Organising for Circularity: An Empirical Analysis of Project Organising and the Development of Circular Economy Firm Capabilities

ABSTRACT Firms pursue the circular economy (CE) by using projects as organisational forms. However, the transformative role of project organising (PO) in developing circular firm capabilities (FC) remains underexplored. In this study, we examine the effects of PO on the development of critical circular FC in CE‐based firms. We draw on primary data from a survey of 227 project professionals, managers and business owners from CE‐based firms and apply structural equation modelling (SEM) to analyse our data. We find that PO supports the combined development of FC including circular organisational routines (OR), eco‐innovation capabilities (EC), strategic agility (SA) and dynamic capabilities (DC). We also find that the combined effect of these FC positively enhances the environmental and economic performance of the firms. The study advances theoretical understanding by empirically demonstrating the enabling role of PO in developing circular FC and the role of FC in providing superior performance in CE‐based firms. We recommend that managers adopt projects as a deliberate organising form to enhance the FC critical to CE‐based firm performance.