The Role of Industry 4.0 Readiness, Knowledge Management Capabilities, and Sustainability Culture in Driving Circular Economy Practices

Abstract

This study extends the natural resource-based view (NRBV) theory by examining how Industry 4.0 readiness influences circular economy practices in resource-constrained manufacturing contexts. The research challenges established theoretical assumptions about sustainability culture's role and circular economy implementation hierarchies while investigating the mediating mechanisms of knowledge management capabilities. Data from 704 manufacturing SMEs in Ghana was analyzed using an innovative two-stage PLS-SEM and artificial neural network approach that captured both linear and nonlinear relationships between constructs. This methodical triangulation revealed complex interaction patterns that traditional modeling might miss. The study makes three significant theoretical contributions: (1) Industry 4.0 readiness enhances circular economy practices even at basic levels of technological sophistication, challenging technology-deterministic theoretical perspectives; (2) knowledge management capabilities transform technological inputs into circular outcomes through mechanisms that differ from those in resource-rich contexts, emphasizing informal knowledge sharing rather than formal codification; and (3) sustainability-orientated culture functions as the strongest direct predictor of circular economy practices rather than as a moderator, contradicting Western-centric theoretical frameworks. The study reconceptualizes how NRBV theory applies in resource-constrained environments by demonstrating that circular economy implementation hierarchies are context-dependent rather than universal; value creation from technological resources depends more on effective orchestration than sophistication; and sustainability culture functions differently in collectivist contexts than is theorized in individualistic societies. These theoretical extensions transcend the specific Ghanaian context to offer generalizable insights into how resource endowments and cultural contexts shape sustainability capability development.