How Does Circular Economy Affect Firms’ Innovation Performance? The Interaction Effect of Open Innovation

Recently, circular economy (CE) attracts much attention from governments and companies. And we analyze how CE affects enterprises’ innovation output, determining their long-term competitiveness. Given the close relationship between CE activities and inbound open innovation (OI), we further consider the impact of the interaction between inbound OI and CE on enterprise innovation output. Based on data from Chinese listed companies, we found that CE can promote the improvement of enterprise innovation output, and the interaction between CE and OI can further enhance this effect. Further heterogeneity testing indicates differences in the roles of CE and inbound OI at regional and industry levels. The implicit suggestion from the results is that policy formulation should consider enterprise and regional attributes more to enable enterprises to benefit better from CE activities.