Do firms consider their peers when going circular? Social norms among Italian firms in circular innovation adoption

The circular economy requires strong industry engagement and innovation, particularly through circular innovation. Despite the recognized role of eco-innovation in enabling the circular economy transition, research on the factors influencing firms' adoption of circular innovation remains limited. This study integrates behavioural economics to examine the role of social norms in firms' circular innovation adoption. We hypothesize that firms are more likely to adopt circular innovations when they perceive a social norm supporting such investments. Using two waves of survey data from Italian manufacturing SMEs (2017–2020), we test this relationship through random-effect and fixed-effect logit models. Our findings confirm that social norms significantly influence circular innovation adoption and that circular innovations are generally driven by some of the drivers identified in the broader eco-innovation literature. These results complement and expand existing research on circular innovation drivers, an area that remains underexplored. Moreover, our findings have important policy implications, suggesting that behavioural tools, such as social norm information, could be leveraged to promote circular innovation adoption alongside traditional policy instruments, enhancing their overall effectiveness.