of entrepreneurial firms. The role of organizational capabilities

Organizations face growing challenges of resource depletion, climate change, and increasing stakeholder pressure to follow eco-friendly practices. Dynamic firms focus proactively on capitalizing on existing resources while exploring new ones for competitive advantage. This research investigates the role of ambidexterity and frugal innovation in enhancing entrepreneurial firms’ environmental, social, and governance (ESG) performance, emphasizing the significance of organizational ambidexterity, effectuation, and business analytics capabilities. It tackles two fundamental inquiries: (1) how do ambidexterity and frugal innovation influence ESG performance? 2) what functions do ambidexterity, effectuation, and business analytics serve in this relationship? The study capitalizes on 968 respondents working in manufacturing and services firms in Turkey. The findings indicate that organizational ambidexterity and effectuation are essential facilitators for ambidextrous and frugal innovation. These capabilities assist organizations in balancing the exploration and exploitation of resources, which is crucial for maintaining continuous innovation in a dynamic business landscape. However, business analytics fails to significantly impact innovation outcomes when resources are limited, especially in unpredictable markets. Under such conditions, institutional stability and market insights are regarded as dominant. The study asserts that ambidextrous innovation bolsters a firm’s capacity for frugal innovation, while both strategies markedly enhance ESG performance. This underscores the significance of cultivating a dual innovation strategy to achieve sustainability and governance objectives within the contemporary business environment.