1.1. INTRODUCTION
Sustainable entrepreneurship implies that firms, by exploiting potentially profitable opportunities, can mitigate environmentally relevant market failures while also balancing economic health, social equity, and environmental resilience (Dean & McMullen, 2007). Based on the existing literature (Cohen & Winn, 2007; Dean & McMullen, 2007; Johnsen, Miemczyk, & Howard, 2017; Schaltegger & Wagner, 2011), the aim of this chapter is to define sustainable entrepreneurship and to describe the way firms approach sustainable entrepreneurial opportunities.
Despite the economic progress and an increase in the quality of life over the last decades, the world has experienced substantial adverse effects on the natural environment and these effects have reduced economic system sustainability (Edenhofer, 2015; SkjĂŠrseth & Eikeland, 2016; Sunny & Shu, 2019). Surface water contamination, toxic waste in groundwater, air pollution concerns, ozone depletion, climate change, and the destructive global effects of ocean fisheries are among the negative effects on the environment. The long-term economic impacts of these adverse effects are extensive, since much of the worldâs economic output depends on natural system sustainability (Costanza et al., 1997).
Entrepreneurship has a crucial role in solving these environmental challenges through the implementation of products, services, and production methods that are both environmentally-friendly and competitive on the market (Dean & McMullen, 2007; Johnsen et al., 2017). Sustainable entrepreneurship stems from the desire to stop activities having a negative impact on the environment, combined with a motivation to create economic value (Dean & McMullen, 2007; Schaltegger & Wagner, 2011).
This chapter adds to the existing literature on sustainable entrepreneurship by thoroughly investigating the nature of sustainable entrepreneurial opportunities through an analysis of the way firms exploit these opportunities. Research and analytical techniques from a wide variety of disciplines have been used, including the theory of the firm, entrepreneurship, regional studies, strategic management, and innovation studies. This research provides a deep understanding of a new configuration of the role of sustainable entrepreneurship and supports it with plenty of empirical evidence.
Cohen and Winn (2007) suggest that firms are able to identify, recognize, and create opportunities to counteract existing negative environmental externalities (e.g., natural resource exhaustion), thus generating several environmental, social, and economic benefits. The sources of sustainable entrepreneurial opportunities arising from the market side will be explored in this chapter, along with an analysis of the recognition, discovery, and creation of entrepreneurial opportunities (Sarasvathy, Dew, Velamuri, & Venkataraman, 2003) using three different perspectives on the market process, that is, the allocative view; the discovery view; and the creative view (Buchanan & Vanberg, 1991). The allocative view, which is linked to opportunity recognition, relates entrepreneurial opportunities to the recognition of ideas having the potential to redistribute resources for the benefit of some actors without worsening the situation for others (Dean & McMullen, 2002). In this context, sustainable opportunities deal with the exploration of existing markets: there is a strong need for a matching between demand and supply. According to the discovery view, which is related to opportunity discovery, entrepreneurial opportunities arise from information asymmetries regarding the true value of resources. In this case, sustainable entrepreneurial opportunity pertains to the exploitation of both existing and latent markets: the demand exists, while supply has to be implemented (Sarasvathy et al., 2003). The creative view, which is associated with opportunity creation, suggests the maximization of multiple stakeholder utility functions (Buchanan & Vanberg, 1991; Cohen & Winn, 2007). Here, sustainable entrepreneurial opportunities involve the creation of new markets.
1.2. SUSTAINABLE ENTREPRENEURSHIP
1.2.1. Entrepreneurial Opportunities
Entrepreneurship is the process that gives rise to new economic activities and organizations (McMullen & Dimov, 2013; Shane & Venkataraman, 2000; Wiklund, Davidsson, Audretsch, & Karlsson, 2011). In his seminal work defining the scope of the research on entrepreneurship, Venkataraman (1997) points out the need to broaden our understanding regarding entrepreneurial opportunities and their sources. Based on the contribution of Venkataraman (1997) and Shane and Venkataraman (2000), the literature on entrepreneurial opportunities has increased remarkably and scholars have focused on the earliest stages in the development of new economic activities.
The word opportunity is very complex, and its meaning has been a prominent subject in the various conceptual streams in the literature on entrepreneurial opportunities. Several features of opportunity have been identified by the empirical stream, such as novelty, innovativeness, uniqueness, and scope that, when associated with entrepreneurial characteristics, may result in entrepreneurial action and outcomes. Entrepreneurial opportunities provide favorable and stimulating conditions promoting entrepreneurial action (Eckhardt & Shane, 2003; Shane, Nicolaou, Cherkas, & Spector, 2010). These opportunities stem from changes in the environment that create imbalance that certain individuals, such as entrepreneurs, are able to exploit (Cohen & Winn, 2007; Holcombe, 2003). According to Schumpeter (1934), opportunities are crucial to new combinations of resources and new combinations might be transformed in new products and services, new production methods, new market organizations, or new raw materials.
The literature on opportunity has identified multiple variables that play a major role in influencing the recognition of entrepreneurial opportunities. These variables have an impact on the individualâs ability to see opportunities (Cliff, Jennings, & Greenwood, 2006; Cooper & Park, 2008) and provide a greater understanding of the reason why some individuals can recognize opportunities while others cannot (Baron & Ensley, 2006; Shane, 2000).
The idea that prior knowledge is a key component of opportunity recognition has developed significantly over the years. Shane and Venkataraman (2000) suggest that some individuals have a better ability to identify and assess entrepreneurial opportunities because they have prior knowledge and are endowed with a cognitive capacity that enables them to value this knowledge. Similarly, Shane (2000) argues that prior knowledge helps individuals identify and detect opportunities addressing unmet needs. More recently, Gregoire, Shepherd, and Schurer Lambert (2010) corroborated the vision that prior knowledge is a valuable cognitive resource and the starting point in the process leading to opportunity identification. An individual can gain knowledge through both education and accumulated experience (Clarysse, Wright, & Van de Velde, 2011; Koellinger, 2008). When applying this knowledge to appropriate situations, the individual can recognize and take advantage from opportunities (Choi, LĂ©vesque, & Shepherd, 2008; Dimov, 2007; Fuentes, Arroyo, Bojica, & PĂ©rez, 2010).
1.2.2. Sustainable Entrepreneurial Opportunities
In the present work, sustainable entrepreneurial opportunities are assumed to derive from market imperfection regarding the environment and that market imperfection presents significant opportunities for entrepreneurs who have the ability to recognize them and help solve several environmental challenges. According to Venkataraman (1997), the consequences of entrepreneurship are economic, psychological, and social in nature. Cohen and Winn (2007) add a further category, that is, environmental consequences. Therefore, sustainable entrepreneurship involves an analysis of the way entrepreneurial opportunities result in new goods and services, production processes, and business models that not only generate economic, psychological, and social consequences, but also have an important environmental impact. The inclusion of environmental consequences provides a major contribution to the field of entrepreneurship, including the analysis of social benefits (e.g., it increases the quality of life and peoplesâ health) and the economic benefits deriving from environmental initiatives.
1.2.3. Sustainable entrepreneurs
The literature on sustainable entrepreneurship has investigated several crucial issues for entrepreneurs. Lenox and York (2012) have identified the key questions: under what conditions do entrepreneurs succeed in reducing environmental degradation? What are the primary motivations and processes involved in sustainable entrepreneurship? Why do some entrepreneurs strive to create environmentally relevant firms while others do not?
Sustainable entrepreneurship implies that entrepreneurs generate both environmental and social advantages for a society. Prior works define environmental entrepreneurship as the process involving the identification, evaluation, and exploitation of economic opportunities that exist in environmentally relevant market failures (Dean & McMullen, 2007). Anderson and Leal (2001) proposed a set of specific roles for entrepreneurs in generating environmental benefits. First, they should devise and introduce new ways to market environmental values, identify possible means to generate value by recycling materials, design technologies to enforce the property rights of environmental assets. Globally, they should be guided by an ethical commitment to future generations and not only by their own economic interest. Several studies on social entrepreneurship (Austin, Stevenson, & Wei-Skillern, 2006; Dacin, Dacin, & Matear, 2010) have made an attempt to discriminate entrepreneurship having an explicit social mission. Reviews of these studies (Short, Moss, & Lumpkin, 2009; Zahra, Rawhouser, Bhawe, Neubaum, & Hayton, 2008) have shown their focus on the specific social need they try to address. Therefore, social entrepreneurs are a very broad group, including NGOs, for-profit ventures, and existing organizations.
Briefly, sustainable entrepreneurship refers to the application of entrepreneurial action to directly address sustainability issues such as uncertainty, innovation, and resource allocation (York & Venkataraman, 2010). As regards uncertainty, environmental issues are inherently uncertain since they refer to benefits for future generations. Innovation involves the ca...
