The Effect of Phases of the Adoption of the Circular Economy on Firm Performance: Evidence from 28 EU Countries

Abstract

Although a substantial body of literature has analysed the potential benefits of the circular economy, empirical evidence on the relationship between circular economy-related activities and firm performance is scarce. Rather than analysing only the effect of the circular economy on firm performance, we empirically examine the effects of the different phases of the adoption process of the circular economy on firm performance. Therefore, in this paper, a multiphase framework of circular economy adoption is developed. Employing a propensity-score-matching model on the sample of more than 4000 European SMEs, we show that the adoption of circular economy activities improves firm performance as measured by productivity. In addition, our findings reveal that the impact of circular economy activities on firm performance is dependent on the different phases of the adoption process. Taken together, this study enriches current research on the circular economy by contributing to a more nuanced understanding on the relationship between the different phases of the adoption process and firm performance.