Essays on the Circular Economy: Firm Performance and Regional Dynamics

This doctoral dissertation investigates the economic and technological dimensions of the sustainability transition, with a particular focus on the circular economy (CE) and its implications at the firm and regional levels. By integrating insights from corporate finance, environmental economics, and evolutionary economic geography, the thesis adopts a multi-level perspective to examine how sustainability-oriented strategies translate into financial performance, market valuation, and innovation dynamics. The dissertation consists of three interconnected empirical essays. The first analyzes whether circular economy strategies generate tangible economic benefits for firms, developing a composite indicator of corporate circularity and applying it to a global panel of listed companies. The results show that firms adopting CE strategies experience higher profitability and are rewarded by equity markets. The second essay shifts the focus to the regional level and examines the technological foundations of the circular transition in Europe. Using patent data and network analysis, it reconstructs the circular economy knowledge space across European regions over the period 1980–2015. Drawing on recombinant knowledge theory, the analysis shows that regional circular innovation is driven by localized knowledge bases, with accumulated green technological capabilities and digitally complementary knowledge playing a central role in fostering recombinant dynamics and mitigating the constraints of technological relatedness. The third empirical contribution of this dissertation focuses on the automotive industry as a highly emission-intensive sector to assess the financial implications of carbon risk and mitigation strategies. The findings indicate a robust negative relationship between carbon emissions and both accounting-based performance and market valuation. Further, it sheds light on the potential financial constraints faced by high emitting firms and on the role of policies and regulatory instruments, such as the ETS, in shaping corporate financial performance and access to capital. Overall, the dissertation contributes to the literature by showing that the circular economy transition is not only an environmental objective but also an economically and technologically grounded process. The results highlight the need for coordinated policy frameworks that complement market mechanisms by supporting firms’ and regions’ transition trajectories, thereby aligning financial incentives, innovation capacity, and long-term sustainability goals.