Journal
BUSINESS STRATEGY AND THE ENVIRONMENT
Volume 30, Issue 6, Pages 2773-2795Publisher
WILEY
DOI: 10.1002/bse.2893
Keywords
bank finance; circular business model innovation; circular business models; circular economy; innovation finance
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Access to bank finance is a key challenge for firms engaged in circular business model innovation. Strategies such as securing customer contracts, building relationships, and designing standardized assets can help firms obtain bank finance for circular BMI.
Access to bank finance has emerged as a key challenge for firms engaged in circular business model innovation (circular BMI), both in practice and in the academic literature. Through interviews, focus groups and archival documents, we document the experience of firms accessing finance for circular BMI and assess bank willingness to lend to firms that engage in circular BMI. Our findings offer potential strategies for firms who look for external (bank) finance to realise circular BMI. Using a case study-based theory-refining approach, we identify three core strategies that firms can use to obtain bank finance for circular BMI. First, firms can signal future cash flow expectations by aiming to secure customer contracts and preorders. Second, relationship building with banks, suppliers and customers improves the banks' risk perception of firms. Third, firms can design standardised, long-lasting circular assets that can serve as bank collateral, especially once secondary markets develop, overcoming the difficulty of lending based on innovative, firm-specific assets.
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