Determinants of circular economy performance in construction sector in Vietnam

Abstract

Research purpose This study constructs a circular economy (CE) index and investigates the factors influencing CE performance among small and medium-sized enterprises (SMEs) in the construction industry. Research motivation This study contributes to the existing literature by developing a firm-level Circular Economy Index (CEI) for the construction industry and incorporating infrastructure support and consumer engagement as additional dimensions in analyzing the determinants of CE performance. Research design, approach, and method The study employs Ordinary Least Squares (OLS) regression model, using firms’ CEI in the construction industry as the dependent variable to examine the factors influencing their level of CE performance. Main findings The regression results indicate that government support, business strategy, firm size, and organizational knowledge significantly enhance the circular economy (CE) performance of construction SMEs. Larger firms perform better due to greater resources, while employers’ awareness and employees’ CE knowledge—especially the latter—underscore the critical role of human capital. Institutional support and proactive business strategies further strengthen CE outcomes, whereas location shows a marginally negative effect, and consumer, community, and infrastructure factors are insignificant. Practical/managerial implications Policymakers should prioritize strengthening institutional support and capacity-building programs that enhance firms’ knowledge and managerial skills to promote the effective implementation of CE practices. The findings underscore that internal capabilities, particularly human capital and firm resources, together with supportive government policies, are the primary drivers of CE performance among SMEs in the construction sector.