Innovation and the circular economy: A systematic literature review

The circular economy emerged as an alternative model to the linear system, which now appears to be reaching its physical limitations. To transition to a circular economy, companies must not only be aware of but also engage in more sustainable practices. For such a transition, companies must rethink and innovate their business models and the ways they propose value to their clients while simultaneously considering environmental and social facets. This systematic literature review sought to map out from the company perspective the key topics interrelated with innovation and the circular economy, describing the internal and external factors to consider in such transition processes. Key lines of research were identified, and suggestions for future research and for facilitating movement toward a circular economy are provided. This work contributes to deepening the literature by identifying the priority areas concerning the circular economy and encouraging future research that meets international standards of excellence.


| INTRODUCTION
The current linear economic model based on "take-make-dispose" is reaching its physical limitations (Ellen MacArthur Foundation, 2015) amid estimates that the waste produced annually will reach 2.59 billion ton by 2030 and that this total will surge to 3.40 billion ton worldwide by 2050. The Agenda 2030 identified 17 Sustainable Development Goals (SDGs) that balance the three dimensions of sustainable development (economic, social, and environmental) and highlights how social and economic development also depends on sustainable management of the natural resources of our planet (United Nations, 2015).
Recognizing the fundamental role played by the environment, its functions, and its interactions with the economic system, the circular economy (CE) has emerged as an alternative to the neoclassical economic model (Ghisellini et al., 2016). The CE incorporates a regenerative system that minimizes the entry and waste of resources, emissions, and expenditure of energy through slowing down, closing, and straightening material and energy circuits (Geissdoerfer et al., 2017).
The CE provides a reliable structure for radically improving the current business model within the scope of developing preventive and regenerative eco-industry, as well as boosting well-being based on recovered environmental integrity (Ghisellini et al., 2016;Kumar et al., 2021). The Ellen MacArthur Foundation (2015) highlights how the transition to a CE involves a systemic change that seeks not only to reduce the impacts of the linear economy but also to construct long-term resilience and generate economic and business opportunities while returning environmental and social benefits.
According to the foundation, three principles form the basis for the CE: (1) preserving and enhancing natural capital, controlling finite stocks, and balancing flows and renewable resources; (2) optimizing resource earnings through making products, components, and materials in use at the highest level of utility for the greatest possible length of time, in the technical cycle and the biological cycle; and (3) stimulating the effectiveness of systems by identifying and excluding negative externalities at the outset.
The CE cannot be obtained through attempts by individuals.
Instead, the CE involves a systemic change in companies, industries, and economies through radical shifts in societal values, norms, and behaviors (Chizaryfard et al., 2020). Furthermore, the CE is intrinsically bound to environmental innovation in the way societies legislate, produce, and consume (Prieto-Sandoval et al., 2018).
According to , cultural barriers, especially consumers' lack of interest and awareness and hesitant company cultures, constitute the most significant obstacles to companies advancing toward the CE, which leads to the understanding that the CE has yet to reach the mainstream. In turn, de Jesus and Mendonça (2018) maintain that the drivers of CE are essentially social, institutional, and regulatory factors. Simultaneously, technological and financial barriers may hinder the CE transition process. In this context, eco-innovations (EIs) are crucial to overcoming these barriers. Prieto-Sandoval et al. (2018) propose eight types of EIs for developing the CE: (1) business model, (2) network, (3) organizational structure, (4) process, (5) product, (6) service, (7) market, and (8) client involvement innovations. The authors suggest that these EIs make the shift in the paradigm to the CE visible. Leading studies on this theme have also focused on business model innovation to secure the transition to this new economic model. Lewandowski (2016) identifies two components that should be added for circular business models: the take-back system related to reverse logistics and adoption factors, especially internal factors interrelated with organizational capacities for change to the CE business model, and external factors, which include technological, political, sociocultural, and economic issues. Innovation for circular business models inherently presents a high risk related to the traditional linear business models (Linder & Williander, 2017). According to Bocken et al. (2016), business model innovation closely aligns with product innovation for circularity. These authors propose several strategies for business model innovation and product design based on slowing down and closing resource cycles. Slowing down the resource cycle deals with the extended use of goods over time based on designing goods with longer lifespans and extensions to product lifespans, especially through service cycles to extend the working life of products, for example, through repair and remanufacturing. Closing resource cycles means reusing materials through recycling. Reducing the flow of resources associated with the product and production processes involves resource efficiency.
In addition, according to Konietzko et al. (2020), innovation ecosystems need to be further within the framework of CE and sustainability scenarios. Based on their results, these authors identified three main groups of principles for innovation in the circular ecosystem: collaborating, encapsulating the ways companies interact with other organizations to innovate in the direction of circularity, experimenting, and considering how companies may organize a structured process of trial and error to implement greater circularity and platforms, which relate to how companies may organize social and economic interactions through online platforms to obtain greater circularity.
In this perspective, in keeping with its emerging characteristics, research into innovation remains fragmented with diverse and different dimensions investigated. Previous systematic reviews focused on drivers and barriers to CE and the importance of EI in this transition (de Jesus et al., 2019;de Jesus & Mendonça, 2018;Kraus et al., 2017). However, the literature on innovation and CE has grown in keeping with the progress that the theme has made in going mainstream. Thus, this article maps the main research topics at the intersection of innovation and the CE, spanning a general view of the theme and identifying companies' internal and external factors during this economic transition process. Bibliographic coupling is used identify the main lines of research in the literature on innovation and CE within a broad scope and suggest topics for future research.

| METHODOLOGY
In order to achieve the objectives of this research, this systematic review made recourse to VOSviewer van Eck & Waltman, 2010) to undertake the bibliographic coupling process.
Bibliographic coupling represents a method that applies a number of shared references between the two articles in order to measure their mutual similarities. Littell et al. (2008, p. 1-2) define systematic literature reviews as a "research that bears on a particular question, using organized, transparent, and replicable procedures at each step in the process." Observing the classifications of systematic reviews of the literature proposed by Paul and Criado (2020), we found that our investigation is part of the Method-based review. This type of systematic review aims to synthesize and extend a body of literature that uses an underlying methodology (either quantitative or qualitative).
In this systematic review, VOSviewer was used van Eck & Waltman, 2010) for bibliographic coupling. This process examines numerous shared references between two articles to measure their similarities. The greater the extent of the overlap in the articles' bibliographies, the stronger the articles' level of connection. Bibliographic coupling does not require accumulated citations and may be applied to new publications (which have not yet been cited), emerging fields, and less developed sub-fields (Zupic & Čater, 2015).
The systematic literature review protocol included three phases.
In Phase 1, the Web of Science database was searched for the keywords "innovation*" and "circular econom*." Only articles written in English in the fields of Business, Management, and Economics were selected. The search took place at the beginning of November 2020, and 109 publications were returned. In Phase 2, the articles' titles and summaries were analyzed, resulting in 26 articles excluded due to their lack of relevance to the research topic. Finally, in Phase 3 VOSviewer software version 1.6.15 was used for bibliographic coupling. The research protocol is shown in Figure 1.

| Analysis of bibliographic coupling
To identify the main research themes in innovation and CE, we carried out bibliographic coupling of these documents with VOSviewer. All articles were analyzed irrespective of the number of citations given that 39 of the 83 articles were published in 2020, and excluding uncited articles might lead to excluding relevant articles from the study. This process attributed a minimum of three articles per cluster.
The 83 articles formed a total of seven clusters. The cluster network is shown in detail in Figure 4.  protecting the natural environment, recycling charges for various types of waste, and product quality standards.
According to Hopkinson et al. (2018), individual companies may influence the conditions of the CE support system, establish standards to reduce costs and shape the prevailing levels of consumer awareness and customers' purchase decisions, and support regulation for remanufacturing and reutilization. Furthermore, managing circular business models involves designing for reutilizing and remanufacturing, operating services at scale, and automating to achieve these scales and reduce reverse costs. Rajala et al. (2018) highlight that an ecosystem and collaboration among the different actors are needed for a closed-cycle economy to prosper. The authors identify three archetypes for closed-cycle systems (internal circuits, decentralized systems, and open systems) and then debate the implications of applying information generated by ecosystems to create new value creation opportunities for the business. Kirchherr and Urban (2018) identify transferring and cooperating involving low-carbon energy technology as a factor in successful government policies as well as the appropriate capacities in the recipient countries. Furthermore, the authors verify a positive relationship between research and innovation activities and resource productivity in the European Union.  describe how the key barriers to the CE are related to cultural aspects, particularly consumers' lack of interest and awareness alongside a hesitant business culture. The drivers behind these barriers derive from market barriers that, in turn, result from the lack of government intervention to accelerate the transition to the CE. The authors also report that technological barriers do not rank among the most severe barriers. Florido et al. (2019) identify the roles of the public administration and management entities of the destinations, the resident population, and the tourism sector in the CE transition process and thus, recognize the need for multi-level approaches to nurture innovations in business models for the CE. Sehnem et al. (2019) show how Natura, a leading company in the cosmetics sector, has sought out partnerships with startups to generate business with innovative firms. According to this company, sustainability is a driver of the CE and is measured by innovation, which helps establish a product portfolio that takes into account how demand among consumers changes constantly. Finally, according to De Angelis (2020), the CE becomes possible through multiple, cooperative, and simultaneous innovations across different scales within a broader socioeconomic context, involving regulation, policies, and production and consumption systems.
Companies deploying the CE operationally may obtain sustained competitive advantage through innovative business models in which the circular principles applied to supply and relationships enable the creation, delivery, and capture of economic value, while ecological and social values accumulate for nature and for society.   opportunities. There is also the need to better understand the role of disruptive and emerging technologies in this process, as well as to understand the potential of waste management more deeply.
Furthermore, the literature reflects the need to expand research on innovation in the circular economy to all sectors given that many studies focus on the fashion and manufacturing sectors and sectors dealing with the biological cycle losing out in profile. There is the need to approach new companies and startups, as they may represent a more efficient and effective means of introducing radical innovations and identifying niche opportunities. In addition, in overall terms, the studies focus on European countries which leads to the need to explore other countries and contexts and conduct studies that capture the different terms of regulation, social and cultural conditions, markets, and technologies. The role of consumers in these sustainable innovations also requires deepening. Finally, longitudinal studies account for a priority within the framework of setting out the empirical results of organizations' adoption of circular economy innovations worldwide.
This article also identified internal company factors such as opportunities for waste management and implementation of ecological design tools and resources, competences and dynamic capabilities needed for opportunities for innovation in EC. Regarding external factors, emphasis is placed on involvement and collaboration with the different stakeholders and the regulation conditions. Based on the clusters identified, in Table 2, we list suggestions for future research.
This study maps the main topics in the literature at the intersection between innovation and CE-related themes, thus serving T A B L E 2 Suggestions for the future research agenda Cluster Suggestions for future studies (1) Strategic alliances for innovation in the CE • Introduce the quintuple helix model to research the interested parties and their interrelationships • Empirically explore the applications of the B2B value proposition in different sectors and geographic areas • Undertake empirical studies on digital platforms and intelligent products (2) Business model innovations for the CE transition • Research the business models introduced by startups and expand the understanding of how they capture and deliver value to their clients • Research the usage product biographies and their implications for service provision • Test Antikainen and Valkokari's (2016) proposed framework for sustainable circular business models • Expand the sample of studies measuring resource efficiency and changes in business models to encourage relationships (3) Factors that influence EI-and CE-focused implementation • Carry out studies focused on ecological innovations through collecting primary data • Map the resources and capabilities necessary to these types of eco-innovation (4) Dynamic capabilities of companies and CE implementation, advances in the CE in the Indian fashion sector, and transformational agents • Verify intra-organizational impacts generated by the innovation of business models • Develop studies on resources, competences, and dynamic capabilities in other countries and sectors • Explore the role of universities in promoting CE innovations as a point of departure for future lines of research. The work differs from previous systematic reviews primarily through expanding and extending the temporal range of the articles analyzed and including a large number of recent articles that convey the rising prominence of this theme. However, the utilization of only one database represents a limitation that may have prevented the inclusion of relevant research studies.