Reframing innovation adoption in high compliance sectors: a multi-level perspective on digital twins for circular economy in pharmaceuticals

Abstract

Purpose This paper aims to assess how the pharmaceutical sector’s stringent quality, safety and efficacy (QSE) standards resist circular economy (CE) adoption. Digital twins (DTWs) are acknowledged for operational efficiency, but their role for enabling CE transition remains under-theorised within rigid, high-compliance regime. This study challenges the conventional multi-level perspective (MLP) and its framing of digital technologies as disruptive niche innovations. We argue that, in hyper-stabilised regimes, DTWs must be reconceptualised as active transition intermediaries. Their primary function is to build digital-circular legitimacy, a novel construct that integrates MLP with Institutional Legitimacy Theory. Design/methodology/approach A systematic literature review following Preferred Reporting Items for Systematic Reviews and Meta-Analyses guidelines, augmented by bibliometric analysis, identified prevalent DTW functions and CE intersections. We synthesised this analysis with an adapted MLP framework, enriched by Institutional Legitimacy Theory, to develop a conceptual framework. This framework explains how DTWs can enable sustainability transitions within inflexible socio-technical regimes. The review addressed three core questions: current research trends at the DTW–CE intersection; the adaptation of MLP to theorise DTWs as transitional intermediaries; and the key drivers and obstacles influencing DTW adoption for CE in regulated sectors. Findings The analysis reconceptualised DTW as a cross-level transition intermediary rather than a niche technology. The paper introduces the construct of digital-circular legitimacy, elucidating how DTWs generate auditable, real-time evidence to demonstrate that circular practices comply with core institutional (QSE) rules. Three interconnected mechanisms are articulated across MLP levels: (1) operational legitimisation; (2) systemic destabilisation; and (3) strategic alignment. These mechanisms clarify how DTWs can reduce regime rigidity and orchestrate CE transitions in pharmaceutical manufacturing. Originality/value This research contributes to transition theory. First, it introduces the novel concept of digital-circular legitimacy, explaining how DTWs produce trusted, compliance-ready evidence to make circular practices acceptable in rigid regulatory environments. Second, it theoretically repositions the DTW as an active transition intermediary that operates across niche, regime and landscape levels, moving beyond its typical characterisation as a standalone digital tool. Third, it delineates specific mechanisms through which digitalisation systematically reduces institutional rigidity and supports CE transitions in high-compliance sectors. Together, these contributions provide a new theoretical lens for understanding how digital technologies can enable circular transformation in pharmaceuticals and other highly regulated industries.