What digital‐enabled dynamic capabilities support the circular economy? A multiple case study approach

Abstract

Circular economy and digital technologies are crucial topics in the current academic and managerial debates. It is largely recognised that—although related to different paradigms—digital technologies could support the industrial circular transition, fostering the adoption of circular economy practices. So far, the relationship has been studied by directly linking the adoption of digital technologies to the implementation of circular economy practices; however, indications for practitioners are unclear. There is thus the need to investigate the relationship at a deeper level. This paper aims at contributing to the debate by adopting a dynamic capabilities theory perspective. By employing an explorative multiple case study methodology and based on an abductive logic, this study investigates 11 Northern‐Italy industrial firms in order to understand the transformations that occurred following the adoption of digital technologies and how these transformations supported the adoption of circular economy practices. The results shed preliminary light on which dynamic capabilities—sensing, seizing and transforming, and their related microfoundations—can be enabled by the different digital technologies and how these capabilities and microfoundations support the circular transition. The study thus provides a first‐of‐a‐kind investigation and suggests propositions for further research to better deepen the knowledge of digital‐enabled dynamic capabilities supporting industrial circular economy.

Carbon emission reduction: Understanding the micro‐foundations of dynamic capabilities in companies with a strategic orientation for sustainability performance

“…The traditional perspective of DCs, which focuses primarily on firm performance and how to increase competitive advantage for financial gain, has evolved to incorporate Environmental Social and Governance (ESG) performance criteria (Laaksonen & Peltoniemi, 2018). A body of knowledge has emerged focusing on the relation between sustainability performance (including environmental performance criteria) and the micro‐foundations of DCs (Bocken & Geradts, 2020; Borland et al, 2016; Buzzao & Rizzi, 2021; Coppola et al, 2023; Chevrollier & Kuijf, 2021; Kabongo & Boiral, 2017; Khan et al, 2020; Knoppen & Knight, 2022; Neri et al, 2023; Van Lieshout et al, 2021; Santa‐Maria et al, 2022; Strauss et al, 2017; Vallaster et al, 2021; Wade et al, 2022). For instance, employee behavior has been identified as a key component of micro‐foundations, considering employees to be capable of changing, growing, and adapting (Chevrollier & Kuijf, 2021; Vallaster et al, 2021).…”

“…Raising awareness of sustainability issues and developing closed‐loop supply chains are other vital micro‐foundations of a more circular economy (Coppola et al, 2023; Khan et al, 2020). Furthermore, the capacity to liaise and cooperate with non‐traditional partners such as NGOs is seen as essential when addressing sustainability issues (Bocken & Geradts, 2020; Knoppen & Knight, 2022; Neri et al, 2023; Santa‐Maria et al, 2022; Vallaster et al, 2021) and the creation of support is accelerated if one follows open innovation principles (Van Lieshout et al, 2021). The link between organizational ambidexterity and dynamic capabilities has also been investigated when aiming to create a sustainability‐based competitive advantage (Kabongo & Boiral, 2017; Van Lieshout et al, 2021).…”

“…SDCs are defined by Strauss et al (2017) as “those capabilities that enable an organization to reconfigure its resource base, [in order] to deal with the dynamism resulting from such ‘proactive environmental’ or sustainability strategies” (p. 1340). The literature on SDCs is clearly growing (Bocken & Geradts, 2020; Borland et al, 2016; Buzzao & Rizzi, 2021; Chevrollier & Kuijf, 2021; Coppola et al, 2023; D'Amato & Korhonen, 2021; Dangelico et al, 2017; Knoppen & Knight, 2022; Neri et al, 2023; Strauss et al, 2017; Vallaster et al, 2021; Wade et al, 2022) and expanding on the earlier research efforts on DCs (Eisenhardt & Martin, 2000; Teece, 2007).…”

“…These orientations are linked to different micro‐foundations of DCs (Chevrollier & Kuijf, 2021; Knoppen & Knight, 2022; Van Lieshout et al, 2021). However, most of the literature (Bocken & Geradts, 2020; Borland et al, 2016; Coppola et al, 2023; D'Amato & Korhonen, 2021; Neri et al, 2023; Strauss et al, 2017; Vallaster et al, 2021; Wade et al, 2022) concerning the micro‐foundations of SDCs (specific skills, processes, routines, and actions of organizations) fails to take the examined companies' strategic orientation for sustainability performance into consideration (Cavalcanti Barros Rodrigues & Gohr, 2022; Oliveira‐Dias et al, 2022). This is despite the fact that the chosen strategic orientation will affect a company's performance (Fainshmidt et al, 2019; Wilden et al, 2016) and especially its sustainability performance (Brower & Rowe, 2017; Chevrollier et al, 2020).…”

“…This seems to presuppose that the nature of the sustainability issue addressed does not affect the capabilities that need to be developed. However, more recent attempts that have looked at the micro‐foundations of SDCs in the transition to a circular economy (Chari et al, 2022; Coppola et al, 2023; Khan et al, 2020; Knoppen & Knight, 2022; Neri et al, 2023) or in waste management (Wade et al, 2022) show the interdependence of the sustainability issue under consideration and the consequent micro‐foundations. As such, there is a need for further research on SDCs for sustainability performance that considers specific sustainability issues and explores the development of long‐term sustainability performance.…”