Sensing, seizing, and reconfiguring: Key capabilities and organizational routines for circular economy implementation

Circular economy (CE) has a huge potential to overcome sustainability challenges. The EU and several national governments have been urging firms for CE implementation. However, to date, most firms are failing in translating the CE concept into their business operations. Some scholars point out that firms may attain CE objectives through dynamic capabilities. To empirically investigate whether or not dynamic capabilities facilitate CE implementation, we analyzed a sample of 220 manufacturing firms in Italy through partial least squares structural equation modeling (PLS-SEM). Our PLS-SEM analysis shows that sensing, seizing, and reconfiguring capabilities and their underlying organizational routines significantly facilitate CE implementation. This paper contributes to the literature in the following ways. Firstly, this paper presents the measurement scales of dynamic capabilities and demonstrates how to operationalize a reflective-formative hierarchical component model (HCM) of dynamic capabilities in PLS-SEM. Secondly, this paper highlights the key capabilities and organizational routines through which firms can identify and pursue CE opportunities.