Implementing circular business models in linear economic systems: The case of a new venture addressing the embeddedness paradox

Abstract

Circular business models (CBMs) operate within predominantly linear economic systems which creates a ‘paradox of embeddedness’. That is, paradoxically the processes and ties that create a fit with the linear environment – necessary to implement a CBM and shift the system towards circularity – can reduce the organization’s ability to innovate to achieve circularity. Based on a three-year longitudinal case study of a new venture implementing a circular product-as-a-service (PaaS) model, this paper examines how such businesses navigate this paradox. Our findings reveal their simultaneous use of embedding (partnering with producers to secure resources and promote circularity) and dis-embedding (developing a circular product independently to reduce dependence and inertial forces and avoid mission drift). We show that ventures harness the benefits of embedding and dis-embedding to address the financial and inertial barriers to implementing CBMs. Our findings contribute to the literature by (1) showing how the strategy of combining embedding and dis-embedding enables navigation of the embeddedness paradox, (2) providing a more dynamic account of ways to tackle the barriers to implement CBMs, and (3) enhancing our understanding of the part played by CBMs in new ventures in driving the circular transition.