Trust the process: Regional process knowledge and the geography of circular economy innovation in Europe

The transition to a circular economy (CE) is essential to address pressing environmental challenges. This transition heavily relies on technological progress and innovation. However, the geography of CE innovations is uneven, with some regions outperforming others in developing CE-related inventions. In this paper, we aim to deepen the understanding of the geography of CE innovations and its drivers at the regional level. Specifically, we investigate how the composition of regional knowledge bases is associated with CE innovation, distinguishing between knowledge related to the invention of novel products (product knowledge) and knowledge related to the development of new production processes (process knowledge). Our empirical analysis draws on two unique datasets: one uses natural language processing to identify CE inventions from patent data, while the other identifies process and product knowledge from patent data. Combining these datasets, we analyze data from 283 European NUTS-2 regions and 128 CPC technology fields between 1980 and 2016. Our findings reveal that a higher share of process knowledge within a region’s knowledge base is associated with greater regional intensity of CE innovations. These results contribute to the literature on the geography of the CE, highlighting the importance of place-based policy approaches to foster CE innovation. JEL codes: O31, R11, R12