Exploring business model diversification and circular value creation in digital platforms for circular economy: insights from Chinese preowned electronics industry

Abstract

Purpose Circular economy firms, unlike those in a linear economy, encounter significant challenges due to the nature of nonstandardized products, such as asymmetric information on product specifications and highly dispersed supply and demand. Consequently, achieving large-scale operations becomes inherently difficult for them. However, when digital platform-based circular firms adopt diversified business models, their value creation has the potential to achieve significant scale. This study aims to answer “How do digital platform-based circular firms scale up value creation through business model diversification?”. Design/methodology/approach The authors use a qualitative case study design with a longitudinal (2011–2023) analysis of the various business models developed by ATRenew, a leading firm in the Chinese preowned electronics industry. Findings The authors find that the recycling business model can act as a “cornerstone” business model for a circular firm to integrate the business model portfolio by leveraging the most synergies (or complementarities) with other business models. Besides, digital platform-based circular firms can effectively scale up value creation by leveraging capability complementary on the supply side, through establishing industrial infrastructure shared with the platform ecosystem; and by leveraging customer complementary on the demand side, through activating the dual role played by platform users as suppliers and consumers. Originality/value The authors contribute to the circular business models literature with three mechanisms to scale up circular value creation through business model diversification and advance a set of propositions to be tested in future research. This also has important practical implications for circular economy platform businesses.