A Systems‐Based Approach to Sustainable Development: Integrating Circular Economy Dynamics, Eco‐Technological Innovation, and Institutional Governance for Regenerative Growth

ABSTRACT Achieving UN Sustainable Development Goals 9, 12, and 13 requires more than adopting sustainability principles; it also requires rethinking how firms innovate under rising ecological and market pressures. Despite its promise, the role of circular economy integration (CEI) in driving sustainable innovation (SI) remains underexplored in emerging regions, where industrial growth often intensifies environmental challenges. This study addresses this gap by examining how CEI influences SI and by testing the direct and non‐linear effects of CEI, alongside eco‐technology adoption as a mediating mechanism and sustainability governance as a moderating condition. Anchored in Dynamic Capabilities Theory, Innovation Diffusion Theory, and governance perspectives, the study uses panel data from 561 manufacturing firms in the MENA region from 2010 to 2023. Dynamic panel estimators and instrumental‐variable approaches are employed to address endogeneity and strengthen inference. The results show that CEI significantly enhances SI, but the relationship follows an inverted U‐shaped pattern. Eco‐technology adoption partially mediates this effect, while stronger governance further amplifies the CEI–SI link. The effects vary across regional blocs, industries, and ownership structures, underscoring the role of institutional and sectoral contexts. Robustness checks using alternative measurements confirm the findings. These results translate into a clear policy and practice message: advancing progress toward SDGs 9, 12, and 13 requires coordinated measures that combine consistent regulation and targeted incentives with investments in eco‐technology, circular infrastructure, and governance capacity so firms can scale CE adoption and convert it into sustained innovation.