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

23 Pages Posted: 1 Jun 2019 Last revised: 26 Jul 2019

See all articles by Pelin Demirel

Pelin Demirel

Imperial College London - Faculty of Engineering

Gamze Ozturk Danisman

Kadir Has University

Date Written: June 2019

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.

Keywords: Circular Economy, Eco-Innovation, Eco-design, Entrepreneurship, Finance, Growth, SMEs

Suggested Citation

Demirel, Pelin and Danisman, Gamze Ozturk, Eco-Innovation and Firm Growth in the Circular Economy: Evidence from European SMEs (June 2019). SWPS 2019-13, Available at SSRN: https://ssrn.com/abstract=3414320 or http://dx.doi.org/10.2139/ssrn.3414320

Pelin Demirel (Contact Author)

Imperial College London - Faculty of Engineering ( email )

United Kingdom

Gamze Ozturk Danisman

Kadir Has University ( email )

Istanbul
Turkey

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