Circular Economy Transition in a Business Network : The Actors, Resources, Activities and Institutions (ARAI) Model

Bissah, Emmanuel Tawiah and Mouzas, Stefanos and Stowell, Alison and Ozdemir, Sena (2025) Circular Economy Transition in a Business Network : The Actors, Resources, Activities and Institutions (ARAI) Model. In: The Industrial Marketing and Purchasing Group (IMP) 41st IMP Conference, 2025-08-20 - 2025-08-22, Chalmers University of Technology, Gothenburg, Sweden..

Abstract

In industrial network research, the traditional ARA (Actors–Resources–Activities) model of Industrial Marketing and Purchasing Group developed by Håkansson & Snehota, (1995) has been a fundamental analytical framework that captures the relational dynamics that organise business relationships. Despite, the triadic ARA model offering a strong analytical framework, it significantly undertheorizes the role of institutions and does not account for the institutional environment in which these business relationships are embedded. As sustainability and circular economy transition among businesses within a specific network take centre stage in business and policy agendas, it becomes apparent that the ARA model cannot account for broader institutional influences. This paper presents a fundamental argument for expanding the ARA model to incorporate institutions as a fourth dimension, proposing the ARAI model. The main argument for institutions as the fourth dimension of the ARA model is that actors in a network are embedded in an institutional environment, where institutions are "rules of the game" (North, 1990). Consequently, institutional factors influence the behaviours and preferences of network actors. The ARAI model is then applied to the circular economy concept, and the findings indicate that institutional dynamics play a significant role in shaping the network legitimacy and direction of circular economy practices, rather than institutions being peripheral to network functioning. The developed ARAI model provides a dual-level analytical framework for circular economy adoption by integrating institutional theory into the ARA model, which addresses the gap between interfirm circular economy practices and the macro-level institutional environment. The ARAI model theoretically advances the traditional ARA, adequately taking into consideration the institutional dynamics that influence businesses' sustainability initiatives within the network. The proposed ARAI model enables scholars and practitioners to holistically analyse and understand the circular economy transition in business networks theoretically and practically.