Financial performance of new circular economy companies in rural settings

This study examines how rural conditions affect the establishment and performance of new circular economy (CE) companies-those that reduce, reuse, recycle, and recover materials in their processes-focusing on their longevity, financial performance, and distribution of economic value to stakeholders. We hypothesize that while rural conditions generally lead to fewer business establishments, the liability of rurality is less severe for CE companies than for others. We also anticipate that new CE companies will grow more slowly but achieve better performance, resulting in higher survival rates compared to those in other sectors. Our empirical analysis includes all CE companies established in Spain over the past decade. The results indicate that rural CE companies have higher survival rates than their urban counterparts, even after controlling for factors like subsidies and personnel costs. Although rural CE companies exhibit slower growth, they achieve greater profitability. Thus, the CE sector in rural areas demonstrates sustainability not only through its circular practices but also in financial terms, offering significant implications for investors seeking sustainable ventures. This study explores how demographic and geographic factors in rural areas affect the creation, survival, financial performance, and economic value distribution of circular economy (CE) companies. We found that rural CE companies tend to survive longer than their urban counterparts, partly because entrepreneurs in rural areas have fewer alternative opportunities. Although these rural companies may experience slower growth, they often achieve higher profitability, demonstrating sustainability both in their circular practices and financial outcomes. Analyzing data from CE companies in Spain, our findings highlight the resilience of rural entrepreneurs and reveal promising opportunities for investors interested in sustainable ventures. These insights have important implications for research, business practices, and policies aimed at promoting sustainable economic development in rural regions. Specifically, investors seeking sustainable businesses with a lower risk of failure should consider supporting rural CE companies.