Digital Product Passports as Institutional Innovation Infrastructure: Reducing Information Asymmetries and Enabling Circular Market Formation

The transition toward a circular economy is frequently constrained not by the absence of circular business model designs, but by persistent information asymmetries and fragmented lifecycle data across product ecosystems. The economic mechanisms through which Digital Product Passports (DPPs) influence innovation dynamics nevertheless remain under-theorized. Drawing on transaction cost economics, information asymmetry theory, and innovation systems research, this article argues that DPPs function as institutional infrastructure, transforming sustainability attributes from opaque credence characteristics into verifiable signals: by reallocating information rights and formalizing verification responsibility across previously uncoordinated actors, they change the cost structure of exchange in ways that can—under specifiable institutional conditions—enable circular markets to form where they previously could not. The argument is a theory-extension contribution, illustrated through a first empirical examination of a live, voluntary DPP implementation and four further resale and certification platforms, offering partial, illustrative evidence for the propositions.