Designing the Internal Organization for Circular Economy Innovation: A Knowledge Governance and Microfoundations Approach

Firms implementing circular economy principles in their innovation processes necessitates the redesign of well-established processes and practices. This redesign leverages the various knowledge and practice domains within the firm, at different levels and scales. Despite the importance of knowledge to innovation management, there is a lack of research in innovation studies examining how firms could manage different knowledge flows within the circular economy context. In most research in this area, studies tend to assume that existence of governance mechanisms to manage these knowledge flows. However, given the need for redesigning or introducing entirely new business models to incorporate circularity principles, there is also a need to understand the internal organization that facilitates such changes. In this paper, we conceptualize how organizational mechanisms governing knowledge processes influence firms' adoption of circular-oriented innovation processes. We conclude that firms go through various stages and levels in the adoption process. These levels are linked through situational, action-formation, and transformational mechanisms that govern supportive knowledge processes. We contribute the innovation management literature by linking circular innovation process adoption to knowledge governance and the underlying knowledge processes. Specifically, we highlight the microfoundations nuances of circular-oriented innovation processes adoption that are pertinent to organizing innovation activities within the firm.