Determinants of circular economy practices in innovative SMEs in COVID-19 times: the role of policy incentives

Authors

  • Caterina Cavicchi University of Ferrara
  • Chiara Oppi University of Bergamo
  • Emidia Vagnoni University of Ferrara, Department of Economics and Management

DOI:

https://doi.org/10.14596/pisb.3340

Keywords:

Circular economy, Innovative SMEs, Sustainability, Covid-19 related incentives, Resource-based view

Abstract

Purpose: Specific interventions enabling innovative small and medium enterprises (SMEs) to access finance during a time of crisis are essential for their survival. In Europe, the recovery plan prioritises specific funds to support SMEs’ sustainability transition. This creates an opportunity for SMEs to innovate and survive during the pandemic. However, the role of public policies in supporting SMEs’ sustainability innovation during the COVID-19 crisis has not been explored.

Based on the Italian context, the present study aims to analyse how COVID-19 related incentives for innovative SMEs, issued by the Italian government, have supported circular economy (CE) practices, as well as the development of consistent competences and resources during the pandemic period.

Methodology: The population of Italian innovative manufacturing SMEs was surveyed. Firms were required to indicate the extent to which they adopted CE practices in the Take, Make, Distribute, Use, and Recover fields of action, the consistent competences and resources they developed, and what incentives they accessed. The association between such incentives and CE practices, competences, and resources was tested using one-way analysis of variance.

Findings: COVID-19 related incentives were granted to 43.43% of the innovative SMEs. Firms that accessed incentives had higher levels of CE practices, competences, and resources, with slight differences considering the type of incentives.

Practical and social implications: This study argues that governmental COVID-19 related incentives may have played a role in enhancing CE practices of innovative SMEs. Public support allows firms to invest in the development of internal assets that are needed to capture new business opportunities. This study provides managers with resource and competence knowledge that allows for the adoption of CE practices in a time of crisis.

Originality: The study sheds light on the relevance of dedicated incentives to include innovative SMEs in perspective policies’ decisional processes, which contribute to their sustainability transition.

References

Aranda-Usón, A., Portillo-Tarragona, P., Marín-Vinuesa, L.M. and Scarpellini, S. (2019). Financial resources for the circular economy: A perspective from businesses. Sustainability, 11(3), p. 888.

Barney, J.B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.

Bellandi, M. (2020). Some notes on the impacts of Covid-19 on Italian SME productive systems. Symphonya. Emerging Issues in Management, 2, 63-72.

Bellavitis, C., Fisch, C. and McNaughton, R.B. (2021). COVID-19 and the global venture capital landscape. Small Business Economics, https://doi.org/10.1007/s11187-021-00547-9.

Bontoux, L. and Bengtsson, D. (2015). 2035: Paths towards a sustainable EU economy: Sustainable transitions and the potential of eco-innovation for jobs and economic development in EU eco-industries 2035, Publications Office, Luxembourg.

Brown, R., and Lee, N. (2019). Strapped for cash? Funding for UK high growth SMEs since the global financial crisis. Journal of Business Research, 99, 37-45.

Brown, R. (2020). The impact of Covid-19 on Scottish small and medium-sized enterprises (SMEs): prognosis and policy prescription. Fraser of Allander Economic Commentary, 44(2), 1-14.

Cecere, G., Corrocher, N. and Mancusi, M.L. (2020). Financial constraints and public funding of eco-innovation: empirical evidence from European SMEs. Small Business Economics, 54(1), 285-302.

Chan, R.Y. (2005). Does the natural‐resource‐based view of the firm apply in an emerging economy? A survey of foreign invested enterprises in China. Journal of Management Studies, 42(3), 625-672.

Dey, P.K., Malesios, C., De, D., Budhwar, P., Chowdhury, S. and Cheffi, W. (2020). Circular economy to enhance sustainability of small and medium‐sized enterprises. Business Strategy and the Environment, 29(6), 2145-2169.

De Arroyabe, J.F., Arranz, N., Schumann, M. and Arroyabe, M.F. (2021). The development of CE business models in firms: the role of circular economy capabilities. Technovation, 106, p. 102292.

Deloitte (2020). I bisogni delle PMI per la ripresa post-Covid. La crisi come opportunità per evolvere i paradigmi aziendali. available at: https://www2.deloitte.com/content/dam/Deloitte/it/Documents/strategy/Bisogni_PMI_post_covid19_MonitorDeloitte.pdf (accessed: October 2021, 5th).

Eggers, F. (2020). Masters of disasters? Challenges and opportunities for SMEs in times of crisis. Journal of Business Research, 116, August 2020, 199-208.

Ellen MacArthur Foundation (2012). Towards the Circular Economy: Economic and Business Rationale for an Accelerated Transition. Available at: https://www.ellenmacarthurfoundation.org/assets/downloads/publications/Ellen-MacArthur-Foundation-Towards-the-Circular-Economy-vol.1.pdf (accessed: January 2022).European Commission, (2003). Recommendation 2003/361/EC, 6 May 2003, concerning the definition of micro, small and medium-sized enterprises.

Field, A. (2009). Discovering statistics using SPSS (and sex, drugs and rock’n’roll) (3rd ed.). Los Angeles: Sage.

Gan, X., Fernandez, I.C., Guo, J., Wilson, M., Zhao, Y., Zhou, B. and Wu, J. (2017). When to use what: methods for weighting and aggregating sustainability indicators. Ecological Indicators, 81, 491-502.

García‐Quevedo, J., Jové‐Llopis, E. and Martínez‐Ros, E. (2020). Barriers to the circular economy in European small and medium‐sized firms. Business Strategy and the Environment, 29(6), 2450-2464.

García-Sánchez, I.M., Somohano-Rodríguez, F.M., Amor-Esteban, V. and Frías-Aceituno, J.V. (2021). Which region and which sector leads the circular economy? CEBIX, a multivariant index based on business actions. Journal of Environmental Management, 297, p. 113299.

Ghisetti, C. and Montresor, S. (2020). On the adoption of circular economy practices by small and medium-size enterprises (SMEs): does “financing-as-usual” still matter? Journal of Evolutionary Economics, 30(2), 559-586.

Hall, B.H. (2002). The financing of research and development. Oxford Review of Economic Policy, 18(1), 35–51.

Hart, S. (1995). A natural-resource-based view of the firm. The Academy of Management Review, 20(4), 986-1014.

Ibn-Mohammed, T., Mustapha, K.B., Godsell, J.M., Adamu, Z., Babatunde, K.A., Akintade, D.D., Acquaye, A., Fujii, H., Ndiaye, M.M., Yamoah, F.A. and Koh, S.C.L. (2020), “A critical review of the impacts of COVID-19 on the global economy and ecosystems and opportunities for circular economy strategies. Resources, Conservation and Recycling, 164, p. 105169.

Italian Parliament, (2020). Legge 17 luglio 2020, n. 77 Conversione in legge, con modificazioni, del decreto-legge 19 maggio 2020, n. 34, recante misure urgenti in materia di salute, sostegno al lavoro e all'economia, nonché di politiche sociali connesse all'emergenza epidemiologica da COVID-19.

Italian Parliament, (2015). Legge 24 marzo 2015, n. 33 Conversione in legge, con modificazioni, del decreto-legge 24 gennaio 2015, n. 3, recante misure urgenti per il sistema bancario e gli investimenti.

Johnson, M. P., and Schaltegger, S. (2016). Two decades of sustainability management tools for SMEs: How far have we come? Journal of Small Business Management, 54(2), 481-505.

Juergensen, J., Guimón, J. and Narula, R. (2020). European SMEs amidst the COVID-19 crisis: assessing impact and policy responses. Journal of Industrial and Business Economics, 47(3), 499-510.

Kalmykova, Y., Sadagopan, M. and Rosado, L. (2018). Circular economy–From review of theories and practices to development of implementation tools. Resources, Conservation and Recycling, 135, 190-201.

Kutner, M. H., Nachtsheim, C. J., Neter, J. and Li, W. (2005). Applied linear statistical models (5th ed.). New York: McGraw-Hill.

Le, H., Nguyen, T., Ngo, C., Pham, T. and Le, T. (2020). Policy related factors affecting the survival and development of SMEs in the context of Covid 19 pandemic. Management Science Letters, 10(15), 3683-3692.

Lee, N. and Brown, R.C. (2017). Innovation, SMEs and the liability of distance: the demand and supply of bank funding in UK peripheral regions. Journal of Economic Geography, 17(1), 233-260.

Lim, D.S., Morse, E.A. and Yu, N. (2020). The impact of the global crisis on the growth of SMEs: A resource system perspective. International Small Business Journal, 38(6), 492-503.

Millar, M.M. and Dillman, D. A. (2011). Improving response to web and mixed-mode surveys. Public Opinion Quarterly, 75(2), 249-269.

Miller, R.G. (1997). Beyond ANOVA: Basics of applied statistics (1st ed.). Boca Raton: Chapman & Hall/CRC.

Ministry of Economic Development, (2020). Agevolazioni a favore delle PMI innovative, available at: https://www.mise.gov.it/images/stories/documenti/Sito_Agevolazioni_PMI_innovative_ITA_Ottobre_2020.pdf (accessed 13th March 2021).

Mura, M., Longo, M. and Zanni, S. (2020). Circular economy in Italian SMEs: a multi-method study. Journal of Cleaner Production, 245, 1 February 2020, 118821.

Myers, S.C. and Majluf, N.S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221.

Nawrocka, D. and Parker, T. (2009). Finding the connection: environmental management systems and environmental performance. Journal of Cleaner Production, 17(6), 601-607.

OECD, (2020), Coronavirus (COVID-19): SME Policy Responses. Paris: OECD.

OECD. (2012). Science, technology and industry outlook. Paris: OECD.

Olmos, L., Ruester, S. and Liong, S.-J. (2012). On the selection of financing instruments to push the development of new technologies: application to clean energy technologies. Energy Policy, 43, 252–266.

Ormazabal, M., Prieto-Sandoval, V., Puga-Leal, R. and Jaca, C. (2018). Circular economy in Spanish SMEs: challenges and opportunities. Journal of Cleaner Production, 185, pp.157-167.

Palazzi, F., Sgrò, F. and Ciambotti, M. (2018). Business crisis during the global economic recession: focus on Italian SMEs. Piccola Impresa/Small Business, 3, 39-58.

Pencarelli, T., Cesaroni, F.M. and Demartini, P. (2020). Covid-19 and Italian small and medium-sized enterprises: consequences, threats and opportunities. Piccola Impresa/Small Business, 3, 9-17.

Penrose, E.T. (1959). The Theory of the Growth of the Firm (3rd ed). Oxford: Blackwell.

Podsakoff, P.M., MacKenzie, S.B., Lee, J.Y. and Podsakoff, N. P. (2003). Common method biases in behavioral research: a critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879.

Prieto-Sandoval, V., Torres-Guevara, L.E., Ormazabal, M. and Jaca, C. (2021). Beyond the circular economy theory: Implementation methodology for industrial SMEs. Journal of Industrial Engineering and Management, 14(3), 425-438.

Prieto‐Sandoval, V., Jaca, C., Santos, J., Baumgartner, R.J. and Ormazabal, M. (2019). Key strategies, resources, and capabilities for implementing circular economy in industrial small and medium enterprises. Corporate Social Responsibility and Environmental Management, 26(6), 1473-1484.

Rizos, V., Behrens, A., Van der Gaast, W., Hofman, E., Ioannou, A., Kafyeke, T., Flamos, A. et al. (2016). Implementation of circular economy business models by small and medium-sized enterprises (SMEs): barriers and enablers. Sustainability, 8(11), 1212.

Roper, S. and Turner, J. (2020). R&D and innovation after COVID-19: what can we expect? A review of prior research and data trends after the great financial crisis. International Small Business Journal, 38(6), 504-514.

Scarpellini, S., Valero‐Gil, J., Moneva, J.M. and Andreaus, M. (2020). Environmental management capabilities for a “circular eco‐innovation”. Business Strategy and the Environment, 29(5), 1850-1864.

Scarpellini, S., Marín-Vinuesa, L.M., Portillo-Tarragona, P. and Moneva, J.M. (2018). Defining and measuring different dimensions of financial resources for business eco-innovation and the influence of the firms' capabilities. Journal of Cleaner Production, 204, 258-269.

Schöggl, J.P., Stumpf, L. and Baumgartner, R.J. (2020). The narrative of sustainability and circular economy-A longitudinal review of two decades of research. Resources, Conservation and Recycling, 163, 105073.

Schroeder, P., Anggraeni, K. and Weber, U. (2019). The relevance of circular economy practices to the sustainable development goals. Journal of Industrial Ecology, 23(1), 77-95.

Downloads

Published

2022-10-22

How to Cite

Cavicchi, C., Oppi, C., & Vagnoni, E. (2022). Determinants of circular economy practices in innovative SMEs in COVID-19 times: the role of policy incentives. Piccola Impresa / Small Business, (1). https://doi.org/10.14596/pisb.3340

Issue

Section

Research Articles
Received 2022-02-15
Accepted 2022-04-13
Published 2022-10-22