Rural handicrafts constitute an important pathway for enhancing women’s agency and supporting community-based sustainability in developing regions such as Iran. Yet, despite the economic and sociocultural significance of handicraft production, the underlying social processes through which handicraft engagement translates into empowerment and broader local sustainability outcomes remain insufficiently theorized, particularly in patriarchal rural contexts. Addressing this gap, this study develops a context-specific explanatory model of how participation in handicraft production and market exchange contributes to rural women’s empowerment and local sustainability in Razavi Khorasan Province, Iran. Adopting a grounded theory methodology following the systematic coding paradigm of Corbin and Strauss (2015), this study draws on in-depth interviews with 25 purposively selected rural women artisans who met specific inclusion criteria (minimum three years of active involvement, handicrafts as primary or significant secondary income source, and permanent rural residence). Data were collected over a six-month fieldwork period and analyzed through iterative open, axial, and selective coding procedures, supported by constant comparison and assisted by MAXQDA 2024. Ethical safeguards included written informed consent, interview duration management (45–75 min), culturally appropriate compensation, strict confidentiality protocols with pseudonymization, and a commitment to disseminate findings back to participating communities through simplified Farsi summaries and community meetings. The analysis resulted in an integrative process model encompassing: (1) causal conditions, including personal motivation, commitment to cultural heritage, and the pursuit of financial independence; (2) contextual and intervening conditions, such as environmental stressors (e.g., drought), informal social networks, market accessibility, and the availability of small-scale governmental loan schemes; and (3) strategic actions, including cooperative formation, skill enhancement, exhibition participation, and locally embedded supply chain development. The core category emerging from the analysis is “negotiated agency,” a socially embedded mechanism through which women leverage economic contribution from handicrafts to renegotiate household roles and community status without directly confronting prevailing cultural norms. This iterative cycle—skill acquisition → economic contribution → negotiated agency → expanded market participation → strengthened social capital → local sustainability—extends dominant individualistic models of women’s empowerment by foregrounding relational and context-contingent processes. Collectively, these strategies fostered an emergent rural entrepreneurial ecosystem that enhanced women’s self-confidence, economic autonomy, social recognition, and environmentally responsible resource use. However, structural constraints, particularly limited market integration and uneven institutional support, continue to restrict women’s entrepreneurial trajectories. The study contributes a transferable process model for understanding gendered rural entrepreneurship in culturally conservative contexts and advances empirically grounded propositions for inclusive, locally embedded sustainability transitions.
