Fit for tension: Firm size, innovation pressure, and the structure of operational renewal

How should resource-constrained manufacturers renew operations under mounting innovation pressure? We theorize and test a contingent model in which market pressure affects operational innovation indirectly through two pathways, technology investment (exploitation) and human-capital utilization (exploration), and in which firm size conditions both pathways. Using Eurobarometer 433 data on 2,213 European manufacturing firms, we estimate a conditional process model combining ordinary least squares and logistic regressions. We find a negative direct effect of pressure on operational innovation, but positive mediated effects via technology and human capital; the technology pathway is substantively stronger. Size matters: larger firms more effectively translate pressure into technology investment, whereas smaller firms rely relatively more on human capital, implying performance parity for sequential strategies when resources are tight. We contribute boundary conditions to ambidexterity theory and offer actionable guidance: small and medium-sized enterprises should sequence renewal by first mobilising human capabilities, then adding technologies; large firms can pursue ambidextrous investments.