Between Support and Constraint: How Ecosystem Support, Institutional Barriers, and Local Governance Shape Circular Entrepreneurship

Sammanfattning

In order to have a perfect transition toward a circular economy, a company not only needs innovative business models but also ecosystems, institutions, and governance structures that can support the entrepreneurs building them. Even though for small and medium-sized enterprises (SMEs), the conditions that submerge circular business models can survive and develop remain poorly understood. This study investigates what support and barriers circular SMEs experience within ecosystem support organizations, institutions, and local governance and how these conditions shape their viability and development. Drawing on 13 semi-structured interviews with circular SME founders and managers and with ecosystem and governance actors in Växjö, Sweden, the study employs an interpretivist, abductive approach and thematic analysis. The empirical material is interpreted through an integrated theoretical framework combining circular entrepreneurship theory, entrepreneurial ecosystem theory, institutional theory, and resource dependence theory. We have closed on three principal theories. First, a meaningful divergence exists between how the circular economy is practiced by SME founders in pragmatic, locally embedded, and partial ways and how it is framed by ecosystem and governance actors at a more strategic and systemic level. This divergence produces a persistent gap between the support designed and the support needed. Second, ecosystem support in Växjö is extensively available but unevenly accessible and generically designed. The most effective forms of support are relationship-based intermediation, procurement-led market creation, and the legitimating value of the city’s sustainability identity. Third, the study identifies what it terms the "governance paradox": the condition in which the municipality simultaneously enables circular entrepreneurship through sustainability legitimation and procurement and constrains it through internal departmental fragmentation, risk-averse operational cultures, and structural centrality that creates legitimacy dependencies for circular SMEs. Overall, the study adds to the existing knowledge by showing how governance can simultaneously support and hinder circular entrepreneurship, by drawing attention to the importance of legitimacy as a form of dependence for SMEs, and by suggesting a more detailed framework for understanding what makes an entrepreneurial ecosystem supportive of circular business development.