Transition Toward a Sustainable Circular Economy: A Perspective on Green Innovation and Governance Policy Using a Novel <scp>MMQR</scp> Approach

ABSTRACT As global sustainability challenges intensify, the transition to circular economy (CE) practices has become a critical strategy for businesses seeking to align with Sustainable Development Goals, particularly SDG 12. In emerging markets, understanding the key drivers behind successful CE adoption is vital for fostering sustainable growth. This study investigates how RET influence the adoption of CE practices in manufacturing firms across the MENA region, with a focus on the moderating roles of green innovation and governance policy. Drawing insights from the resource‐based view, dynamic capabilities, and stakeholder theories, the study constructs models linking returnee directors (RET) to CE adoption. Using a panel dataset of 5302 firm‐year observations, the study employs advanced econometric techniques, including MMQR and dynamic GMM modeling, while addressing endogeneity through IV‐2SLS, lagged effects, and PSM estimations. The findings reveal that RET significantly enhance CE practices across lower, middle and upper quantiles. Green innovation not only directly promotes CE adoption, but also amplify the positive influence of RET on CE practices. Additionally, robust governance policies strengthen the relationship between RET and CE practices, particularly at higher quantiles, underscoring the importance of institutional frameworks for fostering sustainability. This study highlights the pivotal role of RET in advancing CE and offers practical insights for policymakers and business leaders aiming to align with global sustainability goals. By integrating green innovation and effective governance mechanisms, this research provides a strategic roadmap for accelerating the transition to a CE in emerging markets.