Abstract Transitioning to a sustainable economy requires firms to transform their business models in accordance with circular economy principles. Circular economy scholarship has predominantly examined resource-rich large firms and circular startups, leaving established, resource-constrained small-to-medium-sized enterprises (SMEs) underexplored. Facing capability constraints regarding resources, knowledge, and organizational capacity, government policy intervention plays an important role. Through interviews with 15 experts and analysis of seven government programs, we reveal the transition dynamics that shape SME circular engagement and how government intervention can reinforce the optimization of linear business models or facilitate moving toward circular business model transformation.
Alwin et al. (2026) studied this question.