Abstract
Firms looking to transition toward a circular economy often confront persistent uncertainty while striving to balance innovation, sustainability, and profitability. This study explores how effectuation - conceptualized as a higher-order entrepreneurial logic - enables 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, organizational learning, and circular innovation. Drawing on data from 294 professionals across manufacturing and technology sectors, the study applies Partial Least Squares Structural Equation Modeling (PLS-SEM) to examine the proposed relationships. The findings show that effectuation significantly enhances both Open Innovation Capability (OIC) and Sustainability-Oriented Learning Capability (SOLC), which subsequently foster circular value creation. These capabilities act both in parallel and sequentially, suggesting that effectual reasoning promotes circular outcomes primarily through capability transformation rather than deliberate strategic design. Moreover, the paradox mindset amplifies the Effectuation – SOLC - CVC pathway, illustrating how comfort with contradiction strengthens sustainability learning under conditions of uncertainty. The study enriches theoretical understanding by linking entrepreneurial cognition, knowledge-based capability development, and paradoxical thinking within the circular economy domain. 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.