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Circling the Squares: Radical Innovation and Management Control Systems in the Circular Economy
KTH, School of Industrial Engineering and Management (ITM), Engineering Design. (Integrated Product Development and Design, IPDD)ORCID iD: 0000-0001-6697-9811
2023 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

An economic system built upon the sale of tangible goods produced using finite resources is inherently unsustainable. The idea of a Circular Economy (CE) as a viable pathway to sustainability has gained considerable attention from academia, policymakers, and the business community. The CE builds on a new logic in the business environment in which industrial firms operate that requires substantial changes. We face a significant knowledge gap concerning how firms internally manage the implementation and adoption of CE. Filling in this knowledge gap is critical to understanding how to implement CE at large and established firms with a considerable history of a linear logic, which are known to favor incremental improvements to existing business opportunities over radical innovation.

This thesis aims to delve into the managerial challenges that large, established industrial firms encounter when implementing CE principles, and how they address these challenges, particularly through managerial controls. Additionally, it aims to provide insights into how management can facilitate radical circular innovation and support the circular transformation of incumbent firms. To accomplish this aim, existing knowledge on barriers to CE has been synthesized through a systematic literature mapping and a systematic literature review. Next, interviews (n=68) at five large and established industrial firms provide empirical insights concerning the implementation and adoption of CE principles. In addition to the four appended papers, this comprehensive summary theorizes about the empirical findings using literature on radical innovation, sensemaking, and managerial controls. 

Building on the empirical papers, this analysis sheds light on two distinct patterns in how managers frame CE: incremental framing versus radical framing. It is argued that this has considerable consequences concerning with respect to ambitions, operationalization, and the means used to achieve a CE. In addition, the thesis theorizes about the relationship between the management control systems and the prevailing framings of CE. Based on an understanding of this relationship and the tensions and conflicts associated with the different framings, it is argued that managerial controls can act both as barriers to and enablers of CE adoption at incumbent firms. In addition to the practical and theoretical implications of this finding, the thesis pinpoints limitations and assumptions concerning managerial control systems in relation to CE and propose new avenues in light of this. 

Finally, the analysis is synthesized into an integrative framework that differentiates three different modes of organizational behaviors within the context of CE transitions: optimizing, transforming, and systems building. This framework integrates the theoretical foundations of the thesis, acknowledges the identified issues, and offers actionable implications for researchers and practitioners.

Abstract [sv]

Ett ekonomiskt system byggt på försäljning av varor tillverkade av ändliga resurser är i grunden ohållbart. Idén om en Cirkulär Ekonomi (CE) har vuxit fram som en möjlig väg framåt och har fått betydande uppmärksamhet från akademin, beslutsfattare och näringslivet. CE bygger på en ny logik i affärsmiljön där industriella företag verkar och kräver betydande förändringar. Det finns dock en betydande kunskapslucka om hur företag hanterar implementering och antagande av CE internt. Denna kunskapslucka är särskilt avgörande att förstå i stora och etablerade företag med en lång historik av en linjär logik, och som är kända för att gynna inkrementella förbättringar av befintliga affärsmöjligheter framför radikalt nya.

Denna avhandling syftar till att fördjupa sig i de ledningsmässiga utmaningarna som stora och etablerade industriföretag står inför när de implementerar CE-principer och hur de hanterar dem, särskilt genom kontrollmekanismer. Dessutom syftar den till att ge insikter om hur ledningen kan underlätta radikal cirkulär innovation och stödja en cirkulär omvandling av befintliga företag. För att uppnå detta mål har befintlig kunskap om hinder för CE syntetiserats genom en systematisk litteraturkartläggning och en systematisk litteraturstudie. Därefter ger intervjuer (n=68) i fem stora och etablerade industriella företag empiriska insikter om implementering och antagande av CE-principer. Förutom de fyra bifogade artiklarna teoretiserar denna kappa kring de empiriska resultaten med hjälp av litteratur om radikal innovation, meningsskapande och kontrollmekanismer.

Med utgångspunkt i de empiriska artiklarna så visar analysen två olika tolkningar eller ”inramningar” av CE inom företagen: en inkrementell inramning och en radikal inramning. Det argumenteras för att inramningen har betydande konsekvenser när det gäller ambitioner, operationalisering och tillvägagångssätt för att nå CE inom företaget. Dessutom teoretiserar avhandlingen om förhållandet mellan kontrollmekanismer och vilken inramning av CE som blir dominerande inom företaget. Genom att förstå detta förhållande och de spänningar och konflikter som följer olika ramverk, hävdas det att ledningskontroller kan fungera både som hinder och effektiva mekanismer för CE-antagande i befintliga företag. Förutom de praktiska och teoretiska innebörderna pekar avhandlingen på begränsningar och antaganden kring kontrollmekanismer i relation till en cirkulär logik, och föreslår nya forskningsspår i ljuset av detta.

Slutligen syntetiseras analysen till ett integrerat ramverk med tre olika mönster av organisatoriskt beteende i en övergång till CE: Optimering, Transformation och Systembyggande. Detta ramverk integrerar de teoretiska grunderna för avhandlingen, pekar på de identifierade problemen, och beskriver innebörden för forskning och näringsliv.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2023. , p. 60
Series
TRITA-ITM-AVL ; 2023:36
Keywords [en]
circular economy, innovation, innovation management, sustainability, management control systems
Keywords [sv]
cirkulär ekonomi, innovation, innovationsledning, hållbarhet, kontrollmekanismer
National Category
Other Mechanical Engineering Other Social Sciences not elsewhere specified
Research subject
Machine Design
Identifiers
URN: urn:nbn:se:kth:diva-339792ISBN: 978-91-8040-787-8 (print)OAI: oai:DiVA.org:kth-339792DiVA, id: diva2:1813482
Public defence
2023-12-15, Kollegiesalen / https://kth-se.zoom.us/j/66315078105, Brinellvägen 8, Stockholm, 13:00 (English)
Opponent
Supervisors
Available from: 2023-11-21 Created: 2023-11-21 Last updated: 2025-05-05Bibliographically approved
List of papers
1. Unlocking the Linear Lock-In: Mapping Research on Barriers to Transition
Open this publication in new window or tab >>Unlocking the Linear Lock-In: Mapping Research on Barriers to Transition
2020 (English)In: Sustainability, E-ISSN 2071-1050, Vol. 12, no 3, article id 1034Article in journal (Refereed) Published
Abstract [en]

The linear paradigm of take-make-dispose in production and consumption patterns impedes the achievement of global sustainability goals. Strategies for maintaining the added value of resources and circulating them have been discussed as promising for the future. There are, however, many barriers to be addressed to overcome the linear lock-in. The large body of literature on these barriers is notably diverse in terms of theory, methods, sectors, products, and settings. This demonstrates the complexity of delineating implications to the practice and research needs. Without a common framework to analyse barriers, knowledge does not accumulate, hindering the development and implementation of solutions and policies that could effectively address the barriers. In this article, we developed a systematic map of studies on barriers related to the circular transition. The purpose was twofold: (1) to classify published research on barriers; (2) to provide a searchable database for future more rigorous systematic literature reviews. We reviewed the abstract of 527 publications and classified the study according to a developed scheme. This classification scheme includes the research paradigms (circular economy, sharing economy, collaborative consumption and product-service systems), circular strategy (recycling, remanufacturing, component/product reuse, and access-based consumption), country, sector/industry/product, and research approach and method. The resulting research map is open source, serving also as an adaptive digital database for researchers alike to perform systematic reviews and contribute further to its collaborative development

Place, publisher, year, edition, pages
MDPI, 2020
Keywords
circular economy; sharing economy; collaborative consumption; product-service systems; barriers; systematic map
National Category
Economics and Business
Research subject
Planning and Decision Analysis, Strategies for sustainable development
Identifiers
urn:nbn:se:kth:diva-268750 (URN)10.3390/su12031034 (DOI)000524899600018 ()2-s2.0-85081235769 (Scopus ID)
Projects
ABC Mechanisms: From Ownership to Access-Based Circularity in Sweden
Funder
Vinnova, 2018-04691
Note

QC 20200221

Available from: 2020-02-20 Created: 2020-02-20 Last updated: 2023-11-21Bibliographically approved
2. Barriers to access-based consumption in the circular transition: A systematic review
Open this publication in new window or tab >>Barriers to access-based consumption in the circular transition: A systematic review
2022 (English)In: Resources, Conservation and Recycling, ISSN 0921-3449, E-ISSN 1879-0658, Vol. 184, article id 106364Article in journal (Refereed) Published
Abstract [en]

Barriers to access-based consumption (ABC) have been extensively studied in different strands of literature. However, cumulative knowledge is not organized to date, and a comprehensive overview of barriers identified by empirical studies in diverse strands is lacking. Such a picture is essential for laying the ground for further change-oriented research and actual changes in practice. This article reports on the results of a systematic review on barriers to transitioning from ownership- to access-based consumption. The review focuses on the literature strands product-service systems, circular economy, sharing economy, and collaborative consumption. Through open and axial coding of 289 barriers reported in 45 empirical studies, we found 17 themes of barriers concerning consumers, business, and society. The analysis of the barriers reveals four significant insights important for the research and practitioner community:

  1. the overall experience of ABC and trust mechanisms need to be better understood;
  2. organizational aspects in traditional business need a system change;
  3. regulation plays a fundamental role in making ABC work for business, society, and sustainability; and
  4. sharing risks and experimentation for new learnings are necessary.

These four major insights suggest that consumers need business and government to offer enabling conditions for ABC – spanning from raising awareness and understanding to improving user experience. Furthermore, businesses need governments to create the necessary structures to support ABC offerings – from decreasing risks to increasing incentives. How and which mechanisms can further facilitate circular behaviors is a salient topic for future investigations.

Place, publisher, year, edition, pages
Elsevier BV, 2022
Keywords
acces-based consumption, barriers, systematic review, sharing economy, collaborative consumption, circular economy, product-service systems, delningsekonomi, barriärer, systematisk litteraturstudie, cirkulär ekonomi
National Category
Other Social Sciences not elsewhere specified
Research subject
Industrial Engineering and Management; Industrial Ecology
Identifiers
urn:nbn:se:kth:diva-312108 (URN)10.1016/j.resconrec.2022.106364 (DOI)000805668900001 ()2-s2.0-85129700514 (Scopus ID)
Projects
ABC Mechanisms: From Ownership to Access-Based Circularity in Sweden
Funder
Vinnova, 2018–04691EU, Horizon 2020, 776577
Note

QC 20220627

Available from: 2022-05-18 Created: 2022-05-18 Last updated: 2025-05-05Bibliographically approved
3. The role of radical innovation in circular strategy deployment
Open this publication in new window or tab >>The role of radical innovation in circular strategy deployment
2023 (English)In: Business Strategy and the Environment, ISSN 0964-4733, E-ISSN 1099-0836, Vol. 32, no 3, p. 1085-1105Article in journal (Refereed) Published
Abstract [en]

Circular economy (CE) is gaining interest among industrial firms in light of sustainability concerns, and several incumbent firms are integrating it into their strategy. In this study, we scrutinize learnings from three large established industrial firms with a clear CE agenda and that are front‐runners in CE strategy deployment. We analyze exploitation and exploration approaches to CE and problematize how these approaches relate to radical innovation, which we argue is critical for achieving CE. Semi‐structured interviews ( n  = 30) were used to collect data. We found several issues referring to (1) challenges and approaches to normative management, (2) how the innovation ecosystem is engaged, (3) how goals and metrics relate to CE, and (4) resources and coordination regarding the CE initiative. Overall, current exploitative approaches are favored over explorative, mirroring an undesired imbalance between the two. We suggest several ways to counteract this. For example, (1) addressing existing norms so that they align with the ambitions in CE, (2) actively managing collaboration in the innovation ecosystem, including radically new setups of different actors, and (3) that managers need to carefully consider when and how to use goals and measurements in a circular strategy deployment, to foster both radical and incremental innovation.

Place, publisher, year, edition, pages
Wiley, 2023
Keywords
Circular economy, management, innovation, radical, strategy
National Category
Business Administration
Research subject
Business Studies
Identifiers
urn:nbn:se:kth:diva-312427 (URN)10.1002/bse.3108 (DOI)000790746300001 ()2-s2.0-85129343807 (Scopus ID)
Projects
CET: Circular Economy Transitions
Funder
EU, Horizon 2020, 776577-2Vinnova, 2020-00713
Note

QC 20250513

Available from: 2022-05-18 Created: 2022-05-18 Last updated: 2025-05-13Bibliographically approved
4. Tensions in management controls: Enabling radical innovation for a Circular Economy
Open this publication in new window or tab >>Tensions in management controls: Enabling radical innovation for a Circular Economy
(English)Manuscript (preprint) (Other academic)
Abstract [en]

While several existing firms have begun making changes to meet a circular economy transition, it is clear that they meet with several managerial challenges. Management control systems can help managers make the radical changes and facilitate the innovation processes that is required to meet circular economy. However, little is known about how management controls are applied in the context of a circular economy transformation, and whether traditional management controls are compatible with a circular logic. This paper aims to provide detailed and empirically based insight on these issues.

This study examined three large industrial incumbent firms to see how they utilize action-, result-, and cultural controls to implement circular economy principles, and what tensions they have experienced. We used semi-structured interviews (n=38) to collect data, and thematic analysis for the analysis.

The analysis suggests that while circular economy principles are not integrated in all parts of the management control system, there are still several factors that can both enable and impede a circular transformation. Furthermore, imbalances and inconsistencies were found concerning different types of managerial controls used. Alarmingly, circular economy initiatives are at risk of being reduced to minor incremental improvements if the radical changes needed are not better understood, and changes made to the management control system to facilitate these.

This research provides rich qualitative insights bridging the new phenomenon of circular economy adoption in incumbent firms with research on innovation management and management controls.  

Keywords
Innovation, circular economy, management controls
National Category
Business Administration Social Sciences Economics and Business Mechanical Engineering
Research subject
Business Studies; Industrial Engineering and Management
Identifiers
urn:nbn:se:kth:diva-339745 (URN)
Projects
Rethinking Innovation for the Circular Economy Transition (RICET)
Funder
Vinnova, 2021-03230
Note

QC 20231121

Available from: 2023-11-17 Created: 2023-11-17 Last updated: 2023-11-21Bibliographically approved

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