The Role of Institutions in Creating Circular Economy Pathways for Regional Development

Abstract

In the past decade, the circular economy has gained attention as a mechanism of transition toward a regenerative, low carbon, and resource-efficient society. As the history of previous radical transformations shows, successful transition toward the circular economy cannot take place without understanding the institutional features of industrial transformations. This article highlights the significance of institutions by placing the circular economy model in the context of the natural resource–based sector and discusses the importance of institutions in regional path development. The article identifies three institutional determinants of both endogenous and directed transformation toward the circular economy model in the regional context: (i) proximity of physical flows and assets, (ii) maturation and diversity of market networks, and (iii) inherent values and patterns of cooperation. This article offers a starting point for future studies of circular economy transitions and the role of institutions as enabling, as well as at times obstructing transition environments.