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Financing solutions for circular business models: Exploring the role of business ecosystems and artificial intelligence
RISE Research Institutes of Sweden, Digital Systems, Prototyping Society.ORCID iD: 0000-0003-4820-5104
RISE Research Institutes of Sweden, Built Environment, System Transition and Service Innovation.ORCID iD: 0000-0002-3462-5987
RISE Research Institutes of Sweden, Digital Systems, Data Science.ORCID iD: 0000-0002-9567-2218
RISE Research Institutes of Sweden, Digital Systems, Data Science.ORCID iD: 0000-0001-7856-113X
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2023 (English)In: Business Strategy and the Environment, ISSN 0964-4733, E-ISSN 1099-0836, Vol. 32, no 6Article in journal (Refereed) Published
Abstract [en]

The circular economy promotes a transition away from linear modes of production and consumption to systems with circular material flows that can significantly improve resource productivity. However, transforming linear business models to circular business models posits a number of financial consequences for product companies as they need to secure more capital in a stock of products that will be rented out over time and therefore will encounter a slower, more volatile cash flow in the short term compared to linear direct sales of products. This paper discusses the role of financial actors in circular business ecosystems and alternative financing solutions when moving from product-dominant business models to Product-as-a-Service (PaaS) or function-based business models. Furthermore, the paper demonstrates a solution where state-of-the-art artificial intelligence (AI) modeling can be incorporated for financial risk assessment. We provide an open implementation and a thorough empirical evaluation of an AI-model, which learns to predict residual value of stocks of used items. Furthermore, the paper highlights solutions, managerial implications, and potentials for financing circular business models, argues the importance of different forms of data in future business ecosystems, and offers recommendations for how AI can help mitigate some of the challenges businesses face as they transition to circular business models. © 2022 The Authors. 

Place, publisher, year, edition, pages
John Wiley and Sons Ltd , 2023. Vol. 32, no 6
Keywords [en]
artificial intelligence, circular business models, circular economy, digital technologies, finance, product-as-a-service
National Category
Business Administration
Identifiers
URN: urn:nbn:se:ri:diva-61415DOI: 10.1002/bse.3297Scopus ID: 2-s2.0-85142433810OAI: oai:DiVA.org:ri-61415DiVA, id: diva2:1717484
Note

 Funding details: VINNOVA, 2019‐03166; Funding text 1: We are grateful to Vinnova (Sweden's Innovation Agency) for financial support (grant number 2019‐03166) through the research project AID‐CBM: AI Driven financial risk assessment for Circular Business Models.

Available from: 2022-12-08 Created: 2022-12-08 Last updated: 2024-05-23Bibliographically approved

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Fallahi, SaraMellquist, Ann-CharlotteMogren, OlofZec, Edvin ListoHallquist, Lukas

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