Green Innovation and Innovation Performance: The Roles of Circular Economy, Environmental Dynamism and Environmental Munificence

ABSTRACT This study establishes the connection between Green Innovation (GI) and Innovation Performance (IP) under review with a special focus on the mediating role of the Circular Economy (CE) and the moderating impacts of Environmental Dynamism (ED) and Environmental Munificence (EM). The study was based on the Natural Resource‐Based View (NRBV), Dynamic Capability Theory, and Institutional Theory to extract data on 370 participants in the private sector in Ghana and analyzed it using the Partial Least Squares Structural Equation Modeling (PLS‐SEM). The findings have shown that GI has a positive influence on CE and IP; at the same time, CE is a very strong enhancer of IP and the mediator of the relationship between GI and IP. On the other hand, ED does not have notable moderating effects on the GI‐CE relationship, whereas EM has a negative moderating effect on the CE‐IP relationship. These results indicate that circular practices are central processes through which green innovation can improve performance, but the effectiveness of these processes depends on environmental conditions. From a practical perspective, the results indicate that managerial focus should prioritize introducing the principles of the circular economy to green innovation strategies rather than treating green initiatives as isolated compliance efforts. To policymakers of developing economies and resource‐dependent economies, the findings indicate the role of developing specific policy tools that can lead to circular efficiency and encourage sustainable innovation performance and prevent excessive dependence on environmental generous treatment. The paper enhances the theoretical value to the literature on sustainability‐oriented innovation.