Digital pathways to circular economy adoption: the roles of digital innovation and open innovation

Purpose This study explores the contributions of digital capability, digital orientation and digital transformation towards digital innovation, open innovation and the circular economy adoption. Design/methodology/approach The study's framework is based on a rigorous literature review and underpinned by theories, i.e. the resource-based view (RBV) and dynamic capabilities theory. The study uses a quantitative design and collected data from managers, including strategic planning managers, research and development and innovation managers in the public and private energy/utilities sectors in Pakistan. The researchers used 332 useable sample size to infer the results. Findings The findings of the study demonstrate a positive effect of digital capability, digital orientation and digital transformation on digital innovation, circular economy adoption and open innovation. Digital innovation and open innovation also positively predict circular economy adoption. Finally, digital innovation and open innovation are found to be significant mediating constructs that link digital capability, digital orientation, digital transformation and circular economy adoption. Practical implications The findings provide practical guidelines for managers and policymakers by demonstrating that strengthening digital capabilities and fostering innovation can accelerate the adoption of the circular economy. These results can help organisations to prefer digital investments and innovation initiatives to enhance resource efficiency and circular operational practices. Originality/value This study extends the RBV and dynamic capabilities theory by explaining how organisational digital resources are transformed into circular economy adoption through the complementary mediating roles of digital innovation and open innovation. Rather than examining digital capability, digital orientation and digital transformation independently, the study offers an integrated theoretical explanation of their combined influence on circular economy adoption and provides empirical evidence from Pakistan's public and private energy/utilities sector. This context remains underexplored in the literature.