Green Finance and Artificial Intelligence in Circular Economy Strategies: Evidence From Indian Plastic MSMEs

ABSTRACT Although circular economy (CE) strategies are central to sustainable performance, their adoption depends on enabling financial and digital technologies. Addressing the gap, this study examines impact on CE strategies for sustainable performance in Indian plastic MSMEs, with green finance as mediator and AI adoption as moderator, by synthesizing the natural resource‐based value, dynamic capabilities, and diffusion‐of‐innovation theories. Data collected from 425 plastic‐based MSMEs across India were analyzed using hybrid partial least squares structural equation modelling and artificial neural network. The findings show that circular product design significantly enhances environmental performance (β = 0.250), while remanufacturing bolsters economic (β = 0.224) and social impact (β = 0.149); extended producer responsibility demonstrates powerful social outcome (β = 0.286). Green financing partially mediates these relationships (VAF = 20%–55%), ANN exhibits robust prediction accuracy (RMSE ≈ 0.22–0.24). Previous studies treat governance descriptively; this study conceptualizes governance as structural conditioning system, shaping CE strategies.