The paper aims at providing specific evidence on the quite unexplored area of SME (Small-Medium Enterprises) strategies concerning environmental and techno-organisational innovations dynamics. The theoretical and empirical literature on innovation-performance relationships at firm level, mainly focused on medium-large enterprises, is the conceptual reference of the paper. The objective is to analyse what innovation drivers, taking an extensive view (core innovation drivers, training, industrial relations), are spurring SME labour productivity, the main source of firm competitiveness. Our specific focus on SME adds evidence on SME behaviour, embedding firms in a local context where idiosyncratic factors may explain large part of innovative behaviour and economic performances. The main focus of the paper is nevertheless the extent to which environmental innovations (environmental process product innovation adoptions, environmental R&D, EMS/ISO and other factors) are positively, negatively, or not related to economic performances.
Results show that, training and organisational innovations are the main 'non environmental' significant drivers, operating effects through various different elements. The role of mere process/product innovation is instead not relevant, signalling possible weakness of innovation adoptions in term of value creation or that investments take a longer time to exert effects. Environmental strategies, specifically auditing schemes, especially ISO14000, and 'environmental R&D', both appear to impact positively on firm productivity even with a short lag. Environmental R&D - rarely available as a measure in eco-innovation studies- re-integrates into the picture the role of input technological innovation. Environmental policy-related costs do not seem to exert any negative effect on performances, as possibly expected. Comprehensive innovative SME strategies thus seem to effectively impact on firm performances both through 'standard' organisational innovation levers and higher performance and workers involvement practices, and also new eco-innovation strategies. Tradeoffs between economic performances and 'environmental' strategies seem to be weak or not existing at all, signalling potential complementarities regarding firm core performances and environmental objectives at firm or local district (community) level. Firms to some extent internalize external cost element into the comprehensive innovation strategy of the firm. The impure public good nature of some environmental problems at local level may explain this win win output we find. Our results imply that (SME) firms playing in local production systems facing the challenges of competiveness may address joint private/public aims by implementing corporate social responsibility strategies, that entail environmental investments and involvement of workers in innovative decisions. This chance may be enhanced when the firm is embedded in local production settings and where industrial relations are good given CSR implies the recognition of medium long run economic performances as core objective.