Intelligent Innovation and Circular Economy Adoption: The Mediating Role of Knowledge Integration Capability

ABSTRACT The change toward circular economy (CE) has emerged as a strategic imperative for sustainable industrial transformation. Many firms are still facing substantial challenges with the implementation of designing principles, ecosystem support, and digital technologies. The research explores the relationship between circular business design (CBD), entrepreneurial ecosystem support (EES), artificial intelligence‐enabled innovation (AII), and knowledge acquisition mechanisms (KAM) and their influence on ensuring the enhancement in knowledge integration capability (KIC) of a company which consequently leads to circular economy adoption (CEA). This study examines digital circular economy maturity (DCEM) as a moderating variable that influences how far the process of knowledge integration leads to improved adoption outcomes, based on the resource‐based view, the knowledge‐based view, the dynamic capabilities theory, and the technology–organization–environment framework. This study surveyed 500 manufacturing managers from China and analyzed the survey data through the partial least squares structural equation modeling (PLS‐SEM). The outcomes show that cognitive‐based dynamic (CBD), EES, AII, and knowledge asset management (KAM) served as essential predictors for both KIC and CEA. KIC has emerged as the significant determinant of adoption behavior, mediating the effects of these antecedent factors. The findings confirm that the DCEM influences a direct and positive impact on CEA, as well as on the mediating role of KIC in facilitating adoption. To ensure the reliability of findings, a series of robustness assessments were conducted, including multicollinearity diagnostics, model fit evaluation, and bootstrapped indirect effect testing. The study overall contributes to a deeper theoretical and practical understanding of mechanisms and contextual conditions through which firms adopt circular practices through the integration of multiple theoretical perspectives, while also offering strategic insights for policy makers and managers aiming to accelerate digitally driven circular evolutions.