Green Entrepreneurship as a Catalyst for Circular Economy Transformation: A Configurational Perspective from an Emerging Economy

Manufacturing firms in resource-intensive emerging economies, such as Bangladesh, face extensive environmental pressure related to resource consumption, waste generation, environmental damages and buyers’ sustainability demands. Accordingly, green entrepreneurship (GEN) and circular economy practices (CEP) provide vital pathways to enhance the environmental performance (EP) among these firms. This research examines how GEN and CEP influence sustainable green innovation (SGI) and EP, and answers whether innovation leadership (ILE) and environmental dynamism (END) shape the strengths of these influences. This work draws on the green dynamic capability view (GDCV), developing an integrated framework through the operation of dynamic capabilities into Teece (2007) classical core microfoundations of sensing (SEN), seizing (SEI), and transforming (TRA). The study analyzes survey data from 275 managerial professionals from Bangladeshi manufacturing firms through partial least squares structural equation modeling (PLS-SEM) and fuzzy-set qualitative comparative analysis (fs-QCA). The findings suggest that GEN positively influences both CEP and SGI, whereas CEP also enhances SGI. Besides, SGI is significantly associates in improving EP. In addition, END strengthens the relationship between CEP and SGI, while ILE has a significant negative moderating effect on the relationship between GEN and SGI. The outcomes of this research are valuable for managers in Bangladesh to implement linear and conditional strategies to enhance firms’ environmental performance. The results suggest that managers should promote green entrepreneurial initiatives, implement circular economy practices in daily operational activities, and transform circular routines into clean products and processes to facilitate environmental performance at firms. For policymakers, this study highlights the need for relevant policy actions in this context.