The effects of circular economy initiative implementation on business performance: the moderating role of organizational culture

Abstract

Purpose – The study aims to examine the micro-level implications of implementing a circular economy (CE) business model on firms’ financial performance and the effect of organizational culture in this context. Design/methodology/approach – Using a survey method to obtain 617 usable questionnaires from diverse business sectors in Ghana, a largely unexplored region and relying on institutional and legitimacy theories. Findings – The study shows that the implementation of CE policies, such as the reducing, reusing, recycling, recovery and restoration of resources used in manufacturing, distribution and consumption processes, contributes to improved financial efficiency. Furthermore, organizational culture moderates by way of strengthening the positive relationship between CE and business financial performance. Originality/value – This study contributes to the literature on circularity and the broader discourse on ecological issues by arguing that institutional and legitimacy theories, which are both from the political economy theory, suggest that firms’ economic activities will be influenced by the political, social and institutional context. Therefore, the firm’s decision to embrace a different business model such as CE should be seen from the political environment involving rules and regulations, social dynamics both within and outside the organization and the institutional structures within which the firm operates. These mechanisms establish a business case for the implementation of CE initiatives and is guided by intent and specific goals. This motivates and encourages employees to be more involved in their duties and interactions leading to high levels of employee satisfaction, which improves productivity and profitability.