Drivers and outcomes of circular economy implementation: evidence from China
| DOI | https://doi.org/10.1108/IMDS-05-2022-0267 |
| Published date | 13 September 2022 |
| Date | 13 September 2022 |
| Pages | 1178-1197 |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
| Author | Yina Li,Yuzhou Hu,Lixu Li,Jiayan Zheng,Ying Yin,Shaoling Fu |
Drivers and outcomes of circular
economy implementation: evidence
from China
Yina Li and Yuzhou Hu
School of Business Administration, South China University of Technology,
Guangzhou, China
Lixu Li
School of Economics and Management, Xi’an University of Technology, Xi’an, China
Jiayan Zheng
School of Business Administration, South China University of Technology,
Guangzhou, China
Ying Yin
Department of Electronic Business, South China University of Technology,
Guangzhou, China, and
Shaoling Fu
College of Economics and Management, South China Agricultural University,
Guangzhou, China
Abstract
Purpose –Although the circular economy is widely regarded as an essential strategy for firms, the present
understanding of the drivers and outcomes of circular economy implementation is underdeveloped. In this
paper, the authors draw on the natural resource-based viewand information processing theory to explore how
an environmental orientation and digital supply chain platforms promote circular economy implementation,
and increase the impact of circular economy implementation on financial performance.
Design/methodology/approach –The authors surveyed 249 Chinese firms and used hierarchical
regression analysis to test hypotheses.
Findings –The empirical results reveal that three primary modes of circular economy implementation—
reinvent and rethink (INV), restore, reduce and avoid (RRA), and recirculate (REC)—are all driven by
environmental orientation and digital supply chain platforms. More interestingly, digital supply chain
platforms have an inverted U-shaped moderating effect on the relationships between environmental
orientation and INV and between environmental orientation and RRA. Most importantly, IN V and RRA are
positively related to financial performance, whereas REC does not have a significant relationship with
financial performance.
Originality/value –The authorscontribute to the literature on the circular economy by revealing new drivers
and outcomes of different modes of its implementation. Additionally, the findings have implications for how
firms should frame their circular economy initiatives in the context of the digital revolution.
Keywords Circular economy, Environmental orientation, Digital supply chain platform,
Financial performance
Paper type Research paper
IMDS
123,4
1178
Yina Li appreciates the support of grants under the Joint Funds of NSFC and Guangdong Province,
China [U1901222], Guangdong Basic and Applied Basic Research Foundation, China
[2021A1515011884], and the Social Science Foundation of Guangzhou, China [2020GZYB02]. Lixu Li
appreciates the support of grants under Shaanxi Provincial Department of Education [22JK0120] and
Shaanxi Provincial Federation of Social Sciences [2022HZ1204].
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/0263-5577.htm
Received 1 May 2022
Revised 22 June 2022
Accepted 14 July 2022
Industrial Management & Data
Systems
Vol. 123 No. 4, 2023
pp. 1178-1197
© Emerald Publishing Limited
0263-5577
DOI 10.1108/IMDS-05-2022-0267
1. Introduction
Circular economy refers to a regenerative system that reduces resource input and waste, as
well as emissions, by slowing, closing and limiting the material and energy cycle (Yuan et al.,
2008;Murray et al., 2017;Schroeder et al., 2019;Patwa et al., 2021). Because the circular
economy can theoretically improve financial performance while also ensuring that the
consumption of natural resources is sustainable, many scholars and practitioners believe that
it provides a feasible way for firms to achieve harmony between economic growth and
environmental protection (Kristoffersen et al., 2021). In recent years, China has proposed
many policies to facilitate the circular economy (McDowall et al., 2017;The State Council,
2021a,b), such as the carbon peaking and carbon neutrality goals in 2021. These point to the
establishment of a green, low-carbon and circular economic system, and promote a
comprehensive green transformation of the country’s economic and social development (The
State Council, 2021a). Indeed, China may be said to have promoted the positioning of the
circular economy to a new strategic height (McDowall et al., 2017).
However, a recent global survey showed that while around 75% of firms had analyzed or
discussed the circular economy, only 12% had actually placed it at the core of their firms’
strategies (Løne, 2021). This observation indicates only superficial participation and a
widespread lack of genuine implementation. Moreover, shifting from a linear to a circular
business model entails significant investment (Patwa et al., 2021), and many firms doubt the
circular economy’s ability to deliver tangible cost reductions and financial benefits (Murray et al.,
2017). In short, given that the evidence in both research and practice is inconclusive, additional
research on the drivers and outcomes of circular economy implementation is required.
The natural resource-based view suggests that the competitive advantage of a firm is
fundamentally determined by its interaction with the natural environment (Hart, 1995).
Environmental orientation refers to managers’awareness of the critical environmental
challenges confronting their firms (Banerjee et al., 2003). Because environmental orientation
reflects a firm’s efforts in addressing environmental challenges (Chan et al., 2012), and
because circular economy implementation is a major means for achieving sustainable
development (Zhu et al., 2011), environmental orientation is expected to be a potential driver
of circular economy implementation. Moreover, according to information processing theory
(Premkumar et al., 2005), every firm has to process complex environmental information, and,
to achieve sustained competitive advantage, firms must match their information processing
capabilities to their information processing needs. The term digital supply chain platforms
refers to the digitally driven infrastructure established for the constant and high-velocity
transfer of supply chains (Rai and Seth, 2006); such platforms require the integration of
multiple advanced technologies, such as big data, artificial intelligence, blockchain, the
internet of Things, and cloud computing. Because digital supply chain platforms can greatly
increase firms’information processing capabilities (Gunasekaran et al., 2017;Frank et al.,
2019), they should be another driver of circular economy implementation. Although
environmental orientation and digital supply chain platforms are important for a firm to
implement the circular economy, little is known about their interplay. Hence, our first
research question is: What are the effects (separate and combined) of environmental
orientation and digital supply chain platforms on circular economy implementation?
Some scholars argue that implementing a circular economy may result in cost savings and
increased economic and resource efficiency (Murray et al., 2017). However, others suggest
that firms may face financial obstacles when implementing the circular economy because it is
difficult for them to assess the appropriate level of investment and return on investment
(Stromberg, 2004;Ageron et al., 2012;Govindan and Hasanagic, 2018). We contend that one of
the main reasons for the above inconsistency is that most studies regard circular economy
implementation as a unitary concept (Kristoffersen et al., 2021;Stekelorum et al., 2021;
Rodr
ıguez-Esp
ındola et al., 2022) and do not take account of the different modes of
Drivers and
outcomes of
circular
economy
1179
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