Digital Tools Drive Circular Economy Gains in Jordan’s Factories, Study Finds

Digital transformation has become one of the most debated levers for building a greener economy, but hard empirical evidence about whether going digital actually makes manufacturers more circular and more profitable has been scarce, especially outside the world’s largest economies. A new study from Jordan now offers some of the clearest numbers yet. Researchers Aws Al-Okaily and Manaf Al-Okaily of the School of Business at Jadara University surveyed 176 managers at Jordanian manufacturing firms and used a statistical technique called partial least squares structural equation modeling, or PLS-SEM, to trace exactly how technological and financial resources flow through digital transformation into circular economy practices and, ultimately, into sustainable economic performance. Their results, published open access in the journal Discover Sustainability, validate every hypothesis they proposed, painting a coherent picture of how resources, technology, and sustainability connect in an emerging market.

The theoretical backbone of the study is a pairing of two influential frameworks from management research. The first is the resource-based view, or RBV, which holds that a firm’s competitive advantage grows out of resources that are valuable, rare, and difficult to imitate. In this study, the authors applied the RBV to test whether technological resources and financial resources drive digital transformation. Technological resources were measured with survey items asking whether firms possess the hardware equipment required for digital transformation, have access to the necessary data, own the required software, and hold the broader technical resources needed to digitize. Financial resources were captured through items on whether firms allocate sufficient funding to digital initiatives, can acquire digital technologies and infrastructure, can maintain and upgrade those technologies over time, and can equip employees with the skills to use new digital tools.

The second framework, dynamic capability theory, or DCT, explains how firms adapt and reconfigure their resources in fast-changing environments. The authors drew on DCT to model digital transformation as a dynamic capability that enables firms to reshape their operations toward circularity. Digital transformation itself was measured through managers’ agreement with statements such as whether the firm aims to digitalize everything that can be digitized, whether it seeks to achieve information exchange digitally, whether it uses digital technologies to create stronger networking between different business processes, and whether it collects massive volumes of data from different sources. This conceptual chain, from resources through digital capability to circular practice and economic outcome, formed the structural model that the PLS-SEM analysis put to the test.

The statistical results were unambiguous. Both technological resources and financial resources had positive and significant effects on digital transformation, confirming that firms cannot digitize on goodwill alone; they need functioning hardware, usable data, appropriate software, technical staff, and, crucially, money, not only to buy technology but to keep it current and to train the people who use it. Digital transformation, in turn, showed a positive effect on circular economy practices. Those practices were measured with concrete operational items: whether the firm is dedicated to reducing the consumption of raw materials and energy, whether it continuously enhances the energy efficiency of its production equipment, whether it recycles waste generated during the manufacturing process, and whether it reprocesses waste and discarded materials to manufacture new products.

Perhaps the most commercially significant finding concerns the bottom line. The study found that digital transformation has a positive effect on sustainable economic performance directly, and that circular economy practices also positively influence sustainable economic performance. Economic performance was assessed through four indicators drawn from the survey: whether the firm has decreased the cost of materials purchased, whether it has decreased the cost of energy consumption, whether it has improved its return on investment, and whether its profit growth is superior to that of its competitors. In other words, the circular practices that digitalization enables are not framed here as a costly ethical indulgence; in this dataset they are associated with lower input and energy costs, better returns, and faster profit growth than rivals achieve.

The context of the study matters as much as its statistics. Jordan is an emerging economy with manufacturing firms that often operate under tight resource constraints, volatile energy prices, and water scarcity, conditions that make the circular economy’s promise of doing more with less particularly attractive. Much of the existing literature on digital transformation and sustainability has been built on data from large Western economies, leaving genuine uncertainty about whether the same relationships hold where firms are smaller, capital is scarcer, and digital infrastructure is still maturing. By demonstrating that the resource-to-digitalization-to-circularity chain functions in Jordan, the study extends the evidence base for emerging markets and suggests that the mechanisms identified elsewhere are not artifacts of wealthy economies.

The methodological choices deserve attention because they shape how much confidence readers should place in the findings. PLS-SEM is well suited to studies like this one because it can estimate an entire network of relationships simultaneously, allowing the researchers to test each proposed path while accounting for the others. The sample of 176 managers provides the kind of respondent-level insight that objective firm records often cannot, since practices such as waste reprocessing and energy-efficiency upgrades are not always systematically documented in emerging-market firms. The survey instruments were explicit and operational, asking managers to report on specific, observable behaviors rather than vague attitudes, which strengthens the interpretability of the measurement model. Ethical approval for the study was obtained from the Research Ethics Committee at the School of Business, Jadara University, and the research was conducted according to the guidelines of the Declaration of Helsinki, with informed consent obtained from all participants.

For managers, the practical implications are direct. The findings suggest that firms contemplating a sustainability strategy should not treat digital transformation and circular economy initiatives as separate agendas. Instead, investments in hardware, software, data access, and technical skills appear to be the enabling foundation on which circular practices, such as recycling manufacturing waste into new products and continuously improving the energy efficiency of production equipment, can be built. Equally, the financial resource findings caution that underfunded digital programs, in which technology is purchased but not maintained, upgraded, or matched with employee training, are unlikely to deliver circular or economic benefits. The inclusion of a dedicated survey item on funding employee digital skills signals that the human side of transformation is treated as a financial commitment, not an afterthought.

For policymakers in Jordan and comparable economies, the study offers an evidence-based argument for supporting manufacturers’ digital capabilities as a route to national sustainability goals. If technological and financial resources reliably enable digital transformation, and digital transformation reliably enables circular practices that improve economic performance, then policies that ease access to digital infrastructure, financing, and skills training could generate a double dividend: environmental gains through reduced raw material and energy consumption, and economic gains through lower costs and stronger profit growth. The authors note that their work contributes to the literature by examining the role of technological and financial capabilities in enabling successful digital transformation, and by exploring how digital transformation can be leveraged to promote circular economic practices and enhance sustainable economic performance in an emerging economy.

The study also leaves open questions that future research will need to address. Self-reported survey data, however carefully constructed, capture managers’ perceptions, and longitudinal designs would be needed to establish how these relationships evolve over time and whether causality runs as cleanly as the structural model implies. The generalizability of findings from 176 Jordanian manufacturing firms to other emerging economies remains to be tested. Still, the core message is striking in its simplicity: in this dataset, every link in the chain from resources to digitalization to circularity to economic performance held firm. For manufacturers weighing whether digital investment can pay for itself while shrinking their environmental footprint, the Jordanian evidence suggests the answer, at least in one emerging market, is a qualified and quantified yes.

Subject of Research: The effect of digital transformation on circular economy practices and sustainable economic performance in Jordanian manufacturing firms

Article Title: The impact of digital transformation on circular economy practices and sustainable economic performance in Jordanian manufacturing firms

Article References: The impact of digital transformation on circular economy practices and sustainable economic performance in Jordanian manufacturing firms. (n.d.). https://doi.org/10.1007/s43621-026-04580-0

Image Credits: AI Generated

DOI: 10.1007/s43621-026-04580-0

Keywords: digital transformation, circular economy, sustainable economic performance, Jordan, manufacturing, resource-based view, dynamic capability theory, PLS-SEM, emerging economies, energy efficiency, waste recycling, technological resources