Tensions in Management Controls: Enabling Radical Innovation for a Circular Economy

Meeting the demands of a circular economy entails substantial organizational change and innovation, particularly by industrial incumbent organizations. This paper aims to deepen understanding of how such organizations use management controls to strengthen circular principles and drive innovation, while also shedding light on tensions in the management control system that may occur following the contrasting logics of linearity and circularity. The study collects qualitatively rich empirical data from three large industrial organizations in Sweden, employing 38 semi-structured interviews and thematic analysis. The study suggests that the management control system serves as a valuable instrument for implementing circular principles through interventions, and conversely, as a system that can entrench a linear logic in organizations. Specifically, the analysis reveals that while circular principles are not fully integrated into all aspects of the management control systems, specific identified factors enable or impede innovation in the circular transformation. Imbalances and inconsistencies in the use of action-, result-, and cultural controls were also identified. The practical implications emphasize a risk of reducing circular initiatives to minor improvements without a comprehensive understanding of the needed radical changes and corresponding adjustments to the management control system. Overall, the research provides valuable and qualitatively rich insights connecting the adoption of the circular economy in incumbent organizations and further strengthens the bridge between literature on innovation management, circular economy, and management control systems, highlighting the importance of addressing tensions and imbalances for successful circular transformations.

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Johan Arekrans[1][*], Sofia Ritzén[1], Susanne Nilsson[1]

• [1] KTH Royal Institute of Technology, Engineering Design, Unit of Integrated Product Development and Design, Brinellvägen 85, 114 28 Stockholm, Sweden.
• [*]Corresponding author: [email protected]