Circular Economy Principles and Eco-Innovation on Economic and Environmental Performance in Chinese Small and...

This study examines how circular economy principles and eco-innovation mediate the effects of external factors, customer pressure, market risk, regulatory support, and technological advancement on environmental performance, economic performance, and employee well-being in Chinese small and medium-sized enterprises (SMEs). A quantitative, cross-sectional survey was conducted with 165 Chinese SMEs. The relationships among the constructs were examined using Partial least squares structural equation modeling (PLS-SEM), with each construct assessed through multiple survey items. Regulatory support (β = 0.33) and customer pressure (β = 0.24) were the strongest positive antecedents of circular economy principles, while market risk had a negative effect (β = -0.19). Circular economy principles were strongly associated with eco-innovation (β = 0.52). Eco-innovation was positively associated with employee well-being (β = 0.42), environmental performance (β = 0.38), and economic performance (β = 0.29). Customer pressure and market risk did not significantly affect technological advancement, and their indirect effects on eco-innovation via technological advancement were non-significant. However, circular economy principles mediated the effects of all three external factors on eco-innovation, while technological advancement mediated only the effect of regulatory support. The associations with environmental performance were stronger than those with economic performance. Overall, circular economy principles and eco-innovation help explain how external enablers relate to environmental, economic, and employee well-being outcomes in Chinese SMEs.