Abstract
Governments at the EU and the member state level are placing increased emphasis on public research and development (R&D) for energy and the environment to advance a circular economy (CE). To achieve CE goals, it is critical to engage SMEs as they represent the vast majority of enterprises in the EU. To date, there is a lack of evidence regarding the impact of these public R&D investments on SMEs' CE activities. We address this gap by analysing the impact of public environmental and energy R&D on CE implementation and investment by SMEs. The study draws from a multi-level database of 10,618 SMEs across 28 EU member states for the period 2013–2015 from the Flash Eurobarometer 441 survey and country-level data from other EU sources. Employing a mixed-level probit regression, we find that the knowledge generated by public environmental and energy R&D, defined as country-level investments in this activity from 2004 to 2015, positively affects SMEs' implementation of CE activities. Additionally, the study finds that public environmental and energy R&D affects the level of SMEs' investment in CE activities negatively, suggesting that more public R&D can substitute for the financial efforts that SMEs have to take when implementing CE activities.
Highlights
Curtailing the increasing environmental degradation caused by human activity requires significant changes in current production and consumption patterns (European Commission, 2015a; United Nations Development Programme, 2019)
The mar ginal effects presented at the bottom of the table suggest that an increase of one log point in Public environmental and energy R&D (PEERD) per firm (i.e. €11.22 per firm or €25.7 million total investment on average) leads to an increase of around 6% in small and medium enterprises (SMEs)' probability of implementing at least one Circular Economy (CE) activity
We investigate whether public environmental and energy research and development (R&D) (PEERD) provides SMEs with the sci entific knowledge and capabilities to tackle CE implementation
Summary
Curtailing the increasing environmental degradation caused by human activity requires significant changes in current production and consumption patterns (European Commission, 2015a; United Nations Development Programme, 2019). Firms—especially micro, small and medium enterprises (SMEs)—can face challenges related to a lack of fi nancial resources, proper technology, and/or technical expertise, which can deter them from implementing and investing in CE activities (European Commission, 2019; European Resource Efficiency Knowledge Centre (EREK), 2019; Ormazabal et al, 2018; Rizos et al, 2016).1 This represents a limitation for the transition to a CE as SMEs are the predominant type of firm in most economies, especially in the European Union (EU), and are an essential driver of economic and social development (OECD, 2019). This is in line with growing evidence on the impact of public subsidies for increasing R&D investment amongst SMEs (Becker, 2015)
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