Digital Absorptive Capacity and Barriers to Circular Transformation Among Small and Medium-Sized Enterprises: A Theoretical Review and Policy Implications for Vietnam

In the context where small and medium-sized enterprises (SMEs) account for as much as 95 percent of all enterprises in Vietnam, yet many firms that have gained access to digital technology through the Enterprise Digital Transformation Support Program have not translated that access into circular business practice as envisioned by the Scheme for Circular Economy Development in Vietnam, this study aims to systematize the mechanism through which digital absorptive capacity is converted into SMEs’ circular transformation capacity, to construct a barrier-classification framework corresponding to each absorptive-capacity stage, and on this basis to propose policy implications suited to Vietnam’s practical conditions. Using a desk-research method that synthesizes, analyzes, evaluates, and compares secondary literature grounded in three theories - absorptive capacity theory, circular economy theory, and innovation-barrier theory for SMEs - the study constructs a barrier-classification framework organized as a four-stage absorptive-capacity matrix, comprising acquisition, assimilation, transformation, and exploitation, cross-referenced with the internal or external origin of each barrier, and shows that the transformation and exploitation stages are the two policy bottlenecks left unaddressed in Vietnam, while existing support programs concentrate mainly on the acquisition stage. On this basis, the study proposes a set of policy implications tied to each stage and implementing actor, contributing a more structured analytical framework in place of the topic-based barrier listings common in the existing literature.