Resource efficient eco-innovations for a circular economy: Evidence from EU firms

•We investigate the drivers of eco-innovations adoption linked to a circular economy transition.•Policies strongly affect adoption incentives related to recycling, while evidence related to material inputs is weaker.•“Green” demand plays a significant role for circular economy innovations adoption.•Accounting for endogeneity and sample selection issues is essential to convey robust evidence using firm level survey data.•R&D drives general innovation adoption, but it does not sustain eco innovations aimed at resource efficiency. Innovation adoption and diffusion by firms are key pillars for the EU strategy on resource efficiency and the development of a circular economy. This paper presents new EU evidence regarding the role of environmental policy and green demand drivers to sustain the adoption of resource efficiency-oriented eco-innovations. Using a large cross-section dataset of EU firms and accounting for sample selection and endogeneity, the results strongly support the idea that environmental policy and demand-side factors are both significant in driving the adoption of innovations that promote recycling, reduce waste and decrease the use of materials. The paper provides a relevant piece of new, quantitative-based knowledge, which complements the large case study-based evidence on sound management and policy strategies for the circular economy.