Abstract Product take-back programmes based on Extended Producer Responsibility (EPR) are critical in advancing the Circular Economy; however, their effectiveness depends on the underlying governance models. While Collective Producer Responsibility (CPR) dominates in regions like the European Union (EU), it is often criticised for failing to help incentivise sustainable product design. In contrast, Individual Producer Responsibility (IPR) is proposed by some studies as more effective in incentivising sustainable product design, but its efficacy lacks empirical evidence and support. Our research fills this gap by empirically investigating how IPR-based product take-back affects firm-level environmental and financial performance. Drawing on the Practice-Based View, we hypothesise the effects of IPR-based product take-back on Circular Product Design (CPD) and firm performance. Based on survey data from 227 Chinese manufacturers and 9 post-survey interviews, we find that IPR-based product take-back does not directly impact environmental or financial performance. However, it positively impacts CPD, through which it exerts an indirect positive effect on both environmental and financial performance. These results contrast sharply with the EU's CPR-dominant model, in which producers have little incentive to alter product designs. Our findings underscore the significance of EPR governance models in shaping the effectiveness of product take-back programmes and have important theoretical and practical implications.