Towards a circular economy: decision making of managers in uncertain investment situations

Abstract

This study examined factors that influence managers’ decision making regarding investment in circularity. All of the surveyed managers were (co-)responsible for financial business within their organisations, that are based in the Netherlands. In the fight against resource exhaustion it is of major importance, that organisations invest in new business models that are based on circularity rather than on linearity of resources. As a baseline assumption of this study managers are expected to be less likely to invest in circularity as these kinds of investments are expected to have lower or even negative benefits. At the same time, as this is not a fixed outcome and the investments could be profitable as well, managers’ decisions are affected by several influences in the decision making process towards investment. Through this study – based on multidisciplinary theories - new insights are presented regarding these influences. By finding hurdles and opportunities, influential actors, like financial institutions, are provided with information. Consequently, they come to understand how to approach organisations with regard to investments in circularity. In this way, this study forms a contribution to the transition towards a circular economy and also to the fight against resource exhaustion. A linear regression analysis examining 349 Dutch managers has found five factors to be positively or negatively influencing managers’ decision making with regard to investment in circularity. Financial risk perception, attitudes towards environmental concerns in general and the extent to which managers are influenceable, have been found to be hurdles for managers’ decision making. Subjective norms on investment in circularity from outside the organisation and the perception of opportunities have been found to be opportunities for managers’ decision making. Also, alternative explanations for theoretically hypothesised mechanisms are elaborated on extensively.