This study aims to provide empirical findings of the extent to which the ambidexterity found in innovation and social networks will mediate the relationship between entrepreneurial orientation (EO) and firm performance (FP). This study also compares the ambidextrous strategy between the balanced dimension (BD) and combined dimension (CD) and examines their contribution to the small- and medium-sized enterprises (SMEs’) performance.
The current study used an explanatory research design by surveying a total of 205 fashion firms’ owners/managers in Yogyakarta, Indonesia, using a semi-structured questionnaire. Path analysis with mediating tests and independent t-tests were used.
The results revealed that innovation and social network ambidexterity mediate the relationship between EO and the SMEs’ performance. One ambidextrous strategy, the BD strategy, is superior to the CD one. The study makes an interesting discovery: the CD strategy apparently dominates FP when EO does not exist.
The study suggests that no ambidextrous strategy (i.e. BD and CD) used by the SMEs can fit all situations. In detail, the study provides four different strategies for SMEs to build organizational ambidexterity, namely, innovate and sustain; elevate; expand; and collaborate and survive. It is also suggested that the SMEs consider two main principles when dealing with an ambidextrous strategy, “anything that is too much is not always good” and “one size does not fit all.” By doing so, the SMEs are expected to be able to use internal and external resources and choose the most appropriate ambidextrous strategy to respond to the relevant situation (e.g. the changes of consumer behavior due to the COVID-19 pandemic).
Using a dynamic capability approach by integrating two perspectives, i.e. the internal (resource-based theory) and external (resource-dependency theory) perspectives, makes the study relevant and valuable to better understand the role and type of ambidexterity among SMEs as a mediating factor between EO and FP. This paper breaks new ground by confirming a paradoxical phenomenon concerning organizational ambidextrous practices within SMEs. Additionally, four strategies for ambidextrous were developed to respond to the anomaly.