Drivers in the Eco-Innovation Road to the Circular Economy: Organiational Capabilities and Exploitative Strategies

Abstract

This article contributes to the empirical literature on the drivers of eco-innovation within the context of an organizational capability and exploitative strategies towards a circular economy. It explores the dynamics of the determinants of eco-innovation. The aim of this study is to contribute to this debate by analyzing evidence regarding the different factors influencing organizational capabilities in “transformative innovation” to support transition while eliminating obstacles to sustainability. The practical contribution of this paper is a consolidated, complete framework of eco-innovation that provides substantial insights to practitioners and facilitates the spread of eco-innovative practices. This study will benefit policy makers, key institutions, and firms to leverage the organizational capability with the effective implementation of eco-innovation processes towards a circular economy, where structural changes and transformative eco-innovation are the main determinants. However, the exploration of eco-innovation dynamics within a circular economy is still widely disregarded, especially concerning the trends and dynamics in policy-making processes and strategy development. The research employed the multi-criteria SAW method. The purpose of the suggested methodology is to establish the criteria for ranking the drivers of eco-innovation adoption. Research findings indicate the nexus between the drivers in eco-innovation and social behavior, eco-design, infrastructural changes, and political approaches. This study provides a comprehensive framework for understanding the drivers of eco-innovation towards a circular economy with regard to organizational capabilities and exploitative strategies.

1. Introduction

There are various approaches related to the emergence of the concept of a circular economy. However, most academics concur that the term ‘circular economy’ was introduced by Pearce and Turner (environmental economists) [1] with a focus on the interconnections of the basic economic functions of the environment. Taking into consideration the academic literature since the early 1970s, the circular economy is considered a motivational roadmap which entered the policy agenda, the desired “end-state”, only within the last decade [2]. For instance, the concept also became the main plank of the EU Circular Economy Action Plan, a few years after the adoption of China’s Circular Economy Promotion Law of 2009 [3].

A circular economy is regarded to be an effective and sustainable economic system focusing on the development and growth of the economy via the recirculation and reduction in natural resources [4]. Moreover, the circular economy concept is based on environmental concerns and its nexus with economic and social components that function as a closed-loop of resource utilization from extraction to consumption. At any stage of production, the main concept of circular economy is to reverse waste into a resource which can be used again and again. Furthermore, the model changes not only the production process, but also values, behavior, and habits of consumers and producers. This concept is based on the underlying approach towards progression as a more sustainable economic paradigm. Firstly, the goal of this research is to illustrate the drivers that support or streamline the circular economy, and secondly, to explain specifically what the concept is comprised of; this is done by introducing systematic innovation. Kemp and Pearson [5] define eco-innovation as “the production, assimilation, or exploitation of a product utilization, manufacturing techniques of goods or services, or practices that are new to the firm or organization and that outputs, throughout its life cycle, in a reduction of environmental risk, pollution, and other negative impacts of resource use (including energy use) compared to similar alternatives”. Eco-innovation has been accepted as a specific roadmap for higher efficiency, increasing effectiveness, and supporting competitiveness while having peremptory impacts on society, the environment. and businesses [6].

Taking into consideration the economic growth issues and challenges in terms of technological capabilities, innovative approaches are critical for economic development that is both environmentally and economically sustainable. Innovation process and its nexus with sustainable development takes the key role in this context. Eco-innovation activities are the most significant component of sustainable development and environmentally friendly technological advancement, which plays a significant role in society and businesses.

The forces associated with the introduction of sustainable development principles, the changes in the global economy, the increased demand for goods and services encourage the seeking of new solutions contributing to efficient and environmentally conscious development, which diminishes the risk of damage to the ecosystem.

Current economic growth models are causing irreversible damage to the environment due to the increased consumption of resources and the dependence on imported raw materials and energy sources, thus significantly impacting quality of life, both now and in the future. Eco-innovation decreases the consumption of natural resources and reduces the release of hazardous substances throughout the lifecycle of a product, service, or production process. This type of innovation increases the short-term and long-term competitiveness of businesses, especially in international markets. In order to achieve the positive effects of eco-innovation, there is a need to assess the progress of organizational capabilities for the adoption of eco-innovation and to identify the drivers to reveal the most appropriate measures addressing the prevailing issues. There is a lack of tools, information, and data identifying circular economy strategies, taking into account all involved parties and organizational capabilities to determine the major drivers that are reinforcing the eco-innovations toward circular economy. It is also important to emphasize the lack of methodological approaches for measuring the departing point of the eco-innovation derivers with their nexus with key institutions and actors. Therefore, this is the backbone of the research objectives presented and formulated in following sections.

The article is organized as follows: Section 2 describes the theoretical underpinning of the circular economy concept and its link to eco-innovations. Section 3 describes the methods used to analyze the impacts of the key factors on waste prevention, waste recycling, and product re-use approaches with regard to drivers for the eco-innovation road to a circular economy. Section 4 concludes the research questions developed and defined above by identifying the need for additional study into a more innovation-oriented approach to eco-innovations towards a circular economy.

2. Theoretical Background

Linear Economy versus Circular Economy

The concept of linear economy is based on the “take-make-waste” or “take-make-dispose” model which has been widely used until today. Under this concept, the product turns into waste after consumption. The concept is widely seen as a risk for economies, as production and consumption are growing rapidly, which leads to the scarcity of resources [7]. This inflicts serious damage on the environment and eventually, on societies and businesses. The linear economy is described as an open-ended model, whereas, in the circular economy approach, eco-efficiency is developed through the optimization of the system. McDonough and Braungart introduced the concept of “cradle to cradle” (C2C), which is specific to a regenerative circular economy [8]. The transformation of waste into new materials and new products, the usage of natural energy sources, and the diversity of ecosystems are all part of the process of generating sustainable energy [9]. Thus, the main point of departure in a circular economy is to diminish the harmful impacts prevailing in the production and consumption process and to promote and concentrate on increasing the affirmative impact of the system by innovative approaches towards the existing issues and system change. The sharing economy paradigm could also be related to a circular economy [10]. The circular economy process could be presented as a closed-loop in which waste is obtained after the product is used or consumed, and is, as much as possible, transformed into a resource and returned to the production of recycled products, minimizing, or preferably eliminating, waste (Figure 1).

When waste generates resources after recycling, a linear economy transforms into a circular economy [11]. Biological and technological product waste is being recycled without environmental damage [12]; however, there is also non-recyclable waste which usually ends up in a sanitary landfill [13]. The circular economy’s primary driver may be seen in waste management. The circular economy’s 3R waste management is linked to Reduce, Reuse, and Recycle, whereas the 4Rs include Reduce, Reuse, Recycle, and Recovery [14].

From another perspective, the process carries a high risk of quality consistency, labor cost, unexpected expenses in the production process, and material loss, which also affects the functionality of the material. Hence, the creation of an absolutely circular economy is not possible, due to the previously mentioned risks, and does not necessitate that the economy must follow a strictly linear path. In fact, most of the elements have already been rendered circular in the current circular economic model. From the organizational capability point of view, less extraction of raw materials and more recycling, a shift in business models from products to services, qualified employees who have knowledge and experience regarding product recycling, and different financing options are crucial for moving forward toward a circular economy. The irrepressible development of digital technology in the last decades is the key point motivating businesses to profitably scale towards a circular economy [15]. Furthermore, taking into consideration the product value, where the value chain is influenced by circular economy practices, the competitiveness dynamics transform through technologies that are disruptive, such as recycling technology, analytics, and mobility [16]. In essence, reuse, repair, or re-manufacturing loops take precedence over energy recovery, recycling, or landfilling. [17]. The speed and demand for new input is apparently reduced by the circulation of matter and energy in a circular economy [18,19].

Indeed, the circular economy concept (

Table 1. The concepts and terms applied in the context of a circular economy.

Concept	Principles
Cradle to cradle	a. A new life could be given to the used product through product design. In nature, for example, there is no waste. As the leaf nears the end of its life, it may fall to the ground, providing nourishment for microorganisms. b. Industries should be restructured in such a way that they can use renewable sources, including sunlight, water, and air, to diminish the dependency on the energy coming from nonrenewable sources [35].
Upcycling and downcycling	Recycling is considered to be upcycling and downcycling. In contrast to recycling, upcycling is the process through which a product cycle is modified or transformed into a new product life cycle of the same or greater quality. However, when it comes to downcycling, the opposite is true [36].
Displacement effect	The displacement effect is linked to neither textiles nor garments that will not be produced or bought as an outcome of efficient and effective use of existing materials or things.
Ecological footprint	Usually, the biocapacity of the system is compared with the ecological footprint, which is a measure of human impact [37].
Waste hierarchy	Taking steps to improve energy efficiency and make better use of natural resources begins with establishing a waste hierarchy.

) has been considered as being solely a concept in the early stages [20] that lacks adequate conceptualization [21], a suitable constructed framework [22], and the ability to put sufficient weight on social dimensions [23]. Similarly, the concept has been criticized by the EU WH for many reasons, namely for the poor promotion of the reduction of waste [24,25,26], for not differentiating the forms of recycling [27], and even for its priority options with regard to their environmental impacts [28,29].

In today’s politics, the circular economy model has gained significant prominence, with its adherents emphasizing the opportunities and economic growth it can create [30,31], as well as its social and environmental benefits [32,33,34]. In this study, the circular economy is considered to consist of a wide range of indicators that are necessary in order to evaluate the performance of any circular economy investment or policy. Figure 2 presents the summary of the ideas discussed in this section.

The circular economy model includes the efficient use of recycling and material reuse processes which lead to technological development and eco-innovations that advance sustainability, job creation, increase investment in green sectors and technologies, change habits and routine of the society, impact consumer behavior, and contribute to sustainable economic growth [38]. The model can bring solutions to many environmental issues by protection or even allocation of the resources. Therefore, the idea behind a circular economy is the efficient reuse of resources, social capital, and economies.

There are various terms and concepts used in the literature to define innovations that are closely linked to the environment, such as “eco”, “environmental”, “green”, and “sustainable”. Nevertheless, it was observed that since 2005, the notions of “eco-innovation” and “green” have gained popularity in scientific publications [39].

In the last decades, various definitions of eco-innovation have been proposed that approach eco-innovation from two perspectives, namely effect and motivation. Some of the most prominent definitions are given below: “The practice of producing new products, processes, or services that provide value to customers while reducing environmental issues is known as eco-innovation”, by Fussler and James (1996) [40]; “eco-innovation is an innovation process toward sustainable development”, by Rennings [41]; “eco-innovation refers to any type of invention that aims to make important and measurable advancement toward the objective of sustainable development by decreasing environmental consequences or attaining a more efficient and responsible use of natural resources, including energy” [42]; “eco-innovation is an innovation that consists of new or modified processes, practices, systems, and products which benefit the environment and so contribute to environmental sustainability”, by Oltra and Saint Jean [43]; “innovation that improves environmental performance”, by Carrillo-Hermosilla [44]; and “the introduction of any new or significantly improved product (good or service), process, organizational (including materials, energy, water and land) and decreases the release of harmful substances across the whole life-cycle”, by the Eco-Innovation Observatory [45]. Therefore, eco-innovation is widely accepted by numerous authors as the key of environmental protection and sustainable development [46,47,48,49].

Recent studies on eco-innovation indicate crucial aspects for the implementation of eco-innovation, which can be counted as legal regulations, knowledge of the market and its requirements, inter-functional cooperation, innovation-oriented instruction, and current and expected regulations on environmental protection [50,51,52,53,54].

An increasing interest in eco-innovation has been observed among both academia and business. The scientific literature has suggested various definitions in recent decades. However, the definitions of “eco-innovation” and “green innovations” have been used in the literature since 2005 [39]. In the context of business, eco-innovation is described as the production, implementation, or exploitation of anything new in terms of product or service offerings, production processes, organizational structure, management, or other business practices that is novel to organizations or users and that results, throughout its lifecycle, in the decrease in environmental risk and damage, pollution, and the negative impacts of the use of resources [55]. Notably, the drivers of eco-innovation and innovation are different due to the theoretical assumptions and different contexts [44,49]. The recent studies on eco-innovation reveal external and internal barriers of eco-innovation adoption in firms. Meanwhile, the motivation to adopt eco-innovation is determined by the firm’s knowledge and experience [56]. The factors driving eco-innovation include technology, regulation, and market [48,53]. Moreover, the motives related to the decrease in costs and orientation towards environmental issues are distinguished [55]. However, the empirical research conducted in the field of eco-innovation tends to rely solely on the survey method, where the responses are collected from one source, i.e., the firms and the samples are very small. There are motivational reasons for organizations to adopt eco-innovation based on new business models, processes, or products that will ultimately minimize the environmental damage. Companies should find solutions to environmental challenges. These challenges depend on the sector in which the company competes, the “external factors” of its activities, and the strategy-based “internal factors”. They also depend on many other complications and complexities that the company must deal with [56,57,58]. The win-win strategy is the core of eco-innovation activities when they are implemented in a strategic, systematic, and conscious way [59], integrating environmental approaches to internal and external strategic decisions. Therefore, the adoption of a strategy for eco-innovation is closely related to the critical role of all stakeholders in transitioning to an economy that incorporates ecological concepts into innovation strategies and competitiveness. Horbach [60] mentions that environmental innovation is influenced by the supply and demand factors, as well as environmental legislation.

This categorization allows us to reflect on the influence of technological push and demand pull factors, along with an environmental, socio-economic, political, and institutional framework [60] (

Table 2. Determinants of eco-innovation activities.

Supply Side	Technological and managerial skills Innovation capabilities of organizations Collaboration with key institutions Access to the proper data Experience and knowledge transfer Qualified human resources
Demand Side	Market demand Public understanding of the importance of clean production; concern for the environment and a desire for ecologically friendly products
External influence (political, institutional)	Existing and future regulatory approaches Institutional capabilities and structure

).

Companies play a significant role in a country’s environmental performance based on their activities and their impact on the environment. Simultaneously, consumer behavior relies on eco-innovative product options of companies. In fact, companies could guide and regulate consumption based on the introduction of new products, even in cases where consumers are not aware of their needs and wants, with innovations presented to the market [61]. Innovation, in turn, supports these wants and needs, intending by the development of new processes and products by a combination of factors, resources, skills, and knowledge [62]. Business models are also accepted as significant drivers on the road towards a circular economy. Nevertheless, business models for a circular economy are not necessarily based on eco-innovations [63]. Managers and business owners can identify the major issues they will face in implementing and managing circular economy strategies in order to make their organizations more circular [64]. There are many drivers of eco-innovations that will offer growth and potential to green technologies and eco-friendly businesses [65]. Moreover, various studies have been conducted to examine and compare the contributions made to environmental innovation by the public sector and the private sector, respectively, and to compare their determinants [66]. For this reason, determining the drivers in eco-innovation towards a circular economy stands out as a core issue, first in the literature, and then empirically. Both innovation and eco-innovation pursue commercial success as a goal, but contrastingly, as eco-innovation is under significant pressure to limit environmental damage by society, environmental regulations, and other factors. Figure 2 illustrates the systematic approach to circular economy integration and their related hypotheses. In this study, we define the theoretical relationship between the three stages of circular economy integration, eco-innovation environment, and organizational capabilities.

Hypothesis1 (H1).

There is a relationship between political approaches, recycling infrastructure, and organizational/process eco-innovation.

Hypothesis1 (H2).

There is a relationship between political approaches, eco-design, and organizational/product eco-innovation.

Hypothesis1 (H3).

There is a relationship between political approaches, eco-design, consumer and producer behavioral changes, and product/process eco-innovation.

These research hypotheses make it possible to study the direct and indirect effects of eco-innovation drivers, to analyze organizational capabilities, and to develop exploitative strategies on the road towards a circular economy.

3. Research Methods

Here, we will describe the research methodology used to examine the drivers of eco-innovation towards a circular economy with regard to organizational capabilities and exploitative strategies. In this research, we have analyzed, combined, and synthesized research findings from published research and key-informant expert interviews based on the multi-criteria assessment SAW method [67,68,69]. We employed a literature review to conduct searches and eligibility screening of the literature within limited resources. The research methodology employed data collection, which was planned and conducted in multiple steps. First, a comprehensive literature analysis was conducted by reviewing related literature on the topic of a circular economy paradigm and eco-innovation and its practices on the Web of Science, Scopus, and EBSCO, with the intent of describing a synthesis of the proven eco-innovation drivers. Second, together with this task, a questionnaire was presented to experts from significant research groups and key institutions who specialize in eco-innovation in order to identify the drivers of the eco-innovation road towards a circular economy with regard to organizational capabilities and exploitative strategies. Content analysis of the results was used to synthesize the findings. Third, in order to analyze the differences/similarities and the intersections/overlaps in the drivers of eco-innovation and their nexus with organizational capability and the strategy implications, a comparative analysis was conducted to confirm the matching points seen between the findings from the literature and the expert evaluation. Finally, the theoretical concept was worked out to illustrate the total picture of the research object. Figure 3 depicts the sequence of the research process.

On the path towards a circular economy, the aim of the suggested methodology is to establish the criteria for ranking the drivers of eco-innovation adoption. The target drivers are set with regard to organizational capabilities and exploitative strategies. Furthermore, semi-structured interviews and literature reviews were performed to determine and identify the drivers for eco-innovation adoption through information systems, annual reports, and official publications. The criteria for each item are defined. Seven expert interviews (

Table A1. Formulation of the research question for multi-criteria assessment SAW method.

Indicators	Political Approach Toward Circular Economy	Recycling Infrastructure	Taxes on Waste GENERATION	Eco-Design and Energy Consumption	Material Efficiency and Re-Use	Waste Sorting	Repair, Refurbish and Remanufacturing	Consumer and Producer Behavioral Changes	Education and Awareness	E X P
Waste Landfill
Land Requirements
Citizens well-being
Waste Collection
Waste Recycle
Resources Consumption
Heat and electricity recovery
Demand
Production
profit
Production cost
Population
Disposal Income
Employment
Responsible Consumption
Product Sharing
Product re-use
Regional Circular economy integration
Global Circular Economy Integration

) were conducted in the research [70,71]. Depending on their nature and the information available, the criteria could be ranked numerically so as to measure them in a way that is easy to understand, where analysts and experts score all the drivers, for instance, by rating their impact from 0.00 (low) to 1.00 (high). Therefore, the following stages of the methodology present valuable insights regarding data collection that produces more robust decision-making and results different from those obtained by SAW.

Moreover, the next step is the classification of drivers. Two main categories of drivers can be defined, namely implementation drivers and sustainability drivers. Implementation drivers are categorized as follows: stakeholders, infrastructural investment, government regulations, and customer demand. Meanwhile, the drivers for sustainability can be counted as environmental initiatives, consumer and producer behavior, management, stakeholders, and personal quests. Experts and managers classify the drivers, which are then stored in a separate matrix. The final stage is the evaluation of the drivers. Expert evaluations are carried out at this stage. The experts score the drivers from 0.00 (low) to 1.00 (high) according to the effect they perceive regarding each driver, as measured in the metrics: time, cost, motivation, efficiency, effectiveness, and technical complexity.

4. Data Analysis and Results

This section details the findings in order to achieve the research objectives. Moreover, the assessment of the results was performed by analyzing the research results, the results from the literature, the evaluation of the key indicators of the circular economy, and the classification of the drivers of the eco-innovation road with respect to organizational capability and exploitative strategies. This section concludes by presenting the classification results, determining the advantages and contributions of eco-innovation in organizations toward a circular economy, internal and external variables and factors influencing eco-innovation, and exploitative strategies for eco-innovation, adopting the circular economy concept to the local context based on the systematic approach to the circular economy integration.

According to systems analysis based on this approach, “using systems thinking to better appreciate the potential of the circular economy at the territorial level”, any circular economy strategy conceived and implemented at the domestic level leverages the territorial context [57]. The main focus points are waste management and human well-being, as well as the region’s key sectors and institutional infrastructure, knowledge, and innovation potential to create new business opportunities and employment in the circular economy; material re-use for key local industries to reduce overall system costs; a strong local governance to promote citizen participation in a continuous stakeholder-led planning process; and improving economic competitiveness. The selected criteria were analyzed and assessed by the experts in order to measure the impact of each indicator on the system (

Table 3. A causal link between the selected variables in the circular economy concept.

Indicators	Political Approach towards Circular Economy	Recycling Infrastructure	Taxes on Waste Generation	Eco-Design and Energy Consumption	Material Efficiency and Re-Use	Waste Sorting	Repair, Refurbishing, and Remanufacturing	Consumer and Producer Behavioral Changes	Education and Awareness	E X P
I	+0.5	+0.2	0.0	+0.2	0.0	+0.05	0.0	+0.05	+0.0	6
II	+0.3	0.3	0.0	+0.25	0.0	+0.15	0.0	0.0	0.0	6
III	+0.4	0.0	−0.0	0.1	0.0	0.0	0.0	+0.25	+0.25	4
A	+0.1	+0.15	−0.0	+0.0	+0.0	+0.15	+0.0	+0.3	+0.3	6
B	+0.1	+0.5	−0.0	+0.2	+0.1	+0.1	+0.1	0.0	0.0	3
C	0.2	−0.0	0.0	−0.3	−0.0	0.0	+0.4	0.05	0.05	3
D	0.1	−0.2	0.0	−0.3	0.2	+0.0	−0.2	0.0	0.0	6
E	0.0	0.0	−0.0	−0.0	+0.1	0.15	+0.25	0.25	0.25	2
F	+0.15	+0.1	−0.05	−0.05	+0.1	0.1	+0.2	0.2	0.0	4
G	0.0	−0.0	−0.2	−0.2	+0.2	−0.0	+0.2	+0.0	+0.0	4
H	+0.0	−0.0	−0.2	−0.1	+0.2	−0.0	+0.2	0.1	0.0	4
I	0.0	−0.1	0.0	−0.0	−0.3	−0.2	+0.2	−0.2	−0.0	2
J	+0.0	0.0	−0.15	0.05	0.2	0.0	+0.1	+0.2	+0.15	4
K	+0.2	0.1	0.05	0.05	0.0	0.1	+0.3	+0.0	+0.15	6
α	+0.0	0.0	0.0	0.05	0.2	+0.0	0.0	+0.35	+0.35	3
β	0.0	0.0	0.0	0.0	0.2	0.1	0.1	+0.3	+0.3	6
φ	+0.1	0.0	0.0	0.0	+0.3	+0.1	0.1	+0.3	+0.1	3
R	+0.4	+0.25	−0.0	0.0	+0.0	+0.0	+0.2	+0.0	0.15	6
GL	+0.4	+0.25	0.0	0.0	+0.0	00	0.2	0.0	0.15	6

Source: Expert evaluation and Bassi et al., 2020. I = waste landfill; II = land requirements; III = citizens’ well-being. A = waste collection; B = waste recycling; C=resources consumption; D = heat and electricity recovery; E = demand; F = production; G = profit; H = production cost; I = population; J = disposable income; K = employment; R = regional circular economy integration; GL: global circular economy integration; α = responsible consumption; β = product sharing; φ = product re-use.

).

The local mechanisms and drivers for a circular economy are extremely context specific. Some factors that are intrinsically linked to territories were analyzed and identified across various studies. These are expected to have an impact on the circular system’s leverage mechanisms. As a result, the early awareness of such characteristics is critical for the development of successful place-based strategies. The method used provides an overview for comparing a specific circular economy issue to a broader viewpoint. This not only provides a comprehensive framework for a critical reflection on the existing circular economy initiatives, both territorial and regional, but also provides insights into prospective actions that could be explored to develop the circular economy. Among the crucial support points, we observed both positive and negative trends. In terms of the latter, economic growth increases employment, income, and demand, and hence, waste generation. Any cost reduction coming from circular economy initiatives that raise disposable income is likely to have a rebound effect. Taking into consideration the research result, it presents a clear view on how the circular system is attached to organizational capability and exploitative strategies.

As in all economic models, every element of the system is linked to the others and cannot be considered separately. The system is based on the interaction of public and private organizations, leading to close collaboration and mutual strategy. Determination of supporting and balancing loops helps us to foresee the outcomes of circular economy interventions. In this way, strategies can be devised in which interventions are aimed at creating new possibilities and at the same time, counteracting the potential adverse effects.

The dynamics of innovation in a circular economy imply a gradual transformation of technology and the economy. It is potentially passing through the adoption of both incremental and radical improvements towards the circular system. The key drivers of eco-innovation adoption in relation to a circular economy are policies/regulations and market demand (

Table 4. Classification of drivers for the adoption of eco-innovation towards a circular economy.

Category	Variables	Implementation Drivers	Sustainability Drivers
Government/institutional	Regularity and normative pressures/cooperation/technology and infrastructure	Determined by governments, noncompliance with regulations can be very costly to the firm (local, regional, and international level)	Environmental legislative demand
Management and organization	Adoption of certifications/environmental managerial concerns, and leadership/organizational culture towards eco-innovation	Environmental management approach, the role of top executives in adopting eco-innovation and in integrating innovation and sustainability in companies’ strategy/organizational innovation	Company’s management quest for a better environment/environmental initiatives and advances in product innovation
Stakeholders and customers	Publicity/demand	Develop more environmentally friendly products/processes	The wish to be on the forefront of future legislative demands/customer’s demands
Consumer behavior and culture/employee satisfaction	Awareness/responsible consumption	Satisfy customer demand/extend product range	Product re-use and share/personal quest for a better environment

).

Institutional drivers attempt to develop well-established concepts based on norms, beliefs, and rules that demonstrate the vision of the companies and shape organizational capability, behavior, and culture. To mitigate the negative effects rendered by the focus on shareholder value, uncertainty avoidance, and short-termism, we identified an approach to stakeholder and shareholder value, embracing ambiguity, and valuing business sustainability as institutional drivers for dynamic capabilities at the organizational level. From the producer perspective, we have to look closer at societal culture and produce propositions that are truly more preferred by consumers, resulting in long-term viability for producers. According to our findings, institutional factors, such as balancing shareholder and stakeholder value, embracing ambiguity, and valuing organizational sustainability, imply a collaborative innovation strategy, with a strategic focus on eco-innovations and patient investments. Importantly, strategic drivers enable sensing, seizing, and transforming the innovation activities toward the circular economy.

Taking into account the above hypotheses (H1, H2, H3), the hypothesis stating that there is a relationship between political approaches, infrastructural changes, and the organizational capabilities with regard to product eco-innovation and process eco-innovation was confirmed. The study also confirmed that there is a relationship between political approaches, eco-design, and organizational capabilities for eco-innovation and product eco-innovations. Furthermore, the relationship between political approaches towards a circular economy, eco-design, and the consumer/producer behavioral changes through exploitative strategies regarding infrastructural, institutional and organizational changes, education, trainings, and social awareness proved to be true as well.

The study addressed the circular economy concept and the prospective market for eco-innovative products, as well as the possibility to increase a firm’s organizational efficiency through new organizational methods or the adoption of environmental processes, and sought to comprehend how eco-innovation has been studied in the literature. Following a thorough examination of the data acquired throughout the research, which aimed at assessing and expanding the body of knowledge concerning the drivers of eco-innovation towards a circular economy with regard to organizational capability and exploitative strategies, the conceptual framework was drawn (Figure 4). In general, our approach suggests that external factors impact internal factors, and they both affect the eco-innovation adoption process, leading to the positive performance of companies.

The model aims at the comprehension of the drivers of eco-innovation and serves as a map towards the sustainable behavior of businesses, which often face tradeoffs when they undertake financing eco-innovation activities in the circular system. Understanding their motivations can aid policymakers in guiding and predicting company behavior, as well as developing instruments to encourage more environmental management. In terms of the firms’ resources and capacities, the findings show that collaborations with partners, alliances, and networks have a favorable impact on the product, process, and radical eco-innovations. The company size is positively related with the decision to eco-innovate the product and process with respect to organizational capability. The scale of the company is used as a proxy for the possible strategic and operational eco-innovation drivers. Small businesses confront greater challenges in implementing environmental solutions. This finding is consistent with the earlier research, which suggests that the size of a company has a positive impact on environmental efforts in general.

5. Discussion and Findings

The concept of a circular economy has been underlined as a socio-technical frame to transform the linear economy into a more sustainable, restorative, and regenerative system. Such a transition between the linear economy and the circular economy [7,8,9], which is actually a move towards ecological sustainability, is about a structural change leading to the introduction of transformative innovation [12,13,14,17,38,39,40]. In recent years, many studies have focused on the nexus between a circular economy and innovation activities. However, there are not many studies focusing on eco-innovation dynamics within the circular economy, such as drivers and barriers [44,48]. This paper is an exploratory study on the drivers of the eco-innovation road towards a circular economy. Even though the methods are different, the results are similar to those of other studies in this field [49,51,52,54,56]. Nevertheless, this study emphasizes the nexus between producer and consumer behavior, political approaches towards a circular economy, and product/process eco-innovations as the driving force in the development of organizational capabilities and exploitative strategies. It is important to emphasize that no industrial manufacturing process can include a green production process without addressing sustainability, societal development, and most importantly, a circular economy. Furthermore, companies can obtain financial and environmental benefits through sustainable manufacturing processes [63]. This approach will bring social and economic benefits to the eco-innovation process. In addition to policy implications and laws, institutional framing is also a driving force. Nonetheless, it poses risks to the circular economy. In order to avoid mismatches and contradicting incentives, a consistent strategic route is required. The focus on the promotion of systemic eco-innovation is also of paramount importance. Eco-innovation is viewed as a crucial approach for overcoming challenges to a CE transition where drivers have a significant role to play. The nexus between supply and demand factors could also affect corporate image and reputation, market relations, information flows, pressures for change, and cooperation/collaboration networks influencing the eco-innovation drivers. Moreover, firms are linked with NGOs, research centers, suppliers, consumers, competitors, financial institutions, and government regulations. The practical contribution of this paper is a consolidated, complete framework of eco-innovation that provides substantial insights to practitioners and facilitates the spread of eco-innovative practices. In particular, regulators could play a significant role in helping to implement environmentally friendly technologies which would be a fruitful area for further research.

6. Conclusions

Proposals for further research on eco-innovations are made in this article. Academic studies have a significant place in developing sustainability by offering innovation-oriented sustainable solutions, presenting managers, policy-, and decision makers alike with instruments that might be useful in the process of adapting and implementing the new strategies. The research outcome of this study is compatible with the prior academic studies and contributes to the current and future debate. Departing from the point of understanding of what the primary drivers of the eco-innovation road towards the circular economy are enabled us to facilitate theoretical advancement of the knowledge and develop a conceptual model. Moreover, the study makes a significant contribution by emphasizing the internal factors and dynamics that firms can monitor, control, and manage in order to adopt eco-innovation. The key actors, such as managers, decision makers, or policy makers eager to adopt eco-innovation should take these factors into consideration in order to support a change and be ready for the challenges that might occur during the implementation process. Although the significance of eco-innovation as a basic ability of a firm has been underlined, the academic articles analyzed in this systematic review usually do not consider this aspect while assessing companies by means of empirical investigation. Therefore, this is a limitation of our research.

Taking into account the external factors, such as the environmental conditions which companies have little control over, they might move beyond mere compliance by adhering to internal factors such as competence in terms of strategy and the environment, human resources, and environmental managerial concerns. In addition, we defined how eco-innovation has been researched and examined in business literature related to the drivers that affect the company’s adoption, capabilities, and motivation for the implementation of eco-innovation.

The most important implementation drivers of eco-innovation practices are the political approach towards the circular economy and customer demands, as identified by the experts. This shows that innovation activities of the companies are based on the new and upcoming tendencies and trends in the market; it is possible to generate a strong pull towards the eco-innovation environment, which is highly dependent on the political approach and the infrastructure. In contrast, other drivers, such as environmental initiatives and product innovation, as well as consumer and producer behavior, are perceived as important components which are linked to education and the awareness of the circular economy. This shows that when it comes to eco-innovation implementation, effective support from policy makers and the management level of organizations, as well as the focus on social awareness, are more important than the product itself. For continuation, drivers such as environmental legislative demands and market demands are linked and must be managed together and coherently. In contrast, the organizational capability highly depends on the employee’s qualifications, access to market data on supply and demand, and collaboration with competitors and key institutions.