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This study explores how firms transform environmental orientation into circular economy (CE) practices through two forms of eco-innovation: eco-product and eco-process innovation. Drawing on the Resource-Based View, it examines how internal and external environmental orientations foster these innovations and how they, in turn, enhance circular practices and sustainable performance. Data were collected from 310 firms in Vietnam and analyzed using partial least squares structural equation modeling and polynomial regression with response surface analysis to assess both direct effects and the additive (congruence-based) interplay between the two eco-innovation types. The results show that environmental orientation significantly promotes both types of eco-innovation, which positively influence circular economy practices and improve sustainable performance. Response surface tests indicate that circular economy practices increase linearly as eco-product and eco-process innovation rise simultaneously, demonstrating additive synergy rather than a curvilinear relationship, while innovation imbalance (incongruence) does not produce meaningful differences in circular outcomes. This research advances understanding of how environmental orientation drives circular transformation through dual eco-innovation pathways and clarifies that overall eco-innovation intensity, more than non-linear curvature or imbalance, explains circular implementation. The study offers guidance for managers and policymakers on aligning product and process innovation strategies to strengthen circular transformation and sustainability outcomes.
Bui et al. (Fri,) studied this question.
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