Green entrepreneurial orientation and sustainable performance of MSMEs: the role of circular economy and digital capability

Purpose Manufacturing firms face increasing stakeholder pressure to optimize business processes, improve waste management and enhance sustainable performance (SP). Achieving these objectives requires the strategic implementation of green initiatives, sustainable practices and digitalization. Given this, the study investigates how green entrepreneurial orientation (GEO) influences SP through the mediating role of circular economy practices (CEPs) and the moderating role of digital capability (DC). Design/methodology/approach Data were collected using a two-wave time-lagged field survey from 543 manufacturing MSMEs in Nigeria. Partial least squares structural equation modeling (PLS-SEM) was conducted using SmartPLS 4 to analyze the data. Findings The results indicate that GEO has a positive and significant effect on both CEP and SP. Furthermore, CEP partially mediates the relationship between GEO and SP, suggesting that the influence of GEO on SP also operates indirectly through CEP. In addition, the results show that DC significantly moderates the relationship between GEO and CEP, while its moderating effect on the GEO–SP relationship is not significant. Originality/value This study is among the first to empirically examine the interconnected relationships among GEO, CEP, DC and SP through the lens of dynamic capabilities theory. It also provides actionable insights for manufacturing MSMEs on formulating policies and strategies that strengthen CEP and, in turn, enhance SP.