Eco‐innovation and firm growth in the circular economy: Evidence from European small‐ and medium‐sized enterprises

Abstract

As the circular economy (CE) concept gains growing popularity among consumers and producers, small‐ and medium‐sized enterprises (SMEs) increasingly look for ways to reorganize their offering and operations to integrate into the CE. This study examines the impact of (a) circular eco‐innovations and (b) external funding available for CE activities on the growth of European SMEs using a data set of 5,100 SMEs across 28 European countries in 2016. Findings reveal that a significant threshold investment (i.e., higher than 10% of revenues) into circular eco‐innovations is required for SMEs to benefit from investing into the CE. Moreover, the majority of circular eco‐innovations fail to boost the growth rates of SMEs, with the exception of investments into eco‐design innovations. Although traditional forms of debt and grant finance targeted to CE activities are found to have no or negative impact on the growth of SMEs, equity finance (i.e., angel and venture capital investments) contributes positively to their growth. The study offers insights into the lower levels of SME engagement in the CE as well as policy implications for improving engagement.

Crowdfunding as a tool to support sustainability‐oriented initiatives: Preliminary insights into the role of product/service attributes

“…When launching their sustainability‐oriented initiatives, entrepreneurs often fail to successfully communicate with conventional financiers (Lehner, ), who consider expected yields, security of the investment, and accounting liquidity as the most important investment criteria. Indeed, several authors (e.g., Demirel & Danisman, ; Ortas, Burritt, & Moneva, ) claim that a central obstacle that hinders SD is the lack of funding. In this context, CF is enthusiastically discussed in the media as an alternative means to finance sustainability‐oriented initiatives (e.g., Harte, ; Park, ; Thorpe, ).…”

The Effect of Phases of the Adoption of the Circular Economy on Firm Performance: Evidence from 28 EU Countries

“…What is more, Chine is the first country to have adopted the CE promotional law which applies the 3R principles. The CE is a restorative and regenerative approach that minimises resource use, energy leakage, and waste by closing the energy and material loops [1,7,8]. Therefore, the circular economy is a model for extend previous research associated with the adoption of environmental activities by analysing how different phases of the adoption of the circular economy affect firm performance.…”

“…Based on a comprehensive literature review, in [11] the CE was defined as an economic system that operates at micro, meso and macro levels and switches the 'end-of-life' concept to the concept that is focused on sustainable development. Moreover, working on a sample of 128 circular start-ups, [12] distinguished between five circular archetypes: design-based, waste-based, platform-based, service-based and nature-based.The broad consensus in this literature is that the investment in the circular economy can generate positive effects on firm performance [7,8,11,[13][14][15][16][17]. More precisely, it is considered that firms could profit from the circular economy adoption through the generation of environmental benefits associated with the reduced impacts and resource usage, cost savings generated from reduced natural resource requirements, and the new markets formation [13][14][15].…”

“…In other words, the predominant aim of a business model based on the circular economy is to help firms to generate value through the utilization of resources in multiple cycles, and waste and consumption reduction [18]. Although there have been considerable analyses that have discussed the advantages associated with the adoption of the circular economy, there has been surprisingly little empirical research that has determined the link between the circular economy and firm performance [8]. In most studies, the emphasis was on determinants and obstacles of the circular economy implementation [1,6,19,20].…”

“…The broad consensus in this literature is that the investment in the circular economy can generate positive effects on firm performance [7,8,11,[13][14][15][16][17]. More precisely, it is considered that firms could profit from the circular economy adoption through the generation of environmental benefits associated with the reduced impacts and resource usage, cost savings generated from reduced natural resource requirements, and the new markets formation [13][14][15].…”