What lies about circular economy practices and performance? Fresh insights from China

Abstract

The circular economy has indeed been the subject of increasing academic and industry interest in recent years, particularly in the context of corporate social responsibility (CSR) initiatives. This study explored the implications of circular economy practices for corporate performance using panel data from Chinese-listed firms between 2009 and 2019. To this end, the text analysis method was used to acquire the frequency of circular economy-related words to measure corporate circular economy practices. This study has yielded four main findings. First, circular economy practices can improve firm performance based on resource-based theory. Second, innovation and digital transformation strategies can amplify the positive impact, and resource use efficiency improvements are the principal means for circular economy practices. Third, there is firm heterogeneity in the influences of circular economy practices on corporate performance. Namely, the circular economy practices have a greater impact on state-owned enterprises, large enterprises, and heavily polluting enterprises. Fourth, only appropriate circular economy practices can positively impact firm performance. These findings suggest that circular economy practices are an effective model for sustainable corporate development. It is indeed important to understand the role of circular economy practices in emerging countries such as China, where rapid economic growth and urbanization have led to significant environmental challenges.