THE ROLE OF OPEN INNOVATION AND CIRCULAR ECONOMY TO ACHIEVE SUSTAINABILITY OBJECTIVES

The prevailing business activities are rapidly being considered as unsustainable. So, addressing sustainability concerns is becoming urgent because of scarce resources, fragile environments, and volatile societies. The scientific research in this regard may guide businesses to implement various strategies that may help cater sustainability requirements of diverse stakeholders. However, practically, it is a real challenge for the businesses to address the broad and complex sustainability problems as these are based on various conflicting environmental and socio-economic objectives. In recent years, against the linear economic model, the circular economy or circularity is believed to have abilities to improve sustainability performance. However, because of various barriers, the transition to a circular economy has become a challenge. These challenges are generally linked with lack of suitable equipment, tools and technology, less capable employees, and paucity of technical knowledge. In this regard, the recent phenomenon of open innovation is considered to help decrease these barriers and challenges to implement circularity and improve business sustainability. Moreover, recently literature highlight that dynamic capabilities may also effectively foster circular economy practices. However, although the concepts of open innovation and dynamic capabilities are getting increasing attention for circularity and/or sustainability objectives, no study has integrated them comprehensively and investigated their relations in an empirical way. In order to fill these gaps in a systematic way, this this doctoral thesis aimed multiple objectives. In this regard, the first objective was to perform a systematic literature review on the topic to investigate the connections and integration of open innovation, circularity and sustainability, identify the most common variables of these concepts that may help improve the three dimensional sustainability performance, and highlight the important future prospects of their integration. The second major objective was to empirically investigate how the circular economy implementation and open innovation impact the sustainability performance of European manufacturing companies. The objective was also to explore the influence of both inbound and outbound open innovation, along with the influence of environmental dynamism. The overall third objective of this thesis was to examine how and which dynamic capabilities impact the adoption of open innovation, focused at addressing sustainability challenges for improving companies’ sustainability, all three sustainability dimensions (the triple-bottom line concept). The objective was also to evaluate the comparative role of various types of dynamic capabilities and organizational routines. In order to address the first main objective, 40 related articles (published from 2012 to 2023) were selected for the analysis. The results revealed that open innovation was used to enhance business capabilities to circularity and/or sustainability, and comparatively inbound model was more frequently used than outbound. Overall, integration of open innovation, circularity and/or sustainability was found more mature for environmental dimensions of sustainability. The review study also documented a framework of 75 sustainability variables, with at least 27 indicators related to open innovation, circularity, and sustainability. For the second and third key objectives, the data were collection from more than 300 European manufacturing companies through an online survey. Based on data analysis employing the partial least squares structural equation modeling, we found that circular economy implementation significantly enables the adoption of both inbound and outbound open innovation in companies for achieving sustainability performance objectives related to all three dimensions. Both, inbound and outbound open innovation activities triggered by implementation of circularity practices show significant positive impact on sustainability. We also found that that open innovation activities have positive mediating effect on the relationship between circular economy practices and environmental, economic and social sustainability. The results also reveal that that environmental dynamism moderates the relation between circular economy and, inbound and outbound open innovation activities. The results also demonstrated that dynamic capabilities related organizational routines significantly facilitate open innovation implementation, which consequently influence the overall sustainability accomplishment of companies. Comparatively, reconfiguring and then seizing routines showed more positive impact on companies to start an open innovation venture. We also found that open innovation pursuits triggered by dynamic capabilities have more positive impact on environmental dimension than economic and social aspects of sustainability. Overall, being an original and comprehensive research on circular economy, open innovation and sustainability concepts, it has contributed in expanding the pertinent knowledge and results carry various important implications for related researchers and practitioners in their effort to circular economy transition and achieving better environmental and sustainability performance of industries.