Microfoundations of dynamic capabilities: Insights from circular economy business cases

Abstract

Circular economy is a key strategy to achieve corporate sustainability. However, so far, most firms are unable to translate the concept of circular economy into their corporate strategies, business models, and operations. Some scholars have argued that firms need to develop new (and dynamic) capabilities for circular economy implementation. Yet there is a little discussion on how firms can develop such capabilities. Notably, there is a paucity of research on specific skills, processes, and organizational activities (microfoundations of dynamic capabilities) that may facilitate circular economy implementation. To address this knowledge gap, using a multiple‐case studies approach, we explore microfoundations of dynamic capabilities in successful circular economy business cases. Our findings indicate that dynamic capabilities positively contribute to circular economy implementation. Our case studies show that case firms identified circular economy opportunities by using four microfoundations of sensing capability. Further, case firms acted on the identified opportunities by using simultaneously three microfoundations of seizing capability and four microfoundations of reconfiguring capability. This paper contributes to the literature on the relations between dynamic capabilities and corporate sustainability by providing insights on how sensing, seizing, and reconfiguring dynamic capabilities act in successful operationalization of circular economy strategies.

The role of dynamic capabilities in circular economy implementation and performance of companies

“…Wu et al (2013) pointed out that "whether firms can overcome sustainability challenges lies in the development and application of their dynamic capabilities" (p. 257). Few scholars have recently substantiated the above statement (Kabongo & Boiral, 2017;Khan et al, 2020;Mousavi & Bossink, 2017). Khan et al (2020) pointed out that "sensing", "seizing", and "reconfiguring" can be referred to as a sequential process through which companies identify and pursue CE opportunities.…”

“…Few scholars have recently substantiated the above statement (Kabongo & Boiral, 2017;Khan et al, 2020;Mousavi & Bossink, 2017). Khan et al (2020) pointed out that "sensing", "seizing", and "reconfiguring" can be referred to as a sequential process through which companies identify and pursue CE opportunities. They explicated that sensing is a set of activities that aim to identify new opportunities by scanning, learning, and interpretation.…”

“…implement an organizational change are dependent on its DCs. Hence, DCs are crucial for achieving CE (Khan et al, 2020).…”

Organizational transition management of circular business model innovations

“…Hofmann, 2019;Lewandowski, 2016;Lüdeke-Freund et al, 2018;Rosa et al, 2019). However, with a few exceptions (Bocken et al, 2018;Chen et al, 2020;Heyes et al, 2018;Khan et al, 2020), there is a lack of investigations of how firm management can initiate and navigate CBM innovation while taking organizational dynamics and restructuring processes into account. As such, the organizational dimension of CBM innovation remains uncharted territory.…”

Customer value creation in a natural resource-scarce environment: the role of market knowledge in adaptation and sustainability

“…Given that quality of life extends beyond economic performance, the adaptation capabilities may also have a direct effect, due to their environmental and social impact. The adaptation capabilities affect the living environment by reducing the over-exploitation of natural resources (García-Sánchez, Gallego-Álvarez, & Zafra-Gómez, 2019; Khan, Daddi, & Iraldo, 2020). We therefore hypothesize:…”