Aligning incentives for implementing reversible bonding as a circular economy innovation

Abstract

AbstractA transition towards a circular economy (CE) often involves the development and adoption of novel technologies and business models. Its implementation, however, requires a close collaboration within and between organizations along supply chains. In this paper, we investigate incentive alignment for the implementation of reversible bonding, a technique that enables separating materials on demand. We use data from semi‐structured interviews with supply chain actors in manufacturing and construction and identify its potential for process optimization and improved repair, refurbishment, and recycling opportunities. Quality, safety, and performance are identified as the most important boundary conditions while split incentive problems tend to impede the implementation of reversible bonding. Switch costs, a lacking market demand, and insufficient mandatory regulations cause split incentive problems, which may be aggravated or mitigated by several market imperfections. Recommendations include investing in collaborative capabilities within organizations and an ex‐ante identification of split incentive problems when constructing circular supply chain governance mechanisms.