Digital Innovation in Circular Economy in SMEs: A Comprehensive Review and Multi-Level Framework

Abstract

Digital innovation has become a key enabler of the circular economy, yet existing research on SMEs remains fragmented across technological, organizational, and institutional perspectives. This study addresses this gap through a bibliometric analysis and systematic literature review of 87 peer-reviewed articles published between 2017 and 2025. The review synthesizes the evolution of digital research, identifies its theoretical foundations, key barriers, enabling factors, and performance outcomes, and develops a multi-level conceptual framework linking micro-, meso-, macro-, and ecosystem-level perspectives. The findings suggest that successful digital innovation-enabled circular transformation depends on the interaction of digital capabilities, organizational resources, institutional support, and stakeholder collaboration. The study further reveals that financial constraints, limited digital capabilities, and weak institutional support remain major barriers, whereas Industry 4.0 technologies, leadership commitment, and ecosystem collaboration serve as critical enablers. By integrating fragmented theoretical perspectives into a coherent framework, this review advances the understanding of digital adoption in SMEs and provides a structured research agenda together with practical implications for managers and policymakers seeking to accelerate sustainable digital transformation.