Adoption of circular economy practices in supply chains to enhance firm performance: industrial symbiosis and ecological modernization theory perspective

Purpose While many firms in the developing economies are actively engaged in the circular economy practices, they face a range of challenges in transitioning to and scaling circular practices in their supply chain. Prior related studies lack empirical evidence on the adoption of circular economy practices in the supply chain with the focus on developing countries. Hence, this research attempts to investigate various factors from the industrial symbiosis lens, such as firm collaboration and social innovation, and from the ecological modernization lens, such as technological development, organizational intention and government policy, and their effects on adoption of circular economy practices in supply chain to provide evidence on the improvement in the firm performance, specifically in emerging economies like India. The moderating role of firm type (manufacturing and service industries) and firm size (large-scale and small-and-medium scale) in the Indian context is also examined. Design/methodology/approach The study proposes 18 hypotheses by integrating and extending the industrial symbiosis and ecological modernization theories. Self-administered questionnaire survey is used to gather quantitative data. Respondents are managers and executives of large-, medium- and small-scale manufacturing and service firms in India. Structural equation modelling approach is applied to analyse and test the hypotheses. For confirming the inferences drawn from the model and ensuring the model’s predictability, a robustness test on the model is performed. Findings Results revealed that firm collaboration, government policy and organizational intention directly and positively impact adoption of circular economy practices in the supply chain. The circular economy practices in supply chain also indicated a direct and positive relationship with firm performance. Firm type moderates the relationship of government policy and adoption of circular economy practices in the supply chain, and firm size moderates the association between organizational intention and adoption of circular economy practices in supply chain followed by the firm performance. Originality/value Given the complexities of developing countries like India, the study concentrated on identifying the significant factors that facilitate the adoption of circular economy practices in the supply chain and thereby, the firm performance in the Indian context from the theoretical lens of industrial symbiosis and ecological modernization. Besides, the moderating role of firm type (manufacturing and service firms) and firm size (large corporations and small and medium enterprises) on the relationships in the Indian context is also an addition to the existing related literature. Overall, the study stands out as one of the few attempts to provide empirical evidence on the factors influencing adoption of circular economy practices in the supply chain to improve the performance of firms from a developing country perspective.