Aligning Digital-Circular Capabilities and Institutional Pressure in Construction: A Strategic Framework for Circular Economy Transformation

Digital circular transformation depends not only on organizational capabilities but on the institutional conditions that enable their deployment. While prior research has examined these dimensions separately, limited attention has been given to their alignment.

This study introduces the Digital Circular Alignment Model Strategic Positioning Matrix (DCAM SPM), integrating the Resource-Based View and institutional theory to explain how internal capabilities and external pressures jointly shape circular outcomes. Using survey data from 223 Nordic wood construction firms, we map organizations across capability–pressure configurations and examine their relationship with circular performance.

The results reveal a highly asymmetric pattern: most firms exhibit high digital-circular capabilities, while institutional pressure varies substantially. Consequently, capabilities function as a baseline condition rather than a source of differentiation, and variation in outcomes is primarily driven by institutional pressure. Contrary to conventional strategic fit assumptions, we find no significant interaction effect, suggesting that capabilities and pressure operate through parallel rather than synergistic mechanisms.

These findings contribute to strategy research by identifying a boundary condition for capability-based theory under conditions of capability saturation and by reframing alignment as configurational positioning rather than multiplicative fit. The study further provides a diagnostic framework for assessing strategic positioning in circular economy transitions.