Doing Well by Doing Good: An Operationalization of Closed-Loop Orientation Using CATA

Abstract

Closed-loop orientation is a strategic orientation to promote circular economy concepts, such as closed-loop supply chains, at the firm level. While linear business models are among the main causes of today’s environmental challenges, such as pollution and depletion of resources, closed-loop supply chains provide a solution by focusing on value recovery. While research confirms that closed-loop orientation is positively linked to firm performance, closed-loop orientation has not been operationalized for secondary, and hence large-scale, longitudinal datasets. Moreover, existing research focuses solely on closed-loop orientation in efficiency-driven economies. In this study, we use computer-aided text analysis (CATA) to operationalize closed-loop orientation for secondary data. We validate our measure by linking closed-loop orientation to firm performance with data from S&P500 firms. We offer three contributions. First, we develop a methodology that enables future scholars to further investigate the nascent research area of closed-loop orientation. Second, we are among the first to extend existing closed-loop orientation research to secondary data. Third, we find evidence that closed-loop orientation is positively linked to firm performance in an innovation-driven economy, adding to the natural resource-based view. These findings encourage practitioners to consider closed-loop supply chains as source for competitive advantage in the face of today’s environmental challenges.