Interactive Framework on Absorptive Capacity and Organizational Learning for Circular Economy Transition

ABSTRACT The transition to a circular economy ( CE ) requires organizations to move beyond linear production systems toward regenerative, resource‐efficient models. For small and medium‐sized enterprises (SMEs), this transition is especially demanding due to constrained financial, technological, and human resources. This study proposes an integrated interactive framework combining absorptive capacity and organizational learning (AC–OL) to explain how SMEs acquire, assimilate, transform, and exploit knowledge for effective CE adoption. Drawing on a systematic review of 138 articles published between 2005 and 2024 in the Web of Science database, the study identifies key enablers, such as prior knowledge, market intelligence, collaborative networks, and digital technologies, that strengthen SMEs' capacity to internalize circular practices. It also underscores persistent barriers, including financial vulnerability, cognitive lock‐in, siloed organizational structures, and limited CE ‐specific expertise. The proposed framework aligns the four dimensions of absorptive capacity (acquisition, assimilation, transformation, exploitation) with the 4I organizational learning processes (intuition, interpretation, integration, institutionalization), highlighting the feedback loops that support iterative capability development. The findings contribute theoretically by positioning AC–OL as a central mediating mechanism in the CE transition and practically by offering a structured roadmap to help SMEs overcome barriers, embed learning, and advance sustainability outcomes.