The transition to a circular textile economy depends not only on technologies that convert textile waste into recycled fibers, but also on the ability to create and scale markets for these materials. Despite growing recycling capacity, investment, and policy support, demand for recycled textile fibers remains limited. This thesis examines how firms can mitigate this supply–demand misalignment and facilitate market scaling in the circular textile recycling industry.

Adopting the Dynamic Capabilities View (DCV) as an overarching theoretical lens, the thesis integrates three complementary perspectives on market creation and scaling in circular textile value chains. It shows how firms leverage distinct but complementary strategic capabilities to mitigate supply–demand misalignment and facilitate market scaling. Using an interpretive qualitative approach, the thesis synthesizes three exploratory papers through an abductive theory-elaborating process. The empirical foundation comprises 40 semi-structured interviews with textile recyclers, apparel brands, and fabric manufacturers, complemented by desktop investigations, follow-up communications, and on-site observations. The findings show that supply–demand misalignment stems not only from technological constraints but also from asymmetric market knowledge, divergent perceptions of value, and fragmentation across the value chain. Market scaling therefore requires firms to understand and shape demand, align offerings with customer value perceptions, and coordinate activities across organizational and supply-chain boundaries.