A Deep Dive into Managing Paradoxical Tensions in Circular Business Model Innovation

A significant new study has been published in the Journal of Knowledge Management (ABS2), co-authored by MMTC member Lucia Pizzichini, together with Federica Pascucci, Andrea Sabatini, Valerio Temperini, and Jens Mueller.

"Managing Paradoxical Tensions in Circular Business Model Innovation: A Dynamic Capabilities Approach"

This paper tackles a critical and underexplored issue in today’s business environment—the paradoxical tensions that arise during circular business model innovation (CBMI), a key process for firms striving towards sustainability through the adoption of circular economy (CE) principles.

The study aims to bridge a knowledge gap in the emerging field of CBMI by developing a theoretical framework based on two key theoretical perspectives:

1. Paradox Theory – to highlight the often invisible but impactful contradictions that arise when organizations integrate CE principles into their business models.
2. Dynamic Capability Theory – to explore how firms can manage and mitigate these tensions, enabling them to successfully transition to a circular business model.

The authors conducted a longitudinal case study of an incumbent firm transforming to a circular business model. By applying qualitative research methods, they gained an in-depth understanding of the challenges and tensions that emerge during this process. The focus of the study was on paradoxical tensions that arise from the need to:

• Implement organizational changes
• Balance conflicting goals and competing priorities
• Navigate uncertainty in transforming traditional business practices to align with CE principles

Key Findings:

The paper identifies several paradoxical tensions that firms commonly face when undertaking CBMI:

• The process of circular transformation often results in organisational contradictions, where firms struggle to balance old and new priorities.
• Conflicting goals emerge between achieving sustainability objectives and maintaining operational efficiency.
• The pace of transformation is affected by how firms manage these tensions—firms that fail to handle early-stage contradictions may slow down the transition or hesitate to engage more fully with external partners.

A major contribution of the study is the identification of dynamic capabilities—the ability of a firm to sense, seize, and transform opportunities—as a critical factor in managing these tensions. Firms with well-developed dynamic capabilities are better able to navigate paradoxes and accelerate their shift towards a circular economy.

As businesses increasingly face pressure to adopt more sustainable practices, understanding the challenges of circular business model innovation is critical. This paper provides invaluable insights for both scholars and practitioners, offering a clear framework for addressing the tensions that arise when integrating circular economy principles into existing business models.

For those interested in sustainable business models, circular economy practices, and organizational change, this paper offers rich insights into the complex challenges and opportunities involved in CBMI.