Harnessing the potential of digital technologies in manufacturing: a conceptual framework for enhancing circular economy capabilities through institutional pressure and data-driven decision-making

Abstract

The growing uncertainty of the environment, combined with external pressures, forces manufacturing firms to reconfigure their resources and capabilities and to align their operational behaviours with the imperatives of sustainability. However, despite the rising interest in the circular economy and digital transformation, it remains unclear how firms translate institutional pressures into circular sustainable practices. Drawing on Institutional Theory and Information Processing Theory, this study addresses this gap by developing a conceptual structural contingency model that explains the mechanisms through which coercive, normative, and mimetic pressures activate distinct informational channels (technological, decisional, or direct). Furthermore, by formalising the interaction effect between digital technologies and data-driven decision-making capability, our model highlights that technological infrastructure alone is insufficient, and its success depends on the development of data-driven decision-making capability to effectively convert institutional pressures into circular capabilities. This article contributes to the literature by opening the black box of institutional isomorphism, resolving the digital productivity paradox through informational alignment, and offering a micro-founded research agenda to guide future empirical validations of the circular transition.