Eco-Entrepreneurship – An Empirical Perspective based on Survey Data

Eco-entrepreneurship has become an increasingly researched area, not least because it increasingly caught the attention of policy makers as one promising response to sustainable development challenges. Given the emerging character of the field, to date however most contributions remained conceptual or reported results of case study research. The discussion of eco-entrepreneurship should therefore benefit from the analysis of large-scale empirical research projects. This chapter contributes to a large scale empirical analysis at both, the individual and the firm level. At the individual level, eco-entrepreneurship seems to crucially depend on environmentally-concerned individuals actually behaving entrepreneurially. Despite this being a crucial pre-condition, its empirical validity has rarely been analysed. I use large-scale survey data to answer the question of how environmental concern and entrepreneurial behaviour are related. At the firm level, numerous classifications of ecoentrepreneurial ventures have been provided at the conceptual level. I extend this literature at this level, by analyzing for a large-scale sample of European firms what determines their classification into being a specific category of an eco-entrepreneurial venture. Introduction Eco-entrepreneurship has emerged as an intensively debated topic over the last years with a recent upsurge of writing in the field. At the same time, the debate on this topic has moved increasingly from journals focussed on environmental management (e.g. Schaltegger 2002) to mainstream business journals (e.g. Cohen & Winn 2007; Dean & McMullen 2007). The topic of eco-entrepreneurship lies at the nexus of innovation, concern for the environment and entrepreneurship. Yet, to date most contributions remain conceptual or focus on reporting case studies (e.g. Schaltegger 2002; Schaltegger & Petersen 2001). Rarely found are results and analyses of larger-scale empirical surveys on the topic and it is this gap in the literature that this chapter addresses. More specifically, at the individual level I analyse the linkages between entrepreneurial behaviour and environmental concerns and at the firm level I study what predicts the classification of a venture into a specific category of eco-entrepreneurship in order to arrive at a better understanding of the value of conceptual models of ecoentrepreneurship. Based on data collected among students and alumni from science and engineering programs of a large German technical university, I apply binary choice models and provide a nuanced empirical answer to this question. At the firm level, only few of these concepts have been applied to large-scale empirical data and even less so beyond mere descriptive analysis. Using important determinants derived from extant literature on entrepreneurship and innovation management, I apply ordered logit models to establish how these determine the categorization of an eco-entrepreneurial venture in the well-known scheme developed by Schaltegger and Petersen. Extant Literature Several definitions have emerged for what eco-entrepreneurship is. For example, some authors proposed typologies of eco-entrepreneurship. For example, Isaak (1999) distinguishes incumbent firms which become incrementally or stepwise more environmentally concerned and entrants which from the start provide environmentally-benign products and use environmentally-friendly processes. Similarly, Schaltegger and Petersen (2001) and Schaltegger (2002) distinguish eco-entrepreneurship from other forms of corporate environmental management activities and summarize this with a positioning matrix. More recent attempts related eco-entrepreneurship to market imperfections and in doing so provided a more systematic categorisation of entrepreneurial opportunities that simultaneously contribute to environmental improvements, in essence arguing that specific market failures are the underlying root cause for such entrepreneurial activities (Cohen and Winn 2007; Dean and McMullen 2007; Cohen et al 2007). What is notable in all these classifications as well as others (e.g. Linnanen 2002; Walley & Taylor 2002) is however the absence of the dimension of innovativeness (e.g. radical versus incremental or original versus imitation) which seems to be of considerable relevance for entrepreneurial rents as well as opportunity realization. Whilst from the review of extant it becomes clear that the field of eco-entrepreneurship over time has been growing quantitatively, that papers relating to it have been published more frequently in mainstream business journals and that the field as a whole has become more accommodating qualitatively, it still has not fully integrated the extensive literature on conventional entrepreneurship. In particular, a large theoretical, conceptual and empirical literature exists on the factors that determine entrepreneurial behaviour at the individual level (such as attitudes or education) as well as the firm level (such as industry conditions or firm size). It is this literature I link my large-scale quantitative studies of eco-entrepreneurship to. Hypothesis development Hypotheses at the level of the individual As emerges from the review of literature, eco-entrepreneurship holds a bold promise, namely, 1 It needs to be acknowledged though, that already Isaak (1999) and Pastakia (1998) mention the reduction of negative (environmental) externalities as a defining criterion for environmentally oriented entrepreneurship. Schaltegger and Wagner (2008) link this to an evaluation of the innovativeness of the opportunities pursued. that because entrepreneurial opportunities exist which are caused by market imperfections, individuals will pursue these in the expectation of entrepreneurial rents. However, the literature also points us to assume that entrepreneurially minded individuals will pursue those opportunities from which they expect the highest rents to be extractable. The question immediately arises, whether the entrepreneurial opportunities that are based on market imperfections are identical with those that promise the highest entrepreneurial rents. One could argue that given the large number of market imperfections still existing with regard to the environment, based on revealed preferences the answer is no. More specifically, this is also well documented with regard to defined environmental fields. For example, the case of energy efficiency is well researched and it has been shown there, how inefficiencies persist, even though their removal would be profitable – yet not profitable enough to be preferred in the light of other investment opportunities with higher returns (Jaffe & Stavins 1994; Sanstad & Howarth 1994). This raises intriguing questions about the promise of eco-entrepreneurship: is it that there are individuals, that are innovative (i.e. commercialise rather radical inventions), entrepreneurial and environmentally concerned? And does being both innovative and environmentally concerned associate with a stronger entrepreneurial drive? If the answer of at least one of these two questions is no, then the promise of eco-entrepreneurship may be flawed or at least for the moment significantly limited, and government intervention (e.g. support to universities in terms of degree courses that provide entrepreneurial skills to environmentally concerned students) may be justified to create conditions more conducive to eco-entrepreneurship in quite the same fashion such government intervention is demanded for energy efficiency investments (e.g. in terms of energy efficiency standards for buildings). Based on these considerations, I propose the following two hypotheses: H1a: There will be a positive relationship between an individual’s environmental concerns and actual entrepreneurial behaviour. H1b: The positive relationship between an individual’s environmental concerns and actual entrepreneurial behaviour will be moderated by the level of innovativeness. Hypotheses at the firm level As concerns new venture firms, based on the literature review, the question arises as to what the conditions are for spontaneous emergence of eco-entrepreneurship in terms larger or smaller firms addressing the mass market or a niche, respectively. Schaltegger and Petersen (2001) and Schaltegger (2002) have developed a typology of ecoentrepreneurial activities by classifying the extent to which such an activity has large market influence and what priority environmental objectives have in the firm. Based on these two dimensions, they identify four types of such activities, namely the ecopreneur (high market influence and high priority of environmental objectives), the bioneer (high priority of objectives, but low market influence), and the environmental manager (high or low influence and low priority). The model hence implies that having a large market impact can be related to both, environmental management and ecopreneurship. It also suggests, that having strong environmental objectives can be related to both, bioneering and ecopreneurship. For example the analysis of Petersen (2002) finds that amongst 64 new, 46 can be traced back to start-ups whose foundation was related to an ecological objective and who Petersen (2003) considers as having emerged out of the green movement.This implies a significance of management systems and size for eco-entrepreneurship. I hence propose the following hypotheses: H2a: The size of the firm is positively associated with the likelihood of being classified as an ecopreneur (i.e. the smaller the firm, the lower the likelihood of being an ecopreneur). H2b: A firm having an EMS is positively associated with the likelihood of being classified as