An exploratory study into emerging market SMEs’ involvement in the circular Economy: Evidence from India’s indigenous Ayurveda industry

Abstract

This paper explores the extent to which SMEs can adapt and develop circular economy practices in an emerging market context. Since the evidence provided by the literature is mostly based on large firms operating in developed countries, our focus on India’s indigenous Ayurveda industry allows a much-needed and nuanced lens through which to view circular economy activities. We use a two-step research design involving a systematic bibliometric analysis as a first step in the highlighting of numerous themes emanating from the circular economy literature. Second, we complement these insights with two case studies based on SMEs in the Indian Ayurveda industry. Our findings reveal that SMEs engage and contribute to the circular economy. More specifically, we present unique insights into the reasons, drivers, and motivations for SME involvement in the circular economy, wherein we observe a blending of indigenous practices and modern technology. Our findings allow us to propose several important implications for theory and practice.

Introduction

In the quest to become more socially responsible, many organizations, mostly larger ones, have been following ethical and sustainable practices for quite some time (Lahane et al., 2020, Yadav et al., 2021). These efforts to contribute toward the circular economy (CE) can be observed in various industries across the world. For example, Parida, Burstrom, Visnijic and Wincent (2019) show qualitative evidence of how resource-intensive manufacturing firms can work with their interdependent ecosystem partners to become more sustainable and contribute to the CE. There is also recent evidence from the services sector (Sanguino, Barroso, Fernández-Rodríguez, & Sánchez-Hernández, 2020), construction sector (Benachio, Freitas, & Tavares, 2020), and the primary sector (Milios, Beqiri, Whalen, & Jelonek, 2019) that uncovers various unique approaches used by organizations to support the development of circular activities in the context of their business model innovations. Indeed, the CE has emerged as a popular approach to address sustainability concerns (Barreiro‐Gen & Lozano, 2020) and can be defined as “an industrial economy that is restorative or regenerative by intention and design” (Ellen MacArthur Foundation, 2013, p.14). The CE considers waste as a resource and consists of activities such as reducing, repairing, reusing, recycling and remanufacturing (Barreiro‐Gen and Lozano, 2020). The CE necessitates a shift from a traditional linear production–consumption path to a regenerative or closed loop path of production and consumption to attain harmony between economic and environmental interests (Merli, Preziosi, & Acampora, 2018). Table 1.

Overall, this emerging and rich evidence portrays the diverse efforts by many firms and countries to transform from a linear economy to a CE. This transformation essentially involves the sustainable, cyclical, and regenerative use of all types of resources at different micro, meso, and macro levels and interactions between economic agents in a particular ecosystem (Kirchherr et al., 2017, Kristensen and Mosgaard, 2020). However, the existing evidence and literature are focused primarily on larger firms, including multinational corporations (MNCs), while only a few, more recent, insights focus on small and medium-sized enterprizes (SMEs) and highlight their essential role in the CE (Dey et al., 2019; 2020). Given that SMEs are the backbone of many economies worldwide and are an integral part of many supply chains of larger firms regionally and globally, it becomes imperative to investigate the extent of their contribution toward the CE.

Another limitation on the current understanding of the CE is the lack of research on SMEs’ activities, innovations, and strategies, particularly in emerging markets. These activities, innovations, and strategies are potentially different from those of developed markets. They can have a varying impact not only on SMEs themselves but also on the region in which they operate (e.g., van Loon and Van Wassenhove, 2020, Subramanian et al., 2019, Dey et al., 2020, Zhang et al., 2019, Salmenperä et al., 2020, García-Quevedo et al., 2020, Agyemang et al., 2019). More specifically, we still do not know much about the role, involvement, and practices of emerging market SMEs in the CE context. For example, in India, unique traditions of sustainable business and management practices have deep historical roots in indigenous philosophies and knowledge systems. India has a rich cultural and intellectual heritage, such that both atomistic modernity and holistic indigenous systems, values, and traditions can coexist, which leads to integrated and hybrid forms of managing people and performance at work (Holtbrügge and Garg, 2016, Malik et al., 2021). The foundations of India’s indigenous administrative and political practices can be linked back to a series of texts and compilations between the second and third centuries. The treatise by Kautilya, entitled Arthashastra, has a substantive set of procedural guidelines for the study and practice of politics, economics, government, military strategy, and ethical decision making in Indian culture (Chaturvedi, 2001). India has also been blessed with several other indigenous philosophical knowledge systems, including that of the Ayurveda, which prescribes a set of principles that humans should follow for conducting themselves. The Ayurveda focuses on transmitting the key principles for living in a sustainable manner (Chaturvedi et al., 2001, Sujatha, 2020).

However, from our first step, namely the bibliometric literature review, we identify that there is limited, scattered literature and evidence on the role of emerging market SMEs in the CE and, hence, we aim to contribute to the literature by overcoming this research gap. We focus particularly on the indigenous Ayurveda industry in India, which is a medical system with roots in ancient Sanskrit language texts dating back thousands of years. As a second step, we complement the insights drawn from our bibliometric analysis with two case studies based on SMEs in the Indian Ayurveda industry. Within this traditional industry context, we are keen to understand how SMEs adopt CE practices. In summary, our paper, through the above two steps, investigates the following two research questions (RQs):

• RQ1: What are the key research themes explored in the literature on the CE?

• RQ2: Within the indigenous Ayurveda industry, what are the practices adopted by emerging market SMEs to enhance their involvement in a CE?

There are five pivotal ways in which we contribute through this paper. First, this paper explores the extent to which SMEs operating in niche, traditional and historical industries like the Ayurveda industry in emerging countries, such as India, have been adapting and developing CE practices. Second, we investigate SMEs and develop the scant literature on CE practices in the SME context, as prior research has predominantly concentrated on large firms operating in developed countries. Thus, our focus on SMEs in India’s Ayurveda industry offers a nuanced lens to view CE activities. Third, we contribute to the research on CE by bringing together a scattered research field through a bibliometric review of the CE knowledge base. This helps to understand how the knowledge–research base of the CE field is structured, taking into account its underlying features and explanations along with the conceptual structure of the field’s entire research base (which includes research articles, review papers, books, and book chapters). We have done this by using robust bibliometric metadata of the research field. Our fourth contribution is methodological, as we use a two-step research design involving the above systematic bibliometric analysis. This analysis highlighted the research gaps, which were then redressed by investigation of important sources of insight. That is, we substantiated and complemented our first step by conducting two representative case studies of SMEs in the Indian Ayurveda industry in a detailed and critical manner. Fifth, we have contributed through our findings, which provide evidence that SMEs from the Indian Ayurveda industry engage and contribute to the CE. Specifically, we present unique insights into the reasons, drivers, and motivations for SME involvement in the CE, wherein we observe a blending of indigenous practises and modern technology.

The rest of the paper is organized as follows. First, we provide an overview of our bibliometric analysis of the literature on CE. This section is followed by a review of the role of CE in emerging markets, particularly as it works in SMEs. Next, we present details of the methodological approach and analysis of the data. Finally, we discuss the implications of our conclusions for theory, practice, and future research.