Challenges of circular new ventures: An empirical analysis of 70 cases

Abstract

The challenges encountered by established firms transforming their linear business models into circular business models (CBMs) have received extensive research attention. Such firms have experience and market foothold but tend to adopt an incremental approach to CBMs due to risks of business model cannibalization. However, there is relatively limited research on the challenges experienced by new ventures developing CBMs from scratch – circular new ventures. New ventures are often agile, experimental and deploy disruptive CBMs even though they lack resources. The lack of knowledge specific to this topic is constraining for entities such as incubators and accelerators that seek to facilitate the emergence and scale-up of circular new ventures. Furthermore, researchers cannot presume that the challenges experienced by established firms are the same for new ventures when developing CBMs. Thus, the aim of this article is to explore the challenges that new ventures experience while developing circular business models from scratch, synthesize the sources of these challenges and provide practitioner implications to overcome them. In doing so, we studied 70 circular new ventures across Europe. Our article makes four original contributions to the literature. First, our study is seminal in using a large cross-country dataset to qualitatively analyse the empirical challenges of new ventures developing circular business models. Second, we identify which challenges are generic for CBMs, which challenges are specific for certain CBM types and for circular new ventures in particular. Third, we show that the challenges of circular new ventures are determined by their: (i) type of circular business model, (ii) industrial sector, (iii) institutional context, and (iv) new ventures liabilities. Altogether, we highlight that while circular new ventures and new ventures experience several similar challenges, circular new ventures particularly struggle to scale-up due to their liabilities of newness and smallness which limits their resources and legitimacy to enter strategic partnerships crucial for new venture survival.