How Circular Innovation Is Learned: A Process Study of Modularity‐Based Initiatives in Industrial Firms

Abstract

Circular innovation (CI) research has identified a wide range of circular strategies and design approaches, yet offers limited insight into how CI evolves as a learning process within firms and which governance mechanisms guide this progression. Drawing on organizational learning (OL), this study examines how exploration and exploitation shape the CI process and how communication governs its progression. We study modularity, a prominent form of CI, through a 4‐year longitudinal qualitative study (2021–2025) based on 33 interviews across three Indian‐headquartered, globally operating firms in construction, electronics, and manufacturing. The study makes three contributions: (1) It contributes to the CI literature by theorizing CI as a learning process unfolding through three phases, learning the logic, learning to adapt and optimize, and learning to institutionalize, in which exploration and exploitation shift in salience and intensity as innovation progresses; (2) it extends CI research by conceptualizing communication as a governance mechanism that coordinates and stabilizes learning through feedback, cognitive, and social and behavioral control; and (3) it contributes to OL scholarship by showing that circular practices first generate operational memory, practical knowledge embedded in repair, recovery, and design routines, which communication gradually codifies into organizational memory that guides subsequent learning phases. Managerially, the study guides strategic leaders in governing CI through cross‐functional communication, operational managers in balancing experimentation with standardization and feedback routines, and firms in developing digital platforms that make learning visible across CI initiatives.