Green Digital Technologies, Circular Economy Adoption, and Sustainable Business Performance: The Mediating Role of Eco-Innovation and the Moderating Role of Institutional Support

Abstract

Green digital technologies are increasingly used to improve environmental visibility, resource efficiency, and sustainability-oriented decision-making. However, their association with sustainable business performance may depend on whether firms convert digital resources into organizational capabilities and implemented circular practices. Drawing on the Natural Resource-Based View, Dynamic Capabilities Theory, and Institutional Theory, this study examines a moderated serial mediation model in which eco-innovation and circular economy adoption sequentially mediate the relationship between green digital technologies and sustainable business performance, while institutional support moderates the relationship between eco-innovation and circular economy adoption. Survey data were collected from managers and professionals in Saudi industrial and manufacturing firms. Of the 450 questionnaires distributed, 420 were returned, and 386 usable responses remained after data-quality screening and were analyzed using partial least squares structural equation modeling in SmartPLS 4. The results show that green digital technologies are positively associated with eco-innovation (β = 0.662, p < 0.001) and circular economy adoption (β = 0.263, p < 0.001). Eco-innovation is positively associated with circular economy adoption (β = 0.487, p < 0.001), which, in turn, is strongly associated with sustainable business performance (β = 0.726, p < 0.001). The serial indirect association through eco-innovation and circular economy adoption is significant (β = 0.234, p < 0.001). Institutional support also strengthens the eco-innovation–circular economy adoption relationship, although the interaction is comparatively modest (β = 0.118, p = 0.002). The study contributes by distinguishing eco-innovation as a resource-conversion capability from circular economy adoption as an implemented organizational practice and by identifying institutional support as a boundary condition within Saudi industrial firms.