Organizational Learning Practices to Develop Digitalization Capabilities in Circular Economy SMEs

The transition to the circular economy (CE) is widely driven by digitalization and data-driven innovation. However, whereas large companies typically have sufficient capabilities to fully exploit digitalization and data in their business and operations, small and medium-sized enterprises (SMEs) face challenges with the full utilization of digital technologies, coping with ever-increasing amounts of data and finding appropriate analysis methods. Therefore, SMEs operating in the CE sector have a clear need to develop their capabilities in implementing digital technologies to support CE business. This paper investigates how these companies can improve their dynamic capabilities in an inter-organizational learning process, where SMEs can transfer knowledge, make sense of it, and integrate it into their processes in joint action with other SMEs. The paper introduces a comparative multiple case study of six CE SMEs, all located in Finland, which have developed their dynamic capabilities by participating in collaborative learning activities with other SMEs facilitated by a university. The results reveal various learning practices for knowledge-sharing, joint sensemaking and knowledge implementation to support the development of dynamic capabilities for the digitalization of SMEs. The study also shows that inter-organizational learning not only helps the CE SMEs to improve their limited capabilities toward digitalization and data utilization, but also helps them to develop their own organizational culture in a direction that is more open to learning and absorbing new knowledge from outside the firm’s boundaries