A Conceptualisation of Circular Business Models and Explanation of Their Adoption: Evidence From Four In-Depth Case Studies Submitted by Roberta De Angelis to the University of Exeter as a thesis for the degree of Doctor of Philosophy in Management Studies in January 2016 This thesis is available for Library use on the understanding that it is copyright material and that no quotation from the thesis may be published without proper acknowledgement. I certify that all material in this thesis which is not my own work has been identified and that no material has previously been submitted and approved for the award of a degree by this or any other University. Signature: .................................................................... Abstract The scale of the ecological crisis and a combination of socio-economic and regulatory trends (rising global demand for goods, increasing resource price volatility and legislative efforts to reduce waste), are severely undermining the viability of linear operating business models which rest on a take-make-dispose logic. It is within this context that the circular economy gains relevance by proposing more resource efficient industrial processes that mirror the cyclical functioning of the eco-system where waste does not occur. A crucial constituent in the achievement of a circular economy is business model innovation. However, the academic literature on sustainable business models is still in its early days and pays very little attention to the circular economy and to circular business models. Hence, this research contributes to the sustainable business models literature by proposing a conceptualisation of circular business models and by illustrating the processes leading to their emergence and development. Organisational (resources and capabilities) and institutional (regulatory, normative and cognitive) perspectives have been applied mostly separately in the management literature examining why companies pursue ecological and social sustainability goals. This research attempts to reconcile the above agency versus structure dichotomy in explaining the adoption of circular business models. To accomplish this task, a qualitative, hermeneutical study has been conducted. Four holistic British case studies, considered as a form of contextualised explanation and chosen via purposive selection, delineate this research strategy. Participant observations, shadowing and semi-structured interviews (n=33) are the methods used for collecting primary data. Using narrative and comparative analyses, this thesis conceptualises circular business models as characterised by enhanced customers’ value, diffused and interconnected value creation, boundary spanning relational structures and idiosyncratic value capture mechanisms. It finds that their emergence and development is dependent on a combination of organisational and institutional influences. II List of Contents Abstract II List of Contents III List of Tables VII List of Figures VIII List of Appendices IX List of Abbreviations X Acknowledgements XIV Chapter 1 Introduction 1 1.1 Research overview, aims, questions and objectives 1 1.2 Thesis structure 6 Chapter 2 Literature Review 9 2.1.1 Introduction 9 Part one Corporate Environmental Sustainability: Past, Present 12 and Future 2.1.2 Research context 12 2.1.3 Business as ‘unusual’ and capitalism: an oxymoron? 15 2.1.4 Natural capitalism 19 2.1.5 Part one summary 25 Part two The Circular Economy, Business Models, Sustainable 28 Business Models and Circular Business Models 2.2.1 Introduction 28 2.2.2 The circular economy 28 2.2.3 Business models and business model innovation 38 2.2.4 Sustainable business models and circular business models 42 2.2.5 Part two summary 58 Part three Organisational and Institutional Theories in the Study of 62 Corporate Environmental Sustainability 2.3.1 Introduction 62 III 2.3.2 The organisational level 63 2.3.3 The meso level: an institutional perspective 71 2.3.3.1 Institutions and institutional theories 72 2.3.3.2 Institutional influences on corporate sustainability 78 2.3.3.3 Combined approaches to explain corporate 83 environmentalism 2.3.4 Circular business models: appropriateness of an institutional 89 lens 2.3.5 The UK’s circular economy field: a conceptual and graphical 93 representation 2.3.6 Part three summary 100 Chapter 3 Research Method 103 3.1 Introduction 103 3.2 Paradigms for the social enquiry 103 3.3 Selected research paradigm 108 3.4 Research strategy 111 3.5 Data collection and analysis techniques 118 3.6 Quality in qualitative and hermeneutical studies 128 3.7 Research ethics 132 3.8 Chapter three summary 134 Chapter 4 ‘FurnitureCo’ and ‘PlanksCo’ 136 4.1 Introduction 136 4.2 FurnitureCo 136 4.3 FurnitureCo and the circular economy: value proposition and 137 operating model 4.4 PlanksCo 146 4.5 PlanksCo and the circular economy: value proposition and 147 operating model 4.6 Chapter four summary 157 Chapter 5 ‘RailCo’ and ‘UniCo’ 159 5.1 Introduction 159 5.2 RailCo 159 IV 5.3 The UK’s railway and franchising systems 160 5.4 RailCo and the circular economy: value proposition and 161 operating model 5.5 UniCo 172 5.6 UniCo and the circular economy: value proposition and 172 operating model 5.7 Chapter five summary 182 Chapter 6 Results and Discussion 184 6.1 Introduction 184 6.2 Conceptualising FurnitureCo’s and PlanksCo’s business 184 models 6.2.1 FurnitureCo’s value capture 185 6.2.2 FurnitureCo’s value creation 186 6.2.3 FurnitureCo’s value delivery 188 6.2.4 PlanksCo’s value capture 189 6.2.5 PlanksCo’s value creation 191 6.2.6 PlanksCo’s value delivery 192 6.3 FurnitureCo’s and PlanksCo’s business models: emergence 194 and development 6.3.1 FurnitureCo and PlanksCo: organisational level 196 6.3.2 FurnitureCo and PlanksCo: institutional level 200 6.4 Conceptualising RailCo’s and UniCo’s business models 207 6.4.1 RailCo’s value capture 207 6.4.2 RailCo’s value creation 209 6.4.3 RailCo’s value delivery 213 6.4.4 UniCo’s value capture 214 6.4.5 UniCo’s value creation 216 6.4.6 UniCo’s value delivery 220 6.5 RailCo’s and UniCo’s business models: emergence and 222 development 6.5.1 RailCo and UniCo: organisational level 223 6.5.2 RailCo and UniCo: institutional level 228 6.6 Chapter six summary 233 V Chapter 7 Conclusion 235 7.1 Introduction 235 7.2 Originality and contribution 235 7.2.1 Conceptualising circular business models 239 7.2.2 Contextual influences on circular business models 246 7.2.3 Organisations investigated 251 7.2.4 Research method 252 7.3 Limitations, recommendations for future research and key 257 lessons References 268 Appendix I: An example of questions asked to interviewees 315 and of an interview transcript Appendix II: Summary of data collection activities 320 VI List of Tables Table 2A The ReSOLVE framework 30 Table 2B Originators of the CE thinking 36 Table 2C Key points in the BM literature 42 Table 2D Overview of the SBMs studies 52 Table 2E Categories and elements of circular BMs 54 Table 2F Review of case studies applying CE principles 55 Table 3A Methodological features of hermeneutics 123 Table 3B Summary of the research methodological features 127 Table 3C Trustworthiness and authenticity criteria 130 Table 3D Criteria for evaluating quality in hermeneutical studies 132 Table 4A FurnitureCo’s practices in relation to the ReSOLVE 146 framework Table 4B Benefits of PlanksCo’s boards 153 Table 4C PlanksCo’s practices in relation to the ReSOLVE framework 157 Table 5A RailCo’s practices in relation to the ReSOLVE framework 169 Table 5B UniCo’s practices in relation to the ReSOLVE framework 182 Table 6A A comparison and a conceptualisation of FurnitureCo’s and 194 PlanksCo’s BMs Table 6B Synthesis of FurnitureCo’s resource, capabilities and 197 organisational characteristics Table 6C Synthesis of PlanksCo’s resources, capabilities and 200 organisational characteristics Table 6D A comparison and a conceptualisation of RailCo’s and 222 UniCo’s BMs Table 6E Synthesis of RailCo’s resources, capabilities and 225 organisational characteristics Table 6F Synthesis of UniCo’s resources, capabilities and 228 organisational characteristics Table 7A Summary of the thesis contribution 256 VII List of Figures 2.1 A stakeholders map 50 2.2 Frameworks used for the conceptualisation of circular BMs 61 2.3 The UK’s circular economy field 100 3.1 Hermeneutic circles 111 3.2 Phases of the research 128 5.1 ACEs’ personal development pyramid 171 6.1 FurnitureCo’s value creation for a broader set of 187 stakeholders 6.2 FurnitureCo’s BM characteristics 189 6.3 PlanksCo’s value creation for a broader set of stakeholders 192 6.4 PlanksCo’s BM characteristics 193 6.5 Relevance of the sources of influences on the evolution of 206 FurnitureCo’s BM 6.6 Relevance of the sources of influences on the evolution of 206 PlanksCo’s BM 6.7 RailCo’s value creation for a broader set of stakeholders 211 6.8 RailCo’s BM characteristics 214 6.9 UniCo’s value creation for a broader set of stakeholders 218 6.10 UniCo’s BM characteristics 221 7.1 Overview of the research findings 255 VIII List of Appendices Appendix I An example of questions asked to interviewees 315 and of an interview transcript Appendix II Summary of data collection activities 320 IX List of abbreviations Abbreviation Definition ABR Action Based Research ACEs Area Champions for the Environment APMG All-Party Parliamentary Manufacturing Group APSRG All-Party Parliamentary Sustainable Resource Group ATOC Association of Train Operating Companies BEMS Building Energy Management System BEMSE Building Energy