Polycentric governance of privately owned resources in circular economy systems

We present an empirical study of three circular economy systems in Finland, the United States, and Spain. On this basis we elaborate a new theory for polycentric governance of privately owned resources, expanding on Ostrom’s (2014) traditional analysis of the governance of common-pool resources. Our focus is to explore how polycentric governance emerges through mechanisms of collective action with businesses, public sector and societal actors. The empirical findings suggest that polycentric governance emerges to address challenges arising from information asymmetries and scale inefficiencies in insular systems with multiple independent governance units. It unfolds through processes of mutual adjustment and the building of mechanisms for collective agency, which lead to gradual hybridization. This leads to new, hybrid governance arrangements and more broadly-based ownership of resources. Our findings make important contributions to the literature on system-level governance for sustainability, hybrid organization, and the resource-based view of the firm. We conclude by discussing how the theory of polycentric governance can advance development of circular economy in systems composed of privately- owned resources.