IDEAS home Printed from https://ideas.repec.org/a/bla/bstrat/v34y2025i1p830-848.html

Artificial intelligence‐based dynamic capabilities and circular supply chain: Analyzing the potential indirect effect of frugal innovation in retailing firms

Author

Listed:
  • Ayman wael AL‐khatib
  • Thurasamy Ramayah

Abstract

Academics and practitioners are increasingly interested in the role of the circular supply chains in maximizing resource use and improving sustainable performance. However, the shift from linear to circular supply chains is still at an early stage and still needs more research. The current study seeks to test the direct effects of artificial intelligence‐based dynamic capabilities on frugal innovation and circular supply chains in a group of retail firms operating in Jordan. The current paper also aims to test the potential indirect effect of frugal innovation. To achieve these objectives, a research framework was developed that explains hypothesized relationships between the previous constructs and was tested empirically through a sample of 212 respondents from the top administrative level in these firms. The casual and quantitative approach was employed to test the hypothetical relationships, and the partial least squares‐structural equation modelling (PLS‐SEM) approach was employed as a tool to analyze the data. The empirical results reported through data analysis showed acceptance of all hypothesized relationships that were hypothesized in this study, as there was a positive effect of both artificial intelligence‐based dynamic capabilities and frugal innovation on circular supply chains. In addition, the mediation was statistically significant, as frugal innovation mediated the relationship between artificial intelligence‐based dynamic capabilities and circular supply chains. This study had a set of interesting contributions at the theoretical and the managerial contributions, as this paper is the first work in the body of the literature that explores these innovative relationships. The current paper also contributed to developing recommendations that would improve sustainable performance in the retail sector by enhancing its dynamic capabilities based on artificial intelligence tools, which leads to strengthening circular supply chains.

Suggested Citation

  • Ayman wael AL‐khatib & Thurasamy Ramayah, 2025. "Artificial intelligence‐based dynamic capabilities and circular supply chain: Analyzing the potential indirect effect of frugal innovation in retailing firms," Business Strategy and the Environment, Wiley Blackwell, vol. 34(1), pages 830-848, January.
    • Handle: RePEc:bla:bstrat:v:34:y:2025:i:1:p:830-848
    DOI: 10.1002/bse.4018
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/bse.4018
    Download Restriction: no
    File URL: https://libkey.io/10.1002/bse.4018?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Junaid, Muhammad & Zhang, Qingyu & Cao, Mei & Luqman, Adeel, 2023. "Nexus between technology enabled supply chain dynamic capabilities, integration, resilience, and sustainable performance: An empirical examination of healthcare organizations," Technological Forecasting and Social Change, Elsevier, vol. 196(C).
    2. Zahid Yousaf & Mirela Panait & Umair Tanveer & Alina Cretu & Andrei Hrebenciuc & Sheikh Muhammad Zahid, 2022. "Value Creation through Frugal Innovation, Innovation Capability and Knowledge Sharing in a Circular Economy," Sustainability, MDPI, vol. 14(14), pages 1-14, July.
    3. Rameshwar Dubey & David James Bryde & Cyril Foropon & Manisha Tiwari & Angappa Gunasekaran, 2022. "How frugal innovation shape global sustainable supply chains during the pandemic crisis: Lessons from the COVID-19," Post-Print hal-03539266, HAL.
    4. Mariani, Marcello M. & Machado, Isa & Magrelli, Vittoria & Dwivedi, Yogesh K., 2023. "Artificial intelligence in innovation research: A systematic review, conceptual framework, and future research directions," Technovation, Elsevier, vol. 122(C).
    5. Dharmendra Kumar & Saurabh Agrawal & Rajesh Kumar Singh & Raj Kumar Singh, 2023. "Coordination of circular supply chain for online recommerce platform in industry 4.0 environment: a game-theoretic approach," Operations Management Research, Springer, vol. 16(4), pages 2081-2103, December.
    6. Rossetto, Dennys Eduardo & Borini, Felipe Mendes & Bernardes, Roberto Carlos & Frankwick, Gary L., 2023. "Measuring frugal innovation capabilities: An initial scale proposition," Technovation, Elsevier, vol. 121(C).
    7. Matthew Quayson & Chunguang Bai & Lihua Sun & Joseph Sarkis, 2023. "Building blockchain‐driven dynamic capabilities for developing circular supply chain: Rethinking the role of sensing, seizing, and reconfiguring," Business Strategy and the Environment, Wiley Blackwell, vol. 32(7), pages 4821-4840, November.
    8. Lutfi, Abdalwali & Alrawad, Mahmaod & Alsyouf, Adi & Almaiah, Mohammed Amin & Al-Khasawneh, Ahmad & Al-Khasawneh, Akif Lutfi & Alshira'h, Ahmad Farhan & Alshirah, Malek Hamed & Saad, Mohamed & Ibrahim, 2023. "Drivers and impact of big data analytic adoption in the retail industry: A quantitative investigation applying structural equation modeling," Journal of Retailing and Consumer Services, Elsevier, vol. 70(C).
    9. Sara Romagnoli & Claudia Tarabu' & Behzad Maleki Vishkaei & Pietro De Giovanni, 2023. "The Impact of Digital Technologies and Sustainable Practices on Circular Supply Chain Management," Logistics, MDPI, vol. 7(1), pages 1-17, January.
    10. Zahid Yousaf & Daniela Mihai & Umair Tanveer & Mădălina Brutu & Smaranda Toma & Sheikh Muhammad Zahid, 2022. "Organizational Innovativeness in the Circular Economy: The Interplay of Innovation Networks, Frugal Innovation, and Organizational Readiness," Sustainability, MDPI, vol. 14(11), pages 1-13, May.
    11. Vadakkepatt, Gautham G. & Winterich, Karen Page & Mittal, Vikas & Zinn, Walter & Beitelspacher, Lauren & Aloysius, John & Ginger, Jessica & Reilman, Julie, 2021. "Sustainable Retailing," Journal of Retailing, Elsevier, vol. 97(1), pages 62-80.
    12. Li, Miaomiao & Cao, Guikun & Cui, Li & Liu, Xiaoquan & Dai, Jing, 2023. "Examining how government subsidies influence firms’ circular supply chain management: The role of eco-innovation and top management team," International Journal of Production Economics, Elsevier, vol. 261(C).
    13. Hong Tian & Ao Wang, 2023. "Sustainable Leadership, Knowledge Sharing, and Frugal Innovation: The Moderating Role of Organizational Innovation Climate," SAGE Open, , vol. 13(4), pages 21582440231, October.
    14. Hossain, Mokter & Simula, Henri & Halme, Minna, 2016. "Can frugal go global? Diffusion patterns of frugal innovations," Technology in Society, Elsevier, vol. 46(C), pages 132-139.
    15. Krohn, Malte & Petersen, Finn & Hochmuth, Dustin & Herstatt, Cornelius, 2020. "The Deliberative Frugal Mindset: A model of managerial opportunity recognition for frugal innovation," Working Papers 109, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
    16. Sheshadri Chatterjee & Ranjan Chaudhuri & Sachin Kamble & Shivam Gupta & Uthayasankar Sivarajah, 2023. "Adoption of Artificial Intelligence and Cutting-Edge Technologies for Production System Sustainability: A Moderator-Mediation Analysis," Information Systems Frontiers, Springer, vol. 25(5), pages 1779-1794, October.
    17. Rohit Agrawal & Vishal A. Wankhede & Anil Kumar & Sunil Luthra & Abhijit Majumdar & Yigit Kazancoglu, 2022. "An Exploratory State-of-the-Art Review of Artificial Intelligence Applications in Circular Economy using Structural Topic Modeling," Operations Management Research, Springer, vol. 15(3), pages 609-626, December.
    18. Sjödin, David & Parida, Vinit & Kohtamäki, Marko, 2023. "Artificial intelligence enabling circular business model innovation in digital servitization: Conceptualizing dynamic capabilities, AI capacities, business models and effects," Technological Forecasting and Social Change, Elsevier, vol. 197(C).
    19. Owais Khan & Tiberio Daddi & Fabio Iraldo, 2020. "The role of dynamic capabilities in circular economy implementation and performance of companies," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(6), pages 3018-3033, November.
    20. David J Teece, 2014. "A dynamic capabilities-based entrepreneurial theory of the multinational enterprise," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(1), pages 8-37, January.
    21. Hengky Latan & Ana Beatriz Lopes de Sousa Jabbour & Joseph Sarkis & Charbel Jose Chiappetta Jabbour & Murad Ali, 2024. "The Nexus of Supply Chain Performance and Blockchain Technology in the Digitalization Era: Insights from a Fast-Growing Economy," Post-Print hal-04432403, HAL.
    22. Bimpizas-Pinis, Meletios & Calzolari, Tommaso & Genovese, Andrea, 2022. "Exploring the transition towards circular supply chains through the arcs of integration," International Journal of Production Economics, Elsevier, vol. 250(C).
    23. Fuller, Christie M. & Simmering, Marcia J. & Atinc, Guclu & Atinc, Yasemin & Babin, Barry J., 2016. "Common methods variance detection in business research," Journal of Business Research, Elsevier, vol. 69(8), pages 3192-3198.
    24. Fosso Wamba, Samuel & Queiroz, Maciel M. & Chiappetta Jabbour, Charbel Jose & Shi, Chunming (Victor), 2023. "Are both generative AI and ChatGPT game changers for 21st-Century operations and supply chain excellence?," International Journal of Production Economics, Elsevier, vol. 265(C).
    25. Carla Coppola & Agostino Vollero & Alfonso Siano, 2023. "Developing dynamic capabilities for the circular economy in the textile and clothing industry in Italy: A natural‐resource‐based view," Business Strategy and the Environment, Wiley Blackwell, vol. 32(7), pages 4798-4820, November.
    26. Kumar, Mukesh & Raut, Rakesh D. & Mangla, Sachin Kumar & Chowdhury, Soumyadeb & Choubey, Vikas Kumar, 2024. "Moderating ESG compliance between industry 4.0 and green practices with green servitization: Examining its impact on green supply chain performance," Technovation, Elsevier, vol. 129(C).
    27. David J. Teece & Gary Pisano & Amy Shuen, 1997. "Dynamic capabilities and strategic management," Strategic Management Journal, Wiley Blackwell, vol. 18(7), pages 509-533, August.
    28. Wohlgemuth, Veit & Wenzel, Matthias, 2016. "Dynamic capabilities and routinization," Journal of Business Research, Elsevier, vol. 69(5), pages 1944-1948.
    29. Shmueli, Galit & Ray, Soumya & Velasquez Estrada, Juan Manuel & Chatla, Suneel Babu, 2016. "The elephant in the room: Predictive performance of PLS models," Journal of Business Research, Elsevier, vol. 69(10), pages 4552-4564.
    30. Julian Kirchherr & Andrea Urbinati & Kris Hartley, 2023. "Circular economy: A new research field?," Journal of Industrial Ecology, Yale University, vol. 27(5), pages 1239-1251, October.
    31. Latan, Hengky & Lopes de Sousa Jabbour, Ana Beatriz & Sarkis, Joseph & Chiappetta Jabbour, Charbel Jose & Ali, Murad, 2024. "The nexus of supply chain performance and blockchain technology in the digitalization era: Insights from a fast-growing economy," Journal of Business Research, Elsevier, vol. 172(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Peng, 2025. "Implementing circular supply chain in Chinese SMEs: The role of bricolage capability, frugal innovation, and entrepreneurial leadership," International Review of Economics & Finance, Elsevier, vol. 103(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Al-kahtib, Ayman & Alghababsheh, Mohammad & Khattab, Mais, 2025. "The role of organizational ambidexterity and frugal innovation in enhancing circular supply chains: The effect of artificial intelligence capabilities," Technological Forecasting and Social Change, Elsevier, vol. 210(C).
    2. Bag, Surajit & Gupta, Shivam & Chan, Hau-Ling & Kumar, Ajay, 2024. "Building smart product-service systems capabilities for circular supply chains in the Industry 4.0 era," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 188(C).
    3. Massari, Giovanni Francesco & Nacchiero, Raffaele & Giannoccaro, Ilaria, 2025. "Transformative supply chains: the enabling role of digital technologies," International Journal of Production Economics, Elsevier, vol. 283(C).
    4. Chowdhury, Soumyadeb & Ren, Shuang & Richey, Robert Glenn, 2025. "Leveraging artificial intelligence to facilitate green servitization: Resource orchestration and Re-institutionalization perspectives," International Journal of Production Economics, Elsevier, vol. 281(C).
    5. Shore, Adam & Tiwari, Manisha & Tandon, Priyanka & Foropon, Cyril, 2024. "Building entrepreneurial resilience during crisis using generative AI: An empirical study on SMEs," Technovation, Elsevier, vol. 135(C).
    6. Luca Marrucci & Tiberio Daddi & Fabio Iraldo, 2022. "Do dynamic capabilities matter? A study on environmental performance and the circular economy in European certified organisations," Business Strategy and the Environment, Wiley Blackwell, vol. 31(6), pages 2641-2657, September.
    7. Al-khatib, Ayman wael & AL-Shboul, Moh'd Anwer & Khattab, Mais, 2024. "How can generative artificial intelligence improve digital supply chain performance in manufacturing firms? Analyzing the mediating role of innovation ambidexterity using hybrid analysis through CB-SEM and PLS-SEM," Technology in Society, Elsevier, vol. 78(C).
    8. Abbas, Jawad, 2026. "Resource orchestration and firm competitive performance: The role of knowledge absorptive capacity in converting business analytics into strategic competitive advantage," Technological Forecasting and Social Change, Elsevier, vol. 222(C).
    9. Zhang, Peng, 2025. "Implementing circular supply chain in Chinese SMEs: The role of bricolage capability, frugal innovation, and entrepreneurial leadership," International Review of Economics & Finance, Elsevier, vol. 103(C).
    10. Wójcik, Piotr & Obłój, Krzysztof & Buono, Anthony F., 2022. "Addressing social concern through business-nonprofit collaboration: Microfoundations of a firm’s dynamic capability for social responsibility," Journal of Business Research, Elsevier, vol. 143(C), pages 119-139.
    11. Kristoffersen, Eivind & Mikalef, Patrick & Blomsma, Fenna & Li, Jingyue, 2021. "The effects of business analytics capability on circular economy implementation, resource orchestration capability, and firm performance," International Journal of Production Economics, Elsevier, vol. 239(C).
    12. Crumbly, Jack & Pal, Raktim & Altay, Nezih, 2025. "A classification framework for generative artificial intelligence for social good," Technovation, Elsevier, vol. 139(C).
    13. Zhao, Lang & Xu, Jiawei & Zhang, Baofeng & Lu, Jianjun, 2026. "Leveraging AI to enhance firms’ resource efficiency: ecological modernization theory and resource-based view perspectives," International Journal of Production Economics, Elsevier, vol. 291(C).
    14. Modgil, Sachin & Gupta, Shivam & Kar, Arpan Kumar & Tuunanen, Tuure, 2025. "How could Generative AI support and add value to non-technology companies – A qualitative study," Technovation, Elsevier, vol. 139(C).
    15. Sheng, Margaret L. & Hartmann, Nathaniel N., 2019. "Impact of subsidiaries' cross-border knowledge tacitness shared and social capital on MNCs' explorative and exploitative innovation capability," Journal of International Management, Elsevier, vol. 25(4).
    16. Li, Bailu & Teece, David J. & Baskaran, Angathevar & Chandran, VGR, 2025. "Dynamic Knowledge Management: A dynamic capabilities approach to knowledge management," Technovation, Elsevier, vol. 147(C).
    17. Wohlgemuth, Veit & Wenzel, Matthias & Berger, Elisabeth S.C. & Eisend, Martin, 2019. "Dynamic capabilities and employee participation: The role of trust and informal control," European Management Journal, Elsevier, vol. 37(6), pages 760-771.
    18. Zhao, Xiongfei & Li, Shuangjie, 2025. "Artificial intelligence and public environmental concern: Impacts on green innovation transformation in energy-intensive enterprises," Energy Policy, Elsevier, vol. 198(C).
    19. Swen Nadkarni & Reinhard Prügl, 2021. "Digital transformation: a review, synthesis and opportunities for future research," Management Review Quarterly, Springer, vol. 71(2), pages 233-341, April.
    20. Dominik M. Wielgos & Christian Homburg & Christina Kuehnl, 2021. "Digital business capability: its impact on firm and customer performance," Journal of the Academy of Marketing Science, Springer, vol. 49(4), pages 762-789, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:bstrat:v:34:y:2025:i:1:p:830-848. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-0836 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.