The effects of digital technology application and supply chain management on corporate circular economy: A dynamic capability view

Abstract

Developing circular economy capability has emerged as an effective response to environmental pressures on firms. The proliferation of digital technology has created uncertainty in developing corporate circular economy capability. Although research has begun to focus on the impact of digital technology application on corporate circular economy capability, empirical evidence remains absent. Simultaneously, few studies have concerned corporate circular economy capability obtained from supply chain management. The answer to the correlation between digital technology application, supply chain management, and circular economy capability is unavailable in current research. Based on a dynamic capability view, we investigate how digital technology application affects corporate circular economy capability through supply chain management regarding supply chain risk management, collaboration, and integration. This underlying mechanism was verified with 486 Chinese-listed industrial firms and the mediating model. The findings demonstrate that digital technology application and supply chain management significantly affect corporate circular economy capability. The mediating channel whereby the digital technology application provides circular economy capability can facilitate the positive impact of supply chain risk management and collaboration while undermining the adverse effects of supply chain integration. These mediating channels differentiate in heterogeneous growth firms and are more pronounced in low-growth groups. It presents an opportunity to use digital technology to reinforce the positive impact of supply chain risk management and collaboration and mitigate the negative effect of supply chain integration on circular economy capability.

Keywords: Circular economy capability; Digital technology application; Supply chain management; Underlying mechanism.