Understanding circular economy adoption by SMEs: a case study on organizational legitimacy and Industry 4.0

Abstract

PurposeThis paper explores how Industry 4.0 facilitates small and medium-sized enterprises (SMEs) in emerging markets to gain and maintain organizational legitimacy from the government and market and capture value from circular economy (CE) adoption in their businesses.Design/methodology/approachThe authors conduct an in-depth, multistakeholder case study in an SME in China’s hazardous waste recycling and re-utilization industry and apply a qualitative analysis.FindingsThe findings show that Industry 4.0 could facilitate SMEs to gain organizational legitimacy through two mechanisms, namely conforming and transcending. Conforming results in baseline-level outcomes to obtain legitimacy while transcending leads to ecosystem value-cocreation, which goes beyond government expectations and reinforces SMEs' legitimacy.Originality/valueThe authors validated the enabling role of Industry 4.0 in CE adoption in SMEs and have generated legitimation processes and strategies that facilitate SMEs to capture value from CE adoption.

The impact of dynamic capabilities on circular economy: the mediating effect of the industrial Internet of things

“…In view of the extensive CE literature, CE practices are widely known in large manufacturing companies because major manufacturing firms focus on promoting and developing their sustainable activities (Zheng et al ., 2022). Scholars have also discussed at length how to apply CE practices in developed contexts and economies such as the United States and Western Europe.…”