The impact of eco-innovation on circular economy in EU countries: How patents affect circular material use rate?

PURPOSE: The main objective of this study is to examine how eco-innovation activities, measured by the number of patents related to recycling and secondary raw materials, affect the level of use of circular materials in economic processes in European Union countries. Simultaneously, to take into account the impact of the other drivers of the circular economy, the study includes control variables such as GDP per capita, share of income from environmental taxes, age structure of the population, and level of education of the population. METHODOLOGY: This study uses a generalized linear model for panel data. For all analyzed explanatory variables, greater inter-group variation than intra-group variation was observed, so a panel-averaged effects estimator was used. The study sample includes 28 European Union (EU) countries. The time scope of this study is 2010-2019. Eurostat database was the source of the unbalanced panel data. This study seeks answers to the following research question: What is the impact of patents related to waste management and recycling on the circularity rate of the EU economies? FINDINGS: The results indicate that leaders in the area of circularity are the Netherlands, France, and Belgium. Ireland, Romania, and Portugal occupy last place in terms of the circularity of the economy. There is considerable variation in the number of patent applications related to waste management and recycling in the EU countries. Luxembourg, Finland, Belgium, and the Netherlands have the highest propensity for patents. In contrast, Bulgaria, Greece, and Croatia show the lowest patent activity. Finally, the higher the propensity to patent in waste management and recycling technologies, the higher the rate of circular use of materials. IMPLICATIONS: The results provide a compelling rationale for prioritizing and incentivizing investments in promising technologies to achieve both environmental sustainability and economic prosperity in the long term. ORIGINALITY AND VALUE: Our study sheds new light on the link between eco-innovation and circular economy in EU countries. We address the issue of possible nonlinearities between circularity and its drivers. Given the fractional nature of the response variable (i.e., circular material use rate), we apply the generalized estimating equations (GEE) approach to model both the mean structure and association structure of fractional responses.