The role of entrepreneurship, innovation and socioeconomic development on circularity rate: Empirical evidence from selected European countries

Over the last years, member states have monitored the circular economy transition and reported specific indicators to Eurostat. This study analyzes the relationship of macro data between entrepreneurship, innovation, socio-economic development, and circularity progress using a panel dataset of eighteen European Union (EU) countries from 2010 to 2019. Estimators such as feasible generalized least squares, fully modified ordinary least squares, and dynamic ordinary least squares long-run estimators are employed to yield reliable estimators. Empirical findings document that entrepreneurship, innovation, and socio-economic development significantly affect the circularity rate over the study period. In particular, the circularity rate will increase by 0.19% if entrepreneurship in Europe increases by one percent, whereas "polluting" entrepreneurship seems to have a negative association with circularity. A 1% increase in research and development (proxy of innovation) will increase the circularity rate by 0.65% on average. The annual circularity rate will also increase by 0.73% if economic growth increases by 1%. Human development index also has a high impact on the circularity process amid EU economies. Based on the empirical results, the study argues that a faster process in progressing circularity can be reached if the EU provides opportunities for increased entrepreneurship, higher levels of innovation, and more equal and fair socio-economic advancement as measured by higher human development. As there is scarce literature in this area, this study aims to pave the way in looking into further macroeconomic drivers affecting circularity.