Institutional and Entrepreneurial Drivers of Small and Medium-Sized Enterprises’ Circular Economy Practices in Central and Eastern Europe and the Western Balkans

This paper examines the influence of institutional quality, stakeholder networks, entrepreneurial ecosystems, and policies on the adoption of circular economy practices by SMEs in twelve Central–Eastern European and Western Balkan countries. Using the Flash Eurobarometer 549 data, we first cluster countries by the level of circular economy adoption and find that they are highly interdependent. We apply cross-validated LASSO regression to identify two circular economy practices with the highest leverage (minimizing waste and saving materials). We also show that EU membership benefits appear when national administrations can effectively absorb and deploy EU incentives, helping firms transition from basic resource efficiency towards more advanced circular strategies. A two-pillar policy agenda is recommended: building targeted capability bundles inside firms (green-skills training and support for eco-design and production) and strengthening institutions and entrepreneurial ecosystems.