Technological capabilities, institutional context and circular economy adoption

Purpose This study examines how technology acquisition and development influence circular economy (CE) adoption in European small and medium-sized enterprises (SMEs). It further explores the moderating role of financial resources, internal expertise, and external support in this relationship while also assessing the direct impact of cultural factors on CE adoption. Design/methodology/approach This study analyses a dataset of 12,778 European SMEs. By employing a hierarchical Probit model, it combines firm-level variables with country-level indicators. Findings The results highlight that both external sourcing of technological solutions and internal innovation capabilities are critical for SMEs' transition to the CE. Firm-level factors, including technological resources and internal capabilities, play a more decisive role in CE adoption compared to external support. At the national level, short-termism aligns with CE through pragmatic resource efficiency, while individualism fosters entrepreneurial approaches to sustainability. However, their overall impact remains secondary to firm-specific drivers. Originality/value Leveraging the resource-based view and dynamic capabilities theories, this study investigated technological orientation by differentiating between technology acquisition and development, offering a nuanced understanding of how SMEs adopt CE practices. It highlights the moderating role of financial resources, internal expertise and external support, showing that while financial resources facilitate technology acquisition, internal expertise is key to leveraging these solutions. Additionally, external support has a limited impact on firm-driven innovation. At the national level, the study provides new insights into the role of cultural dimensions, demonstrating that short-term-oriented and individualistic societies align with CE adoption, challenging prevailing narratives.