From Digital Footprints to Circular Value: How Frugal Innovation and Green Absorptive Capacity Transform Digital Traceability Into Circular Business Model

ABSTRACT Despite the exponential growth of research in circular business models and their implications for environmental performance, most studies are predominantly conceptual, with limited theoretical basis and empirical examination of their enablers. To tackle this, we employ the resource orchestration theory to develop and empirically validate a novel model by examining the association between digital traceability and circular business model through green absorptive capacity and frugal innovation. We gathered survey data from 247 manufacturing multinational companies (MMNCs) in Ghana and tested the framework using a variance‐based structural equation modeling technique (PLS‐SEM) and Importance‐Performance Map Analysis (IPMA). The results showed that digital traceability significantly enhances the circular business model. Furthermore, green absorptive capacity and frugal innovation positively mediate this relationship. The IPMA conclusively indicates that MMNCs should prioritize strategic investment in digital traceability and frugal innovation efforts, as these areas yield the greatest potential for accelerating circular business model realization.