Digital Servitization for Circular Business Model Innovation: A Dynamic Capabilities Perspective

Environmental issues and resource scarcity call for a circular economy, yet progress remains slow. Manufacturers are an important actor in this transition because they orchestrate material flows, but many struggle to translate circular ambitions into practice. Guided by the dynamic capabilities theory, this study investigates digital servitization as a means of circular business model innovation. Thirteen semi-structured interviews across eight Dutch manufacturers were analysed with the Gioia method to identify the dynamic capabilities and microfoundations that enable such a transition. By explicating microfoundations that translate digital usage data into circular value propositions, this study reveals the mechanisms through which digital servitization supports circular business model innovation. The study makes two primary contributions: it integrates the distinct bodies of literature on digital servitization and circular business model innovation through the perspective of dynamic capabilities, and it translates these insights into a clear, practical guide for managers seeking to accelerate the circular transition. By clarifying how dynamic capabilities can align digital servitization initiatives with circular objectives, this study offers an understanding of how dynamic capabilities facilitate the transition to circularity through digital servitization. It contributes theoretically to the integration of digital servitization and circular business model innovation into the dynamic capabilities framework and provides practitioners with actionable strategies for circular business model innovation.