Complementary Capabilities for Circular Practices: Firm-Level Evidence in Germany on the Role of Digitalization and Innovation

This paper investigates how digital readinessand innovation activitiesare associated with circular practices in German industry and industry-related services. It also examinesfour capability configurations involving sustainability orientation and economic performance.Drawing on survey data fromapproximately300German  firms, we  estimate logistic  regression  models  with  interaction  effectstoassessconditional relationships rather than isolated drivers. Neither digital readiness nor innovationactivitiesaloneshowa significant association with CE implementation. Their interaction ispositive andstatistically significant at the 10% level. Firms seem more likely to adoptCE practices when innovation activities coincide withhigherlevels of digital readiness. The exploratory analysis finds no significantevidence for interactions involving digital readiness,innovationactivities,sustainability orientation,and economic performance.The study contributes firm-level  evidence  to  the CEliterature  and  provides  policy-relevant  insights  for  data-driven  regulatory frameworks.