How Do Circular Economy Practices Drive Interfirm Collaboration and Digitalisation?

ABSTRACT Circular economy (CE) has become a crucial paradigm in sustainable business models, driving the shift from linear processes to closed‐loop systems. While CE practices focus on sustainability by eliminating waste and reusing resources, their role in fostering collaboration between firms and driving the adoption of digital technologies remains underexplored. Through qualitative analysis of expert interviews across various industries, this research uncovers how CE activities catalyse resource‐sharing, joint ventures and strategic alliances. Additionally, it is reported that integrating digital tools is crucial for the successful implementation of CE. Finally, the study reveals that regulations can both facilitate and hinder the adoption of CE practice, presenting a critical insight for policymakers. As a result, the findings highlight a synergistic relationship between CE practices, collaboration and digitalisation, providing valuable insights for firms, academia and policymakers aiming to achieve sustainability and improve firm performance through CE initiatives.