Making sense of circularity. An institutional logic perspective on circular business model transitions in incumbent firms

Circular business models (CBMs) promise improved resource efficiency, value creation and retention. Still, CBM operationalization among large incumbents remains slow in practice. Yet, this plays a critical role in driving industry transformations towards sustainability. Prior research outlines challenges that incumbents encounter when operationalizing CBMs - yet remains fragmented and unable to explain where these tensions come from and how to effectively address them. This paper draws on institutional logics and paradox theory to explore underlying logic tensions as a potential explanatory factor and conceptualizes incumbents’ transition to CBMs from an institutional logics perspective. It thereby aims to strengthen CBM research’s theoretical grounding and provide a more systematic, actionable understanding of challenges faced by established firms. The findings delineate the competing institutional logics that incumbents need to accommodate when transitioning to circularity (established ‘business logic’ and emerging ‘circular logic’). Relating this to the business model, the paper structures and explains CBM challenges as logic tensions with incumbents’ established business model, structures and routines. Subsequently, organizational responses based on logic hybridization are derived and exemplified through illustrative cases. This paper suggests that considering the multiple logics that incumbents in transition to circularity face as a missing link between idea and action helps (A) rationalize incumbents’ challenges with (and hesitation towards) CBM operationalization and (B) develop organizational responses for more effective CBM uptake. Further research is needed to empirically validate the conceptualized logics and test how the theorized relations to CBM challenges and corresponding management strategies hold true in practice.