Closing the loop: Indusry 4.0 and open innovation for circular economy transition

In response to the need for digital and circular transformations in Europe, this study examines how the integration of Industry 4.0 (I4.0) and open innovation (OI) is facilitating the shift towards a circular economy (CE) by mitigating environmental impact and enhancing regional competitiveness. Using panel data for 27 European Union member states, hierarchical cluster analysis reveals four distinct transition paths among EU countries: 1: balanced transition (Bulgaria, Belgium, Czechia, Denmark, Croatia, Austria and Slovakia belong to this cluster), 2: open innovation focused (Estonia, Ireland, Greece, Cyprus, Luxembourg, Hungary, Malta), 3: circular economy and Industry 4.0 leaders (belong Germany, France, Latvia, Lithuania, Poland, Romania, Sweden), 4: growing circular potential (Spain, Italy, Netherlands, Portugal, Slovenia, Finland). These groupings diverge from traditional economic or R&D league tables, suggesting that the combination of different long‑term policies shapes digital‑circular synergies. The findings highlight the need to modify digital manufacturing roadmaps to address specific circular bottlenecks (e.g., open innovation in Cluster 2, growing circular potential in Cluster 4). For policymakers, the findings emphasize that coupling Industry 4.0 incentives with OI policies can facilitate faster, more inclusive circular transitions across the EU.