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project with the title shades of green investigating new Ventures attention
upon sustainability and its impact on success
the rise of global challenges such as climate change LED to heightened pressure on corporations
it stems from various sources among others regulatory interventions in
this context have increased for example European law now requires public interest
entities with more than 500 employees to annually release non-financial statements
at the same time monitoring from the media on environmental matters increased a study
by flammer reports that media's attention on corporate environmental matters is about
six times higher in the 2000s compared to the 1980s social movements such as the most
recent Global Fridays for future marches are also loudly calling for Action in this regard
also consumers Consciousness and disregard has increased a growing amount of customers now has
preferences for products or services with certain attributes or to certain production methods
overall this led to heightened corporate attention on sustainability matters meaning
firms increasingly incorporate environmental concerns into their strategy and their
allocation of investment capital for example car manufacturers invest heavily in electric cars and
into firms in a Renewables and new agricultural methods are developed to name only a few
Academia is also paying increasing attention
D antecedence and consequences of firms environmental Endeavors have long been of Interest
the financial consequences still represent the focus within this research stream as the debate on
the role and responsibility of profit maximizing corporations within our society continues
but research results and conclusions are still mixed overall it appears now that a small
minority of empirical studies reported positive relationship between environmental initiatives
and financial performance the same applies to CSR studies early views based on an agency perspective
viewed CSR related activity as largely detrimental to a firm's financial performance as they may add
costs distract managers and benefit them rather than shareholders more recent work suggests that
some sustainability practices now represent best practice hence are a necessity others may even
enable firms to achieve successful differentiation from its competitors another recent study
investigates the question whether investors actually believe firm CSR activities to pay off
their results indicate that they care rather very little but there is some evidence that long-term
investors and financial analysts do increasingly pay more attention to sustainability events
it was also found that analysts who have been described as surrogate investors shift their
assessments of CSR activities over time and eventually evaluate these Endeavors as positive
all of this research is mainly based upon large listed meaning established firms
but newly founded firms May Drive Green Innovation and as such play a major role in tackling climate
change and ensuring sustainable economic growth the question whether these screen initiatives
actually pay off for new Ventures meaning are well received by investors remains however
largely unexplored a canadian-based study from 2012 reports a negative relationship
between CSR activities and financial performance this finding supports the view that despite the
sustainability being a major Trend Environmental Protection may still be associated with additional
costs rather than opportunities the findings from prior CSR and sustainability research
may not be applicable since the setting of new Ventures is very different to established ones
our study aims to address this Gap we deem it important to consider the differences as regards
the extent to which they consider sustainability matters as such we distinguish between firms that
pay no attention at all those who pay little attention for example through mentioning it
briefly within their communication to potential investors and those that pay high attention for
example through incorporating environmental issues within their core business model
let us first look into the potential effect of high environmental attention on the financial
prospects of new Ventures the potential economic returns for new Ventures with high attention
upon sustainability may be more positive for the following non-exhaustive reasons
external pressure to behave responsibly towards the environment has increased tremendously which
makes corporate Endeavors within the green sector more promising and attractive new Ventures with
sustainability activities at their core may be able to differentiate themselves and gain a
competitive advantage this can attract substantial tension from investors who also increasingly
consider environmental issues in their investment decisions as a result of the growing legitimation
of the green sector second green entrepreneurs might benefit from a better reputation and
strong and close stakeholder relationships local communities with Goodwill new Ventures may depend
on May appreciate their environmental efforts also top talents which are a scarce resource within new
renters may be more inclined to work for a firm that pays attention to environmental concerns
third having a green business model May ensure against corporate risks as pressure on politics
increases it is likely that governments enforce stricter environmental legislation
Queen new Ventures might prevent incurring additional costs through these expected changes
additionally CSR activities build moral Capital thereby reducing the negative
impact of potential future harmful events overall we argue that new Ventures which
pay high attention to environmental concerns benefit from the recently growing legitimation
after green sector and suggests that the effect upon economic returns is thus positive
however this may not apply to new Ventures who pay only little attention to environmental concerns
we argue that these new Ventures are rather not rewarded for mentioning it briefly
within their Communications to potential investors this is due to the following
investors May perceive these Endeavors as a costly distraction from The Core Business
activities managers may not be as competent in addressing environmental issues compared
to the knowledge on their actual business model they may therefore have difficulties negotiating
these matters with various stakeholders hence a time-consuming extra effort
second if these activities represent environmental activities that are already established within the
industry investors will not reward those new Ventures that address a necessity
this also applies to Consumers who nowadays at least expect firms to adhere to certain
established regulations and Norms within this context third and from an agency perspective
sustainability activities are viewed as alleged made this is because potential investors May
fear that these are pursued not to actually support the feasibility of the business model
but rather serve the interests of the founders improve their Public Image and benefit their
future careers the insurance-like effect may have particularly apply to them and not to shareholders
overall we argue that paying little attention to sustainability does not pay off for new Ventures
investors may not view these conservations as a business opportunity during times of
heightened environmental awareness but rather as a costly distraction as such new Ventures that
do not incorporate environmental issues in their company representations at all may be better off
combining both strings of augmentation we suggest a U-shaped relationship between
new Ventures attention upon sustainability and financial success starting to pay attention to
sustainability issues will decrease financial success as these activities are perceived as
time and cost consuming leading to a negative exponential relationship
in contrast a credible inclusion of sustainability thoughts in the business model and corresponding
representations can create a competitive Advantage leading to an exponential positive relationship
between new Ventures sustainability attention and financial performance
combining a positive and negative exponential function leads to an
overall u-shaped relationship between new Venture sustainability attention and financial success
we further suggest that the experience of Founders place a moderating role Founders
in their underlying characteristics shape new Venture performance Founders experience is deemed
to play a crucial role in convincing investors of the performance prospects of their endeavors
Founders prior work and prior industry experience positively influenced stakeholder perceptions and
as such enhances cognitive legitimacy studies in this way suggest that career experience is
particularly important on the conditions of uncertainty this applies to the green sector
which still may be described as emerging on a large scale despite the accelerating level of
legitimation reputable Founders who have gained a large amount of work experience and build a
valuable Network within the industry may be more convincing in selling their green story but this
may only apply to new Ventures with sustainability activities at the very core of the business model
that experienced Founders should understand the need to focus on the on their core
activities whereas newcomers may be more inclined to show that they pursue a wide
range of activities including that they pay a little attention to environmental concerns
this however may not be credible and potentially rather perceived as advertising or greenwashing
we hypothesize Founders experience in form of Prior work or prior industry experience
to flatten for low attention and to steepen for high attention the u-shaped relationship between
new Ventures attention upon sustainability and new Venture success we test our hypothesis in
a European sample of 1258 single Founders in there for profit new Ventures that were founded
between 2013 and 2017. we collected relevant data from the publicly available database crunch base
let us look at our measures and start with the independent variable to measure new Ventures
attention upon environmental concerns We performed a Content analysis upon firm's descriptions
in the context of new Ventures one can argue that the information provided in firm's descriptions is
particularly suitable for capturing a firm's intention and attitude towards very specific
subject the underlying assumption era is that words or phrases that are frequently used are
cognitively Central and reflect what is most on the user's mind we constructed this proxy
in several steps first we Define search items that the stakeholders and in particular investors would
associate with firms sustainability efforts and hence perceive the Enterprise as green
the words are mainly based upon previous research second we downloaded the descriptions and used the
linguistic inquiry word count software covered for computerized text analysis to apply our dictionary
thereby we control for a different length and necessitated and minimum word count
moreover we perform the validation process to ensure the accuracy of the vocabularies
employed to identify the new Ventures attention upon sustainability we also had to make sure
that the range of attention was captured in an appropriate manner our dependent variable is
New Hampshire success which we operationalize as the venture's ability to attract funding
as various funding rounds signal trust and belief in new Ventures prior studies reveal a number of
funding rounds to be an adequate proxy for new Venture success our moderating variable
is Founders experience we measure prior work experience as the number of years the founders
work prior to starting new venture for prior industry experience we create a dummy variable
which is coded one if the founder has had previous experience in Juventus industry and zero otherwise
we furthermore control for a host of variables that were previously
identified as determinants of new Venture success given that the dependent variable
takes on non-negative Integer values we use the poison regression model for our analysis
let us next have a look at our results in model 3 we test our hypothesis 1 which proposes a
U-shaped relationship between attention upon sustainability and eventual success let's zoom
in the result shows a positive and significant relationship which supports hypothesis 1.
We performed several checks in order to ensure the appropriateness of the
u-shaped relationship which you find outlined in our paper
in the figure here you see an illustration of the u-shaped relationship model 4 and 5 test
the moderating effect of Founders prior experience let us have a closer look at the relevant numbers
model 4 tests our hypothesis to a which outlines a moderating effect of Founders prior work
experience on the relationship between attention upon sustainability and new Venture success
the relationship is positive and significant thus supporting our hypothesis 2A Model 5 tests our
hypothesis to be which outlines a moderating effect of Founders prior industry experience
the relationship is positive but not significant thus our hypothesis to be is rejected
this figure provides an illustration of the confirmed moderating effect
at different levels of Prior work experience
we aim to make several contributions with our study first we add to the broader literature
on CSR and sustainability since a large majority of studies within the stream has focused on large
established firms he Ventures however may play a key role in driving green innovation as such
we theoretically consider the peculiarities of new Ventures and find empirical support for our large
European sample we fill an empirical Gap with up-to-date evidence on a major trend of our time
in this vein our study also contributes to a growing stream of studies within CSR
and sustainability research that considers different types of sustainability practices
we showed us that this distinction is vital since it has different success implications
for new enters from a methodological point of view our content analysis represents an alternative to
the commonly used CSR ratings and questionnaires which allows replicability in an eventual context
second we contribute to the entrepreneurship literature
research on new Ventures success factors mainly focuses on individual characteristics of the
entrepreneur but only recently has been extended by organizational and environmental factors we add
sustainability as an environmental influencing factor of new Venture success and also consider
founder characteristics in this relation our study also has practical implications as the
green sector becomes more and more legitimized an increasing number of entrepreneurs may want
to exploit the opportunities arising through the heightened attention upon sustainability
entrepreneurs should carefully consider the degree of greenness and formulating
their new business idea and selling it to stakeholders and shareholders
moreover when engaging in a new Venture that focuses on a green business model prior work
experience can help Founders to overcome uncertainties and Foster new Venture success
many thanks for your attention if you have any questions ideas for improvement
or any other remarks do reach out we greatly appreciate your input
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