Digital transformation, open innovation and circular business model transition: The role of effectual logic

Despite the theorized role of open innovation in shaping circular business models, there remains ambiguity about how open innovation can accelerate the transition toward circularity. Transition towards a circular business model typically presents obstacles for entrepreneurial organizations because they lack access to resources. Ambiguity remains on how organizations transitioning to a circular business model deploy open innovation strategies and what decision-making mechanisms underpin the value co-creation processes. We address the research question: How do organizations deploy open innovation in circular business models? We explore how open innovation is integrated with circular business models. Based on a qualitative analysis of forty-three open-ended online interviews and Gioia’s methodology, the findings reveal that effectual logic supports organizations in effectively deploying open innovation while pursuing a circular business model. The transition towards circularity raises dilemmas about leveraging collaborations, and effectuctual logic assists in integrating an open innovation strategy into the circular business model. By minimizing resource commitment, collaborating with diverse stakeholders, and continuously refining processes, managers pursuing circularity can effectively address the challenges encountered during the transition to circularity.