This study serves a dual purpose. First, it aims to explore the phase-wise progression that small and medium-sized enterprises (SMEs) and startups must undertake to become successful ecosystem partners, supporting large industrial firms in their circular transition. Second, it seeks to examine how these small firms manage change and foster collaborative cultures through strategies enabled by positive organizational scholarship (POS) during their phased evolution.
This study provides empirical evidence through a multiple case study-based approach involving 12 born-circular SMEs/startups from 5 diverse Indian industrial sectors. Insights were gathered by conducting two rounds of semi-structured interviews with 24 participants and one validatory seminar with eight participants.
This research identified three distinct and complementary phases – compare, compete and collaborate – that SMEs/startups can undergo to emerge as successful ecosystem partners. Each phase encompasses specific business practices, including various circular activities. These activities serve as clear indicators of the smaller firms’ potential competence in aiding larger firms during their circular transitions.
This paper contributes to the theoretical understanding of the circular economy by outlining a trajectory for SMEs/startups to establish successful partnerships. Another contribution is the application of POS as a positive change management paradigm to facilitate circularity. Additionally, the study highlights the context of developing nations, which remain underexplored compared to their developed counterparts in circularity initiatives.
1. Introduction
The circular economy (CE) has gained substantial momentum as an effective and responsible solution to the adverse impacts concerning the linear “take-make-dispose” economy (von Kolpinski et al., 2023). The Ellen MacArthur Foundation (2013) describes CE as an industrial system that is restorative and regenerative and designed to address issues related to resource scarcity and sustainable economic growth (Coffay and Bocken, 2023; Setia et al., 2022) with key emphasis on the efficient utilization of material resources, encompassing both waste management and waste prevention (Prabawati et al., 2023). The inherent benefits of CE position it as a critical option for both industrial firms and SMEs/startups (Han et al., 2023; Kumar and Sharma, 2023). The overarching aim is to amplify endeavors in alignment with the sustainable development goals (SDGs) set forth in the United Nations (UN) 2030 Agenda (United Nations, 2015).
Transitioning from a linear to a circular net-zero economy requires diverse, specialized expertise that often surpasses the internal capabilities of individual firms, highlighting the importance of ecosystems in fostering collaborative innovation (Okorie et al., 2021). Ecosystems, characterized by dynamic networks of interconnected organizations, create regenerative synergies by pooling resources and expertise across varying stakeholders (Rana, 2022; Trevisan et al., 2022). Research demonstrates that while large firms frequently drive ecosystem orchestration, SMEs/startups contribute by introducing novel, flexible solutions that complement the established structures of industrial firms (Veleva and Bodkin, 2018; von Kolpinski et al., 2023). However, the collaborative process between large and small firms is marked by operational divergence – large firms often adhere to structured, specialized frameworks, while smaller entities rely on agility and evolving business models to navigate shifting market demands (von Kolpinski et al., 2023; Shamsuddoha and Kashem, 2022). This juxtaposition, while offering innovative potential, introduces complexity in aligning operational goals and scaling solutions. Moreover, the transition to circular models necessitates bridging the resource gaps faced by SMEs/startups. Asgari and Asgari (2021) reveal that regulatory hurdles, financial constraints and limited visibility create significant entry barriers for smaller firms seeking partnerships with large industrial players. Kuik et al. (2023) further emphasize that SMEs/startups, despite being crucial drivers of circular innovation, require structured frameworks and pathways to effectively integrate into larger industrial ecosystems. Trevisan et al. (2022) emphasize that as ecosystem collaboration gains prominence, the role of SMEs/startups in fostering resilience and adaptability within industrial networks continues to evolve. Their ability to introduce niche innovations and agile solutions positions them as valuable contributors to circular transitions, complementing the structured approaches of larger firms. However, understanding the pathways through which these smaller entities navigate and solidify their roles within ecosystems remains limited. Such discussion also raises several unanswered questions, such as how SMEs/startups effectively collaborate with large firms to facilitate circular transitions. What practices do they implement to become successful ecosystem partners? How do these practices contribute to a productive and effective partnership?
Against such context, this study investigates how SMEs/startups establish themselves as successful ecosystem partners in the circular transition, defining “successful” as engaging in partnership agreements with industrial firms. Thus, the first research objective (RO1) is to explore the phases through which SMEs/startups evolve as successful ecosystem partners of industrial firms in their circular transformation.
Statistics reveal that 10% of startups fail within the first year and up to 70% fail within five years (Howarth, 2023). However, partnering increases success rates to around 30% (Kapoor, 2023). Collaborating with established firms allows SMEs/startups to access broader markets, resources and networks (Usman and Vanhaverbeke, 2017), accelerating the adoption of circular principles among industrial firms. This symbiotic relationship makes SMEs/startups attractive ecosystem partners, enhancing their chances of long-term success and survival. SMEs/startups drive circular transitions in industrial firms by reassessing internal resources, expertise and technologies (Kuhlmann et al., 2023). Implementing systematic change management through positive organizational scholarship (POS) fosters a culture of continuous improvement (Cameron et al., 2003). POS emphasizes positive work environments that enhance organizational commitment (Lopes et al., 2009), employing “positive deviance” approaches to inspire and engage employees (Chan, 2018). However, applying POS to manage change during circular transitions within ecosystem collaborations remains underexplored. Thus, the RO2 of the study is to explore the role of POS approaches employed by SMEs/startups during different phases to become successful ecosystem partners.
This study contributes to the existing literature of CE and POS by addressing three research gaps.
Firstly, while the ecosystem collaboration is increasingly acknowledged, the existing body of literature is limited and centered on the barriers SMEs/startups encounter when attempting to integrate into industrial ecosystems (Kuik et al., 2023; Wielopolski and Bulthuis, 2023). The prevailing focus highlights structural and operational misalignments, resource constraints and scaling difficulties faced by smaller firms in these partnerships (Asgari and Asgari, 2021; Kuik et al., 2023; Veleva and Bodkin, 2018). This narrow emphasis overlooks the strategic processes SMEs/startups adopt to successfully position themselves as ecosystem partners, creating a critical gap in understanding how smaller firms proactively build capabilities and align with large industrial firms’ circular initiatives (Sharma et al., 2019). While much attention has been given to the orchestration challenges large firms face (Trevisan et al., 2022), the phased pathways through which SMEs/startups evolve into credible and effective ecosystem contributors remain underexplored. Secondly, our research advances the POS literature by extending its application beyond traditional domains. While most POS studies focus on human behavior, sociological dynamics and psychological factors within organizational settings (Caza and Caza, 2008; Lopes et al., 2009), the integration of POS approaches to manage change in SMEs/startups for fostering successful partnerships in circular initiatives is novel. This study broadens the scope of POS by demonstrating its relevance in driving CE transformations.
Thirdly, although studies by Veleva and Bodkin (2018), Rizos et al. (2016) and Suchek et al. (2022) explore collaborative partnerships in developed nations, there is a notable lack of research addressing such partnerships in the context of CE transitions within developing countries, such as India. This study seeks to bridge this gap, contributing to a more comprehensive understanding of how SMEs/startups can engage in circular partnerships across diverse economic landscapes.
The paper proceeds by presenting a review of literature in Section 2, outlining the methods in Section 3, presenting findings and the framework in Section 4, offering a discussion that underscores theoretical and managerial implications in Section 5 and concludes with limitations and suggestions for future research in Section 6.
2. Literature review
2.1 SMEs/startups supporting large firms in circular transitions
Large industrial firms are under increasing pressure to integrate CE practices as part of their sustainability agendas, driven by resource scarcity and global initiatives like the UN SDGs (Haque et al., 2024). However, transitioning to circular models requires diverse and specialized expertise that large firms often lack internally (von Kolpinski et al., 2023). SMEs/startups have emerged as vital enablers in this transition, offering innovative, resource-efficient solutions that align with circular principles (Borrero and Yousafzai, 2024; Eiselein and Langenus, 2025). Their agility and ability to experiment with niche technologies allow large firms to overcome inertia and implement regenerative systems more effectively. These smaller firms play a significant role in eco-innovation, resource recovery and waste minimization – areas where large firms face structural and operational limitations (Ferreira et al., 2024). Through collaborative partnerships, SMEs/startups help large firms decouple growth from resource consumption, fostering a more sustainable industrial landscape. Such partnerships are increasingly viewed as essential for achieving systemic CE transitions, including emerging economies where industrial circular ecosystems are still evolving (Song and Ahn, 2024).
For SMEs/startups, gaining entry into the ecosystems of large firms is not a straightforward process (Lit et al., 2024). Despite their potential, these smaller firms encounter numerous hurdles, including limited visibility, ā lack of established reputations and financial constraints (Xu et al., 2024). The rigid procurement processes and selective partnership criteria of large firms further complicate entry, often requiring SMEs/startups to demonstrate scalability, reliability and alignment with long-term corporate sustainability goals (Balzano et al., 2025). Additionally, SMEs/startups face regulatory and institutional barriers, making it difficult to meet the compliance standards of larger partners (Le et al., 2024). In India, for example, small firms engaged in plastic recycling and renewable energy sectors often struggle to secure large-scale industrial contracts, constrained by access to finance and technical scalability (Patwa et al., 2021; Scheel et al., 2020). This misalignment underscores the need for a more inclusive ecosystem approach, driven by stakeholder collaborations and government support to bridge the gap between SMEs and industrial giants (Eiselein and Langenus, 2025; Veleva and Bodkin, 2018).
To foster successful collaborations, SMEs/startups must strategically position themselves by demonstrating unique competencies and aligning with the evolving needs of large firms (Malherbe and Tellier, 2024). This involves participating in industrial consortia, piloting joint projects and leveraging entrepreneurial networks to build credibility and trust (Xu et al., 2024). Entrepreneurial networks play a crucial role in facilitating knowledge exchange, helping SMEs translate innovative solutions into scalable business models that resonate with large firms (Dzhengiz and Patala, 2024). Additionally, applying frameworks like the Quintuple Helix Model enhances ecosystem alignment by integrating stakeholders from academia, government and the private sector, fostering circular entrepreneurial ecosystems (Borrero and Yousafzai, 2024; Eiselein and Langenus, 2025). Through this collaborative approach, SMEs/startups can gradually position themselves as indispensable partners, accelerating circular transitions across industrial sectors while simultaneously benefiting from the scale and resources of their larger counterparts (Ferreira et al., 2024).
Although studies increasingly highlight that SMEs/startups are becoming essential partners in facilitating large firms’ circular transitions, the process by which these smaller firms achieve partnership status remains unclear (Borrero and Yousafzai, 2024; Veleva and Bodkin, 2018). There is a notable gap in research regarding the specific pathways and strategic phases SMEs/startups follow to integrate into large firm ecosystems (Ferreira et al., 2024). Addressing this gap is essential to provide actionable insights for both small and industrial firms seeking to enhance circular collaborations. To explore this process, we turn to POS, a framework well-suited for fostering innovation, resilience and collaborative success in circular transitions by emphasizing strengths, adaptability and mutual growth.
2.2 Positive organizational scholarship as a facilitator of accentuating positive change
POS, rooted in the concept of positive deviance, has emerged as an alternative approach to managing organizational performance across various disciplines (Sharma and Chillakuri, 2023). Positive deviance, originating in sociology, identifies innovative strategies to drive exceptional performance in organizations (Bradley et al., 2009). Similarly, POS is conceptualized as a practical strategy that aims to identify and promote high performance, challenging existing practices to create opportunities for “positively deviant” and spectacular organizational outcomes (Herington and Van de Fliert, 2018; Mertens et al., 2016). This approach offers a practical framework for driving positive change and exceptional performance in diverse problem domains.
POS is a future-oriented approach that leverages positive dynamics in collaborative relationships to drive continuous improvement and radical adjustments (Caza and Caza, 2008; Cameron et al., 2003). It emphasizes facing challenges with enthusiasm while enabling organizational adaptation, growth and success (Quinn and Cameron, 2019). POS explores the enablers, motivations and outcomes of positive organizational phenomena, driving change by building on past successes and envisioning a future shaped by positive aspirations (Cameron et al., 2003; Kelly, 2010). By utilizing existing resources and fostering optimism, POS effectively manages change through shared, inspiring visions and by reframing challenges as opportunities for growth (Nilsson, 2015; Quinn and Cameron, 2019). Techniques such as collaborative problem-solving, empowering change champions, and employing appreciative inquiry enhance organizational adaptability, employee engagement and resilience, equipping organizations to navigate change more effectively (Kelly, 2010; Robichau, 2017).
SMEs/startups seeking successful partnerships encounter multi-level challenges that demand holistic adaptation to address pervasive problems competitively (Herington and Van de Fliert, 2018). Operating often at survival levels, these firms depend on their adaptive capabilities and intentions to co-evolve within dynamic ecosystems (Scheel et al., 2020). Large firms increasingly evaluate SMEs/startups based on collaboration criteria, requiring them to adapt their resources, competencies and structures to meet the demands of circular ecosystems (Quinn and Cameron, 2019; Veleva and Bodkin, 2018; von Kolpinski et al., 2023). Despite these challenges, SMEs/startups thrive by leveraging their inherent strengths, particularly their cognitive potential, and fostering a mindset of continuous self-improvement (Chan, 2018; Sharma and Chillakuri, 2023).
This proactive mindset enables SMEs/startups to define problems, determine desirable outcomes and identify “champions” of successful practices. POS strategic tools provide valuable guidance for navigating the complexities of partnerships with large firms. For instance, appreciative inquiry explores “why” to strategize effectively, authentic leadership identifies the “who” that drives positive behavior and high-quality networks reveal the “how” to achieve desired outcomes. POS empowers SMEs/startups to analyze and replicate successful behaviors and strategies for effective partnerships (Herington and Van de Fliert, 2018). By cultivating achievement-oriented attitudes, POS enables SMEs/startups to pursue resilient opportunities and tackle CE complexities with optimism (Mertens et al., 2016).
POS, as a pragmatic management philosophy, has been extensively applied in organizational behavior, sociological and psychological studies (Mertens et al., 2016). However, its use as a positive change management paradigm to foster partnership dynamics toward sustainable goals remains rare. This study addresses this gap by proposing a framework that integrates relevant POS practices during each phase of the SME/startup journey to becoming successful ecosystem partners of large industrial firms. Practically, this framework provides a strategic tool for practitioners to address collaboration complexities and cultivate achievement-oriented mindsets essential for navigating challenges in circular ecosystem partnerships (Herington and Van de Fliert, 2018).
3. Research methods
3.1 Research approach and empirical setting
Transitioning to the CE in India presents significant growth opportunities, with projected annual values reaching US$ 218bn (Rs 14 lakh crores) by 2030 and US$ 624bn (Rs 40 lakh crores) by 2050 (IBEF, 2023). SMEs/startups are pivotal for economies, contributing up to 40% of national income in developing nations (World Bank, n.d). In India, the micro, small and medium enterprises (MSME) sector, including circular SMEs/startups, plays a crucial role, contributing 30.50% to services, 45% to industrial production and 49.5% to exports (IBEF, 2023). These entities drive innovation, sustainability and inclusive economic growth, facilitated by increasing collaboration with industrial firms in India (Huynh, 2021). Initially, we identified five sectors in India responsible for causing significant amounts of pollution and found to be actively engaged in practicing circularity (IBEF, 2023). Thus, we selected fashion and textile (WBCSD, 2024), food and agriculture (Rodino, 2023), energy (World Economic Forum, 2022), waste recycling (Entrepreneur, 2024) and construction-real estate (Bain and Company, 2022) as the research context for this study.
Given the exploratory nature of our research, particularly since the collaboration process has not been previously studied, we employed abductive methods. Abductive reasoning integrates existing knowledge with novel observations, allowing for new theories and insights (Janiszewski and Van Osselaer, 2022).
3.2 Data collection
Since the literature on how SMEs/startups become successful ecosystem partners for industrial firms during circular transitions is still emerging, we adopted a multiple case study approach to ensure methodological fit (Edmondson and McManus, 2007). Our study focused on 12 “born-circular” SMEs/startups (Suchek et al., 2022), meaning these businesses integrated circular principles from their inception, with circularity embedded in their identity and strategy. Such firms emphasize sustainability and resource efficiency from the start (Zucchella and Urban, 2020). SMEs/startups share traits like limited resources, entrepreneurial drive and innovation, which help direct research and support efforts. In India, SMEs are classified based on investment and turnover: micro (up to INR 100,000, <10 employees), small (INR 10 crores, 10–49 employees) and medium (INR 500,000,000, 50–249 employees). Startups, according to the government, have a maximum lifespan of 10 years (15 for biotechnology) and a turnover cap of INR 1,000,000,000 (OECD, 2021).
We identified 1,007 SMEs/startups from Startup India (Startup India, n.d.) across 5 sectors in 4 states, selected for convenience of data collection. Out of these, 359 were active in sustainability and circularity. After reviewing their websites and social media, 114 were classified as “born circular.” We created a directory with their contact details and shared a cover letter explaining the research purpose. Initial interest was received from 45, and we ultimately interviewed 12 relevant SMEs/startups over 6 months. Others were excluded due to a lack of partnerships with large manufacturing firms. Data were collected through semi-structured interviews with 24 informants (Lobe and Morgan, 2021). To ensure diverse perspectives, informants came from various organizational levels and units. Data collection occurred in two phases: first-round face-to-face interviews with 17 informants and a second round with 7 for validation. Multiple researchers conducted the interviews, which were recorded, transcribed and kept confidential. Secondary sources, such as archives and annual reports, were used for data triangulation (Bans-Akutey and Tiimub, 2021). Findings were validated in a seminar with eight participants from five industrial firms (Table 1). The validation seminar guide differed from the one used for SMEs/startups. Data analysis from SMEs/startups was presented, and large firm respondents were asked to agree or disagree, explaining their reasoning. For each phase, the guiding question was: “Do these activities reflect what SMEs do to become ecosystem partners with firms like yours? Please explain why.” Discussions followed, addressing examples, priorities and key points. Respondents were divided into two groups for interactive discussions and were later mixed to ensure diverse perspectives and balanced feedback.
Sources of data collection and validation
| Description of cases and sources of supporting evidence for SMEs/startups | ||||||||
|---|---|---|---|---|---|---|---|---|
| Case firms | Employees | Type | Core business | Evidence sources | No of interviewees | Designation (year of experience) | Duration of interviews (minutes) | Round (R) (no of informants) |
| FT1 | 5–15 | Startup | Fashion and textile | Interview, Website | 2 | Sustainability Textile Consultant (6), Founder (8) | 34, 42 | R1 (2) |
| FT2 | 1–10 | Startup | Fashion and textile | Interview, Website | 1 | Director (11) | 45 | R1(1) |
| FT3 | 10–20 | Startup | Fashion and textile | Interview, Website | 3 | Co-founder (5), Communications and Outreach Associate (3), Branding and Marketing Consultant (2) | 25, 38, 42 | R1 (1) R2 (2) |
| FA1 | 50–60 | SME | Food and agriculture | Interview, Website | 2 | Innovation Manager (7), Senior Manager – East (3) | 40, 52 | R1 (1) R2 (1) |
| FA2 | 30–40 | Startup | Food and agriculture | Interview, Website | 2 | Head-Agro Business (2), Senior Manager (5) | 34, 30 | R1 (1) R2 (1) |
| RE1 | 100–110 | SME | Renewable energy | Interview, Website | 1 | Chief Executive Officer (CEO) and Founder (9) | 45 | R1 (1) |
| RE2 | 20–30 | Startup | Renewable energy | Interview, Website, Annual report (18 pages) | 3 | Advisor-Biofuels (3), Research Analyst (Sustainability) (1), Principal Consultant (2) | 26, 38, 44 | R1 (2) R2 (1) |
| WR1 | 115–125 | SME | Waste recycling | Interview, Annual report (29 pages) | 2 | Co-founder and CEO (10), Product Development Manager (6) | 33, 50 | R1 (2) |
| WR2 | 25–35 | Startup | Waste recycling | Interview, Annual report (36 pages) | 2 | Co-founder and CEO (16), Business Development Manager (10) | 39, 45 | R1 (1) R2 (1) |
| WR3 | 10–20 | Startup | Waste recycling | Interview, Website | 2 | Chief Managing Director (9), Project coordinator (7) | 21, 37 | R1 (2) |
| WR4 | 70–80 | SME | Waste recycling | Interview, Website | 3 | Owner (19), Assistance manager (1), Lead-regulatory policy and consultancy (6) | 29, 29, 34 | R1 (3) |
| CRE1 | 190–210 | SME | Construction and real estate | Interview, Website | 1 | Owner (11) | 50 | R2 (1) |
| Description of cases for validatory seminar through large industrial firms | |||
|---|---|---|---|
| Firms (core business) | No of employee | No of participant(s) | Designation (year of experience) |
| M1: Fashion and textile | More than 25,000 | 1 | Regional head-CSR (17) |
| M2: Food and agriculture | More than 4,800 | 2 | Deputy manager (10), R and D technical engineer (5) |
| M3: Renewable energy | At around 1,500 | 2 | Lead (Marketing and Growth initiatives) (9), Regional deputy head (Business development) (11) |
| M4: Waste recycling | More than 3,400 | 2 | Assistant manager (4) and senior manager-CSR division (7) |
| M5: Construction | More than 1,600 | 1 | Deputy general manager (11) |
Source(s): Compiled from data collection during interview and seminar by authors)
3.3 Data analysis
We employed the constant comparison analysis method (Kolb, 2012) to identify patterns. The analysis advanced through multiple iterations, focusing on distinctions and similarities among first-order categories, second-order categories and aggregate dimensions (Gioia et al., 2013). The data analysis was structured into three main steps. Firstly, we used specialized software to obtain first-order codes from the transcript and completed the coding process. First-order codes were determined based on the researcher’s interpretation, validated by two subject matter experts. We observed 20–30% similarity in activities among SMEs/startups for a single first-order code (Chandra and Shang, 2019). Following the Gioia methodology, we structured second-order themes and aggregate dimensions by mapping first-order codes to second-order themes, drawing inspiration from literature on collaborations for circularity (Coffay and Bocken, 2023; Suchek et al., 2022; Veleva and Bodkin, 2018; von Kolpinski et al., 2023). This process was repeated to combine second-order themes into aggregate dimensions, ensuring our analysis was grounded in both empirical data and theoretical frameworks. Finally, we iterated these steps multiple times for refinement. To ensure coding reliability using the Gioia methodology, we developed a detailed framework with definitions of codes and themes. Researchers prepared independent coding trees, formed two teams based on 50% similarity, tracked agreements with a contingency table and calculated Cohen’s kappa, achieving 72% accuracy after three iterations (Nili et al., 2020).
4. Results and framework
This section describes the outcomes derived from our multiple case research pertaining to the path followed by SMEs/startups to enter into successful partnerships with industrial firms (Figure 1) in their journey to circularity is outlined below.
The coding tree presents a three-layered flow structure. The layout consists of three columns with a rectangular text box with a right-pointing end on the right side that points to a text box in the second column. The second column text boxes synthesise the three major overarching conceptual areas in three columns. The first box in the first column is labeled “Assessing relevant circular business models”, and “Comparing resource expertise to fulfil increased demand for circular offerings”, and points to a text box in the second column labeled “Comprehension of operational alignment”. The second box in the first column is labeled “Aligning with guidelines to assist circular transitions”, “Implementing industry best practices to support circular transitions”, and “Obtaining certifications recognised by professional networks to support circularity”, and points to a text box in the second column labeled “Adherence to norm and regulations”. “Comprehension of operational alignment” and “Adherence to norm and regulations” point to an oval labeled “Comparing against similar entities”. The third box in the first column is labeled “Implementing technical excellence in circular solutions”, and “Showcasing innovative circular operational practices”, and points to a text box in the second column labeled “Demonstration of innovative prowess”. The fourth box in the first column is labeled “Expanding varied circular product and service portfolio”, and “Tailoring customised circular solutions to unique client needs”, and points to a text box in the second column labeled “Diversification of portfolio”. “Demonstration of innovative prowess” and “Diversification of portfolio” point to a second oval in the third column labeled “Competing against other entities”. The fifth box in the first column is labeled “Proposing collaborative value for circular advantages”, and “Sharing and utilising resources for equitable circular solutions”, and points to a text box in the second column labeled “Partnerships through joint ventures”. The sixth box in the first column is labeled “Accessing new global and local markets to implement circular opportunities”, and “Supporting global collaboration to navigate regulatory and legal challenges for circular initiatives”, and points to a text box in the second column labeled “Joining consortia networks”. “Partnerships through joint ventures”, and “Joining consortia networks” point to the oval labeled “Collaborating with large firms”.Coding tree
The coding tree presents a three-layered flow structure. The layout consists of three columns with a rectangular text box with a right-pointing end on the right side that points to a text box in the second column. The second column text boxes synthesise the three major overarching conceptual areas in three columns. The first box in the first column is labeled “Assessing relevant circular business models”, and “Comparing resource expertise to fulfil increased demand for circular offerings”, and points to a text box in the second column labeled “Comprehension of operational alignment”. The second box in the first column is labeled “Aligning with guidelines to assist circular transitions”, “Implementing industry best practices to support circular transitions”, and “Obtaining certifications recognised by professional networks to support circularity”, and points to a text box in the second column labeled “Adherence to norm and regulations”. “Comprehension of operational alignment” and “Adherence to norm and regulations” point to an oval labeled “Comparing against similar entities”. The third box in the first column is labeled “Implementing technical excellence in circular solutions”, and “Showcasing innovative circular operational practices”, and points to a text box in the second column labeled “Demonstration of innovative prowess”. The fourth box in the first column is labeled “Expanding varied circular product and service portfolio”, and “Tailoring customised circular solutions to unique client needs”, and points to a text box in the second column labeled “Diversification of portfolio”. “Demonstration of innovative prowess” and “Diversification of portfolio” point to a second oval in the third column labeled “Competing against other entities”. The fifth box in the first column is labeled “Proposing collaborative value for circular advantages”, and “Sharing and utilising resources for equitable circular solutions”, and points to a text box in the second column labeled “Partnerships through joint ventures”. The sixth box in the first column is labeled “Accessing new global and local markets to implement circular opportunities”, and “Supporting global collaboration to navigate regulatory and legal challenges for circular initiatives”, and points to a text box in the second column labeled “Joining consortia networks”. “Partnerships through joint ventures”, and “Joining consortia networks” point to the oval labeled “Collaborating with large firms”.Coding tree
4.1 Comparing against similar entities
In the first phase, SMEs/startups aim to become effective ecosystem partners with large manufacturers in their journey towards circularity by conducting a comprehensive comparison with similar entities. This phase involves two key business practices: comprehension of operational alignment and adherence to norms and regulations.
4.1.1 Comprehension of operational alignment
This business practice centers on comparing if an interested SME/startup is operationally aligned, ensuring that its synchronization of business activities with successful similar entities. According to the interviewees, this practice involves two key activities. The first activity involves assessing relevant circular business models (CBMs), wherein SMEs/startups explore and comprehend the elements of the CBMs – specifically, how value is created, delivered and captured – adopted by their successful counterparts. A product development manager of WR1 explained, “Our team extensively analyzes successful business models within the circular ecosystem. Our goal is not just understanding but also adapting these models to our specific context. This ensures alignment with the circular principles pursued by large manufacturers, fostering a fruitful collaboration.” As an example, WR2 has adjusted CBM to effectively manage solid waste resource recovery. This adaptation involves close collaboration with local, rural and urban self-governance within a three-tier governance structure. The second activity emphasized by SMEs/startups involves comparing resource expertise to fulfill increased demand for circular offerings. This allows aspiring SMEs/startups to compare whether they have the necessary expertise to provide circular offerings that are at par or superior to those of successful entities. According to the co-founder of FT3, “Our current emphasis is on recruiting talents to engage in outreach activities with circular suppliers within the jute industry. This strategic move is in response to the growing requirements of large manufacturers seeking circular fashion alternatives, particularly in clothing and fashion accessories made from reusable materials. It’s not solely about our offerings; it’s about ensuring a strong alignment with the needs of large manufacturers. Consequently, we are proactively training our talents to stay in sync with the evolving trends in the industry.”
4.1.2 Adherence to norms and regulations
Under this practice, our cases reported that it is a meticulous examination of whether their activities align with the regulatory landscape, mirroring those of successful SMEs already established as ecosystem partners. Norms and regulations refer to the established standards and principles that govern the operations of organizations involved in circular practices. Here, the first highlighted activity is aligning with guidelines to assist circular transitions. Guidelines offer specific recommendations to match required norms and regulations for creating a unified front within the ecosystem. In this context, startup FT1 emphasized that, upon thorough industry observation aiming to reduce single-use plastics, they have developed innovative and sustainable packaging strategies. The sustainability textile consultant highlighted, “Our sustainable packaging technology positions us for collaborative partnerships with large manufacturers striving to embrace circular practices.” The second activity, mentioned by our cases, is implementing industry best practices to support circular transitions. Beyond compliance to guidelines, the aspiring entities strive to adopt practices that go above and beyond minimum requirements, showcasing a dedication to excellence for assistance towards circular transitions journey. The innovation manager of SME FA1 mentioned that “Our IoT technology, supported by edge computing, predicts soil moisture and adjusts sprinkler water discharge. Through this we seek collaboration with large companies, similar to successful agrotech SMEs/startups.” Our cases also emphasized a third activity, which is obtaining certifications recognized by professional networks to support circularity. Our SMEs/startups actively pursue certifications to confirm their alignment with industry norms and circular principles, acting as proof of their capabilities as valuable contributors to the ecosystem. As stated by the owner of CRE1, “Certifications go beyond being mere badges; they symbolize our commitment to excellence. Adhering to certifications such as green building and ASTM International ensures compliance to ensure the quality of fly ash with recognized industry standards.”
4.2 Competing against similar entities
Once the comparison is at satisfactory level, SMEs/startups indulge in looking for their unique capabilities, which will provide them competitive position in comparison to other similar entities, especially those who are already successful ecosystem partners. In this phase, our cases reported that they emphasize two business practices: demonstration of innovative prowess and diversification of portfolio.
4.2.1 Demonstration of innovative prowess
The first activity discussed by the case SMEs/startups is implementing technical excellence in circular solutions through which these entities ensure that their offerings are not only innovative but also technically robust. This involves investing in cutting-edge technologies and staying abreast of the latest advancements in circular practices. Advisor-Biofuels from RE2 startup explained, “Implementing mini-grids with intelligent transformers and integrating biofuel technology optimizes single-phase LT voltages for local conditions. Our modular technology enables independent operation, ensuring reliability and efficiency in remote areas.” The second activity highlighted by the case SMEs/startups is showcasing innovative circular operational practices. Here informants mainly discussed asset management and remote monitoring and maintenance for minimizing disruptions, contributing to the overall efficiency and lifespan extension. For example, SME RE1 offers technologically robust online dew point monitoring and compressor performance for their ecosystem partners for complete remote monitoring of the distribution network for any abnormalities and corrective measures minimizing loss and maximizing efficiency.
4.2.2 Diversification of portfolio
In the competition with comparable entities, our cases noted the significance of diversifying their portfolio as a beneficial business practice. Within this practice, one activity involves expanding a varied circular product and service portfolio. This encompasses extending the range of sustainable products, integrating circular design principles and providing diverse services that address various facets of circular practices. The project coordinator at WR3 stated, “Our initial focus was on extended producer responsibility under the Plastic Waste Management Rules, 2016. However, recognizing the need to broaden our circular product portfolio, we introduced various circular service offerings. Our diversified portfolio now includes recycling certifications, data destruction, and upcycling, offering both onsite and offsite circular services. This step is crucial to cater to the diverse needs of various large firms across different sectors.” The second highlighted activity involves tailoring customized circular solutions to unique client needs, aiming to establish a niche by addressing specialized requirements and challenges for a competitive advantage. The Senior Manager – East at FA1 stated, “We have developed proficiency in creating tailored recycling dashboards that display a range of wastes originating from the agriculture sector. Our advanced technology enables the extraction of customized waste categories such as crop residue, food scraps, plastic mulch, water waste and expired pesticides, delivering them to diverse client locations based on their specific needs.”
4.3 Collaborating with large firms
In the collaborative phase, SMEs/startups engage in partnerships through joint ventures with large manufacturers or join consortia networks. These collaborative efforts are essential for aligning with the circular goals of large firms and collectively driving sustainable practices.
4.3.1 Partnerships through joint ventures
Under this practice, the first activity emphasized by our cases was proposing collaborative value for circular advantages. This entails creating a compelling narrative that underscores how the partnership will contribute to circular practices, innovation and market positioning for both parties. In this process, SMEs/startups carefully evaluate and align their goals with those of large firms to ensure a shared commitment and harmonious collaboration toward circular objectives. FT2’s Director highlighted, “Overcoming inertia is crucial. Large industrial firms, structured traditionally, face challenges in circular transitions due to rigidity. Our flexibility complements their needs, and together, we can propose collaborative value.” Our cases discussed sharing and utilizing resources for equitable circular solutions as the next activity. It involves the sharing of large manufacturers’ factories, machinery, logistics and infrastructure, along with SMEs/startups’ expertise in digitalization, data analytics and artificial intelligence (AI). This collaboration leads to optimized resource utilization and shared expertise for providing equitable circular solutions. According to FA2’s senior manager, “Our AI, crop sciences and IoT-enabled solutions assist large food manufacturers, providing exposure to scale our business and access to valuable resources like software and instruments. Some of our personnel also share office space with them, creating a mutually beneficial, profit-sharing arrangement.”
4.3.2 Joining consortia networks
The next practice was participating in consortia networks that involve becoming part of a network of orchestrators, where several large manufacturers and ecosystem partners collaborate collectively. Here, our cases reported two sets of activities. The first activity was accessing new global and local markets to implement circular opportunities. This activity involves leveraging the network’s reach and connections to expand market presence and explore opportunities in different regions. FT3’s branding and marketing consultant explained, “Our web portal is designed to establish consortia networks to connect with large manufacturers for accessing global markets and enhancing circular practices. The platform is freely accessible for basic information and networking, with a paid interface offering product-specific insights and networks.” The next activity highlighted was supporting global collaboration to navigate regulatory and legal challenges for circular initiatives. This activity primarily highlights the advantages of forming consortia in multiple countries and overcoming the legal and regulatory constraints. As per WR4’s owner, “Air transportation of lithium metal and lithium-ion batteries is prohibited due to regulations. Leveraging our expertise in recycling lithium batteries, we became a part of consortia with large manufacturers from the USA and Europe to manage battery recycling in the Indian market.”
Finally, large firm respondents validated key insights, recognizing SMEs/startups’ role in innovation, joint ventures and consortia as essential for circular integration. Adherence to regulations, operational alignment and certifications were highlighted as critical for building trust. However, for some findings, large firms suggested reconsideration. Large firms questioned SMEs/startups’ ability to diversify portfolios at scale, citing operational and scalability challenges. Concerns also emerged about SMEs/startups consistently matching resource expertise for high-demand projects. While SMEs/startups emphasized resource sharing, large firms stressed the need for stronger governance to ensure equitable benefits. Additionally, SMEs/startups’ influence on international regulations was doubted, with firms suggesting external support is necessary for broader compliance and collaboration.
4.4 Framework for phase-wise POS integration
This section outlines a phased framework for SMEs/startups to manage change and navigate the tensions of circular partnerships. We selected POS as a promising theoretical angle to guide the framework (see Table 2, Figure 2). It addresses phase-specific challenges and integrates POS practices to provide actionable guidance (Nilsson, 2015; Quinn and Cameron, 2019; Wielopolski and Bulthuis, 2023). The core distinction of POS is its ability to reinforce strengths identified in validated results while offering targeted strategies to overcome weaknesses reflected in non-validated results. This dual capacity is critical for SMEs/startups aiming to solidify their roles as ecosystem partners with large firms, addressing the nuanced gaps that hinder full integration.
The framework shows two concentric circular bands surrounding a striped interior circle. The innermost circle contains the central text “Successful partnership between S M Es or startups and industrial firms”. Two curved arrows inside this circle form a cyclic loop around this text. The two concentric circular bands contain three rectangular boxes. The rectangular box at the top is labeled “Comprehension of operational alignment” and “Adherence to norms and regulations”, along with a text box labeled “P O S Enabler: Appreciative Inquiry”. From this box, an arrow extends right and points to a text labeled “Competing”. From “Competing”, an arrow extends downward and points to a text box on the bottom right labeled “Demonstration of innovative prowess” and “Diversification of portfolio”, along with a text box inside it labeled “P O S Enabler: Authentic Leadership, PsyCap”. From this box, an arrow extends downward and points to a text labeled “Collaborating”. From “Collaborating”, an upward arrow arises and points to a text box labeled “Partnerships through joint ventures” and “Joining consortia networks”, with a text box in it labeled “P O S Enabler: High Quality Connections, Resilience”. From this box, an arrow extends upward and points to a text labeled “Comparing”. From “Comparing”, an upward arrow arises and points to the rectangular box at the top. Below the “Competing”, “Collaborating”, and “Comparing”, a phrase reads “P O S as a cognitive enabler” in the innermost circle.A POS-enabler integrated suggestive framework
The framework shows two concentric circular bands surrounding a striped interior circle. The innermost circle contains the central text “Successful partnership between S M Es or startups and industrial firms”. Two curved arrows inside this circle form a cyclic loop around this text. The two concentric circular bands contain three rectangular boxes. The rectangular box at the top is labeled “Comprehension of operational alignment” and “Adherence to norms and regulations”, along with a text box labeled “P O S Enabler: Appreciative Inquiry”. From this box, an arrow extends right and points to a text labeled “Competing”. From “Competing”, an arrow extends downward and points to a text box on the bottom right labeled “Demonstration of innovative prowess” and “Diversification of portfolio”, along with a text box inside it labeled “P O S Enabler: Authentic Leadership, PsyCap”. From this box, an arrow extends downward and points to a text labeled “Collaborating”. From “Collaborating”, an upward arrow arises and points to a text box labeled “Partnerships through joint ventures” and “Joining consortia networks”, with a text box in it labeled “P O S Enabler: High Quality Connections, Resilience”. From this box, an arrow extends upward and points to a text labeled “Comparing”. From “Comparing”, an upward arrow arises and points to the rectangular box at the top. Below the “Competing”, “Collaborating”, and “Comparing”, a phrase reads “P O S as a cognitive enabler” in the innermost circle.A POS-enabler integrated suggestive framework
Phased approach for SMEs/startups: overcoming collaboration challenges with large firms using POS practices
| Phase | Challenges SMEs/Startups face | Key questions for SMEs/Startups to consider | Name of the collaborative approach (POS practices) | Examples of practice |
|---|---|---|---|---|
| Comparison phase | Resource expertise disparities, financial constraints, technological integration challenges Rizos et al. (2016), and Scheel et al. (2020) |
| Positive comparative sync (Appreciative Inquiry) |
|
| Competition phase | Limited R&D resources, portfolio diversification challenges, complexity of tailoring circular solutions; Kuik et al. (2023) and Sharma et al. (2019) |
| Eco-competitive mastery (PsyCap and authentic leadership) |
|
| Collaboration phase | Differing organizational goals, capability mismatches, integration complexities, substantial investment needs and regulatory navigation Saharan et al. (2023) |
| Collaborative resilience nexus (high-quality connections and resilience building) |
|
Source(s): Compiled by authors
Validated results confirm that large firms recognize SMEs/startups for their innovative prowess, specialized circular solutions, adherence to norms and engagement in partnerships (e.g. joint ventures and consortia). POS enhances these strengths by embedding appreciative inquiry and high-quality connections into SMEs/startups’ organizational fabric (Cameron et al., 2003; Kelly, 2010; Shanker et al., 2023). Appreciative inquiry helps SMEs/startups continuously reflect on their innovative milestones, reinforcing the mindset that fosters ongoing experimentation and solution refinement. Moreover, authentic leadership and psychological capital (PsyCap) within POS further align with validated outcomes like obtaining certifications and adhering to large firms’ operational frameworks (Lopes et al., 2009; von Kolpinski et al., 2023). By cultivating confidence, optimism and resilience, SMEs/startups strengthen their pursuit of regulatory compliance and professional recognition, solidifying their credibility in the eyes of large firms.
Non-validated results expose critical gaps, such as portfolio diversification, scaling resource expertise, equitable resource-sharing and global regulatory navigation. Large firms remain skeptical of SMEs/startups’ ability to scale circular offerings or expand their portfolios effectively. Here, POS plays a corrective role by fostering PsyCap and positive deviance. For instance, PsyCap’s resilience and efficacy components enable SMEs/startups to experiment with smaller pilot projects, gradually scaling solutions without overextending their resources. This incremental approach addresses large firms’ concerns about scalability and operational robustness. Similarly, positive deviance encourages unconventional but effective strategies for resource-sharing and navigating regulatory challenges, positioning SMEs/startups to innovate in areas where large firms perceive deficits (Chan, 2018).
Furthermore, while SMEs/startups may struggle with global regulatory frameworks, POS fosters collaborative intelligence and high-quality connections (Cameron et al., 2003). By engaging SMEs/startups in global consortia and knowledge-sharing networks, POS mitigates large firms’ skepticism regarding their capacity to operate at international scales. This supports SMEs/startups in crafting equitable, well-governed partnerships that meet large firms’ expectations for resource distribution and compliance.
5. Discussion, implications and conclusion
Our study identifies three critical phases SMEs/startups navigate to establish themselves as industrial ecosystem partners in circular transitions. This aligns with Xu et al. (2024) and Balzano et al. (2025) on the importance of operational alignment and regulatory adherence. However, we extend this by highlighting SMEs/startups’ proactive efforts to obtain certifications and implement best practices, enhancing their credibility as partners. Borrero and Yousafzai (2024) and Ferreira et al. (2024) emphasize the role of multi-stakeholder collaborations, such as the Quintuple Helix Model, in fostering innovation. Our findings support this, particularly through SMEs/startups’ involvement in joint ventures and consortia networks. We expand on this by demonstrating how small firms propose collaborative value and tailor solutions to meet large firms’ circular needs, positioning themselves as co-creators of circularity. Malherbe and Tellier (2024) explore alignment challenges like value distribution and institutional inconsistencies. While our study acknowledges these barriers, it further identifies strategies SMEs/startups use to overcome them, such as emphasizing technical excellence and operational robustness to secure competitive advantages. Similarly, Dzhengiz and Patala (2024) and Eiselein and Langenus (2025) highlight governance and stakeholder engagement in circular transitions. We extend this by illustrating how these small firms expand portfolios and address diverse client needs, reinforcing their role in circular ecosystems.
5.1 Theoretical implications
This study contributes to the literature on CE and POS. We extend the CE literature, which is overly burdened with various barriers and enablers for collaboration between small and large firms. For instance, Rizos et al. (2016) and Kuik et al. (2023) identified barriers such as supply network support, a lack of capital and complex regulatory knowledge. Veleva and Bodkin (2018) addressed enablers, future opportunities and CBMs for corporate–entrepreneur collaborations. However, the process through which smaller entities can become successful ecosystem partners has been completely overlooked. This study identifies three phases – compare, compete and collaborate – that any small firm can follow. Every phase is distinctive, highlighting the meticulously planned business operations of small firms as they aim to assist large firms during their circular transition.
Secondly, we advance the understanding of POS literature and integrate it with the circularity perspective. Earlier works, such as Spreitzer and Sutcliffe (2007), emphasized the “enriching possibility” viewpoint of POS. Scheel et al. (2020) have called for “key enablers” that can holistically manage internal resources to create true sustainable wealth. Nilsson (2015) has called for investigation into the exploration of aspirational goals using POS to achieve firms’ growth and success. POS practices contribute to a “broaden and build” strategy, fostering appreciation and collaboration, thereby increasing the likelihood of success at both individual and systemic levels (Caza and Caza, 2008). However, although possibilities are there, previous studies have not linked POS with the concept of circular transition. In this study, through the proposed framework, we introduce business practice-specific, relevant and practically implementable POS approaches aligned to each phase – Positive Comparative Sync for the comparison phase, Eco-competitive Mastery for the competition phase and Collaborative Resilience Nexus for the collaboration phase. The approaches are capable of addressing challenges that SMEs/startups may encounter during their journey to becoming successful partners. Lastly, most of the studies have been conducted in developed nations; for example, Veleva and Bodkin (2018) selected their cases from USA, whereas Rizos et al. (2016) studied cases from the Netherlands, and UK Research has particularly called for the exploration of collaborative activities concerning developing nations (Rezania et al., 2023; Scheel et al., 2020). Here, we introduce novelty by selecting cases from a developing nation like India where CE implementation is advancing.
5.2 Managerial implication
This study offers three key managerial implications for SMEs/startups, industrial firms and policymakers, providing targeted insights to foster circular transitions through collaborative ecosystems. Firstly, the study serves as a phase-wise guide for SMEs/startups, outlining the necessary steps to become successful ecosystem partners with industrial firms. By highlighting the importance of operational alignment, resource expertise and regulatory adherence, SMEs/startups can better navigate entry barriers and position themselves as valuable contributors to circular initiatives. Additionally, the study emphasizes the role of POS as a cost-effective tool to drive innovation, enhance resilience and foster long-term growth, enabling SMEs/startups to manage change and scale their circular practices effectively. Secondly, for industrial firms, the findings provide a structured approach to screening and assessing potential SME/startup partners. By understanding the phased pathways SMEs follow, large firms can better evaluate alignment, operational capabilities and collaborative potential. This insight informs strategic decisions on joint ventures, consortia networks and other collaborative models, allowing firms to leverage the specialized expertise of SMEs to accelerate circularity and strengthen their industrial ecosystems. Lastly, policymakers can draw from the study to design supportive frameworks and initiatives that enhance SME/startup participation in industrial ecosystems. Programs like India’s Innovation Mission and Startup India exemplify how financial and regulatory support can empower SMEs/startups, reinforcing their role in advancing CE transitions (Government of India, 2024). Policymakers can build similar environments to bridge gaps between large firms and SMEs/startups, promoting inclusive growth, innovation and sustainable economic development.
To conclude, existing literature often views SME/startup partnerships as static interactions, overlooking the phases necessary for integration into circular ecosystems. Our study introduces a phased framework with actionable steps that enable SMEs/startups to build trust, align resources and overcome collaboration challenges. While prior studies, such as Ferreira et al. (2024) and Malherbe and Tellier (2024), emphasize the role of large firms as ecosystem orchestrators, our research shifts the focus to the SME/startup perspective, highlighting how these smaller entities position themselves as key enablers of circular transitions for large firms. Additionally, our framework makes a novel contribution by applying POS to examine how SMEs/startups navigate change and cultivate collaborative cultures throughout their phased evolution. By linking POS to the growth of small firms, this study offers fresh insights into how positive change fuels innovation, resilience and cooperation within circular ecosystems. This approach directly supports the SDGs, driving sustainable partnerships through innovation and competitiveness (SDG 17), advancing responsible consumption and production (SDG 12) and accelerating climate action (SDG 13), reinforcing the critical role of SMEs in shaping a more sustainable industrial future.
6. Limitations and future research
There are limitations in this study that can motivate future research. Firstly, it focuses on the Indian context, a developing nation. While the process can be cautiously generalized, validating them in developed nations would enhance robustness. Developed nations, leaders in CE, may show variations due to greater flexibility or government and industrial sector initiatives. Secondly, a longitudinal approach could provide deeper insights than cross-sectional studies. For example, SMEs/startups could implement suggested POS techniques in phases, with feedback gathered over time on effectiveness. Lastly, to address the study’s qualitative nature, future research could consider mixed-methods approaches for more broadly applicable findings.
