Absorptive Capacity, Organizational Learning, and Circular Economy Performance in Asian SMEs: The Moderating Role of Digital Technology Adoption

ABSTRACT The transition to a circular economy ( CE ) requires SMEs in Asian emerging economies to navigate complex knowledge acquisition and integration processes under limited institutional scaffolding. Although absorptive capacity (AC) and organizational learning (OL) are increasingly recognized as key enablers of CE transitions, no large‐scale multi‐country empirical study has yet tested their joint operation or quantified the boundary conditions under which digital technology amplifies their effects. This study addresses that gap by validating an integrated AC–OL framework and assessing the moderating role of digital technology adoption (DTA) in shaping CE performance, operationalized as a second‐order composite construct encompassing environmental CE performance (waste reduction, resource efficiency, material circularity) and business CE performance ( CE ‐attributed revenue, supply chain circularity, and innovation outputs). Using survey data from 580 SMEs across six Asian countries and PLS‐SEM analysis, the results show that all four dimensions of absorptive capacity positively influence CE performance, with knowledge transformation and exploitation exerting the strongest effects. Organizational learning significantly mediates these relationships, confirming its role as a key mechanism through which knowledge is converted into circular practices. DTA strengthens the link between knowledge assimilation and transformation, underscoring its role as a capability amplifier. Multigroup analysis reveals cross‐country heterogeneity, with stronger transformation effects in China and India and a greater reliance on informal learning elsewhere. Together, these findings offer SME managers and policymakers across Asian economies an evidence‐based roadmap for sequencing CE capability investments, identifying digitalization as a strategically important co‐investment target for CE learning programs, particularly where basic digital infrastructure must precede, rather than accompany, CE knowledge transfer initiatives.