Unveiling the drivers of green innovation and their impact on sustainability performance: the mediating role of circular economy practices

Purpose Grounded on the natural resource-based view (NRBV) theory, this study aims to analyze the impact of five green strategies – environmental regulations, corporate environmental ethics, green dynamic capability, top management support and green intellectual capital, on green innovation and its impact on sustainability performance of manufacturing firms in Egypt; in addition, the mediating role of circular economy practices on the relationship between green innovations and firms’ sustainability performance was assessed. Design/methodology/approach The data were collected from 394 responses from Egyptian manufacturing firms by using purposive sampling method. Partial least squares structural equation modeling (PLS-SEM) was mainly employed to analyze the data. Findings The study finds that environmental regulations, corporate environmental ethics, green dynamic capabilities and top management support significantly enhance green innovations of Egyptian manufacturing firms, while green intellectual capital is found insignificant. The relationship between green innovations and sustainability is found to be positive. The results reveal that circular economy practices partially mediate the relationship between green innovations and sustainable practices in Egyptian manufacturing firms. Practical implications To ensure sustainable business performance in Egypt, a long-term strategy focusing on green innovations is essential. The government should enforce strict regulations, while firms adopt sustainable practices, support managers and train young employees to drive green supply chain innovations and enhance business performance. Originality/value This study focuses on manufacturing firms, exploring the impact of green business processes on green innovation and sustainability performance. It uniquely examines the mediation role of the circular economy and provides insights applicable to developing countries like Egypt.