Drivers and outcomes of circular economy implementation: evidence from China

Abstract

PurposeAlthough the circular economy is widely regarded as an essential strategy for firms, the present understanding of the drivers and outcomes of circular economy implementation is underdeveloped. In this paper, the authors draw on the natural resource-based view and information processing theory to explore how an environmental orientation and digital supply chain platforms promote circular economy implementation, and increase the impact of circular economy implementation on financial performance.Design/methodology/approachThe authors surveyed 249 Chinese firms and used hierarchical regression analysis to test hypotheses.FindingsThe empirical results reveal that three primary modes of circular economy implementation—reinvent and rethink (INV), restore, reduce and avoid (RRA), and recirculate (REC)—are all driven by environmental orientation and digital supply chain platforms. More interestingly, digital supply chain platforms have an inverted U-shaped moderating effect on the relationships between environmental orientation and INV and between environmental orientation and RRA. Most importantly, INV and RRA are positively related to financial performance, whereas REC does not have a significant relationship with financial performance.Originality/valueThe authors contribute to the literature on the circular economy by revealing new drivers and outcomes of different modes of its implementation. Additionally, the findings have implications for how firms should frame their circular economy initiatives in the context of the digital revolution.