Finnish forest-based companies in transition to the circular bioeconomy : drivers, organizational resources and innovations
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This is a self-archived version of an original article. This version may differ from the original in pagination and typographic details. Author(s): Title: Year: Version: Copyright: Rights: Rights url: Please cite the original version: CC BY-NC-ND 4.0 https://creativecommons.org/licenses/by-nc-nd/4.0/ Finnish forest-based companies in transition to the circular bioeconomy : drivers, organizational resources and innovations © 2019 Elsevier B.V. Accepted version (Final draft) Näyhä, Annukka Näyhä, A. (2020). Finnish forest-based companies in transition to the circular bioeconomy : drivers, organizational resources and innovations. Forest Policy and Economics, 110, Article 101936. https://doi.org/10.1016/j.forpol.2019.05.022 2020
Finnishforest‐basedcompaniesintransitiontothecircularbioeconomy:Drivers, organizationalresourcesandinnovations ABSTRACT Forest‐basedbusinessesarethecenterofthetransitiontothesustainableandcompetitive circularbioeconomyinFinland.ThisstudyexploresthetransitionofFinnishFBSfirmstonew businessmodels,withafocusontheorganizationalresourcesandcapabilitiesneededfor transition.Italsoidentifiestheimportantelementsinthebusinessenvironmentandtherole ofinnovationsinthisprocess.Thestudyusesthematicinterviewswithmanagersfromvarious FBSfirmsandcompaniesfrominterfacingsectors,allofwhichhaveoperationsinFinland. Despitethedifferencesbetweenfirms,thestudyfindsmanycommondriversandresources thatFBScompanieshighlightassignificantinthetransition.Thestudyresultsindicatethat intangibleandhumanresourcesareessentialforthetransition.Aninnovative,agile,flexible andencouragingorganizationalcultureisacrucialresource.Thecultureshouldbesupported by non‐hierarchical top management and inspiring employees (so‐called power people). Communication and marketing skills, and innovations developed by teams with diverse knowledge are essential. To successfully manage the transition, companies need a deep understandingofwhatthemarketsandsocietyrequire,andtheymustdeveloplong‐term competiveness through future‐oriented strategic thinking. Pursuing sustainability and innovativeness in internal as well as external organizational environment are essential factors.Thestudypresentsinsightsfortheresearchercommunityandmanysocietalactors aswellasrecommendationsfortheFBScompaniestofacilitatethetransitiontonewcircular bioeconomy businesses.It also contributes to the resource‐based perspectives literature, particularlythedynamiccapabilitiesapproach. Keywords:Forest‐basedsector,Finnishcompanies,Transition,Circularbioeconomy, Resources,Innovations 1.Introduction Societiesandeconomieseverywhereareintransition.Inadditiontothemanywidelyknown global factors, there is also a range of local, more minor change agents affecting the environment.Theefforttocreatemoresustainablesocietiesandeconomiesrequiresnew types of thinking. The transition is also affecting various businesses, forcing them to reconsider business strategies and models. Emerging new business models need to be sustainable,circular,renewable,resource‐efficient,innovativeandinclusive(see,e.g.,Boons, 2013;Bockenetal.,2014;Wells,2016;Hetemäkietal.,2017).Espositoetal.(2018)conclude thattoadoptacirculareconomymodelcompaniesneedtodevelopdisruptivetechnology andbusinessmodelsbasedonlongevity,renewability,reuse,repair,upgrade,refurbishment, servitization,capacitysharing,anddematerialization.Contemporaryunderstandingsofvalue andthemeaningofvaluecreationarealsoundergoingchanges.AccordingtoDeBackeretal. (2015),mostOECDcountriesarecharacterizedbyadecreasingshareof manufacturingin totalemploymentandvalueadded,whereastheroleofservicesisgrowinginimportance.
Innovationsinmanufacturingandservicesareexpectedtobecomeincreasinglybundledin productsandprocesses. Afirm’sexternalenvironment,itscorporateand businessstrategies,anditsresourceand capabilitybaseneedtobecloselylinkedtoeachother(Grant,2010).Forafirmtosustainits competitive advantage, it needs to constantly upgrade its business strategies, models, resources and capabilities. This means that firms become able tomeetthechallengesof developing old resources and capabilities while creating new ones when identifying and respondingtochangingdemandsandopportunitiesinthebusinessenvironment(Teeceet al., 1997; Eisenhardt and Martin, 2000). Different firms have different approaches in developingcapabilities,butinemergingandtechnology‐basedindustriesinnovationsremain thecriticalsourceofcompetitiveadvantageandthekeygoalsofstrategyformulation(Grant, 2010).Tosucceed,companiesdependonfindinginnovativesolutionsthatrespondtoglobal challengesaswellastostakeholders’demands(Hansen,2016;PinkardandO’Grady,2016; Hetemäkietal.,2017). The business environment of forest‐based sector (FBS) companies1 is changing rapidly, becomingmoremultifacetedwithincreasingcomplexities(e.g.,UNECE/FAO,2011;Hansenet al., 2013; Hurmekoski and Hetemäki, 2013; Hetemäki et al., 2017).Theconceptsof sustainability, bioeconomy and circular economy are receiving significant attention in the public discourse, particularly in many public and private sector strategies (de Besi and McCormick,2015;Ghiselliniet al., 2016; Baumgartner and Rauter, 2017). Hetemäkiet al. (2017)arguethatoverarchingsocietalobjectivesforfuturedecadesrequireatransitiontoa circularbioeconomy.Thisindicatesthatconnectingthebioeconomytothecirculareconomy conceptiscriticalbecause,whencombined,thetwoapproachesarestrongerinadvancing thesegoals.ThismeansthatFBScompaniesneedtorestructuretheirbusinessesandcreate novelbusinessmodelsalongwiththedemandssetbythesurroundingenvironment. YetintheliteraturetheFBSisdescribedasamaturesectorwithatraditionalbusinessculture that is focused on costs and engaged in high‐volume production and resistant to change. Thesecharacteristicsarenotlinkedtoinnovativeness(Hansen,2016).Hansen(2016,p.246) statesthat“innovationinthebioeconomywillhappenwithorwithoutcurrentforestsector companies,” and participating in the bioeconomy is not possiblewithoutinnovationin products,processesandbusinessmodels.Thestudiesindicatethatcreatinginnovationcalls forexpertisefromvariousfields,cross‐sectoralcollaborationandnetworks,andthecreation ofnewtypesofconsortia(NäyhäandPesonen,2014;Toppinenetal.,2017).Itisclearthat FBSfirmshavebecomeinterconnectedwithothersectorsandwillbecomemoresointhe future (Hurmekoski and Hetemäki, 2013; Näyhä et al., 2015). Facilitating innovation in traditional firms should begin by emphasizing organizational culture and the top management’scommitmenttothetransition(Hansenetal.,2014;NäyhäandPesonen,2014; Hansen,2016). Finland’sculturalandeconomicdevelopmenthasbeenbasedonforestsforcenturies.Path dependency(seeDosi,1982;NelsonandWinter,1982)isawell‐recognizedchallengeforthe 1Inthisresearch,theterm“forest‐basedsector(FBS)companies”isunderstoodtoinclude,inadditionto companiesinthesector,companieswhichinterfacewiththeFBSorutilizerawmaterialandside‐streamsfrom theFBS.
traditional Finnish forest industries. For example, Poesche and Lilja (2016) describe past capitalintensityandheavyinvestments,intra‐andintercontinentalgamesinmergersand acquisitions, and the narrowly specialized university programs inpapertechnologyas previouskeydriversfor pathdependency in the Finnishforestindustry. However,forest‐ basedbusinesseshavemorerecentlybeenthefocusofthetransitiontothesustainableand competitivecircularbioeconomy(MinistryofEconomyandEmploymentofFinland, 2014; Hetemäkietal.,2017;Näyhä,2019)andmanyFBScompaniesaredevelopingnewproducts fromwood‐basedbiomass,suchasbioenergy,rawmaterialfortextileindustries,nanofibers, biocomposites,biodegradableplastics,polymers,foodadditivesorpharmaceuticalproducts. Apartfromlarge‐scalebiorefineries,thereisalsopotentialforsmaller‐scale,decentralized, highervalue‐addedproduction,aswellasbusinessesbasedonservices(e.g.,Ollikainen,2014; Näyhäetal.,2014;Näyhäetal.,2015;Hetemäki,2017;Hurmekoskietal.,2018).Altogether, itisbelievedthattheFinnishFBSwillinthefutureproducenovelhighvalue‐addedproducts inconjunctionwithtraditionalforest‐basedproducts(Hetemäki,2014;MinistryofEconomy andEmploymentofFinland,2014;Hetemäkietal.,2017;Näyhä,2019). Wiebkeetal.(2018)concludethataholisticperspectiveontheroleofbusinessmodelsfor thesuccessfultransitiontoaforest‐basedbioeconomyisoftenlackingintheliterature,and manystudiesonlyimplicitlyaddresscertainaspectsrelatedtobioeconomybusinessmodels. This study explicitly explores the transition of Finnish FBS firmstonewsustainableand competitive business models as they respond to current societal initiatives for circular bioeconomy businesses. The study asks how companies can attain long‐term competitiveness, what the important elements in the business environment are, and especiallywhatkindoforganizationalresourcesandcapabilitiesareneededforthetransition. Inaddition,theroleofinnovationsandinnovativenessinthisprocesswillbeevaluated.The aimistocreateaholisticpictureofafavorablebusinessenvironmentandresourcesforthe FinnishFBScompaniesasthispictureisdefinedandunderstoodbytheFBSfirmsthemselves. EventhoughtheFinnishFBSisanetworkofactorswitharangeofviewsandunderstandings thatcanalsobeconflicting(Näyhä,2019),theaimistopresentaholisticunderstandingof theseissuesbyincludingdifferentactors. Businessstrategiesandmodels,organizationalresourcesanddynamiccapabilitiesandtheir interdependentrelationshipshavebeenaddressedatthetheoreticallevel.However,there remainsaneedtoexplorethesephenomenaatthepracticalleveltoimproveandupdate theoreticalunderstandings,andlinkthemtonewsocietalchallengessuchassustainability. This empirical study address this need by providing a better understanding of these phenomena,presentingarangeofdetailsanddifferentaspectsrelatedtocompanyresources andcapabilitiesintransformingorganizations.Aspracticalcontributionofthestudy,insights forresearchercommunitybothinforestandmanagementsciences,andsocietalactorscan be introduced. Crucially, the study presents recommendations for the FBS companies to facilitatefirms’transitiontonewcircularbioeconomybusinesses.Italsocontributestothe literatureonresource‐basedperspectivesbyextendingtheunderstandingofthedynamic capabilitiesapproach.
2.Theoreticalbackground 2.1Organizationalenvironment,resources,capabilitiesandculture The firm’s external environment and its strategies, resources and capabilities have to be connectedtoeachother.Forcompanies,particularlyforcompanymanagers,itisimportant to analyze environmental factors around their organization. Forthem,itisevenmore importanttoanalyzehowthefactorsarechangingandwhattheirlikelyfuturedevelopment lookslike.Furthermore,thehigh‐impactfactors—thekeydriversforchangethatwilllikely have significant importance for the companies’ success or failure—should be recognized. Typically,keydriversareinterrelated,andtheyarespecifictoacertainindustryorsector (Johnsonetal.,2008). Johnsonetal.(2008)dividefactorsaroundorganizationsintodifferentlayers.Themacro‐ environment is the highest level, consisting of broad environmental factors that have an impactonnearlyallorganizations.Theindustryorsectorcomprisesthefollowinglayer,andit iscomposedoffirmsproducingthesameproductsorservices.Theinnermostlayeraround theorganizationsconsistsofcompetitorsandmarkets.Withinmostindustriesandsectors, therewillbeavarietyoforganizationsthathavedifferentcharacteristicsandcompetitive bases.Furthermore,inthemarketstherequirementsandexpectationsofthecustomersare different(Johnsonetal.,2008).Thefurtherfromthecenter,thelessimpactthecompanyhas overthebusinessenvironmentwhereitoperates(Cashian,2007). Strategiescanbeseenasalinkbetweencompaniesandtheirenvironment(i.e.,thereneeds tobeastrategicfitbetweenacompanyanditsenvironment)(Grant,2010).Duringthe1990s, theemphasisinstrategyanalysisstartedtoshiftincreasinglytoresourcesandthecapabilities ofthecompany,andthesebecameseenasthemainsourceofcompetitiveadvantage.This emphasishascometobeknownastheresource‐basedview(RBV)ofthefirm(Collinsand Montgomery,1995;Barney,2001).Overall,individualresourcesmustworktogetherinorder tocreateorganizationalcapabilities,andtheresourcesandcapabilitiesformthebasisfor building competitive advantage (Grant, 2010). Helfat and Peteraf (2003, p. 999) define organizationalcapabilities:“Theabilityoforganizationtoperformacoordinatedsetoftasks, utilizing organizational resources, for the purpose of achieving a particular end result.” Organizational capabilities are often used interchangeably with the term “competence” (Hamel and Prahalad, 1992). Furthermore, organizational resourcescanbecategorizedin variousways.Forexample,Grant(2010)dividesthemintotangible(financialandphysical resources), intangible (technology, reputation, culture) and human (skills/know‐how, capacity for communication and collaboration, motivation) resources. Grant also (2010) highlights that in the rapidly changing business environment, strategies are less about developingpositionsofsustainedcompetitiveadvantageandmoreaboutcreatingflexibility and responsiveness to develop successive temporary advantages. Johnson et al. (2008) emphasizetheimportanceofthenotionofstrategymoreas“stretch”than“fit,”meaning that a firm’s internal resources need to be constantly developed to meet environmental changes.Accordingly,HelfatandPeteraf(2003)categorizecapabilitiesas“operational”or “dynamic.” ThedynamiccapabilitiesapproachcanbeviewedasanextensionoftheRBVofthefirm,in whichtheevolutionoforganizationalcapabilitiesinthechangingbusinessenvironmentare
included(Teeceetal.1997;HelfatandPeteraf,2003).AccordingtoZahraandGeorge(2002), dynamiccapabilitiescanbeseenaschange‐orientedcapabilities,whichenablecompaniesto restructuretheirresourcebasesothattheyareabletomeetchangingcustomers’needsand competitors’strategies.Shuenetal.(2014)notesthatwhendynamiccapabilitiesarejoined withstrategy,thecombinationenablescompetenciestobebuiltandrestructuredtorespond to changing markets. Teece (2007) has identified three clusters of dynamic capabilities: sensing change, seizing opportunities and transforming (reconfiguring) organizations. Schoemakeretal.(2018)emphasizesthatinturbulentenvironmentsitisimportanttosense market changes before rivals do. Yet sensing opportunities and threats is not enough. Companies have to seize those opportunities in a timely manner by innovating and implementing new systems. In addition, turbulent environments often call for periodic renewal of company, instead of more incremental change of organizational capabilities. Teece (2018) states that with strong dynamic capabilities, companies can create and implementbusinessmodelseffectively,andacompany’sdynamiccapabilitiesarecrucialina variety of ways to its ability to maintain long‐term profitability.Schoemakeretal.(2018) concludethatdynamiccapabilities,businessmodelrenewal,andleadershiphavetobeclosely connectedtoproducetheinnovationswhichareneededincomplexbusinessenvironments. AccordingtoAmuietal.(2017),duetocomplexbusinessenvironments,manyorganizations havebeensearchingforwaystomakesustainabilityadynamiccapabilitywhichisintegrated infirms’strategiesaswellasintheirbusinessmodels.Forittobecomeacompetitivefactor, sustainabilityhastobeinnovativeandadynamicpartofthestrategy.InlinewithAmuietal. (2017),Mousavietal.(2018)arguesthatsensing,seizingandreconfiguringcapabilitiesand relatedorganizationalroutinesallhaveanessentialimpactonafirm’ssustainableinnovation activities.Theyidentifysensingasthemostinfluentialdynamiccapabilitybecauseithasa directeffectonfirms’sustainableinnovation(Mousavietal.,2018). The literature presents a variety of definitions for organizational culture and models for assessing it. Organizational culturewasrecentlydefinedbyGroysbergetal.(2018,p.4): “Cultureisthetacitsocialorderofanorganization:Itshapesattitudesandbehaviorsinwide‐ ranginganddurableways.Culturalnormsdefinewhatisencouraged,discouraged,accepted, orrejectedwithinagroup.Whenproperlyalignedwithpersonalvalues,drives,andneeds, culturecanunleashtremendousamountsofenergytowardasharedpurposeandfosteran organization’scapacitytothrive.”Furthermore,Groysbergetal.(2018)haveidentifiedfour generally accepted attributes for organizational culture: shared, pervasive, enduring and implicit.Sharedmeansthatculturecannotexistsolelywithinasingleindividual,butitliesin shared behaviors and values. Pervasive indicates that culture penetrates the whole organization.Enduringindicatesthatorganizationalculturecandirectitsmembers’actions andthoughtsoverthelongrun.Withcollectiveexperiencesandtheeffectsoflearningonit, organizationsaremorelikelytoselectemployeeswhoappeartofitintheorganization.Over time, firms become resistant to change and external influences. Fourth, an often too unnoticedaspectof cultureisimplicit,concerningtheabilitytorespondtoandrecognize culture instinctively. Since the ability to sense culture appearstobeuniversal,particular themesshouldbeexpectedtotakeplaceacrossthevarietyofdefinitionsandmodelsinthe field. Furthermore, it is perceived that organizational culturegreatlyinfluencesthe development of capabilities. For example, Hock et al. (2015) found in their analysis that
novelty‐oriented cultural values promote capabilities (strategic sensitivity, collective commitment,resourcefluidity),whichadvancesbusinessmodelinnovation,butefficiency‐ orientedculturalvaluesdonotindicatepositiveeffects. 2.2Innovationsandinnovativeness RecentdiscussionsonfutureviewsofFBSareinevitablylinked with innovations and innovativeness.Likewise,therehavebeenvariousattemptstopromoteinnovationsinthis sector.Theseattemptshavebeenfacilitatedbyarangeoffoundationsandprograms,such astheEU’sForest‐BasedTechnologyPlatform(FTP,2018). ThedefinitionsofinnovationsandinnovativenessgiveninFBSstudieslargelycomplywiththe definitionsgiveninotherfieldsaswell.AccordingtoHansenetal.(2006,p.4),“Innovationis creationand/oradoptionofnewideas,processes,products,orservicesthatareintendedto increasevaluetothecustomerandcontributetotheperformanceoreffectivenessofthe firm”.Hansenetal.(2014,p.1344)defineinnovativenessasfollows:“aninnovativeindividual orfirmtendstobeanearlyadopterofnewconcepts,productsandtechnologies;tendsto developorcreatenewideas,conceptsandproducts;orsomemixofthetwo”(seealsoGebert et al., 2003; Rogers, 2003). Furthermore, the difference between innovativeness and innovationisclarifiedbyHansenetal.(2014,p.1344):“innovativenessischaracteristicofan individualorcompany,whileaninnovationisanoutcome,notacharacteristic.”However,in thisstudy,therespondentspartlytendtousethesedefinitionsinterchangeably. The level of innovation activity within an industry sector differs generally based on the industry life‐cycle (namely, introduction, growth, maturity anddecline;Utterback,1994). Productinnovationintensityisgenerallyhigherintheearlyphasesofthelifecycle,whereas process innovations become more important as product innovation declines (Utterback, 1994).IthasbeenindicatedthatFBScompaniesareinnovativein terms of their manufacturing processes, but less proficient in terms of product and business systems innovation,despitethefactthattheselasttwoaretheinnovationtypesmostcruciallyneeded inthetransitiontoabioeconomy(Hansen,2016). Hansen et al. (2014) indicated that within the forest sector, culture is a key driver of innovation.Otherstudieshavenotedthattopmanagementhasacentralroleincreatingan innovativeorganizationalculture(BjörkdahlandBörjesson,2011;NäyhäandPesonen,2014; Hansen,2014;2016).Inaddition,ithasbeenindicatedthatcompanymanagersmaywrongly believethatwhenindustryhasreachedthe“mature”phaseofthelife‐cycle,itisalsobeyond innovation(McGahan,2000).Thesetypesofmanagerialchallengeshavealsobeenfoundin the FBS; previous studies have indicated challenges in innovativeness and innovation managementintraditionalFBS(e.g.,NäyhäandPesonen,2014;Bulletal.,2015). Inthepast,environmentalperspectiveshavelargelybeenneglectedininnovationresearch agendas,butnowadayssustainabilityisoftenseenasamaindriverforinnovations(Nidumolu etal.,2009;Adamsetal.,2012).Variousterms,suchas“eco‐innovation,”“greeninnovation,” “sustainableinnovation”and“environmentalinnovation,”isusedforreferringtoinnovation with an emphasis on environmental sustainability (Varadarajan et al., 2017; Xavier et al., 2017).Varadarajan(2017)appliestheterm“sustainableinnovations”inhisstudy,highlighting
that most sustainable innovations decrease the impact of the company’s activities on ecosystems,ratherthanbeingsustainableinnovationinthestrictestsense. 2.3Theoreticalframeforthestudy Inthisstudy,firsttheJohnsonetal.(2008)modelisappliedfororganizingvariousfactorsin thebusinessenvironment,whichtherespondentsindicateaskeyfactorsforfacilitatingthe transitionprocessintheFBS.However,ithastobenotedthattheauthorhaslooselyfollowed thepresentedmodeland,forexample,combinedtwooftheinnermostlayers.Secondly,the organizational resources of the companies needed for the transitionareorganizedinto tangible,intangibleandhumancapabilities,followingroughlythedivisionpresentedbyGrant (RBV,p.127,2010).FigureA.1illustratestheframeworkdescribedabove,andalsorefersto thenumberingintheresultssectionwherethefindingsinquestionarepresented. Thefeaturesoforganizationalculturehighlightedinthisstudyarediscussedinrelationto attributesidentifiedbyGroysbergetal.(2018).ThefocusofthisstudyistoidentifyFBSfirms’ change‐orientedcapabilitieswhichwillenablethemtorestructuretheirresourcesfornew business models. Resource‐based perspectives, particularly the dynamic capabilities approach, are thus used to form the theoretical basis for reflection on the findings. The findingsofthisstudyarefurtherdiscussedintermsofotherrecentstudiesconductedonthe FBS. Fig.A.1.Frameworkforstructuringenvironmentaldriversandorganizationalresourcesand capabilitiesoftransformingFBScompanies.Thenumberinginthefigurecorrespondswiththe numberingintheresultssections(modifiedfromJohnsonetal.2008;Grant,2010). 3.Materialsandmethods ThemethodologyusedherehasalsobeendescribedearlierinNäyhä(2019),becausethedata for both manuscripts were gathered from the same interviews. In spring 2017, semi‐ structuredthematicinterviewswereconductedwith18companyexecutivesandmanagers from17firmsrepresentingvariousforest‐basedindustriesandinterfacingsectors.Allofthe participatingcompaniesweredevelopingorinvolvedinthedevelopmentofnewproducts andservicesaseithersupplementstotheirportfolioorasmainproducts.Allofthemutilized wood‐based raw material, andoften the use of side‐streams was indicated as playing an importantroleintheirproduction.Additionally,theinterviewedfirmsallhaveoperationsin Finland.Thecompanieswerechosensothatasmanydifferenttypesofcompaniesaspossible wereinvolvedinthestudy.Thus,theFBScompaniesandthefirmsinterfacingwithintheFBS that participated have different business strategies, models, features and products. The companiesvaried,forexample,inmaturity,size,growthplans,marketorientationandthe role of new products versus old products in their portfolio and exchanges (business‐to‐ business/business‐to‐consumers).InadditiontotraditionalFBSproducts,thereweremany newwood‐basedproductsandservicesrelatedtothoseunderstrategicplanning,research anddevelopment,commercializationand/orproduction.Theseincludedbiofuels,bioenergy, biochemicals,biocomposites,textilefibers,biomedicines,healthcareproducts,foodindustry
additives, new types of construction and building materials, interior design products, and packagingmaterialsandsolutions.Overall,thescaleoftheparticipatingcompaniesvaried fromlarge,traditionalandmatureFBScompaniestransitioningtonewbusinessestosmall start‐upcompanies.Mostofthecompaniescategorizedthemselvesprimarilyasbioeconomy actors,andmanyconsideredthemselvesbothasbioeconomyandcirculareconomyfirms. (Formoreoncompanyperspectivesonthebioeconomy,circulareconomyandsustainability, seeNäyhä,2019.) Theintervieweesweregiventhemaininterviewtopicsbeforehandduringtheinitialinquiry, sothattheywouldbeabletoassesiftheywerelikelytopossessadequateknowledgeabout theinterviewthemes.Inotherwords,arequirementfortheintervieweeswasknowledge abouttheresearchtopics.Thepersonnelcontactedheldleadingpositionsinthefirms(e.g., CEO,chiefdevelopmentofficerorchiefsustainabilityofficer). Asawhole,theinterviewquestionnaireconsistedofthreeparts:1)businessmodelsand conceptualization;2)roleinthemarkets,competitivenessandresources;and3)foreseeing thefuture.Thismanuscriptisbasedmainlyonthesecondpart, and specific interview questions are presented in Appendix A. Depending on the respondent’s knowledge and willingnesstoelaborateoncertainquestionsorthemes,additionalquestionsmayhavebeen askedor,respectively,certainquestionswereleftout. Overall,thedatawereapproachedmainlyinductively(seePatton,2002,p.56;Thomas,2006, “generalinductiveanalysis”),meaning,forexample,thatthecoding(seealso“opencoding”, inStraussandCorbin,1998;KovalainenandEriksson,1998)wasnotlimitedtothe predeterminedthemesortheoreticalframeworks.Aninductiveapproachwasseenasthe bestapplicableoptionforexaminingtheongoingnoveltransitionphenomenaandrelated limitedanddispersedinformationontheissuesbeingstudied.However, it needs to be mentionedinthiscontextthatapurelyinductiveapproachisnotpossibleinanyresearch, becauseitwouldrequirethattheresearcherhasnopreconceptionsonthestudiedtopic(see Patton, 2002; Eriksson and Kovalainen, 2008). In this study, elements of the deductive approachwereincluded,forexample,wheninterviewquestionswereformulatedandthe resultswerepresentedandinterpreted,aspreviousstudiesandtheoreticalframeworkswere exploredforfindingvariousanglestoapproachtheissuesbeingconsidered(seealsoPatton, 2002, p. 56). Overall, researchers often apply both induction and deduction in different phasesintheirstudies,asisthecaseinthecurrentstudy,sometimesreferringto“abduction” asanapproachtocombineinductionanddeductioninoneresearchproject(Kovalainenand Eriksson,1998). Thedatawereexaminedusingthematicanalysis(BraunandClarke,2006;Guestetal.,2006). TheinterviewsweretranscribedandATLAS.tiwasusedasananalysis tool. The analysis looselyfollowedthestep‐by‐stepguidepresentedbyBraunandClarke(2006).Basicrulesfor opencodingcreatedbyErikssonandKovalainen(2008,p.164,modifiedfromStrauss,1990; StraussandCorbin,1998)werealsoappliedduringtheanalysisprocess.Theinterviewswere firstreadthroughinordertoobtainanoverallunderstandingofthecontents(similarlyto opencoding).Thenextphasewastocodepreliminarythemes(notethatcategoriesareused interchangeablywithcodesinthisstudy)inthedatathatwereevaluatedasbeingofcentral importanceinrelationtotheresearchgoal(i.e.,understandingthethemeissimilartothe description presented by Braun and Clarke (2006, p. 10): “A theme captures something
companies,andalsobetweenfirmsandtheirpotentialcustomers,shouldbestartedearlier thancurrentlyisthepractice;brainstormingofinitialideasshouldalreadybedonetogether. Potentials related to small‐scale production, utilizing minor raw material streams and producing higher value‐added products should be explored carefully. Some of the respondentscriticizedthatlargecompanies(whichtraditionallybasetheirbusinessesonbulk production)donotknowhowtomanagetheprocessesofhighervalue‐addedproducts,nor do they have the patience or resources to conduct R&D if there is no profit in a short timeframe. In addition, some respondents pointed out that large companies often lack knowledgeabouttheendmarketsoftheseproducts(seealso4.4.2).Alsointhiscontext,the respondentsrecommendedcollaboration,particularlywiththoseactorswhicharecloserto thecustomersandendmarkets. 4.4.2Knowledgeofnewmarkets,organizationalcultures,communicationandmarketing According to this study, a needed knowledge base and technical skills are often found in Finnishcompanies,comparedtocommunicationandmarketingskills,whichareindicatedto be inadequate in many ways. The respondents pointed out that communicating and marketing are especially problematic for small companies because they do not have the resourcesneededfordevelopingthoseskills. Quotation8 The knowledge of value chains andinternational markets is crucial for those companies, transitioningtowardnewbusiness.Thechallengesidentifiedincludedthefrequentneedto findnewmarketsandthelackofvalidityforoldwaysofmarketing traditional products. Therefore, alongside communication and language skills, knowledge of different organizational and national cultures is important when enteringnewmarkets.Different customersoftenneedmarketingmessagesandstrategiesthatarespecificallymodifiedand targetedfortheirneeds.Theintervieweesstressedthatsometimesissuesconsideredself‐ evident by the companies are difficult for their customers to understand. They also emphasizedthatfirmsshouldmarkettotheircustomersthefeaturesandvalues(seealso Section4.2.)relatedtoacertainmaterial,productorservice,notonlyproductsorservicesas such. Quotation9 The respondents emphasized that Finnish people are too modest when marketing their knowledgeandnewproducts,aqualitythatiswidelyrecognizedasachallengeforFinnish companies in various fields. The interviewees highlighted, however,thatthereisanew generationemergingwith newcapabilities,confidenceandabolderattitude. Overall,the respondents emphasized that an understanding of the business environment, its requirementsandmarketdynamicsisthebasisforasuccessfulnew business. A lack of marketingskillsandresourcesfordevelopingthose,aswellastheneedformoreconfident attitudehavebeenrecognizedasachallengeinFinlandinavarietyofcontexts,suchasin
numerousministryreports(Lahtinenetal.,2016;Rikama,2017),publicdiscussion(Kalliola, 2018;Laaksonen,2018)andacademicstudies(Kauppinen,2017;Nurmi,2004). 4.4.3Flexibleemployeesandmultidisciplinaryteams Employeesarethecrucialresourceforcompaniesandthewellbeingofthepersonnelwas highlightedinthestudy. Quotation10 Agileorganizationscannotexistwithoutflexibleemployees.Areadinesstorethinkandthe abilitytolearnareimportantfeaturesforemployeesworkinginthetransformingcompany. Markelova Evans and Salaiz (2018), among others, argue that in fast changing business environments,utilizingemployees’abilitiestosenseandseizenewopportunitiesisavaluable intangibleorganizationalassetwhichcanhelpfirmscreatedynamiccapabilities.Theresults ofthecurrentstudysuggestthattheseabilitiesarespecificallyimportantforpeoplealready workinginthefieldorasseniorsinthefirms.Thisreflectsthefactthattraditionallyinthe Finnishforestindustry,leadersandmanagershavebeenhiredfrominsidetheorganization, oftenmeaningthattheyhavelongcareerpathsinthesamecompany.Somerespondents differentiatedbetweentherolesofemployeesintheinnovationprocess,dividingtheminto employees who innovate and people who conduct the actual research and development work;atthesametime,theystressedthatbothtypesofemployeesareneeded.Independent thinking, not leaning too much on supervisors, was highlighted by the respondents. In addition,commitmenttothetaskathandwasseenasanimportantability.Understanding regulatoryframeworksinthedifferentbusinessenvironmentsaswellasbeingfamiliarwith sustainabilityvaluesandthegoalsofthecircularbioeconomywerealsoseenasimportant capabilitiesofemployees. Employeesareneededwhohaveaninterdisciplinarybackgroundand/orcertainspecificskills (such as design and architectural know‐how, electric automation skills, logistical understanding,laboratoryskills,ecological,microbiologicalandbiochemicalknowledgeand knowledge of conversion technologies) that can respond to the various needs of the transforming companies. Naturally, specific know‐how in wood‐based raw material is important,butemployeesoutsidetheFBS(e.g.,fromcosmeticsorcarorfoodindustries) shouldalsoberecruitedinordertocreatenewtypesofsynergies. Quotation11 Theimportanceofheterogeneoushumancapitalfordevelopingcapabilitieshaslongbeen recognizedinthecontextofRBV(seeBarneyetal.,2011). In relation to understanding customer demands (see 4.4.2 above), the interviewees emphasized a customer‐oriented approach and service skills, referring to the ability of employees to conduct successful dialogue and interactions with customers. Marketing experienceandabetterunderstandingofnewmarketscouldbeattainedalsobyhiringpeople
outsidetheFBSorthroughpartners.Overall,theroleofintra‐andinter‐organizationalteams, combiningdifferenttypesofknow‐how,washighlighted. 4.4.4 Non‐hierarchical top management and “power people” as a source of innovative atmosphere Thecrucialresourceintermsofsuccessfultransitionistheleadershipoftheorganization.The respondentsemphasizedthatcompact,notoverlyhierarchicaltopmanagementisneededto support finding new directions. Top‐down management and hierarchical and/or a matrix organizationalstructure(whereseparateteamsareresponsibleforinnovating)wereseenas problems,particularlyinlargecompanies.Thisconnectswiththeviewthatsmallercompanies andstart‐upcompaniesareoftenalsoseentobemoreflexibleandmoreagiletoreactto changes. The respondents indicated that the main tasks for management are to guarantee innovativenessandtheagilityofthecompanybymeansofanencouragingatmosphereand keyresources.Managementneedstoindicateencouragementandtrustvis‐à‐visemployees’ innovativeness,andtheyhavetochallengeemployeestothinkdifferently. Quotation12 Inaddition,recruitingnewemployeeswithvariousbackgroundsandnewideaswasindicated to be an important responsibility of company management. Schoemaker et al. (2018) highlighttheimportanceofleadersandofstrategicleadershipskillssuchastheabilityto challengecurrentmindsets,engageotherstodevelopnewinsightsandprovidecompelling strategicvisions. Someoftherespondentsalsostressedthatsmallstart‐upcompaniesoftenhaveresearchers in the lead positions of the organization, which may not be an ideal solution. Overall, it appearsthatthemanagementofstart‐upcompaniesneedtomanage“thewholepicture”; theyoftenneedversatileskillsstartingfrominitialinnovationdevelopmentandfindingrisk funderstopersonnelmanagement,scaling‐upandmarketing.Accordingly,Schoemakeretal. (2018,p.37)pointoutthatasinglevisionaryleaderinasmallstartup“isapossibleshortcut”, butinmostcasesitrequirestime,effort,andteamwork.Thesefindingsinturnpointstothe needforsupportmechanismsforstart‐upcompaniesatboththelocalandnationallevels. Importantly,itwasbroughtupthateveryorganizationneeds“powerpeople,”thosewhoare particularlyenthusiasticandinspireotherstousetheircreativenessandtobeinnovative. 5Discussion Forfirmsandtheirmanagers,RBV(seeGrant,2010)emphasizesthatitisimportanttoanalyze environmentalfactorsaroundtheorganization.Thedynamiccapabilitiesapproach(seeTeece 2007;2018)highlightscompanies’abilitiestoaddressenvironmentalchangeandrenewtheir resourcesinawaythattheycaninnovateandrespondtochangewhilemaintainingtheir
competitiveness.Thisstudyindicatesthatlarge‐scalecompaniesandSMEsinFBSareable recognizeandanalyzepresentbusinessenvironmentalfactorswell.Thefirmsseemtohavea thoroughunderstandingoftheresourcesandcapabilitiesneededfortransition,andtheyare abletorecognizerelatedbottlenecksandchallenges.Thoughthechallengeshavelargely been identified, this study demonstrates that the developmental pathways and concrete processestosolvethechallengesanddevelopnewcapabilitiesareofteninsufficient.Interms ofclusterofdynamiccapabilities(Teece,2007,seealsosection2.1),“sensing”appearstobe theleastchallengingforcompanies,whereasactual“transforming”ismuchmoredifficult.In addition,thecompanieshavedifficultyanalyzingfuturedevelopmentsintheirsurrounding environmentandreformulatingtheirbusinessmodelsandactionsaccordingly. 5.1Intangibleandhuman‐relatedcapabilitiesasfacilitatorsfortransition Thisstudyemphasizesseveralintangibleandhuman‐relatedcapabilitiesoftheorganizations askeyfacilitatorsforthetransitionofthecompanies. Thecurrentstudyindicatesthataninnovative,agileandencouragingorganizationalculture, whichinturnfacilitatesthedevelopmentofneededresources,capabilitiesandinnovations, createsthebasisforsuccessfultransitions.AlthoughseveralotherFBSstudiesalsoindicate theimportanceoforganizationalcultureandatmosphereonthedevelopmentofcapabilities, innovativeness and innovations (see Björkdahl and Börjesson, 2011; Hansen et al., 2014; PesonenandNäyhä,2014;Toppinenetal.,2017),itissomewhatsurprisingthatthecultural perspective was highlighted so prominently in this study. Efficiency goals and efficiency‐ oriented cultural values have been indicated to have negative effects on business model innovation,whereascapabilitiessuchasresourcefluidityandstrategicsensitivitypromote innovations(Hocketal.,2015).In thisstudy,efficiencyorientationwasseenasatypical featuremoreforlarger,maturecompanies,affectingfirms’innovativenessaswell.Previous studies also suggest that systematic strategies, structured processes and implementation guidelinesoninnovation‐relatedactionsarelackingincompanies,andmanagementshould paymoreattentiontothisaspect(Hansenetal.,2007;2014;BjörkdahlandBörjesson,2011). Relatedtothis,Hansenetal.(2010)highlightthatmoreinnovation‐focusedorganizational culture is needed in companies, which in turn should be supported by policies and more industry‐focusedacademicresearchandeducation.Thiscurrentstudyfullysupportsthese views. Accordingtothisstudy,topmanagersand“powerpeople”areasourceofinnovativeand encouraging atmosphere in companies. The top management’s key role in creating an innovative organizational culture has been highlighted in otherFBSstudiesaswell(e.g., Björkdahl and Börjesson, 2011; Näyhä and Pesonen, 2014; Hansen, 2014; 2016). It is noteworthy,however,thatthecurrentstudyindicatesthatitisnotonlythetopmanagers, who have a great impact on atmosphere and culture, but also other inspiring employees (“powerpeople”) who encourage theircolleagues.In addition, thisstudy pointstomulti‐ skilledemployeesandteams,whichcanbesupportedbynon‐hierarchicalstructuresinthe companies,ascriticalresources.
Thekeyroleofhumanresources,particularlythatoforganizationleadersandemployees,as asourceofdynamiccapabilitieshasbeenrecognizedinnumerousotherstudies,asreported in several contexts in the results section already. Teece (2007; 2018) states that strong dynamiccapabilitiesarenotattainedwithoutbusinessmodelsthatsupportinnovativeness. In most cases managerial competencies are crucial for refining business models so that innovativeness is possible in companies (Teece, 2007; 2018). Since dynamic capabilities encompassavarietyoforganizationalprocesses,theyrequireleaderswhoareabletodesign and operationalize them in a specific organizational context (Schoemaker et al., 2018). Wolgemuth et al. (2019) indicates that managers can facilitate employee participation throughtrustandinformalcontroloftheiremployees.Yettheyalsoconcludethatdynamic capabilitiesarenotonlyamanagerialtask,asisoftenpresentedintheliterature;instead, employee involvement helps companies unleash the strategic valueofthedynamic capabilities.Theyproposethatcompanieswhichinvolveemployeesindecisionmakingand transition processes seem to make more considered decisions, adjust more quickly, and facilitatethetransitionprocessmoreefficiently.Overall,theresultsofmystudyandofothers suggestthattransformingFBScompaniesshouldfocusonthecapabilitiesandskillsoftheir leadersandmanagerssincetheyhaveacrucialroleincreating the atmosphere and encouragingtheiremployees. Furthermore,thefindingsofthisstudyreflectthatsuccessfuldevelopmentofcompetencies requires common, cross‐organizational values, goals and cultural understanding. These findings bring to the fore the organizational culture attributes of shared and pervasive (identifiedbyGroysbergetal.2018),whichmeansthatcultureexistsincommonvaluesand behaviors that penetrate the whole organization and further influencethecapacity development.Groysbergetal.(2018)alsorecognizedenduringasoneoftheattributesofthe organizationalculture.Oneofthedangersrelatedtothisattributeisthatinthelongrun companiescanbecomeresistanttochange.Thisphenomenonhasbeenclearlyrecognizedin earlierstudiesinmatureforestindustrycompanies(seeNäyhäandPesonen2012;2014).As previously noted above, innovations, flexibility and agility were raised as important capabilitiesforfirms’transitions,andtheywereseenaschallengesforlargercompanies(see alsoPoescheandLilja,2016).Itisinteresting,however,thatinthecurrentstudylargeFinnish FBScompanieswereatthesametimealsoconsideredasforerunnersintermsofnewforest‐ basedbusinesseswhencomparedtoothercountries(seealsoNäyhä,2019). The respondents recognized the need for multidisciplinary knowledge, referring to recruitmentsoutsidetheFBSandthecreationofintra‐andinter‐organizationalteamsand partnerships, which in turn can facilitate the adoption of new practices and transition. Creatingpartnershipsinordertopromoteintellectualcapacitiesandinnovations are also emphasizedinearlierstudies.Forexample,Dangelico(2016)emphasizesbuildingnetworks andcross‐functionalinteractionwhendevelopingsuccessfulgreenproductinnovations.Roos etal.(2014)concludethat makingcontactsandsharingknowledgeareimportantforthe innovation process and market launch. The use of open innovationinthecontextof sustainability innovations has also been studied (e.g., Rauter et al., 2018), and the involvementofdifferentpartnersinthefirms’processescanprovidebeneficialknowledgein termsofcompanies’innovationactivities.However,thisstudyalsobringsupthelackoftrust
between the actors as a challenge, and therefore, genuine collaboration and information sharingaretheissueswhichshoulddefinitelyreceivemoreattentionintheFinnishFBSinthe future. Thisstudyidentifieschallengesincommunication,marketingandcommercialization.Deeper interactionbetweenthecompaniesandtheircustomers,andbetweenthefirmsandtheir otherstakeholders,shouldbeestablished,sothatfirmswouldbeabletounderstandand respond to stakeholders’ current and future needs and values.In addition, Finnish actors often lack the courage and bold attitude when marketing their products and know‐how. Thesephenomenahavebeenwellreported in several otherFBSstudies (e.g.,Näyhäand Pesonen,2014;Hansenetal.,2014;Toppinenetal.,2017).Forexample,Roosetal.(2014) emphasize companies’ knowledge about end‐users in the commercialization of new materials.Thetypesofskillsandmarketexpertiseneededaredifferentthanthoseusedwhen marketingtraditionalbulkproducts.Theyfurthersuggestthatproducersneedtoidentifynew valuesrelatedtonewmaterials(Roosetal.,2014).Thisimportantperspectiveisindicatedby thecurrentstudyaswell:firmsshouldfamiliarizetheircustomersbetterwiththevaluesand featuresspecifictoacertainmaterial,productorservice.Thisstudyalsopointsoutthatthe samevaluebasisconnectscompanies and their customers, creating unique, long‐term relationships.Thisindicatesthatstrongstakeholderorientationisessentialtotransforming companies.(Seesection5.2foramoredetaileddiscussiononforestindustry’sstakeholder orientation.)Overall,challengesincommunicatingandmarketingseemtobewellrecognized amongthecompanies,butforsomereasontheseremainunsolvedintheFinnishFBSandin Finnishsocietyatlarge.Thisissurprisingbecausepayingattentiontotheseiscrucialforthe successofnewbusinesses.Forcompaniesitwouldbeimportanttorecognizetheshared values and communicate these to their customers. Firms should also strive to offer alternativesforproductsandservicesinordertomeetneedsthatcustomersdonotevenyet recognizethemselves.Theaimshouldbetofulfilltheircurrentneedsaswellastheirfuture ones(seealsoHameland Prahalad, 1994).Thisrequiresthatcompanieshaveathorough understandingoftheircustomers’valuesanddemandswhilemakinganefforttounderstand futureneedsthroughstrategicforesightpractices(seealsoVecchiatoandProveta,2010). TransformingFBScompaniesshouldalsoproudlymarkettheirnewproducts(seealsoTable 2). Yetalongsideinternalresourcesandcapabilities,supportfromthebusinessenvironmentand interaction between different actors is needed tofacilitate transitionThisstudyidentifies global sustainability goals and the aims for sustainable circular bioeconomy—indicated in manytermsbyEUandnationallevelpolicies—asdriversforFBStransition.Coreissuesthat alsoneedtobegivenmoreemphasis,andwhicharespecificallyconnectedwiththeFinnish society and mentality, are the general attitude toward entrepreneurship, and how the unsuccessfulentrepreneursaretreated.Bankruptciesareoftenseenasmassivefailures,and losingfaceinunsuccessfulbusinessesisseentobetoorisky(seeNurmi,2004).Thesehavea negativeeffectonestablishingnewFBSinitiativesandstart‐ups,eventhoughadevelopable initialideawouldexist.However,theseareverychallengingissues,deeplyrootedinFinnish culture, to be influenced. The respondents expressed hope in a new, bolder generation bringing a change in attitudes, but such a shift hardly occurs unaided. Developing and
establishingasupportsystemandstructureswillfacilitatethedevelopment.Forexample, betterrisk‐financingandlocalnetworkswouldbeimportantforSMEs.Itisalsoclearthat behavioralchanges,teamworkskills,encouragementofself‐esteemandpositiveattitudes towardentrepreneurshipshouldbeincludedineducationatanearlyphase.Ingeneral,the Finnisheducationsystemisseentobeofahighquality,buttheemphasismightbetoomuch ontechnicalskillsandnotenoughonmarketingandcommunicationskills. 5.2 Strategic evolution and future development of FBS businesses: creating stronger stakeholderandsustainabilityorientation Asstatedinsection5.1,FBScompaniesfacechallengesinexploringandforeseeingfuture developments in their business environment, which in turn creates difficulties in their strategicplanning. AccordingtoToppinenetal.(2013),thestrategicorientationof the forest industry has developed through four distinct stages. The first started in the 1950s from forestry orientation, continued through production orientation, market/customer orientation, and sustainability and increased stakeholder orientation in 2010s, along with growing service orientation.Respectively,forthefuture,Toppinenetal.(2013,pp.419–420)highlightthe importance of three development areas in forest industry’s strategic orientation: “(1) continuingoftherequiredadjustmentstrategiescoupledwiththechanginggeographicfocus in the face of changing industry demand and relative competitiveness between different productionandconsumptionregionsintheworld,(2)addressingtheroleofindustryinthe overallgoalsandagendastowardgreeningeconomiesandglobalsustainabledevelopment, and(3)foreseeablesocietaldevelopmenttowardgrowingserviceorientationinbusiness‐to‐ businessmarkets”. Whentheyareexaminedinthelightofstrategicevolutionandfuturedevelopmentpaths presented by Toppinen et al. (2013), the results of this study suggest that the studied companiescontinuetorelyoncustomerorientationtosomeextent.Thisappearstobethe caseeventhoughthefirmsclearlyindicatedtheirambitiontoincludebroadviewsandthe demands of various stakeholdersin their strategic development. Strong stakeholder orientation,however,requiresdeepinteractionandsharedvaluesbetweenthecompanies andtheircustomersandotherstakeholders.Fromaresource‐basedperspective,stakeholder managementandrelationswithkeystakeholdershavelongbeenrecognizedasoneofthe crucialstrategicresourcesaffectingthecompany’scompetitiveness(seeHillmanandKeim, 2001). Teece (2018) emphasizes that designing good business models requires a deep understandingofcustomers’needsaswell.OneofthemainchallengesinFBSisthattransition towardsmoreversatilebusinessmodelsandexpandedproductportfoliosalsomeansgreater variations in stakeholders’ views, which inturn creates further challenges to fulfilling the possiblyconflictingdemandsofstakeholders(Mikkilä,2006;Joensuuetal.,2018). Itisnotablethatthecurrentstudyindicatesthatcompanyrepresentativesassessustainability asbeingatthecoreoftheirfirms’visions,strategiesandbusinessmodels.Theybelievethat sustainabilityaspectsareconsideredthroughoutthetransitionprocessesinthecompanies (seeNäyhä,2019).Forexample,beingfamiliarwithsustainabilityvaluesandgoalsaswellas
withtheprinciplesofthecircularbioeconomyisseenasanimportantsetofcapabilitiesfor employees to possess. The objectivity of these respondents’ evaluations on their own company’ssustainabilitymanagementandimplementationcanbequestioned.Yetitisclear thatsustainabilityhas,nowandincreasinglyinthefuture,apredominantroleasadriverand asachallengeforFBScompanies.Likewise,sustainabilityisanimportantpartofthestrategy formulation processes as well as of the actual strategies of firms in a fast‐changing environment.Thisimportancemakesitadynamiccapabilitythatenablesfuturesuccessand long‐term profitability (see also Amui et al., 2017; Teece, 2018). Aligning further with resource‐based perspectives, CSR and sustainability‐related activities are seen to provide bothinternalandexternalbenefitsforthecompanies.Thesebenefitscanhelpcompaniesto developnewresourcesandcapabilities(suchasknow‐how,corporateculture,reputationand employeemotivation)thatfacilitatecompanies’strategic,sustainablecompetitiveadvantage (BrancoandRodriquez,2006;Barney,2011;WilliamsandSiegel,2011).Toppinenetal.(2013) further state that, in the future, corporate responsibility activities will increasingly be an inseparablepartofforestindustrycompanies’strategicmanagement.Sustainabilityisalso nowadaysoftenseenasamaindriverforinnovations(Nidumoluetal.,2009;Adamsetal., 2012). In this studyservices‐based business were discussed relatively little (which is naturally affected also by the selection of the involved companies), indicating that the third developmentalpathpresentedbyToppinenetal.(2013)isstilllargelyunrealizedamongthe FinnishFBScompanies.However,otherstudies(suchasNäyhäetal.,2015;Pellietal.,2018; Pelli,2018)havedemonstratedthatthesignificantpotentialrelatedtoFBSservicesbusiness shouldbegivenmoreemphasis. 6Conclusionsandrecommendations FinnishFBScompaniesindicate,inboththeircurrentactionsandtheirfutureplans,astrong willingnesstoparticipateinasustainablecircularbioeconomy(seealsoNäyhä,2019).This studyexploredthetransitionofFBSfirmstowardnewbusinessmodelsascompaniesseekto respondtocurrentsocietalendeavorsformoresustainableeconomies.Thespecificaimof thisstudywastoanalyzekeybusinessenvironmentdriversandorganizationalcapabilitiesas wellasexploretheroleofinnovationsandinnovativenessinfirms’transitions. This study supports the views of previous FBS studies in many ways, but it also presents interestingfindingsthatarespecifictotheFinnishFBS.DifferentFBSactorshavevarious goalsandbusinessmodelsintheirpursuittofulfillthedemandsandexpectationsoftheir customersandstakeholders,andawidevarietyofcapabilitiesandexpertiseareneededin companies.Thisstudyshows,however,thattherearemanycommonresources,features, challengesanddriversthatvariousFBScompanieshighlightassignificantinthetransition process, a surprising finding considering the many differences in the features of the participating firms. Importantly, in this study various intangible and human‐related organizational capabilities and resources were given the most notably emphasis by the respondents.Inshort,transitionrequiresflexibleemployeesandmultidisciplinaryteamsand
collaborationnourishedbyaninnovativeorganizationalculture,whichinturnissupported byencouragingtopmanagementand“powerpeople.”Overall,pursuingsustainabilityand innovativenessininternalaswellasexternalorganizationalenvironmentareessentialfactors forcompanytransitions,andbothneedtopenetratethroughfirmsandallenvironmental layersaroundthem.Table1summarizesthekeyexternalfactorsinthebusinessenvironment and crucial organizational resources and capabilities facilitating the firms’ transitions and futurecompetitiveness.(NotethatTable1followstheframeworkandnumberingpresented inFigureA.1andcorrespondswiththenumberingoftheresultssections).Thekeychallenges aresummarizedinthefollowingparagraphs. Table 1. Key business environment factors and organizational resources and capabilities affectingFBSfirms’transitionandinnovationprocesses(Numberinginthefigurecorresponds toFigureA.1andtherelatedresultssections) It is demanding for any organization to restructure its strategies and business models to matchthechangingbusinessenvironment.AprominentchallengeinthecontextofFinnish FBS firms is that companies often struggle with their stakeholder relationships. The companiesshouldbeabletoconductamoresuccessfuldialoguewiththeirstakeholders,and optimizeandpositiontheirproductsandservicesinawaythatfulfillstheexactrequirements of the target market, their customers and other stakeholders.More open dialogue and intensivecollaborationshouldalsobeestablishedwithotherFBSfirms,avoidinganoverly cautiousattitude.Theseissueshighlightthefact moreflexibilityandagilityareneededin companies,buttheywereoftenseenaslackingespeciallyinlarge‐scale (hierarchical) companies.Moreover,achallengeinFinnishcultureisthatentrepreneurshipischaracterized byafearoffailureandanxietyoverbigrisks.Inaddition,despitethefactthatFinnishactors wereevaluatedtobegoodatinnovating,handlingtechnicalsolutionsandmanagingsmall‐ scale demonstrations, problems emerge in the scale‐up phase, meaning that production quantitiesanddifferentusagesaredifficulttoextend.Theriskfinancing‐thatiscrucialfor start‐ups is often also lacking. Companies face challenges when commercializing and marketingtheirnewproducts. Even though strategies, resources and dynamic capabilities and their interdependent relationshipsinorganizationsareaddressedatthetheoreticallevelinliterature,thereisstill a need to examine these issues from an empirical perspective. As a key theoretical contribution,thisstudyshowsthatintangibleandhumanrelateddynamiccapabilitiesare necessitiesforsuccessfultransition.Companyleadersandemployeesshouldformthecore ofthemostvaluableassetofthecompanies.Theircombinedandstrongdynamiccapabilities to lead, manage, collaborate, innovate, communicate, market, and create the overall organizationculture,allofwhichsupportstherenewal,arethekey.Thesecapabilitiesenable theagiletransitionofthecompanyitselfwhilefacilitatingthetransitionofthesocietywhere itoperates. Onthebasisofthisresearch(aswellasoftheotherstudiesreferredtointhisstudy),several recommendations to facilitate FBS firms’ transition to new businesses can be presented (Table2).
Table2.RecommendationstofacilitateFBSfirms’transitiontonewFBScircularbioeconomy businesses Overall,thisstudyindicatesthatinordertosuccessfullymanagethetransition,companies needtohaveadeepunderstandingofwhatisneeded,requiredandacceptedbythemarkets andsociety,andtheymustdeveloptheorganizationalresources and capabilities to sustainablyrespondtotheserequirements.Itisimportanttonote,however,thatinaddition tothecurrentneeds,companiesmustprepareforfutureneedsandchallenges,meaningthat achievinglong‐termcompetivenessrequiresfuture‐orientedstrategicthinking.Italsoneeds toberememberedthatthistransitionisnotdependentonlyonthecompanies;wide‐scale societaleffortisalsoneeded. References Adams,R.,Jeanrenaud,S.,Bessant,J.Overy,P.,Denyer,D.,2012.Innovatingfor sustainability:Asystematicreviewofbodyofknowledge.NetworkforSustainability. https://ore.exeter.ac.uk/repository/handle/10036/4105.Accesseddate:June12,2018. Amui,L.B.L.,Jabbour,C.J.C.,deSousaJabbour,A.B.L.,Kannan,D.,2017.Sustainabilityasa dynamicorganizationalcapability:Asystematicreviewandfutureagendatowarda sustainabletransition.JournalofCleanerProduction,142,308–322. DeBacker,K.,Desnoyers‐James,I.,Moussiegt,L.,2015.Manufacturingorservices–thatis (not)thequestion:TheroleofmanufacturingandservicesinOECDeconomies.In:OECD Science,TechnologyandIndustryPolicyPapers19.https://www.oecd‐ ilibrary.org/docserver/5js64ks09dmn‐ en.pdf?expires=1523880309&id=id&accname=guest&checksum=DDC1169654C24C023D166 B935319F04E,AccesseddateApril16,2018. Barney,J.B.,2001.Resource‐basedtheoriesofcompetitiveadvantage:Aten‐year retrospectiveontheresource‐basedview.JournalofManagement27,643–650. Barney,J.B.,2011.TheFutureofResource‐BaseTheory:RevitalizationorDecline?Journalof Management37,1299‐1315. Baumgartner,J.,Rauter,R.,2017.Strategicperspectivesofcorporatesustainability managementtodevelopasustainableorganization.JournalofCleanerProduction140,81– 92. deBesi,M.,McCormick,K.,2015.TowardaBioeconomyinEurope:National,regionaland industrialstrategies.Sustainability7,10461–10478. Björkdahl,J.,Börjesson,S.,2011.Organizationalclimateandcapabilitiesforinnovation:A studyofnineforest‐basedNordicmanufacturingfirms.ScandinavianJournalofForest Research26,488–500.
Zahra,S.A.,George,G.,2002.AbsorptiveCapacity:AReview,Reconceptualization,and Extension.AcademyofManagementReview27,185–203. Xavier,A.F.,Naveiro,R.M.,Aoussat,A.,Reyes,T.,2017.Systematicliteraturereviewofeco‐ innovationmodels:Opportunitiesandrecommendationsforfutureresearch.Journalof CleanerProduction149,1278–1302. AppendixA.Semi‐structuredinterviewquestionnaire:themesandquestions 1.Competitiveness 1.1.Whoarethemostimportantcompetitorsforyourorganization?Arethereanychanges tobeexpectedinthefuture? 1.2.Whatarethecornerstonesforthecompetitivenessofyourorganization? 2.Resources 2.1.Describethefavorableoperationalenvironmentforyourorganization(youcanapproach theissueatdifferentlevels). 2.2. What kind of key resources, capabilities and instruments are needed in the transformationtobio‐andcirculareconomiesandinthechangingbusinessenvironment? 3.Innovations 3.1.Whatisthesignificanceofinnovationsandinnovativenessforyourorganizationinthe changingbusinessenvironment(particularlyregardingbio‐andcirculareconomies)? 3.2.Whatkindsofdriversandchallengesdoyouseeinthesituation(describedabove)? 3.3Doyouseethatalackofflexibilityandthecautiousnessoforganizations/management createsbarriersfortransformation/innovativeness? AppendixB.Quotations 4.1 Quotation1: (respondentB) Bycaricaturingabit,insteadofsome committeestryingtoinventhowtosolve someissues,theyshouldinventwhereto aimandwhicharetheboundaryconditions. Andthentheseareindicatedtotheactor.
[…]Inmyopinion,thisisabigthreatfor development.Legislatorsandspecialists haveatendencytoaimtodefine beforehandhowthisparticularproblem shouldbesolved.Thislimitsdevelopment. 4.2 Quotation2: (respondentE) Peopleandcompanieswhichsharethe samevaluebaseintheirbusinesseswillbe faithfulcustomersforus. 4.3 Quotation3: (respondentF) Inmyopinion,theproblemrelatedtorisk financingandscientificandinnovative financinginFinlandisagain,wherecanyou getriskmoneyifnotfromriskfunders, becausethereistoomuchrisk.Inmy opinion,thatdescribesthissituationas well. Quotation4: (respondentD) Ittook10yearsfromcomingupwiththe ideatoactualbusiness,sothatitstartedto makeprofit.Ittakesperseveranceand persistence. Quotation5: (respondentC) Forexample,itisnotunderstoodthatin processindustrywedon’tproducesomany, ifany(newproducts),likeincargogoodsor inthechemicalindustry,wheretensor hundredsofnewproductscomeeveryyear. Inourcase,itcanbeanimprovedproduct orimprovedprocess.Andwhenweare researchingsomeentirelynewissue,the developmentworkwilleasilytake10years. Itisdifferentthan,forexample,changing theappearanceofakeyboardor something. 4.4.1 Quotation6: (respondentE) Strongbeliefinnewness,thatyoucan change.Sometimesyoujustneedtotry yourwingsandseeifthisthingisworking. Thisappliestosociety,largeorganizations, everything.Sure,therearepeoplewhoare resistanttochange.Butwedon’thaveany otherchoicethanchange.Andforest industryhaschangedinagreatway. Quotation7: (respondentA) Infact,asignificantbarrierforrapidchange inourindustryisthatwehaveinvestedso muchmoneyintheselargeproduction facilities.Wecannotsimplychangeour productionactivitiesjustlikethat.Weare
integrallyboundtoourcurrentassets. Start‐upscanchangedirectionratherfast,if thefirstideadoesnotwork. 4.4.2 Quotation8: (respondentF) ItisthequalityandreliabilityofFinnish science.Everybodytalksaboutitlikethis. Nobodydeniesit.Andthecountry’s reputationissocoolthateverybody wondershowwecannotsellourproducts. Quotation9: (respondentE) Learntomarketandsellcertainfeaturesto thecustomers.Insteadofmaterial,sellthe featuresrelatedtowoodfiber.Andyou needtoshiftfromthestricthabitsofthe forestindustry.[…]Andexplainvaluesand whattheyarerelatedto.Dependingonthe differentmarkets,youneedtotakea certainstanceinyourmarketing. 4.4.3 Quotation10: (respondentD) Ofcourse,personnelisadefiniteresource. Withoutpeople,wecannotdoanything. Withoutknowledge,wecannotdo anything.Particularlyifwetalkaboutnew productsandhowtheyaredeveloped.Ideas comefrompeople. Quotation11: (respondentE) Andwhenweknowforest,fiber,pulpparts andwearejoinedwithpeoplefromthe cosmetics,carorfoodindustry,greatthings willbecreated. 4.4.4 Quotation12: (respondentE) Ifwestartwiththeorganization,there needstobeenoughresources,ideasand unlimitedinnovativeness.Letpeopleinvent freely.Andinthefirms,weneedstrong supportfromthetopmanagementforusto movetowardnewthings.