Circular supply chain management: Performance outcomes and the role of eco-industrial parks in China

Abstract

A circular economy (CE) is increasingly recognized as a more environmentally sustainable alternative to the dominant linear take-make-dispose economic model. We empirically investigate the effect of circular supply chain management (CSCM) on cost and financial performance in China, which has established the world’s largest system of eco-industrial parks (EIPs) to promote CE over the last decade. We combine the Natural Resource-Based View (NRBV), Contingent NRBV and the literature on CSCM to develop a conceptual model and test it using survey data collected from 255 Chinese manufacturing firms. The results show that CSCM, when exercised as a unified strategy, has a significant positive effect on cost and financial performance. Firms located within EIPs adopt CSCM at higher levels as compared to firms located outside EIPs. Nevertheless, the contextual factor of being located within an EIP does not moderate the CSCM practice-performance relationship, suggesting that performance is driven by practices rather than firms’ locations. These results were affirmed by post-survey participant validation in three focus group meetings and six face-to-face interviews. Our findings contribute to sustainability literature by offering a new construct and measurement items relevant to CSCM and provide practical insights to guide a transition to a CE.