An Innovation Strategy Towards Circularity in MNCs : The Application of Dynamic Capabilities

Abstract: The business environment is constantly being challenged with growing complexity and rapid changes, usually unforeseeable, as it could be observed during the last decades. One topic growing intensively in importance is environmentally sustainable business practices, which are often driven by societal expectations and new regulations; and which, under the enormous pressure of external stakeholders, cannot be avoided by companies anymore. Circular Economy, a relatively new concept, is becoming more popular, offering businesses not only a competitive advantage, but also the possibility to operate profitably, while still contributing to a sustainable development. This thesis provides insights on how MNCs with linear business models can take advantage of dynamic capabilities in order to incorporate circular business strategies. Current literature lacks research about the connection of how dynamic capabilities can support companies with the implementation of Circular Economy principles. Startups often implement sustainable strategies from inception, but: how can traditional MNCs of complex character successfully innovate their business models and strategies, without major disruption and losing their profitability? We argue that not only these young and born circular companies will lead the markets in the future, but also existing MNCs can successfully develop and stay competitive. This study wants also to highlight what resources and capabilities both types of companies state as key for successful circular business strategies, and how they are handled and embedded in the organizational structure by managers. A qualitative case study approach provided the detailed necessary information (from different industries and degree of circularity) to address the question. The findings widen the research of business model innovation towards circular business strategies and show a clear picture of which dynamic capabilities are of importance and how they can be successfully incorporated. We conclude by indicating that the concepts of learning, knowledge, relationships, leadership and management style were perceived as the most decisive within the organizations; with remaining external barriers as challenging.