Cultivating sustainability: Harnessing open innovation and circular economy practices for eco-innovation in agricultural SMEs

Abstract

The increasing environmental pressures on businesses have driven a global shift toward sustainability, particularly within small and medium-sized enterprises (SMEs). Despite the growing adoption of open innovation and circular economy (CE) practices, a gap remains in understanding how open innovation influences eco-processes, eco-products, and eco-managerial practices—core components of CE—drive eco-innovation in SMEs. Addressing this gap, this study investigates the interplay between open innovation, CE practices and SME initiatives in fostering the development of sustainable products, focusing on the agricultural sector in Thailand. Through Partial Least Squares Structural Equation Modeling (PLS-SEM) and survey data collected using a purposive sampling technique from 211 SMEs across Thailand, the study reveals critical insights. The findings indicate that eco-processes are the most influential component of CE practices in enhancing SME initiatives. Additionally, SME initiatives significantly contribute to the creation of sustainable products, particularly new products from waste and eco-friendly products. However, the study finds that eco-products and eco-managerial practices have limited influence on SME initiatives, highlighting the need for more targeted approaches in these areas. This study bridges the research gap by demonstrating how CE practices enable SMEs in agriculture to achieve sustainability. The findings emphasize the practical value of integrating eco-processes into business strategies while suggesting improvements in eco-product and eco-managerial frameworks. By advancing the understanding of CE-driven eco-innovation in SMEs, this research provides actionable insights for policymakers, SME managers, and stakeholders seeking to enhance environmental performance and competitive advantage in emerging markets.