Linking the adoption of service-based business models to circular economy performance: the moderating role of supply chain practices

Service-based business models (either product-, use-, or result-oriented) have gained attention as a way for manufacturing firms to transition toward a circular economy and foster the implementation of closing-the-loop strategies such as reuse, remanufacturing, and recycling. However, the relationship between the adoption of service-based business models and the achievement of greater circular economy performance remains complex and not fully understood. Adopting the Supply Chain Practice View and paradox theory as theoretical lenses, this paper addresses a literature gap by examining how supply chain practices shape the effectiveness of service-based business models in enhancing circular economy performance. Drawing on survey data from 380 Indian manufacturing firms and employing covariance-based Structural Equation Modeling, the study finds a direct effect of both the adoption of service-based business models and the implementation of supply chain practices on circular economy performance. It further shows that supply chain practices positively moderate the relationship between service-based business models and circular economy performance, strengthening their effectiveness in generating positive circularity outcomes. The study extends the Supply Chain Practice View by clarifying how transferable and imitable supply chain practices such as supply chain tracking, green partner selection, and co-design enable an effective implementation of service-based business models for circularity. Drawing on paradox theory, it also suggests that such practices help firms manage tensions triggered by service-based business models, sustaining a dynamic equilibrium that reinforces circularity performance. From a managerial and policy perspective, these results highlight a valuable opportunity for firms in developing economies to simultaneously support business growth and reduce environmental burdens through the joint implementation of service-based business models and supply chain practices.