Scaling Circular Economy Solutions in Resource-Constrained Environments: A Dynamic Capability Framework for SMEs

Abstract

The circular economy has emerged as a promising pathway for sustainable development, yet limited research explains how small and medium-sized enterprises (SMEs) operating in resource-constrained environments scale circular business models over time. Existing studies predominantly focus on circular business model typologies, implementation barriers, and policy mechanisms, providing limited insight into the capability development processes required for scaling. This study addresses this gap by developing a theory-building framework that explains how SMEs progressively transition from market participation to scalable circular enterprises. Drawing on dynamic capabilities theory, the resource-based view, and institutional theory, the study adopts a qualitative, theory-building approach that combines a structured synthesis of circular economy, sustainability, and strategic management literature with abductive reasoning. GreenSense Ghana Ltd. is used as an illustrative case to contextualize framework development; it is not treated as empirical evidence and is not used for statistical or analytical generalization. Through this synthesis, the study develops a Phased Circular Scaling Model comprising three sequential stages: market entry and validation, manufacturing and waste valorization, and digital integration for ESG-enabled value capture. The study contributes to circular economy scholarship by shifting attention from static circular business model configurations toward dynamic scaling processes. It further extends dynamic capabilities theory by demonstrating how sensing, seizing, and transforming capabilities evolve throughout circular business model development. For practitioners and policymakers, the framework provides a structured roadmap for scaling circular initiatives in emerging markets characterized by institutional and resource constraints.