From Digital Transformation to Circular Manufacturing: How Digital Organizational Capabilities Foster Green Innovation Under Regulatory Intervention

Abstract

This study investigates the influence of digital leadership, digital dexterity, and digital culture on green innovation and circular manufacturing, while examining the moderating role of government regulatory intervention within an integrated Resource‐Based View theoretical framework. A quantitative cross‐sectional survey methodology was employed, collecting primary data from 372 manufacturing firm employees across China with a response rate of 32%. Hypothesized relationships were tested using partial least squares structural equation modeling (PLS‐SEM) via SmartPLS 4.0, with all measurement scales adapted from validated prior research works. Empirical results confirmed all seven hypotheses, establishing that digital leadership, digital dexterity, and digital culture each exert significant positive effects on green innovation, which in turn positively influences circular manufacturing adoption. Government regulatory intervention significantly moderated and strengthened the relationships between all three digital capability dimensions and green innovation, confirming its role as a critical institutional amplifier. This study makes an original theoretical contribution by integrating digital organizational capabilities, green innovation, and circular manufacturing within a unified RBV framework, while introducing regulatory intervention as a boundary condition. Practically, findings advocate for firm‐level investments in digital capabilities and progressive regulatory policy strengthening as complementary mechanisms for accelerating sustainable industrial transitions.