The purpose of this paper is to analyze the factors influencing the adoption of environmental innovations towards a circular economy (CE) by the EU firms, with special focus on technological capabilities and external support. A multivariate probit model is specified to allow the distinction between three types of eco‐innovative practices: Reduce, Recycle, and Redesign technological processes. Using a novel taxonomy based upon the distinction between narrowing, closing, and slowing loops in the use of resources, we find that financial and technological capabilities are essential drivers for all types of CE actions in the European firms. Similar findings are found for the public funding support but only when the firms are recycling (closing resource loops) and redesigning (slowing resource loops). Knowledge from private companies (pecuniary mode) is relevant to Reduce and Recycle strategies. These two eco‐innovative practices are also shown in firms with a wide external knowledge network. Results also show that there is an inverted U‐shaped relation between the diversity of collaboration and the circular Redesign of products. The paper ends up with some implications for practitioners and policy makers.

This paper focuses on the association between the probability and the number of green jobs at the firm level and the circular economy (CE) strategies related to the 4Rs approach (reduce, reuse, recycle and redesign) implemented by companies located in the European Union. Factors related to resources and technological and organizational capabilities are also considered. Using a zero-inflated negative binomial model (ZINB), results confirm that firms involved in CE have a higher probability to generate green jobs. Reusing, redesign and reducing practices are positively related to the number of green jobs. When we consider separately different CE actions, energy efficiency and minimising waste have a positive relationship with the number of green jobs, while recycling practices are not relevant. Reusing materials and redesign are both positively associated with the probability to have green employment and with the number of green jobs. Concerning firm resources and capabilities, larger firms have a higher probability to be in the group of firms with green jobs. As well, firms' technological capabilities, openness to external sources of knowledge and green products and services specialization are crucial not only for the probability but also for having a greater number of green jobs.