Navigating smart practices through dynamic capabilities for sustainable performance: A mixed-method approach

• Digitalization and smart practices enhance circular practices implementation. • Open innovations foster innovative business models for sustainable performance. • Dynamic capabilities aid in identifying and evaluating avenues for industrial business model innovation. Utilizing digital technologies and smart practices in the manufacturing industry has the potential to revolutionize it from a linear to a circular model. This facilitates promotion of sustainability, enhances productivity, and accelerates profits besides benefiting both people and the planet. Recent studies on managerial cognition and the micro foundations of circular practices have emphasized the need for dynamic capabilities to achieve sustainable performance. This research is the first to empirically demonstrate that digitalization and smart practices are crucial for the smooth and effective implementation of circular initiatives. A survey of 330 manufacturing employees with a minimum of seven years of experience in circular supply chain practices was conducted to test the proposed model using structural equation modelling. The measurement model of each construct was validated using the exploratory and confirmatory factor analysis. The results indicate that open innovations are key to creating innovative business model designs, leading to sustainable performance in the manufacturing sector. Furthermore, dynamic capabilities are essential for identifying and assessing unmet opportunities within industrial systems, facilitating open innovations and driving business model innovation for sustainable performance. Based on these unique findings, practitioners should adopt digitalization and smart practices to transform business models through open innovations, accelerating the achievement of sustainable performance.