Circular Innovation Processes from an Absorptive Capacity Perspective: The Case of Cradle to Cradle

Abstract

As advancement of sustainability-oriented innovation, circular innovation addresses not only the lacking environmental challenge integration but adopts a life cycle perspective. We apply absorptive capacity theory with its core processes identification, assimilation, and application for opening up the black box of circular innovation processes. We conducted a multiple longitudinal case study on innovation processes by Cradle to Cradle™ Certified pioneer companies covering the entire inter-organizational innovation network (focal firm, suppliers, intermediaries, certification body). Our findings show that the Cradle to Cradle™ Certified Products Standard triggers innovation processes that can be characterized by a high knowledge intensity. This leads to the need of involving an expanded actor set as compared to conventional innovation and promotes knowledge flows and learning with value chain and institutional partners during all three absorptive capacity phases. Our findings imply that this collaborative form of product development makes companies more innovative. Our contribution is twofold: First, we contribute to the swiftly growing body of circular economy literature, by providing deep insights into innovation processes on multiple levels covering individuals, organizational practices, and inter-organizational collaboration. Second, we contribute to innovation theory by providing a contextualized process model of absorptive capacity better explaining the unique challenges in circular product innovation.