Sustainable Innovation in Action: Driving Circular Entrepreneurship with People, Pressure, and Purpose

Abstract

This study aims to examine how strategic workforce capability, stakeholder pressure, and sustainability-driven innovation collectively influence circular entrepreneurship within SMEs. A mixed-methods approach was employed, integrating quantitative analysis using Partial Least Squares Structural Equation Modeling (PLS-SEM) on 570 SME respondents and qualitative thematic coding from semi-structured interviews. Additional qualitative insights were used to triangulate and enrich the interpretation of quantitative findings. The results reveal that strategic workforce capability serves as the foundation of circular transformation by fostering employee participation, creativity, and continuous improvement. Sustainability-driven innovation acts as the core mechanism that translates workforce competence into eco-efficient processes and circular business outcomes. Stakeholder pressure significantly strengthens the innovation process by encouraging alignment with customer expectations and regulatory demands. The integrated findings confirm that innovation mediates the relationship between workforce capability and circular entrepreneurship, highlighting a dynamic interplay between human capital, innovation, and external influence. This research contributes to advancing circular economy literature by demonstrating how workforce empowerment and innovation synergy can transform SMEs into sustainable, resilient enterprises, offering both theoretical insights and practical guidance for promoting circular entrepreneurship across developing economies.