The Effect of a Human-Centric Approach on Sustainable Business Performance: The Mediating Roles of Dynamic Capabilities, Digital Transformation, and the Circular Economy in Large and Medium-Sized Manufacturing Enterprises in Banyuwangi and Jember Regencie

Farid Yusril Firdaus; Sri Setyo  Iriani; Sanaji Sanaji

doi:10.63922/ijebir.v5i06.6998

Farid Yusril Firdaus Program Pasca Sarjana Manajemen, Fakultas Ekonomi dan Bisnis, Universitas Negeri Surabaya, Indonesia
Sri Setyo Iriani Program Pasca Sarjana Manajemen, Fakultas Ekonomi dan Bisnis, Universitas Negeri Surabaya, Indonesia https://orcid.org/0009-0009-5651-8056
Sanaji Sanaji Program Pasca Sarjana Manajemen, Fakultas Ekonomi dan Bisnis, Universitas Negeri Surabaya, Indonesia

DOI: https://doi.org/10.63922/ijebir.v5i06.6998

Keywords: human-centric approach, dynamic capabilities, digital transformation, circular economy, sustainable business performance

Abstract

Achieving sustainable business performance requires manufacturing firms to integrate human development, organizational adaptability, digital innovation, and resource efficiency into their business operations. However, the mechanisms through which a human-centric approach contributes to sustainable business performance through dynamic capabilities, digital transformation, and circular economy require further empirical investigation. This study examines the influence of a human-centric approach on sustainable business performance and investigates the mediating roles of dynamic capabilities, digital transformation, and circular economy. A quantitative research design was employed using purposive sampling, with data collected through questionnaires from 40 medium- and large-scale manufacturing companies in Banyuwangi and Jember Regencies, Indonesia. The data were analyzed using partial least squares structural equation modeling (PLS-SEM) with SmartPLS 4. The findings indicate that the human-centric approach has a positive and significant effect on digital transformation but does not have a significant direct effect on circular economy. Dynamic capabilities positively and significantly influence digital transformation, circular economy, and sustainable business performance. Digital transformation also has a positive and significant effect on sustainable business performance, whereas the direct effect of circular economy on sustainable business performance is not statistically significant. Furthermore, dynamic capabilities mediate the relationships between the human-centric approach and both digital transformation and circular economy. Digital transformation also mediates the relationship between dynamic capabilities and sustainable business performance, whereas circular economy does not significantly mediate this relationship. These findings highlight the importance of dynamic capabilities and digital transformation as organizational mechanisms linking a human-centric approach to sustainable business performance. Practically, manufacturing managers should strengthen employee development and participation, enhance organizational adaptability, and integrate digital technologies into business processes. Circular economy initiatives should also be supported by appropriate implementation strategies and performance indicators to evaluate their contributions to economic, social, and environmental outcomes.

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