International SMEs and sustainability in the manufacturing industry

Purpose This study aims to examine how international small and medium-sized enterprises (SMEs) explore and exploit opportunities to develop circular business models (CBMs) based on circular economy principles, specifically resource recycling, reuse and recovery. Design/methodology/approach The research uses an exploratory, grounded methodology, using six case studies of international Chinese manufacturing SMEs. Findings The findings suggest that international SMEs explore opportunities to develop CBMs by leveraging their managers’ cognitive understanding of circularity and by taking advantage of government policies as external enablers. They exploit these opportunities through organisational capabilities, global market exposure and the implementation of circular innovation across multiple departments, often resulting in business model innovation or radical redesign to align with circular principles. Research limitations/implications The small sample size limits the empirical generalisability of the findings, as the study focuses on six international SMEs that have successfully developed CBMs in a particular context. Practical implications The study offers practical recommendations for managers to develop CBMs internationally, emphasising the recruitment of young talent and green marketing. Originality/value This study advances research on SME internationalisation and circularity by integrating micro-foundations and institutional theory to explore the development of CBMs as SMEs become exposed to global markets, while highlighting typologies of business model transformation towards circularity.