Bridging Innovation Management and Circular Economy: An Empirical Assessment of Green Innovation and Open Innovation

ABSTRACT Seeking a successful balance between economic growth and the natural environment, more and more companies are attempting to embrace circular economy (CE). Yet, how to take the first step towards the circular transition? This study answers such a meaningful question by delving into innovation management to support the implementation of CE in businesses. In detail, the present research addresses the nexus between green innovation and CE in economic organisations, besides observing the adoption of open innovation strategies. Green innovation, understood as a learning process through adopting novel practices, technologies or products, has been associated with CE implementation, although their effective relationship has typically been overlooked or assumed. On the other hand, open innovation may further accelerate circular‐oriented innovation, encompassing a collaborative approach where companies leverage external ideas and technologies. Using covariance‐based structural equation modelling on a sample of 318 European companies, our study examines the interplay between such phenomena. We find that green product and process innovation enable companies to acquire essential resources to implement CE practices, especially when relying upon open innovation mechanisms. As a result, this study demonstrated the synergic adoption of these innovation strategies, offering new insights based on generalisable claims. Building on the resource‐based view of the firm, we substantiate the importance of environmental awareness and stakeholders' engagement in innovation processes, as a strategic approach to acquire critical resources and knowledge that facilitate the CE implementation. Accordingly, the article delivers practical recommendations for managerial figures by underlining how to harness innovation management to move their first steps towards the CE transition.