The Role of Digital Innovation in Advancing the Circular Economy: Evidence from Plastic Manufacturing Enterprises in Hebron City, Palestine

Abstract

In recent years, Digital Innovation and Circular Economy have received growing interest as important solutions towards sustainability and resource efficiency in industrial companies. The use of advanced digital technologies such as Artificial Intelligence (AI), Internet of Things (IoT), Big Data Analytics, and Cloud Computing has become a key enabler to improve operational performance and environmental sustainability. The Circular Economy aims to maximize resource use, minimize waste, and prolong product lifespans as a means of sustainable development. Despite significant global interest in the relationship between Digital Innovation and the Circular Economy, there is a lack of empirical evidence in the Palestinian context, particularly in the plastic manufacturing sector. This study set out to examine the effect of Digital Innovation on the Circular Economy of plastic manufacturing companies in Hebron City—the effects of Organizational Readiness as a mediator and Government Support as a moderator were also explored. A quantitative research method was used, and data were gathered through a structured questionnaire administered to a sample of 63 plastic manufacturing enterprises in Hebron City. Structural Equation Modeling (SEM) was used in this study to test the hypotheses and analyze the relationships among the variables. The results indicated that Digital Innovation plays an indirect role in the development of the Circular Economy via Organizational Readiness, underscoring the role of organizational readiness, technological infrastructure, and human resources in driving digital innovation initiatives to effective circular economy practices. The results also showed that the relationship between Digital Innovation and the Circular Economy was not statistically significant when moderated by Government Support. The study suggests that organizational readiness for digital transformation can be increased by establishing technological infrastructure, training employees in digital skills, and equipping them with the organizational resources needed to implement advanced digital technologies. These efforts can help to implement Circular Economy Practices effectively and contribute to sustainable industrial development.