Empowering circular economy transformation through immersive digital open innovation

Abstract

Despite broad support for sustainability, the transition from linear to circular economic models remains slow and fragmented across industries. Digital technologies such as the metaverse present new opportunities for enabling circular economy (CE) practices, yet their strategic integration within organizational systems is not fully understood. To address this gap, this study proposes and empirically validates a model that explains how metaverse adoption influences CE implementation through the mediating role of Immersive Knowledge Co-Creation (IKCC), and the moderating effect of Open Eco-Innovation Capability (OEIC). Grounded in the knowledge-based view (KBV), interactive learning theory, and dynamic capabilities theory, the research develops a process-driven and capability-oriented framework to explore the mechanisms and boundary conditions for digital-enabled circular transformation. Empirical data were collected from 220 respondents in Germany's advanced manufacturing sector and analyzed using partial least squares structural equation modeling. The results confirm that IKCC significantly mediates the relationship between metaverse adoption and CE implementation, and that this mediated relationship is stronger in firms with high OEIC. These findings contribute to the growing body of literature on digital innovation in the CE by highlighting the critical role of immersive collaboration and organizational readiness in driving circular processes.