Dynamic tensions in supply chain collaboration: The role of organizational capabilities in advancing the circular economy

This study examines how absorptive capacity (ACAP) and strategic sensitivity (SSENS) jointly influence supply chain collaboration (SCC) to enhance circular economy (CE) performance. While organizational learning and collaborative practices are recognized as important drivers for CE, the combined effect of these capabilities within SCC remains insufficiently explored. Using survey data from Italian manufacturing and construction firms, we find that ACAP and SSENS play distinct yet complementary roles in supporting SCC. Their interplay generates a synergistic dynamic, balancing external market insights with internal knowledge creation, thereby enhancing collaboration through mechanisms such as communication, shared goals, and joint knowledge creation. However, this synergy does not extend to resource- and incentive-based collaboration, where SSENS alone proves inadequate, resulting in a compensatory role for ACAP. Additionally, contrary to previous assumptions in the literature, SCC does not mediate the relationship between ACAP and CE performance, suggesting that internal capabilities independently contribute to CE achievements. The results underscore the need for nuanced integration of organizational capabilities in SCC strategies and provide practical insights for managers and policymakers aiming to align capability development with sustainability objectives.