Determinants Leading to Success:
An Empirical Analysis of the Success Factors of Projects Related to
Circular Economy in the 8th European Framework Programme
Horizon 2020
MSc Thesis Public Administration Track: Economics & Governance
Vytautė Kančytė 2586436
Supervisor: Dr. B. J. Carroll Second reader: Dr. D. D. Toshkov
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Abstract
The topic of circular economy (CE) evolves to be increasingly popular in the debates on issues such as the inefficient use of resources, climate change and pollution. Since 2015, the European Union (EU) is one of the main supporters of the circular use of resources due to the fact that it ameliorates the environment, society and economy, diminishing the material flow, tackling the environmental issues and increasing European competitiveness. Therefore, one of the sources of funding of CE research and innovation is the EU Framework Programmes (FPs), where the latest FP is Horizon 2020. The literature widely discusses the general determinants that encourage participation in EU FPs, dividing them in country level and organisational factors and employing the theories of collaborative networks, cumulative advantage and social practices. However, the precise determinants that aid CE related projects in the EU FPs remain not addressed. Therefore, this research aims to uncover the factors that increase the success of CE related projects in Horizon 2020. It is researched if the determinants of participation in the EU FPs can also aid to succeed for the aforementioned projects. It is found that the CE project determinants leading to success are the presence of national CE related guidance policies, high coherence of eco-innovation policies and their implementation, presence of national CE related institutions, previous successful participation in Horizon 2020 with a CE project, involvement in collaborative networks and active participation.
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Content
List of tables………. iv
List of figures………... v
List of abbreviations……….. vii
Introduction………. 1
Chapter I Background information……… 5
1.1. Circular economy……… 5
1.2. European Union and circular economy………... 7
1.3. Concluding comments………... 9
Chapter II Theoretical framework………... 10
2.1. Literature review and theory………... 10
2.2. Hypotheses and causal mechanisms……….. 16
2.3. Concluding comments………... 21
Chapter III Research design………. 23
3.1. Research design and methodology……… 23
3.1.1. Positivist approach………. 23
3.1.2. Quantitative comparative cross-sectional large-N analysis……… 24
3.2. Conceptualisation, operationalisation and data collection……… 26
3.2.1. Outcome variable………... 26
3.2.1.1. Number of signed grants………. 26
3.2.2. Explanatory variables………. 27
3.2.2.1. Size of the country………... 27
3.2.2.2. National policies related to circular economy………. 29
3.2.2.3. National institutions related to circular economy……… 33
3.2.2.4. Previous successful circular economy’s projects in Horizon 2020…. 35 3.2.2.5. Collaborative networks………... 36
3.2.2.6. Participation……… 37
3.2.2.7. Public opinion on the environment………. 37
3.2.3. Control variables……… 38
3.2.3.1. Rate of unemployment……… 38
3.2.3.2. Share of people above 65 years………... 39
3.2.3.3. Number of highly educated people in the country……….. 39
3.2.3.4. Share of green party members in the national parliament…………... 40
3.3. Concluding comments………... 41
Chapter IV Empirical results and analysis……….. 42
4.1. Descriptive statistics………. 42
4.1.1. Outcome variable: visualised………. 44
4.1.2. Outcome variable relationship with the explanatory variables……….. 46
4.2. Empirical results………... 54
4.2.1. Main bivariate regressions……….. 55
4.2.2. Multivariate regressions with control variables………. 61
4.3. Results of the hypotheses: analysis………... 67
4.4. Concluding comments………... 70
Conclusion……….. 71
References….……….. 78
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List of tables
Table 1. Overview of assigned values to bivariate variables, representing the explanatory variable of national policy……….. 32
Table 2. Overview of assigned values to the explanatory variable national CE related institutions………. 35
Table 3. Descriptive statistics……….. 44
Table 4. Relationships between the number of signed grants in 2018 and dichotomous explanatory variables………. 54
Table 5. Relationships between the number of signed grants in 2019 and dichotomous explanatory variables………. 54
Table 6. Results of the main bivariate negative binomial regressions (outcome variable- number of signed grants in 2018)………...… 56
Table 7. Results of the main bivariate negative binomial regressions (outcome variable- number of signed grants in 2019)………... 57
Table 8. Results of the main bivariate negative binomial regressions (outcome variable- number of signed grants in 2018) (exponentiated coefficients)………..……… 58
Table 9. Results of the main bivariate negative binomial regressions (outcome variable- number of signed grants in 2019) (exponentiated coefficients)………..… 59
Table 10. Results of the main multivariate negative binomial regressions (outcome variable- number of signed grants in 2018) (exponentiated coefficients)……….. 62
Table 11. Results of the main multivariate negative binomial regressions (outcome variable- number of signed grants in 2019) (exponentiated coefficients)……….. 63
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List of figures
Figure 1. Distribution of the dependent variable: bar chart………. 45
Figure 2. Distribution of signed grants in 2018………... 45
Figure 3. Distribution of signed grants in 2019……….. 46
Figure 4. Relationship between the number of signed grants in 2018 and national GDP per capita in 2018……….……… 47
Figure 5. Relationship between the number of signed grants in 2019 and national GDP per capita in 2019………. 47
Figure 6. Relationship between the number of signed grants in 2018 and national population in 2018………... 48
Figure 7. Relationship between the number of signed grants in 2019 and national population in 2019………... 48
Figure 8. Relationship between the number of signed grants in 2018 and the eco-innovation index……….. 49
Figure 9. Relationship between the number of signed grants in 2019 and the eco-innovation index……….. 49 Figure 10. Relationship between the number of signed grants in 2018 and 2019…………... 50 Figure 11. Relationship between the number of signed grants in 2018 and number of
collaborations with EU member states…….……….. 51
Figure 12. Relationship between the number of signed grants in 2019 and number of collaborations with EU member states…….……….. 51
Figure 13. Relationship between the number of signed grants in 2018 and participations in 2018………... 52
Figure 14. Relationship between the number of signed grants in 2019 and participations in 2019………... 52
Figure 15. Relationship between the number of signed grants in 2018 and public opinion on the environment as “very important”………. 53
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Figure 16. Relationship between the number of signed grants in 2019 and public opinion on the environment as “very important”………. 53
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List of abbreviations
CE – circular economy
EC – European Commission
EPR – extended producer responsibility
EU – European Union
FPs – framework programmes
H2020 – Horizon 2020
R&D – research and development
SMEs – small and medium size enterprises
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Introduction
Nowadays, humanity faces inefficient use of resources and high levels of pollution, affecting the environment, economy and society. Therefore, there are various attempts to diminish global warming and mitigate the climate change by agreeing on global measures in both multilateral and national settings. On a supranational level, the European Union (EU) is also facilitating discussion on climate objectives (European Council, 2020). Recently, the EU has launched the eco-innovation plans as well as committed to the zero waste and the “Green Deal” in order to lessen the negative impact of pollution. In line with the heightened attention for climate goals, the topic of circular economy (CE) is increasingly mentioned by various stakeholders. Respectively, the attractiveness of the circularity as one of the solutions to the aforementioned global problems accelerates. To sum up the definition of CE in short- CE offers an alternative to the linear economy and aims for an economy in which materials, resources and products are used for as long as it is feasible, simultaneously diminishing the production of waste (European Commission, 2015). However, the U-turn from the linear to the CE is complicated, requiring substantial investments, research resources, knowledge and enforcement of circularity in the EU member states.
What can help to address these issues are, for instance, various policies supporting circularity, innovation-friendly legislation, the EU emissions trading system, fellowships and individual research grants, general tax-funded support for research and EU framework programmes (FPs) for research and innovation (European Union, 2019). The EU FPs are designed to particularly support research, development and innovations, ensuring European competitiveness on a global scale. The popularity of such programmes skyrocketed since the first EU FP in 1984 (European Union, n.d.). Until now, there are eight EU FPs launches, the last one being the Horizon 2020 (H2020) and taking place from 2014 until 2020. Notably, as the significance of CE started thriving in 2015 in the EU, H2020 is the first EU FP which includes a specific section for projects related to circularity.
Nevertheless, states and organisations usually wish to maximise their utility. Thus, they act in a rational manner, highlighting the costs and benefits of the applications to the EU FPs. As a result, there is a large number of academics investigating general reasons determining why organisations apply to the EU FPs. This leads to various classifications of the factors encouraging to apply, for example, country specific factors or organisation level factors. These
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diverse components may be linked together with theories mostly related to the field of sociology. Therefore, the existing theories of cumulative advantage, collaborative networks and social practices are of great importance.
However, the question of which factors, stimulating the participation in the EU FPs can be called the “success factors” that help to receive an approval and grant for the project is not extensively discussed in the literature. Especially, I am interested in the factors that generate the approval of a project and result in the dedication of a grant for the CE related projects in the EU FPs, which is a relevant topic in today’s world and it is not widely researched yet. Nonetheless, with increasing attention and recognised value of CE, the organisations, interested in the innovation and advancement of CE, shall be curious to understand what may help their projects to thrive. In addition to that, the countries perhaps are also attentive to the factors that may help their organisations to advance and implement circularity easier. Henceforth, the research question of this thesis is- what are the determinants for success of the Horizon 2020
project proposals for transition towards circular economy?
Accordingly, this research is relevant in both academic and societal ways. To contribute to the academic literature, the research tests the existing theories, linked to the discipline of sociology, together with the established classifications of the FPs’ participation factors and applies the uncovered factors encouraging the applications to the FPs to the case of CE projects. Moreover, the existing literature mainly focuses on the discussion of the overall determinants that contribute to the application to FPs. Yet, this thesis aims to identify the specific factors, existing on the national and organisational level, that contribute to the successful admission and financing of the projects related to CE rather than focusing on the broad view on the factors that reinforce participation in the FPs. It also explores how societal practices shape institutions and vice versa. Hence, this is relevant for the realm of Public Administration because the unveiled success factors point to the important aspects that shall help to govern and promote CE and its financing, highlighting where future research may focus. Thus, the goal is to analyse previously rather academically unexplored realm of success factors of H2020 grants of CE related projects and take a look at CE from a comparably different socio-political angle rather than the technical side of it. Moreover, in this analysis, it is neither focused on one specific H2020 project nor on one of the EU member states, instead an overall approach is taken.
From the societal value perspective, the unveiled success factors for the CE projects contribute to the further development and implementation of CE in the EU member states as well as it
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may ease the transition towards circularity. As until now, the implementation of CE in the EU states has been rather diverse and unbalanced. Respectively, if the success factors are identified, policy makers or organisations wishing to apply for an EU FP with CE focused projects may promote the operationalisation and implementation of the success determinants in their country. As a result, there will be more successful CE related projects proposed to the EU FPs and, thus, more funding received for research and innovation. In turn, this process might accelerate the development of circularity and the transition to CE on a larger supranational scale. Consequently, this progress might result in the discovery of some solutions to the aforementioned global problem.
In order to pursue this analysis, for the dependent variable, which is operationalised to be the number of signed grants for projects that concern the area of CE in H2020, the data is gathered from the H2020 publically accessible dashboard. What concerns the explanatory and control variables, the data is collected from various sources such as Eurostat, Eurobarometer, European Circular Economy Stakeholder Platform, diverse internet sources, EC website and various reports. To conduct this research, a negative binomial regression analysis is used, providing a way to detect relationships between dependent and independent count variables where the outcome variable is over-dispersed (UCLA: Statistical Consulting Group, n.d.), which is exactly what it is researched in this thesis- the relationship between the success factors and the number of signed grants dedicated for the development of the CE.
The main findings of the research signify that not all of the factors that encourage participation in the EU FPs are the sources of success for CE related projects in H2020. In fact, only five factors can be called the success determinants. Firstly, national CE related guidance policies together with the coherence and harmonisation of the framework of eco-innovation in a country contribute to the advantage of the CE projects. Secondly, national CE related institutions also bring success to the CE related projects in H2020. Thirdly, previous successful participation is verified to be a benefit when participating in H2020 with a project linked to CE. Respectively, experience, reputation, recognition and cumulative positive practices are important for the CE project applicants. The fourth success factor belongs to collaborative networks, increasing research capacity, knowledge and reputation, which are crucial when composing project proposals. Finally, active participation is the fifth success determinant, meaning that the more CE project applications there are in a country, the more applications lead to success in H2020. In general, it may be assumed that if many organisations submit CE project applications to H2020 the competition between them intensifies, therefore, the projects tend to be more
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developed. Overall, the findings of this research are specific to the time frame and the population of cases in concern. Nevertheless, it provides an overview on the factors that not only encourage to apply to the FPs but also lead to CE projects being approved and receiving funding.
To uncover the success factors that determine receiving the H2020 grant for CE related projects, the structure of the research is the following. The first chapter provides background information on CE, what it is and where it fits in the bigger picture of sustainable development. Moreover, in this chapter, a short introduction is given on how CE is seen by the EU and what kind of policy the EU pursues to transition to circularity. After that, the second chapter is devoted to the literature review and theoretical framework that mainly focus on the various reasons why one may be encouraged to apply for the FPs. The part on theory also somewhat groups the factors mentioned in the literature review. This information forms the foundation for the thesis, on which causal mechanisms and hypotheses are built and presented in the end of chapter two. In turn, chapter three dives into the research design and methodology. In more detail, in this chapter, the approach and methodological decisions are highlighted as well as the conceptualisation, operationalisation and data collection methods are thoroughly explained for every variable. In particular, this research is a quantitative cross-sectional large-N analysis of the EU countries to H2020 in two points in time, i.e. 2018 and 2019. Therefore, a negative binomial regression analysis is chosen to conduct this research and unveil the success factors. Consequently, chapter four presents the descriptive statistics, empirical findings of the research and the analysis of the findings. Finally, the last chapter is dedicated to the conclusion, where the results and hypotheses are discussed together with the implications of the findings, relevance, limitations and recommendations for future research.
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Chapter I
Background information
This chapter aims to explain the main concepts present in the research question and provide background information. It is necessary for the reader to grasp not only the relevance of the granted funding in H2020 but also how it fits to the general debate on CE and EU policy regarding this topic. In the beginning, it is explained what CE is, outlining the definition used in this research. After that, it is shortly presented how CE relates to the economy, society and environment. Consequently, the debate on the definition of CE is concisely explained. Respectively, the approach of the EU towards CE is briefly presented. Finally, H2020 is shortly introduced.
1.1. Circular economy
In this thesis, to have a clear vision what CE is, the definition of the phenomenon provided by the EC is used. The EC defines CE as an economy “where the value of products, materials and
resources is maintained in the economy for as long as possible, and the generation of waste minimised” (European Commission, 2015). Accordingly, CE was designed to improve the way
resources are used in the economy. Therefore, it contrasts with the linear economy and challenges the process of “production – consumption – waste”, resulting in overconsumption of natural materials, which decreases the reproductive capacity and inefficient treatment of waste (Kobza & Schuster, 2016; Korhonen et al., 2018). As a result, circularity’s goal is to decouple economic development from over-consumption of natural resources and environmental degradation (Murray et al., 2017).
For the first time, the term of CE was used around 1980s (Murray et al, 2017), accelerating a new economic model based on the assumption that “everything is an input to everything else” (Merli et al., 2018, p. 704). As the statement implies, CE correlates with the rather innovative idea of the closed economy and takes a critical look at the more conventional linear economy, which is an open type of economy producing a substantial amount of throughput. CE offers a way to decrease throughput in the economy simultaneously bending the linearity by the closed-loop material flow (Merli et al., 2018).
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Additionally, more recognition is brought to CE because efficient use of resources is crucial for the future sustainable development of the economy, society and environment. This concept offers a solution to what seems to be contrasting goals of economic progress and environmental preservation (Rizos et al., 2017). The idea of an economy as a closed system stems from the work of Kenneth Boulding (1966), who emphasises the need to use output of one process as an input for another because there is only a limited amount of natural resources. In other words, Boulding imagined a future economy that would function by reusing a limited amount of inputs and recycling outputs. The closed economy is contrary to the open economy, which is linear and relies on the constant flow of materials. Therefore, CE resonates to the closed system. Geissdoerfer et al. (2017) highlight that the concept of CE is similar to sustainability, implying that CE is linked to sustainability. In turn, sustainability, according to Ehrlich and Commoner, signifies the interconnectedness between the environment, society and economy (Geissdoerfer et al., 2017). Even though there are some divergences between CE and sustainability too, both concepts may enrich one another, linking their advantages and, thus, ensuring amelioration of the planet and society.
In general, there is no unified definition of CE (Murray et al., 2017), thus, the concept stresses various actors, perceptions and diverse principles that were formulated in the recent past, like “regenerative design”, “industrial ecology”, “cradle-to-cradle” and “performance economy” (Merli et al., 2018). Henceforth, even amongst academia, the concept’s boundaries are fuzzy, which perhaps stems from the reason that this field of research is relatively new and is fostered by various research areas as well as a number of schools of thought (Merli et al., 2018; Rizos et al., 2017).
Rizos et al. (2017) outlay different perceptions to CE: some scholars, focus on the resource-efficient definitions and the urge to construct closed material flow loops, diminishing the use of natural resources. Others stress the relevance of the usage of resources for as long as possible, then recovering and reusing the same resources again. Different academics also interpret CE by adding various elements and, thus, go beyond the flow of material resources, considering the topic of sustainable energy, energy efficiency and preservation, land, soil and water. Whereas, some incorporate economic factor and claim that CE generates new types of economic projects, intensifies competitiveness and employment. Although, one of the most common definitions is by the Ellen MacArthur Foundation, stating: CE is “an industrial system
that is restorative or regenerative by intention and design. It replaces the “end-of-life” concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic
7 chemicals, which impair reuse, and aims for the elimination of waste through the superior design of materials, products, systems, and, within this, business models” (Kobza & Schuster,
2016, p. 113). Based on the analysis of various definitions, Rizos et al. (2017) emphasizes that CE also receives two types of criticism. The first type is based on the absence of a narrow and unified definition, which leads to varied implementation and interpretation of CE. The second type is disregard of the social aspect such as gender and equality. Henceforth, this criticism might be regarded as an opportunity to consider various ways to implement and promote circularity, including the aforementioned social aspects in the implementation of this type of the economy.
Nowadays, institutions, academics and businesses pay increasingly more attention to the concept of CE (Merli et al., 2018), which is rooted in a number of schools and theories. It is significant to understand the history and roots of the concept to grasp the overall meaning of the phenomenon as well as to comprehend why there are many differing definitions. It is claimed that industrialists with the mind-set that industry functions as a large organism, not as independent parts, fostered the idea of CE in the nineteenth century (Murray et al, 2017). Moreover, the major foundation for CE is ecological economics (Korhonen et al., 2018). It focuses on the link between the economy and ecosystems, thus, being in contrast to the view of the environmental economists. Respectively, the ecological economists believe that the economy is embedded in the ecosystem, which in turn constraints economic growth. Whereas, the environmental economists regard the environment as a small piece of the economy, thus, leaving plenty of room for economic development. As a result, the shift of views between these two schools of thought signifies the realisation for the need for alteration from linearity to circularity, from an open to closed economy.
1.2. European Union and circular economy
The EU believes that a transition to circularity will benefit the European objectives to develop in a sustainable, low-carbon and resource-efficient way (European Commission, 2015). Consequently, there is a number of policy documents that the European Commission (EC) has produced in order to advance CE in the EU. In 2015, the EC presented the “Circular Economy Package”, which included the Commission Communication “Closing the loop- a European Union Action Plan for the Circular Economy”. The latter document sets the actual measures for the full cycle, meaning from production to consumption and to waste treatment as well as the market for used raw materials and a revision of the waste legislation, that all together should
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support and advance the European economy in the transition (European Commission, 2015). Both aforementioned documents laid foundations for the closure of material loops, increase of competitiveness and creation of new job opportunities. In 2018, the EU adopted the “2018 Circular Economy Package”, including a “Monitoring Framework on Progress Towards a Circular Economy” (European Commission, 2018). The Monitoring Framework advances CE regulation further because it incorporates ten indicators for CE, especially emphasising private investments.
In 2020, as one of the main pillars of the “European Green Deal”, aiming for Europe to become climate-neutral by 2050 and boost the economic competitiveness, the EC adopted a new “Circular Economy Action Plan”. The newly adopted document outlines the goals and measures to advance the current economy, so it would become suitable for a “green future” and increase the competitiveness of the European economy. Simultaneously, the document addresses the environment and development of new consumer rights. The new “Circular Economy Action Plan” is founded on the previous one, adopted in 2015. Hence, in the latest document, the incorporation of businesses and other stakeholders is emphasised again but more attention is devoted to the sustainable design of products and production for CE, power of consumers and sectors where the resources are highly used and where circularity is of great potential (European Commission, 2020a). Therefore, it is noticeable that the EC accelerates the implementation of CE though policy over the years.
One of the biggest EU research and innovation FPs, H2020, also contributes to the development of CE. H2020 is the eighth FP, which is implemented from 2014 until 2020. Its budget is around EUR 77 billion, which is the largest budget of all the EU FPs so far. The overall aim of H2020 is to secure global competitiveness for Europe and cope with societal challenges (European Union et al., 2017). H2020 promises to generate novel products and services form the progressive scientific ideas (Horizon 2020, 2012). It also advances specific objectives such as to enlarge the EU’s scientific base, ameliorate the technological advancement and innovation capacity of the private sector and increase the contribution of research and innovation to address societal issues (European Union et al., 2017). Therefore, CE can be regarded as one of the contributors to these goals. Additionally, the latest FP is characterised by involvement of networks of stakeholders, constituting partnerships between various organisations, states and industries with participants from more than 130 countries (European Union et al., 2017). Interestingly, H2020 is more efficient compared to the seventh FP because funding is granted faster. However, H2020 is highly oversubscribed, which results in a lower success rate, which
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is 11.6%, compared to the success rate of 18.4% for the seventh FP. Consequently, this proves the popularity of H2020 and eagerness of the organisations to research and innovate. Unfortunately, low success rate also leads to wasted resources of applicants if their project is unsuccessful as well as of H2020 as higher costs are required to evaluate a large number of proposals.
1.3. Concluding comments
In conclusion, having outlaid the main background information on CE, it is clear that this type of economy is an innovative idea, based on the view of the ecological economists. Hence, CE helps to advance the goals of sustainability, linked to the economy, environment and society. Due to the fact that there is no unified definition of this concept, it remains somewhat broad. However, in order to narrow it down and have a clear understanding of what CE is, the definition provided by the EC is employed in this research. Furthermore, the EU is highly involved in the development of CE since 2015. Therefore, one of the ways that the EU advances research and innovation linked to CE is through the latest EU FP called H2020, where applicants may apply with their project proposals and receive funding. As a result, H2020 constitutes an important element that advances circularity of the European economy, thus, it is meaningful to learn the factors that lead CE related projects to success.
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Chapter II
Theoretical framework
Research and innovation funding programmes have gained a considerable amount of attention from various organisations over the last decades in the EU. Popularity to apply for EU funding has increased markedly since the first FP in 1984 (Geuna, 1998; Enger & Castellacci, 2016). Nevertheless, there is a discussion on costs and benefits of participation in the EU FPs. This is due to the fact that a number of member states noticed that the benefits or returns form the FPs are lower compared to the increasing contributions (Børing et al., 2019). Therefore, there is an extensive part of academic literature that discusses funding programmes and seeks to grasp various conditions why organisations wish to participate and the aspects that have an impact on their participation in the EU FPs (Enger & Castellacci, 2016; Lepori et al., 2015). Therefore, this chapter firstly addresses the literature review and theories related to FP, factors encouraging participation in these programmes and research integration in the EU. Thereafter, the approach of this research, hypotheses and causal mechanisms, following from the literature review and theories, are outlined.
2.1. Literature review and theory
Even though, on average, the distribution of funding between participants representing higher education institutions, non-profit institutes and private firms is 30/30/30 and 10 is for public sector and non-governmental organisations, the biggest part of the literature concerns factors that determine universities’ success in FPs (Børing et al., 2019). Therefore, the majority of aspects discussed in this paper are also primarily related to the institutions of higher education. However, most of the factors can be applied for various types of organisations. Hence, building on the research of Mantegazzini and Lepori (2019) and Enger and Castellacci (2016), it is started by splitting the main participation determinants into country level factors and organisational level factors. After that, theories related to participation factors and, in particular, literature on CE’s societal institutional factors are outlaid.
To begin with, due to the fact that the member states of the EU are highly diverse there is a part of literature exploring country related aspects that encourage participation in the EU FPs. Scholars emphasise differing models of participation between smaller and larger countries, where the former are more eager to collaborate with foreign organisations, whereas the latter are more oriented into domestic alliances (Mantegazzini & Lepori, 2019; Okubo & Zitt, 2004).
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Research by Okubo and Zitt (2004) shows that the largest EU countries, namely Germany, France and United Kingdom, are the least Europeanised in terms of science and technology. The authors predict that this could be because these countries are more likely to collaborate with non-EU countries, for example, the United States. That proves to be correct, sixty percent of their international collaboration is conducted with other than EU members (Okubo & Zitt, 2004). They also present findings by Sharp, who investigated the second and third FPs and found that northern and southern smaller European countries benefitted more than the larger ones (Okubo & Zitt, 2004).
In addition to that, according to Dinges and Lepori (2006), country aspects such as national funding and strategies, dedicated to research, as well as the national institutional arrangements, can constrain or accelerate the influence of international funding agencies on national policies. National funding might be considered as a complement or a substitute to international funding provided by the EU, hence, influencing participation in the EU FPs (Enger & Castellacci, 2016). Moreover, the degree of convergence or coordination between national and EU policies have a significant effect on participation too (Dinges & Lepori, 2006), meaning that the higher the convergence is, the more accelerated the participation in the EU FPs is. Research shows that internationalisation of national policies results in a higher gathering of the organisations and more eager participation in the EU FP (Enger & Castellacci, 2016).
However, in contrast, other studies, focusing on the lower level of analysis- organisations, show that country level factors are not extremely significant, especially when participation is explored amongst the European institutions of higher education (Geuna, 1998; Lepori et al., 2015). Thus, next to the country level aspects, academics outline the relevance of organisational traits of the applying organisation on the promising participations in the EU FPs. In his study, Geuna (1998) researches participation of higher education institutions in EU funded research projects. He emphasizes the capacity, productivity to conduct scientific research, scientific specialisation area, size and location of the institution as the aspects explaining the probability of participation. The relevance of the size of the firm when applying for H2020 funding is also emphasised in the research of Børing et al. (2019). Although the authors also underline that in order to achieve economic growth and coherence with EU’s goals, it should not be focused only on large firms, hence, smaller and less established firms should also receive funding (Børing et al., 2019). More generally, high reputation or the “name” can also be regarded as a substitute for imperfect information that a funding agency might have about the applying organisation, thus, it is also an important organisational factor as a
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significant determinant of participation in the EU FP (Geuna, 1998; Lepori et al., 2015). The aforementioned researchers also highlight the value of resources, such as researchers that an institution possesses when participating in FP, as an important determinant for participation (Geuna, 1998; Lepori et al., 2015).
Related to the organizational factors, networks and collaborative forms are important factors in the EU FP participation (Breschi et al., 2009, Enger & Castellacci, 2016). In contemporary science, international collaboration proved to be one of the most important traits, which was especially accelerated by the modern types of communication, easing the interaction between scientists (Okubo & Zitt, 2004). It is empirically proven that networks, supporting knowledge and cooperation arise around public programmes that aim to fund research and development (Breschi et al., 2009). This increase signifies the expanding globalisation of science, where one of the forms of internationalisation of science is international collaboration (Okubo & Zitt, 2004).
One of the examples to increase multinational collaboration is the EC’s European Research Area initiative and the EU FPs, which are generally top-down initiatives. However, they leave a sufficient amount of space for scientist to perform bottom-up methods (Okubo & Zitt, 2004). After conducting a research on the first four FPs, Barber et al. (2005) find that interconnectedness between collaboration networks has increased, meaning that the EU was already going towards more integration in European Research Area since the first FP. They also emphasise that a great number of organisations tend to collaborate on few FPs, which might act as a core of the European Research Area (Barber et al., 2005). Enger (2018) calls these networks “closed hubs”. This signifies endurance of scientific connections once they are established (Okubo & Zitt, 2004).
Consequently, these networks draw attention to the main actors, eventually leading to the spread of knowledge and intensified cooperation between the actors (Breschi et al., 2009). As a result, if an organisation is a member of such a network, it has an easier access to information, funding and more help. Consequently, that signifies that competition and cooperation became more interdependent than conflicting (Okubo & Zitt, 2004). Moreover, if an organisation is a member of a network, its reputation is strengthened, which, as it was mentioned before, is an important determinant of successful application to receive funding (Breschi et al., 2009, Enger & Castellacci, 2016). It is proved that these networks are long-lasting, which results in some organisations repeatedly participating in EU supported research, thus, acting as “central nodes”
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in EU FP networks (Enger & Castellacci, 2016, p. 1612). Hence, organisations benefits from being in a network and have a higher chance to apply for the EU FPs and succeed. Notably, a portion of literature analyses additional effects from participation in the FPs, for instance, the research by Polt and Streicher (2005) highlight that research might not have been conducted or might have been smaller without the funding of the FPs. The phenomenon called, “behavioural additionality”, states that public expenditure fosters sustainable outcomes such as the amelioration of the capacity, knowledge and organisational patterns of the organisations in a network (Breschi et al., 2009).
Furthermore, cumulative advantage is a significant factor in participation too. The theory of cumulative advantage is used to explain variation in performance between various actors, which ultimately results in unequal positioning of the actors and an increasing gap between those who are successful and those who are not (Enger, 2018; Merton, 1968). As it was mentioned before, this may be observed in the case of the EU FPs too, where the most respected, well-known and biggest organisations are among the successful EU FPs participants. As Enger (2018) explains, that is basically because the organisational level aspects compile into a basis of cumulative advantage.
The theory of cumulative advantage was first mentioned by Robert Merton (1968). The theory emphasises the importance of feedback from a positive event that can happen either by chance or hard-work. This advantage eventually results in differences between organisations. The primary event has impact on the further behaviour, leading to new events. Therefore, as time passes, the results of these events accumulate into considerable advantages for some actors and disadvantages for others. As a result, the comparative advantage in this process is an outcome of a number of positive events that provided feedback for the actor. What concerns feedback in the FPs, Enger (2018) outlines that institutions become acquainted with administrative processes such as proposal-writing when applying to participate, therefore, the costs (time and resources) of future participations decrease.
Moreover, Enger and Castellacci (2016) discuss and empirically prove that previous participation in the FP is a prevailing aspect that has an effect on further participation in the EU FPs. Consequently, prior participation in the EU FP is highlighted as an important participation factor on the demand side by the EC too (European Commission et al., 2016; Puukka, 2018). The EC identifies an absence of crucial skills and networks as one of the central barriers for small and medium size enterprises (SMEs), gazelles and firms in the new EU
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member states. This means that experience in participating in such programmes is a significant explanatory factor in participation in the EU FPs. Shortage of awareness is also presented as another important barrier that organisations experience, however, this argument is also related to previous experience and networks. Therefore, success in receiving EU funding might be a factor, encouraging to participate in the future.
In contrast, a failure in competition for EU funding, might result in hesitation to apply in the future. Hence, a comparative advantage is gained by the actors that are successfully positioned, while cumulative disadvantages are experienced by those, who do not profit from the event, resulting in a widening gap in the future (Fox, 1983). Merton (1968), after analysing the patterns of winning the Nobel prize and information provided by the Nobel laureates, calls this “the Matthew effect”. The Matthew effect is based on the Gospel according to St. Matthew, as there is a greater recognition for scientific contributions to scientists that are already known compared to the scientists that have not yet gained their recognition (Merton, 1968). This leads to an “unintended double injustice” (Merton, 1968, p. 59) since well-known scientists are unjustifiably favoured while not yet known scientists are unjustifiably deceived. Thus, in more general terms, the cumulative advantage leads to more recognition and stronger reputation, which will gain more resources and recognition in the future, whereas cumulative disadvantage results in an opposite scenario.
Merton (1968) also highlights that analogous processes can be noticed on the level of groups and institutions. Successful participation also boosts the reputation of the network and is a chance to find new connections. Institutions that indicate their professionalism receive more recognition, which ameliorates their placing for resources and intrigues talented people. This line of thought can be applied to understand the rise of networks. New organisations wish to join a network that is already in a firm position and that is linked to other networks. Therefore, as time proceeds, well-developed networks will have even more connections (Enger, 2018), whereas less-developed will be placed in an unfavourable position.
In regards to the transition to CE and the importance of organisations in pursuing circularity, practice theory stresses that people, collaborations and organisations themselves create social practices, which are ingrained in individual views and practices (Hargreaves et al., 2011). Therefore, these actors may be a part of the innovative collective behaviour that shapes economic development. That means that a change in behaviour builds new practices and social
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values that can influence structural forms such as institutions, networks, markets or other actors.
In this theory, practice itself is central (Hargreaves et al., 2011). Henceforth, practices should be understood in a broader sense than just actions, they create social institutions such as values and habits, and they have the power to change the status quo. Social practices are “doings and sayings”, which are detached from the individual decision making (Schulz, Hjaltadóttir & Hild, 2019; Hargreaves et al., 2011). However, the actors are still relevant, they are agents, who perform and shape practices daily (Hargreaves et al., 2011). There is no common approach to practices, nevertheless, Shove and Pantzar (2005) describe them as groups of images, skills and stuff (materials). The actors are the ones who link these elements (Hargreaves et al., 2011).
Institutions are an essential part of economics, they are dependent on a place and they can also be transformed. Institutions can change by adjusting regulation, policy or standards but the change can also be fostered by social practices (Schulz, Hjaltadóttir & Hild, 2019). Therefore, there is an interplay between regulation and social practices that both form institutions. In turn, institutions themselves dictate social practices and influence policy. As a result, the presence of both institutions, related to the CE, and organisations that transform their behaviour, simultaneous reinforcing transformation of the social norms and institutions, is crucial for the transition to the CE as well as for participation in FPs that involve funding for circular transition.
To conclude this section, the existing studies focus on the grouping of the factors that determine the participation of organisations in the EU FPs. Especially, institutions of higher educations are to be distinguished from the others because the most research is done in these organisations. What concerns grouping of the determinants, mostly the authors distinguish between the country specific and organisation specific factors and use regression analysis or country related case studies in order to explore the relationship between a certain factor and the likeliness to apply for FPs. These scholars mostly research earlier FPs, thus, H2020 is not widely discussed in the literature. Moreover, majority of the empirical research is based either on grouping of the factors, collective networks or cumulative advantage theories. However, the social practice theory is not widely used in the discussed empirical studies but it is important because it sheds light on the subject of CE and the socio-political side of the matter. Notably, the empirical analyses are not related to the CE projects specifically. Overall, studies do not focus on the
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factors that lead to success of the CE related projects in H2020, thus, this dependent variable is overlooked in the literature.
2.2. Hypotheses and causal mechanisms
This part aims to explain the hypotheses of this research and the underlying causal mechanisms. Based on the literature review, my approach to understanding the successful participation of CE projects in H2020 is shaped by the aforementioned participation in FPs factors: country level factors and organisational level factors as well as collaboration networks, cumulative advantage and social practices. Therefore, I will build on the aforementioned FPs’ participation factors in order to explain the success of the projects, related to the CE in H2020. It is assumed that the determinants that motivate participation in FPs could lead to successful participation of CE related projects in H2020.
To start with, a significant factor, related to the group of country level determinants, is the country size. As it was previously explained and proven by the empirical studies, the size of the country matters when participating in FPs. There may be several scenarios why this factor is significant.
In one scenario, organisations from smaller EU countries may be more enthusiastic in such participations compared to the larger ones. Naturally, in a smaller country there might be a lower amount of national CE project funding capacities together with fewer numbers of organisations that are related to CE. Shortage of national funding forces entities, concerned with CE research and innovation, to look for other funding possibilities. In addition to that, existence of a small population of companies that are concerned with innovations of CE result in less competition for these type of organisations in the specific country. Therefore, the way to gain recognition is easier compared to when there are many entities interested in the same subject. As a result, the reputation of the CE linked applicants’ increases, which leads to more success in the H2020. In turn, lack of national funding and competition stimulate the motivation of the applicants from small countries to applying to the EU FPs.
Moreover, smaller EU countries’ organisations perhaps have stronger bonds with the funding coming from the EU budget through fiscal transfers and redistribution compared to the bigger countries. For this reason, entities from smaller states are perhaps more familiar with the application procedures and are not deterred by them. Respectively, it provides an advantage for those organisations. Furthermore, as it was mentioned in the previous section, larger EU states have a tendency to establish stronger bonds with non-EU states, thus, the organisations
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from bigger countries might be occupied with fulfilling projects with other than EU partners. For this reason, organisations form smaller countries have more chances to succeed in H2020.
As an alternative, a small country might have an open economy. Hence, if the national budget for CE is substantial, there might be many national organisations that offer help and advice on CE, its implementation and funding possibilities to CE oriented organisations. Consequently, due to the fact that there are not a lot of organisations interested in CE in a small country, the availability for consultations with national institutions increases. Hence, the additional aid may advance the project proposals and result in successful participation in H2020. Therefore, based on these causal mechanisms, the first hypothesis is:
Hypothesis 1 (H1): smaller countries are more likely to have more successful CE related projects in H2020.
Another country level factor that influences participation in the FPs is the internationalisation of CE policies. As it was mentioned before, higher internationalisation of national policies means that there is more convergence between the national and supranational policies. The majority of the EU policies that are related to CE discuss the overall aims and goals for the transition. However, the exact implementation of the goals and governance is left to the member states to decide and supervise.
Hence, if member states “translate” the European strategies and goals into the national policies, also finding ways how to enforce circularity, organisations form those member states would be more keen on pursuing those national policies and apply for H2020. If there are clear national regulations requiring innovation, the organisations would have a more precise view on what is essential and vital at the moment in order to innovate and progress in this field. Furthermore, if some regulation prohibits, for example, landfilling, the organisations have an opportunity to develop innovative circular ideas to have a substitution for the aforementioned treatment of waste.
Moreover, national policies, concerning financing, may especially incentivise SMEs to propose CE projects to H2020. The reason why is if their project succeeds and it is implemented, subsidies may be obtained for the business in the long term. In contrast, if financing is provided for research, the organisations may have increased financial resources to develop their CE project proposals to H2020. Consequently, a well-developed project may have a higher chance to achieve recognition in H2020.
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In addition, if countries have policies that act as roadmaps of what has been achieved, what the goals and challenges are and the ways the country plans to achieve the objectives to turn to CE, the entities are guided towards what is vital and attractive at the moment. In turn, the proposed CE project to H2020 may be relevant at that time and eye-catching, which brings success to the project in the EU FP. Moreover, roadmaps may offer possible solutions to the issues that a country faces. In this way, feasible ideas are fostered and highlighted for the organisations interested in developing CE projects. Respectively, based on these causal relationships, the second hypothesis is:
Hypothesis 2 (H2): the presence of national policies related to CE and its governance leads to more successful applications to H2020.
From the second hypothesis, follows the third one that is also related to country level factors that encourage participation in the FPs. The convergence between the EU’s and national policies regarding the CE and its implementation can encourage creation of special national institutional structures that facilitate implementation of the national and European policies, as well as they may supervise and enforce the implementation of CE linked policies. This research aims to study the importance of the institutions or network platforms related to CE, thus, the following hypothesis is related to both the country aspects and the theory of practice.
Existence of national CE linked institutions may result in two results. Firstly, due to the fact that national CE related institutions specialise in the field of CE, they may act as a factor that stimulates the creation and advancement of projects related to CE. Moreover, such institutions may provide help for organisations to develop and finesse projects. Secondly, these institutions might be indicators of the presence of new circular practices and values related to CE and amelioration of the environment, such as recycling and reuse in the society and organisations. This may further reinforce, create and sculpt the existing institutions. This is related to social practices explained before. Ergo, the proposals that are more elaborate or consider a niche and innovative aspect of CE attract more success in H2020. Hence, the third hypothesis is:
Hypothesis 3 (H3): the presence of national institutions, consulting on implementation of CE in the country, correlates with a higher number of successful applications to H2020.
Linked to the theory of cumulative advantage and collaborative networks, previous successful participation in H2020 is also significant in the debate about the success factors. To begin with, previous successful participation is important because an organisation considers costs and benefits of applying to EU FPs and a new participant is likely to experience the so called sunk
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costs (Enger & Castellacci, 2016). These are fixed costs faced by the applicant when they want to apply for the first time. These costs have two kinds: the first is administrative costs, which include understanding the application system for the EU FP, gathering necessary information and administration, and the second is networking costs, which incorporate time and money spent on looking for partners, collaborations and developing a project. However, these costs occur only once, when an organisation applies again, these costs become irrelevant (Enger & Castellacci, 2016). Moreover, following the aforementioned theory, successful participation results in a stronger reputation, gained experience with the application process and more recognition in the field. As a result, after receiving a grant, the experts that develop projects may feel enthusiastic about applying again and ameliorating the economic, environmental and societal situation even more by implementing circular practices. Additionally, the organisation would already have experience in administrative work required to submit the project proposal as well as the sunk costs would be irrelevant, allowing the investment in the project proposal to be cheaper. Hence, these factors only intensify the probability of succeeding again.
Moreover, because previous successful participation brings advantages, such as experience and higher reputation in the field, an organisation might expect more invitations to collaborate with others. Organisations often look for possibilities to collaborate due to the added value of collaborations. Hence, if an organisation proves to be successful and reliable, it will receive more and more invitations to collaborate with other well-established entities. As it is outlined by the theory of collaborative networks, this is due to the fact that when organisations collaborate, they both have higher financial and human resources to employ for the preparation of the proposal. Therefore, the proposal is more fulfilled and elaborate. Besides that, due to the higher amount of resources in possession, the projects can be bigger in their scope and time frame. Furthermore, some organisations that are in the network might already have plenty of experience in the EU FPs. Therefore, they already have comparable advantage due to the facts mentioned under the previous causal link, which combined result in higher probabilities to succeed in H2020. Hence, the fourth and fifth hypotheses are:
Hypothesis 4 (H4): a higher number of previous successful CE related project applications for H2020 leads to a higher number of the consequent successful CE related project applications for funding by H2020.
Hypothesis 5 (H5): the existence of the collaborative networks in a country leads to more successful H2020 participations.
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In accordance with the theories of the collaborative networks and cumulative advantage and two previous hypotheses it is clear that the participation in the FPs is an important factor itself. The benefits of the collaboration such as stronger position on the playing field, higher reputation, increased cost-savings, knowledge-sharing and boosted availability for help have been highlighted in the previous chapter. Moreover, if there are national CE linked policies, connected to regulation, financial help or guidance, coupled together with national CE enforcing institutions, the chances of an increase in number of participants multiplies. Therefore, based on that, the organisations are encouraged not only to participate but to participate more eagerly, which may be seen in the increased number of project proposals by a certain collaborative network. Henceforth, the odds of the application being successful increases.
Furthermore, more active organisations that participate in such programmes gain greater experience, regarding the administrative tasks that they have to endure as well as the one-time investment costs that they experience when writing and submitting project proposals. In turn, this results in a benefit that the organisation has in comparison with other participants. Respectively, the organisations are familiar with the process, they have already faced the financial costs of application and, hence, may submit more project proposals. Therefore, the fact that the organisations are experienced leads to the outcome that the project proposals are well-defined and consummate. Consequently, the probability of the project being approved increases.
Finally, higher participation results in more competition in H2020 in general. Respectively, competition might have a role of encouragement to refine and perfect the CE project proposals. As a result, the project proposals are highly developed, which enhances the chances of succeeding and receiving a grant. Accordingly, the sixth hypothesis is:
Hypothesis 6 (H6): a higher number of CE related project participations lead to higher number of successful CE related project participations in a country.
Lastly, associated with the theory of social practices, public opinion towards the environment is the final success factor analysed in this research. The assumption behind is that positive public opinion towards the environment results in the support for the CE activities in the country. In turn, not only the green party supporters or politicians encourage CE policies but the people contribute to that too. For this reason, the environment and its preservation are considered as values in the society.
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Consecutively, there may be more CE related policies in the country as well as the circularity and its initiatives could be highly supported in a financial way. That relates to hypothesis three and the presence of national institutions that would govern CE in case it is regarded as a social value and practiced in the society. Moreover, if CE is encouraged to be implemented as a social practice, there might be a great number of CE related organisations that would want to innovate and contribute to the research of the circularity and apply for H2020. As these organisations would have a higher public and thus political support, their projects could be more successful compared to a country, where the environment is not treated as a value. Therefore, hypothesis seven is:
Hypothesis 7 (H7): a positive public opinion towards the environment in the society leads to a higher number of successful CE related projects of that country in H2020.
2.3. Concluding comments
To conclude, this chapter discussed the existing literature and theories on the factors that encourage the participation in EU FPs. The determinants were grouped in country level and organisation level factors and linked to the collaborative networks, cumulative advantage and social practices theories. In the end, hypotheses, regarding the determinants of success of the CE projects in H2020, and causal mechanisms behind them were developed. Consequently, the hypotheses are:
H1: smaller countries are more likely to have more successful CE-related projects in H2020;
H2: the presence of national policies related to CE and its governance leads to more successful applications to H2020;
H3: the presence of national institutions, consulting on implementation of the CE, in the country correlates with a higher number of successful applications to H2020;
H4: a higher number of previous successful CE related project applications for H2020 leads to a higher number of the consequent successful CE related project applications for funding by H2020;
H5: the existence of the collaborative networks in a country leads to more successful H2020 participations;
H6: a higher number of CE related project participations lead to higher number of successful CE related project participations in a country;
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H7: a positive public opinion towards the environment in the society leads to a higher number of successful CE related projects of that country in H2020.
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Chapter III
Research design
Before focusing on the empirical findings and analysis, this chapter will highlight the research design and methodology that has been chosen to conduct the research. Henceforth, first of all, this piece elaborates on the general approach taken in this analysis and research design that has been selected. Consequently, the methodological decisions such as unit of analysis, relevant population and case selection are described. Later, the common threats to inference are discussed. Finally, this chapter ends with the conceptualisation and operationalisation of the main concepts of this thesis by emphasising the variables that are later used for the empirical analysis. Along with the conceptualisation and operationalisation of the key concepts, it is outlined how the significant data in relation with these concepts is collected.
3.1. Research design and methodology
3.1.1. Positivist approach
Overall, this research aspires to explain the underlying factors behind the success, meaning, the approval of the CE projects in H2020. To be precise, it aims to unveil the causal mechanisms that lead to the higher number of accepted proposals in a EU member state. Hence, in general, it can be claimed that this research has a positivist approach in its nature. In a positivist view, questions are outlined as they are and value judgement is rejected (Toshkov, 2016). Therefore, this type of research focuses on depicting, grasping, explaining real events or predicting them simply as they are (Toshkov, 2016). It explores the interconnectedness of empirical findings and theoretical concepts (Toshkov, 2016). Positivist approach has been chosen due to the fact that this perception directly relates to the main objective of this thesis- uncovering the success factors and explaining the causal mechanisms between them and the successful participation of CE proposals in H2020- which is free from subjective, value-driven judgements and intends to explore causal mechanisms and theories outlined in the previous chapter. In particular, this research is an empirical research that is explanatory in its essence but it also has features of exploration type of research. In turn, that signifies that this thesis is concerned with the explanation of the causal events and uncovering of the causal mechanisms, implying a chain of causally related events that lead to a result, which is the approval of CE related projects in H2020 in this case. Here, a full retrospective explanation of the outcome
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phenomenon is aimed to be provided for a population of cases. The explanation is aimed to be provided by testing theories with empirical data while adopting a deductive logic, which has been emphasised by the hypotheses outlaid in the previous section.
3.1.2. Quantitative comparative cross-sectional large-N analysis
This research design employed in this research is a quantitative comparative cross-sectional large-N analysis, where it is focused on two periods of time. On the whole, this research will provide a mechanistic (causal) type of explanation by identifying the causal linkages between the cause and effect, in this way detecting a sequence of causal effects. Consequently, the central benefit from a large-N observational design is that it is able to grasp and measure weak and heterogeneous causal mechanisms where the size of the effect may differ per observation and might be distributed across the population either in systematic or random ways. More precisely, heterogeneous causal effect means that the causal effect is different in various populations. In general, the main idea behind large-N observational research is that even though the result of every case is not fully resolved, the distribution of results shall comply to particular designs of the theory that relates to the reality. This signifies that it is determined if the links between the variables in the set of observations is in accordance with the theory. Moreover, due to the law of large numbers, the other causes do not hinder the observations, thus, the average difference that is noticed in the data moves towards the exact causal relationship between the variables (Angrist & Pischke, 2015).
However, the issue of causal inference, being unobservable, is present in large-N observational research. The problem of causal inference means that there might be something else that accounts for the association that can be observed between the hypothetical causal factor and the observed result in the data. Yet, association is not the same as causation. To be precise, the causation, not the association, is aimed to be identified in this research.
Respectively, association between two variables could be noticed because of reverse causality, pure chance, confounding effects, omitted variable bias or selection bias. Thus, they produce bias in the estimates or unreliable results (Studenmund, 2017). The research design alone is not able to address these problems, therefore, it should be coupled with strong assumptions (Toshkov, 2016), which were outlaid in the previous chapter. Additionally, in order to solve at least some of the issue posed by causal inference, the counterfactual situation should be approximated. A counterfactual situation is when solely the cause changes as everything else
