From effectuation to circular value creation: The knowledge pathways of open innovation and sustainability-oriented learning

Abstract

Firms looking to transition toward the circular economy often confront persistent uncertainty while striving to balance innovation, sustainability, and profitability. This study explores how effectuation – conceptualised as higher-order entrepreneurial logic – is linked to circular value creation (CVC) through knowledge-based mechanisms and how a paradox mindset influences these relationships. Anchored in Effectuation Theory, the Knowledge-Based View (KBV), and Paradox Theory, the research advances an integrated model that connects entrepreneurial cognition, organisational learning, and circular innovation. Drawing on data from 294 professionals across manufacturing and technology sectors, the study applies Partial Least Squares Structural Equation Modelling (PLS-SEM) to examine the proposed relationships. The study further integrates Tensor Product (TP) modelling to generate Takagi-Sugeno (TS) fuzzy rules based on the resulting PLS-SEM model, providing a complementary rule-based characterisation of the key SEM-identified associations that converge on CVC. The findings show that Effectuation is significantly associated with both Open Innovation Capability (OIC) and Sustainability-Oriented Learning Capability (SOLC), which operate as parallel and sequential pathways linking Effectuation with Circular Value Creation. These findings suggest that the relationship between effectual reasoning and circular outcomes is partly associated with capability-based mechanisms rather than deliberate strategic design. Moreover, the Paradox Mindset strengthens the Effectuation–SOLC–CVC pathway, indicating that paradoxical cognition is associated with a stronger sustainability-oriented learning pathway under conditions of uncertainty. Using the TP modelling approach, the study derives a compact set of seven fuzzy rules that reconstruct the PLS-SEM results to a meaningful degree. These rules also reveal the key value ranges within the OIC and SOLC latent dimensions that are most strongly associated with different levels of CVC. The study enriches theoretical understanding by linking entrepreneurial cognition, knowledge-based capability development, and paradoxical thinking within the domain of the circular economy. From a practical standpoint, it underscores the value of nurturing effectual reasoning, fostering open collaboration, and embedding sustainability-oriented learning systems that help firms transform uncertainty into regenerative value. © 2026 The Authors.