Digital-enabled dynamic capabilities for circular economy: The role of firm size

Digital technologies are recognised to support the implementation of circular economy practices in the manufacturing sector. However, the mechanisms and contingencies explaining the relationship have not been properly consolidated, and there is unclear guidance on how to exploit digital technologies to implement the circular economy. Recently, discussions have focused on the possible mediating role of digital-enabled dynamic capabilities in this relationship, as well as moderators, such as firm size, that can impact it. To date, there is little empirical evidence from this standpoint. To improve our understanding of the relationships among digital technologies, circular economy practices, digital-enabled capabilities, and the moderating effect of firm size, this study conducted a quantitative empirical investigation involving 338 European manufacturing firms. We used partial least squares structural equation modelling and conditional mediation analysis to examine how the relationships among digital technologies, digital-enabled dynamic capabilities, and circular economy practices vary across firm sizes. The results show that digital technologies support the implementation of the circular economy both directly and via the mediated path of digital-enabled dynamic capabilities. However, the strength of this relationship varies according to firm size. Larger firms tend to leverage digital-enabled dynamic capabilities more effectively to implement circular economy practices. Lastly, the study suggests avenues for further research to enhance understanding of the role of digital-enabled dynamic capabilities in supporting the circular economy.