Abstract
The current increasing topic around empirical study is environmental issues. Several previous studies examined how open innovation strategies could affect eco-innovation amid research debates about environmental conservation in corporate innovation. This study aims to prove the effect of open innovation strategies on creating eco-innovation to affect SMEs’ sustainable competitive advantage and performance empirically. This study developed and empirically tested the mediating role of eco-innovation on sustainable competitive advantage and performance. A quantitative approach in testing the empirical research model was implemented. A total of 223 SMEs in the batik sector in Yogyakarta were examined. We used purposive sampling approach to select the research sample. The criteria used in the sampling is SMEs batik which has been operating for three years or more. The results revealed that open innovation strategies significantly positively affected eco-innovation while eco-innovation significantly positively affected competitive advantage and SMEs performance. Environmental uncertainty strengthened the eco-innovation relationship on competitive advantage, but not on the SMEs’ performance.