Entrepreneurship and innovation dynamics in support of sustainable development

Sustainable development has emerged as an influential, although controversial, concept for both business and policy, and there is rising recognition that a major transformation is needed to reduce detrimental environmental and societal impacts created by our presently unsustainable practices. Striving for the development that would meet the economic, environmental and social needs of the society is the ultimate motivation of the thesis, with the focus on the environmental dimension. A group of activities that are contributing to the environmental goals are typically marked as environmental innovation. Environmental innovation activities refer to development of innovative products and processes that reduce (negative) environmental impacts. They are considered to be highly risky, as they require abundant financial investments, while the returns are typically collected in the long term. Hence, this type of innovation represents an extremely interesting case for research. Furthermore, the technologies that have emerged from environmental innovation activities are gathered under an umbrella term clean technologies. Even a completely new high-tech industrial sector has emerged, named Cleantech, which is encompassing development of environmentally sustainable products, processes and services. This thesis revolves around the two topics, Cleantech as a recently defined independent industrial sector and environmental innovation as a conduct for advancing detrimental practices. The first research output is focused on the Cleantech sector, which has emerged based on the disruptive, radical technological change. According to the Schumpeterian line of reasoning, the most appropriate actors for fostering this change are entrepreneurs, as they are more flexible and agile to adjust to newly created requirements. Thus, I try to improve knowledge on antecedents and initiators of the technological change in this domain, by studying human capital of entrepreneurial ventures active in the Cleantech sector. In particular, I investigate how patterns of founding team human capital differ for this specific sector, that is, what kind of founders’ human capital is present in Cleantech start-ups, and how it is combined within the teams. This might be crucial in new ventures, as human capital is argued to be a relevant determinant of their success and innovativeness. Empirical results yield that Cleantech sector does demand peculiar requirements in terms of business opportunity recognition and entrepreneurial team formation, which is valuable for proper design of policies targeting this sector. Cleantech is found to require technically highly skilled entrepreneurs, but at the same time, still fairly commercially experienced and economically competent individuals. Furthermore, data reveals that individuals are more prone to team up with cofounders possessing complementary know-how when they are starting a new business venture in Cleantech. The second and third parts of the thesis investigate a subset of environmental innovation that is responsible for improvement of resource efficiency, and more particularly, energy efficiency. I first study determinants of energy-efficient innovation, by enlarging currently established induced innovation view. I contend that environmental externalities of energy (in)efficient practices, which are negatively impacting the society and its sustainable development, create a feedback loop that acts as an additional driver (next to market-based incentives) for introducing energy-efficient innovation. Stakeholder theory, a stream of literature well established in strategic management, supports the proposition. Moreover, based on the industry-level empirical analysis, firms are indeed found to be, in average, influenced by pressures stemming from different stakeholders, mainly regulatory actors. The third part of the study combines country- and firm-level analysis, and considers the institutional characteristics of the business context within which firms need to operate. I attempt to show how energy-efficient innovation activities are contingent on these characteristics, and how this relationship is moderated by firm size. In other words, the focus is put on how small- and medium-sized firms (SMEs) are reacting differently to the institutional context with respect to large firms. Institutional theory is cross-bread with the theoretical discourse on energy-efficiency to create an anchor for the theoretical framework. The developed hypotheses are tested in a cross-country setting, and the obtained results are in support of the main set of hypotheses that institutional characteristics foster energy-efficient innovation. Moreover, different institutional dimensions are found to be working differently depending on the firm size. Compared to large firms, SMEs emerged to be more sensitive to regulatory rather than economic and social institutional characteristics. Several interpretations are offered for these somewhat controversial and thought-provoking results. Based on these, implications for policy interventions and managers of both small and large corporations are drawn. In summary, comprised of analyses on individual-, firm-, industry- and country- levels, this thesis enlightens different parts of the innovation dynamics that fosters sustainable development. Several theoretical lenses were adopted to study different topics, from competence-based, induced innovation, stakeholder to institutional theory. Analyses were performed by means of different statistical and econometric technics. By deploying this multidimensional and heterogeneous approach to the study of sustainable development issues, the thesis supplements the academic literature on the topic and supplies entrepreneurship and environmental policy makers and managers with sound empirical findings.