Unlocking innovation in SMEs with a contingent approach: How does leadership ambidexterity promote organizational ambidexterity and innovation performance?

With the burgeoning concepts of organizational ambidexterity and ambidextrous leadership, this research intends to understand how entrepreneurial firms like small and medium-sized enterprises (SMEs) with resource constraints leverage leadership ambidexterity to achieve organizational ambidexterity, the simultaneous pursuit of exploration and exploitation, and improve product innovation performance. Using a contingency approach, this research draws upon the opportunity-based entrepreneurship theory and proposes that individual-level entrepreneur's leadership ambidexterity, a simultaneous engagement of transformational and transactional leadership, can serve as a viable micro-foundation driver for SMEs to achieve firm-level organizational ambidexterity and subsequent innovation performance. Nevertheless, the effect of leadership ambidexterity on organizational ambidexterity depends upon the firm's entrepreneurial resource allocation strategies, such as resource orientation and reward philosophy. By adopting a two-informant survey approach, the data from a sample of 151 SMEs from manufacturing industries in China was collected. Results confirmed the positive links between leadership ambidexterity, organizational ambidexterity and product innovation performance. The positive effect of leadership ambidexterity on organizational ambidexterity remained consistent across different levels of resource orientation, but the positive impact diminished with an increased emphasis on value-based reward philosophy.