Stakeholder pressure, circular economy, and SME performance: The role of green innovation in emerging markets

Addressing the factors influencing small and medium-sized enterprises (SMEs) to implement environmentally friendly manufacturing processes and how they affect their performance is essential for both researchers and practitioners. While the literature has extensively investigated the economic and environmental aspects of the circular approach, it lacks empirical evidence regarding the societal considerations of the circular economy (CE). Using 381 valid responses of SME managers in Vietnam, we employed a quantitative methodology to investigate how stakeholder pressure (STP) and the moderating effect of green innovation (GE) affect CE practices (CEP), which accordingly influence corporate social responsibility participation (CSRP) and sustainable firm performance (SFP). The results revealed a positive correlation between STP, CEP, CSRP and SFP. The findings further indicate that GE moderates the link between CEP, CSRP and SFP. This study contributes significantly to CE literature by investigating the impact of CEP on sustainable performance in developing countries. It also provides a theoretical framework utilizing RBV theory, stakeholder theory, and network theory to promote CEP. Subsequently, this study sheds light on the importance of stakeholder pressure and green innovation in promoting CE practices and achieving greater sustainable performance within SMEs in emerging markets. Furthermore, the findings of this study present several implications for managers and policymakers as these insights can be utilized to formulate strategies and public policies aimed at bolstering support and advancement for CEP.