Closing the loop through eco‐innovation by European firms: Circular economy for sustainable development.

The purpose of this paper is to analyze the factors influencing the adoption of environmental innovations towards a circular economy (CE) by the EU firms, with special focus on technological capabilities and external support. A multivariate probit model is specified to allow the distinction between three types of eco‐innovative practices: Reduce, Recycle, and Redesign technological processes. Using a novel taxonomy based upon the distinction between narrowing, closing, and slowing loops in the use of resources, we find that financial and technological capabilities are essential drivers for all types of CE actions in the European firms. Similar findings are found for the public funding support but only when the firms are recycling (closing resource loops) and redesigning (slowing resource loops). Knowledge from private companies (pecuniary mode) is relevant to Reduce and Recycle strategies. These two eco‐innovative practices are also shown in firms with a wide external knowledge network. Results also show that there is an inverted U‐shaped relation between the diversity of collaboration and the circular Redesign of products. The paper ends up with some implications for practitioners and policy makers. [ABSTRACT FROM AUTHOR]