Making the circular economy digital or the digital economy circular? Empirical evidence from the European region

This paper answers the question of whether digitalization enables the circular economy or circularity promotes the digital transformation process. We use six diverse measures to reflect the circularity of European countries: municipal waste, the number of circularity patents, circular material usage, recycle waste rate, recycling biowaste rate, and recycling e-waste rate. In order to assess digital businesses, we use four measures of e-Commerce – online selling, e-Commerce sales, e-Commerce web sales, and e-Commerce turnover – and two measures of e-Business: customer relation management usage and cloud usage. We use user-centricity and key enablers to assess digital public services. Our estimation results reveal that the initial development of digitalization can enable European countries to transit to the circular economy. However, the overdevelopment of digitalization hinders this process. By contrast, we present a nonlinear relationship between digitalization and circularity, suggesting that digitalization can positively impact the circularity level after reaching a certain level.