Determinants of Sustainable Entrepreneurship

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Lawai et al. provided a summary of research that was relevant to identifying the key determinants of successful sustainable entrepreneurship[1]:

  • According to Koe et al., attitudinal factors (i.e. sustainable attitude) and perceptual factors (i.e. perceived desirability and perceived feasibility) were important in influencing a person’s level of propensity to sustainable entrepreneurship.[2]
  • Cambra-Fierro et al. argued that variables relevant to sustainable entrepreneurship included legal context, management’s personal values, socio-cultural context, market forces, ownership management structure, and industry-sector characteristics.[3]
  • Uhlaner et al. found evidence that indicated that larger firms, firms from more tangible products, family owned firms, and firms with a more innovative orientation have more inclination towards manifesting sustainable entrepreneurship behaviors.[4] Larger firms are able to bring more resources (financial and human) to bear on sustainability initiatives and have more to lose in terms of reputational damage due to irresponsible behavior.  The responsiveness of family firms is consistent with their stronger ties to the local communities in which they operate.[5]
  • Fedderke and Garlic opined that sustainable entrepreneurship was dependent on the adequacy and sufficiency of both the economic infrastructure (i.e., transport, communications, power generation, water supply and sanitation facilities) and the social infrastructure (i.e., educational and health-care facilities). They observed that improvements to infrastructure can contribute to reduction of income inequality, alleviation of poverty and improved economic growth.[6]

Lawai et al. noted that sustainable entrepreneurs are also subject to many of the same factors that influence commercial entrepreneurs and that the success of both types of entrepreneurs will be influenced by motivating factors, personality characteristics, family support, friend circle/peer group support, management skills and abilities, level of education and environmental forces.[7] Market conditions are also obviously very important and Rahman and Singh observed that the chances of entrepreneurial success increase substantially with competitive pricing, power supply, access to latest technology, access to market channels, and access to business associations.[8]  Researchers also frequently mentioned government support which can come in many forms: financing, infrastructure development, subsidies for accessing raw materials, and assistance with research and development and access to technology.  The government can also serve a valuable role as a customer, not only as a source of revenues for the venture but also as a means for the new venture to test and improve the quality of its products before broader commercial launch.

Ground Rules for Becoming a Sustainable Entrepreneur

In order to effectively pursue sustainable entrepreneurship and achieve some of the benefits associated with sustainable entrepreneurship policies and practices companies must continuously engage in dialogues with all interested stakeholders.  Shareholders must be educated on, and convinced of, the benefits of aspiring for social and environmental responsibility, even though pursuit and achievement of goals in those areas may have an impact on the financial bottom line.  For their part, stakeholders that are more focused on social and environmental performance must also acknowledge that the company needs to be financially sustainable in order to survive and thrive.

Groesbeek and Bos collectively offered the following list of ground rules for becoming a sustainable entrepreneur:

1.             The corporation should start reducing the environmental damage, respecting human rights and treating its employees with great care;

2.             Sustainable entrepreneurship has to be a self-initiated process and should not simply be a response to external pressure;

3.             If a corporation wants to practice sustainable entrepreneurship, it should identify clear aims and targets;

4.             The aims should be closely related to the corporation’s practice and should match the corporate values and its primary activities;

5.             The aims have to be closely related to the consumers’ needs;

6.             The corporation has to be capable of explaining the relationship between sustainability and its activities and production process;

7.             The corporation should adhere to these aims on a long term basis;

8.             Consumers and pressure groups should have a transparent overview of investments made by the corporation related to sustainable entrepreneurship;

9.             Sustainable entrepreneurship practiced by the corporation should not be shifted to the consumers via a price increase;

10.          A corporation should not attempt to overemphasize its efforts; and

11.          A corporation should make sure that its practices are shared by the corporation as a whole, and that they are not solely efforts of the management.

Sources: The first ten rules on the list were offered by Janssen Groesbeek in 2001 and the final rule was added by Bos a year later in another publication.  See M. Janssen Groesbeek, Sustainable Entrepreneurship–Theory, Practice, Instruments (Amsterdam: Business Contact: 2001); and A. Bos, “Sustainable Entrepreneurship in a Changing Europe: Pedagogy of Ethics for Corporate Organizations in Transformation”, in G.F. Simons, D. Min et al. (eds.), EuroDiversity: A Business Guide to Managing Differences (Oxford: UK and Woburn, USA: Butterworth-Heinemann, 2002), 16. 

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This article is an excerpt from Sustainable Entrepreneurship by Alan S. Gutterman, which is available for purchase at various online booksellers.  Readers may also enjoy the author’s book on Entrepreneurship.

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Notes

[1] F. Lawai, R. Worlu and O. Ayoade, “Critical Success Factors for Sustainable Entrepreneurship in SMEs: Nigerian Perspective”, Mediterranean Journal of Social Sciences, 7(3) (May 2016), 338, 342-343.

[2] W. Koe, R. Omar and J. Sa’ari, “Factors Influencing Propensity to Sustainable Entrepreneurship of SMEs in Malaysia”, Procedia Social and Behavioral Sciences, (2015), 172.

[3] J. Cambra-Fierro, S. Hart and Y. Polo-Redondo, “Environmental Respect: Ethics or Simply Business? A Study in the Small and Medium (SME) Context”, Journal of Business Ethics, 82 (2008), 645.  For discussion of sustainable entrepreneurship in Asia, see A. Racelis, “Sustainable Entrepreneurship in Asia: A Proposed Theoretical Framework Based on Literature Review”, Journal of Management for Global Sustainability, 2 (2014), 8-10.

[4] L. Uhlanar, M. Berent and R. Jeurissen, Family Ownership, Innovation and other context variables as determinants of sustainable Entrepreneurship in SMEs: An empirical research study (2010).

[5] L. Uhlaner, H. Goor-Balk and E. Masurel, “Family Business and Corporate Social Responsibility in a Sample of Dutch Firms”, Journal of Small Business and Enterprise Development, 11 (2004), 186; and W. Dyer and D. Whetten, “Family Firms and Social responsibility: Preliminary Evidence from the S&P 500”, Entrepreneurship: Theory & Practice, 30 (2006), 785.

[6] J. Fedderke and R. Garlic, Infrastructural development and Economic growth In South Africa: A review of accumulated evidences (2008).

[7] E. Dionco-Adetayo, Determinants of Small firms’ Entrepreneurial success In a developing economy (2004); and H. Rahman and H. Singh, “Entrepreneurial Support and its levels of Success”, Global Journal for Research Analysis, 3(11) (2014).

[8] H. Rahman and H. Singh, “Economic and Environmental factors leading to Entrepreneurial success”, Indian Journal of Applied Research, 4(12 (2014)).

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