Walking the tightrope: Circular economy breadth and firm economic performance

Abstract

The circular economy (CE) can bring benefits but also pitfalls to the production processes, affecting a firm's economic performance. Using data from European SMEs, we empirically investigate, from the perspective of self-determination theory, the extent to which the breadth of CE activities, that is, the number of CE activities undertaken by a firm, affects a firm's economic performance. Our study theorizes and shows that there is an inverted U-shaped effect brought about by the number of CE activities on economic performance. This research advances our scientific understanding of the CE and provides managers with suggestions on how to maximize the benefits generated by the CE in terms of economic performance by implementing the right amount of CE activities.