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Eco-Innovation and Firm Growth in the Circular Economy: Evidence from European SMEs

Author

Listed:
  • Pelin Demirel

    (Dyson School of Design Engineering, Imperial College London, UK.)

  • Gamze Ozturk Danisman

    (Faculty of Economics Administrative and Social Sciences, Bahcesehir University, Istanbul,Turkey)

Abstract

As the circular economy (CE) concept gains growing popularity among consumers and producers, small and medium-sized enterprises (SME) increasingly look for ways to reorganize their offering and operations to integrate into the CE. This study examines the impact of (1) circular eco-innovations and (2) external funding available for CE activities on the growth of European SMEs using a dataset of 5100 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. While 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.

Suggested Citation

  • Pelin Demirel & Gamze Ozturk Danisman, 2019. "Eco-Innovation and Firm Growth in the Circular Economy: Evidence from European SMEs," SPRU Working Paper Series 2019-13, SPRU - Science Policy Research Unit, University of Sussex Business School.
    • Handle: RePEc:sru:ssewps:2019-13
    as

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    References listed on IDEAS

    as
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