How Companies Move to Circularity: Internal Reorganizing and Adjustment of External Collaboration

ABSTRACT Firms in various industries strive to narrow, slow down, and close resource flows, moving toward a circular economy ( CE ). We theorize that the transformation of established companies toward CE includes two critical interconnected dimensions—adjustment of external collaboration relationships and internal reorganization. We conducted a qualitative study in the plastics industry to explore them empirically. Our analysis indicates that established firms adapt their external collaborations in four ways: companies modify the criteria of partner selection and the strength of dyadic relationships, add new partners and roles in the value chain, and consolidate the external collaboration network. These collaboration adjustments are accompanied by three key facets of internal transformation—reorganization of permanent and temporary organizational structures and processes. Finally, our study provides new insights into the interplay of the intra‐ and interorganizational dimensions of the shift toward the CE .