Research brief
Circular Economy Implementation in Malaysian SMEs
A survey of 350 Malaysian SMEs highlights financial investment and operational readiness as important drivers of circular economy implementation. The ability to absorb and apply knowledge also shapes how resources support implementation.
- Context
- Malaysian SMEs
- Evidence
- 350 SMEs
- Method
- PLS-SEM
- Publication
- 2025
What does the study examine?
The research investigates why SMEs in Malaysia’s service and manufacturing sectors implement circular economy practices. It considers attitudes, financial investment, management support, operational alignment, absorptive capacity and compatibility.
The framework combines the Theory of Planned Behavior, the Resource-Based View and Absorptive Capacity Theory. Together, these perspectives examine intentions, tangible resources and the ability to acquire and use knowledge.
What evidence supports the findings?
The study analyses survey data from 350 SMEs using Partial Least Squares Structural Equation Modelling, or PLS-SEM. The model examines how organisational resources and capabilities relate to circular economy implementation.
The unit of analysis and the Malaysian service and manufacturing context are important when comparing these results with evidence from larger firms, other sectors or different policy environments.
What did the study find?
Financial investment and operational readiness were significant drivers of implementation. Absorptive capacity moderated the relationship between resource deployment and implementation, indicating that resources and knowledge capabilities need to be considered together.
Management support showed limited direct influence in the reported model. This does not mean leadership is irrelevant. It means endorsement alone should not be treated as equivalent to the financial and operational conditions needed for implementation.
What does this mean for SMEs and policy?
For SME leaders, the study points to the practical conditions that turn sustainability intentions into business practices. Financial capacity and operational alignment deserve explicit consideration when planning circular economy initiatives.
For policymakers, the paper highlights financial incentives, capacity building and knowledge-sharing networks as possible ways to address adoption barriers. These implications should be adapted to local infrastructure, market conditions and resource constraints.
How should the evidence be interpreted?
Survey associations provide evidence about the studied sample and model. They do not establish that a single financial incentive or training programme will produce the same result for every SME.
The original paper provides the full research model, measurement approach, statistical results and discussion of limitations. The linked figure gallery offers previews alongside the publisher source.
Original publication
Advancing Circular Economy Implementation in Malaysian SMEs: The Role of Financial Resources, Operational Alignment, and Absorptive Capacity
Ahmed, S., Ahsan, N., Alam, S. S., & Kokash, H. A. (2025). Advancing circular economy implementation in Malaysian SMEs: The role of financial resources, operational alignment, and absorptive capacity. Circular Economy and Sustainability.
DOI: 10.1007/s43615-025-00533-3
This page is an original research summary. Access to the full article is governed by the publisher. No full-text paper is hosted here.