Geographic network effects in a circular economy: A field data analysis of reusable packaging services

Abstract

AbstractProduct–service systems (PSS) have the potential to align businesses’ financial incentives with environmental objectives. Conceptual and qualitative research on non‐ownership consumption suggests that such offerings benefit from dense local networks, which motivate system adoption and use. However, geographic network effects and their magnitude have not been examined with field data capturing revealed behavior. This paper leverages a large field dataset from a system for reusable take‐out food containers to evaluate the effect of increased geographic network density of participating restaurants on (a) the acquisition of new users and (b) the frequency of system use. Based on fixed effects Poisson panel models, this paper finds statistically significant and practically meaningful positive effects of increased geographic network density on acquiring new users. Notably, marginal effects of increased geographic network density on user acquisition diminish as networks get denser. In terms of frequency of use, no significant effects of geographic network density are identified. These results contribute to the literature on non‐ownership consumption by presenting nuanced field evidence of indirect, cross‐side network effects in PSS. Furthermore, findings encourage businesses and policymakers to promote PSS with dense local networks.