Action or reaction? Entrepreneurial and Market Orientation for Implementing Circular Economy Practices in German SMEs

Abstract

Circular Economy (CE) is one of the most promising practices in sustainable business development and achieving climate targets. Small and medium-sized enterprises (SMEs) play a significant role in this context due to their predominance in many countries and their associated ecological impact. Although studies indicate that CE offers various environmental and economic benefits, its implementation within SMEs remains relatively low. While SMEs face multiple challenges and barriers, there remains a lack of insights into the factors that can accelerate CE practices. A promising approach to overcoming these challenges involves strategic orientations. This study examines two specific strategic orientations, market orientation and entrepreneurial orientation, and their relationship with CE implementation in SMEs. Therefore, survey data from 757 German SMEs were analysed using multiple linear regression, which resulted in multifaceted insights. Both market orientation and entrepreneurial orientation positively influence CE implementation. Market orientation and entrepreneurial orientation demonstrate varying joint relationships, with entrepreneurial orientation acting as an enabler in the mediation between market orientation and CE. This study contributes to a deeper understanding of the relationships between various factors influencing the implementation of CE practices in SMEs. In particular, it provides the basis for further research into the interplay between market orientation and entrepreneurial orientation and their joint influence on CE. Practitioners in SMEs should not only integrate market orientation and entrepreneurial orientation as a holistic approach but, more specifically, seek to establish a culture that encourages innovativeness and risk-taking and deepen further marketing efforts throughout the organization to facilitate CE implementation. This ultimately leads to ecological sustainability and financial improvements in SMEs.