Purpose: 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.

Design/methodology/approach: 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.

Findings: 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.

Originality/value: 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.