Impact of Organisational Factors on the Circular Economy Practices and Sustainable Performance of Small and Medium-sized Enterprises in Vietnam

Abstract

Internal organisational factors have been identified as barriers to adopt circular economy (CE) practices in prior research. However, empirical evidence is limited to support this claim. Additionally, their impact on sustainable business performance, especially for the emerging economies and within the small and medium sized enterprises (SMEs) have not been studied adequately. This research bridges these knowledge gaps drawing on from CE, human resource management, innovation and sustainability literature to develop and validate a theoretical model that examines the relationships between organisational factors (leadership, innovation, culture, and skills) and their impact on adopting CE practices to enhance sustainable performance of SMEs. A survey was conducted among 205 SMEs’ employees in Vietnam, and responses were analysed using employing Structural Equation Modelling. Our findings reveal that organisational leadership will facilitate developing the culture and innovation capability to adopt CE practices through a ‘hub and spoke’ strategy for enhancing sustainable performance among the SMEs in Vietnam. In this vein, we recommend creating knowledge sharing strategies, collaborative and cooperative CE working groups within and between SMEs, and information systems capabilities to build sustainable business organisations.