Sustainable circular economy: Unpacking the unintended consequences of digital transformation in Japanese SMEs

Digital transformation (DX) and the shift toward a sustainable circular economy are reshaping industries, raising both practical and theoretical questions about power, collaboration, and ecosystem dynamics. While DX offers opportunities for efficiency and sustainability, it also induces unintended consequences—particularly in altering inter-organizational power relations and blurring traditional industrial boundaries. Drawing on circular economy and ecosystem perspectives, this study investigates these unintended consequences through multiple in-depth case studies of Japanese SMEs. The research reveals how organisations renegotiate constraints and resources to adapt to evolving digital ecosystems. Unlike much of the existing literature that focuses on benefits, this paper uniquely explores the dual nature of unintended consequences—highlighting not only risks but rather, some present exploitable opportunities. The findings offer novel theoretical insights into digital circular economy-era and provide actionable guidance for policymakers and practitioners navigating digital transformation.