Perceptions matter. Exploring dynamics of circular economy innovation processes

Transitioning to a circular economy (CE) entails a fundamental shift in how resources are produced, consumed, and valued in society. This presents challenges and opportunities for innovation across industries. Using absorptive capacity (ACAP) as a lens, we conceptualize the dynamics shaping firms' perceptions of drivers and barriers in CE innovation processes. We aim to better understand the reasons for the limited adoption of CE and how innovation processes emerge within and between firms. Through a longitudinal process study, we tracked how a collective of firms addressed the challenge of post-consumer plastic (PCP) waste in the Norwegian aquaculture industry. Our findings suggest that perceptions change over time as firms explore, assimilate, and exploit new knowledge from interactions between firm-level and the collective level. Moving from a static identification to a dynamic understanding, we captured how changing perceptions can cause shifting framings of drivers and barriers. We develop a framework that depicts how tensions are mitigated over time, in parallel with increasing adoption of CE, underscoring the need for a processual perspective. These insights are illustrated using the example of the world's first net pen walkways made of recycled PCP. Furthermore, we outline recommendations for policymakers and industry, particularly regarding the role of ‘Learning alliances’ and implications for the use of post-consumer materials across industries. Our study adds to the literature on circular economy innovation (CEI) by elucidating how drivers and barriers unfold and by highlighting the roles of collective ACAP and interaction in overcoming barriers to CE. • Perceptions of drivers and barriers play a key role in circular economy (CE) innovation processes • Shifting framings of drivers and barriers are explored as a key mechanism in circular economy innovation (CEI) • A processual framework for understanding dynamics in CE innovation processes is proposedindustry, these are mitigated by collective absorptive capacity (ACAP) • Tensions between circularity and material quality risks are mitigated in the Norwegian aquaculture industry