LAUSR

Abstract Circular Economy (CE) is considered as a significant sustainable initiative for waste minimization in manufacturing firms, but very little research is available on circular economy readiness in Micro, Small and Medium Enterprises (MSMEs). This study aims to develop an extended Theory of Planned Behavior model (ETPB) to explore small firm’s readiness towards circular economy. Environmental commitment and green economic incentives were considered as additional components of the ETPB model. The empirical results of the ETPB model are based on structural equation modeling (SEM), indicate that environmental commitment and green economic incentives with standard components better explains the CE readiness in comparison to the original TPB model. The extended TPB-1 model established the interrelationship between attitude, social norm, perceived behavioral control, additional components and improves the explanatory power of ETPB model. The findings show the impact of attitude, social pressure, environmental commitment and green economic incentives on CE readiness is positive and significant whereas the impact of perceived behavioral control is non-significant. Social pressure and green economic incentives found significantly influencing other predictive components. The research findings will provide a strong platform to understand the relevance of CE readiness in MSMEs and designing strategic plans to encourage circular economy implementation in manufacturing small firms.