SUSTAINABLE
ENTREPRENEURSHIP
Article summary
,Week 1
(Bocken, Short, Rana & Evans, 2014) A literature and practice review to develop sustainable business model (SBM) archetypes
business model innovation involves changing ‘the way you do business’, rather than ‘what you do’ and
hence must go beyond process and products.
• SBMs =‘’Innovations that create significant positive and/or significantly reduced negative
impacts for the environment and/or society, through changes in the way the organization and its
value-network create, deliver value and capture value (i.e. create economic value) or change their
value propositions
• Business model = a conceptual tool to help understand how a firm does business and can be used
for analysis, comparison and performance assessment, management, communication, and
innovation.
three key components:
1. The value proposition: product/ service, customer segments and relationships
2. Value creation: key activities, resources, channels, partners, technology
3. Delivery and value capture: cost structure & revenue streams
Schaltegger et al. (2012) propose a typology of:
• Defensive strategies (adjustment): incremental business model adjustments to protect current business
models focusing on risk and cost reduction often driven by the need for compliance
• accommodative strategies (improvement, integration): modifications of internal processes and
include some consideration of environmental or social objectives (e.g. environmental protection)
• proactive strategies (full integration): concern the redesign of the core business logic of the firm for
sustainable development.
3. Results: the sustainable business model archetypes
The archetypes are classified in higher order groupings, which describe the main type of business model
innovation:
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,• Technological: includes archetypes with a dominant technical innovation component (e.g. manufacturing
process and product redesign)
o Maximize material productivity and energy efficiency: Do more with fewer resources,
generating less waste, emissions and pollution.
o Create value from ‘waste’: The concept of ‘waste’ is eliminated by turning waste streams into
useful and valuable input to other production and making better use of underutilized capacity
o Substitute with renewable and natural processes: Reduce environmental impacts and
increase business resilience by addressing resource constraints ‘limits to growth’ associated
with non-renewable resources and current production systems.
• Social: dominant social innovation component (e.g. innovations in consumer offering, changing consumer
behavior)
o Deliver functionality rather than ownership: provide services that satisfy users’ needs
without having to own physical products
o Adopt a stewardship role: Proactively engaging with all stakeholders to ensure their long-
term health and well-being.
o Encourage sufficiency: Solutions that actively seek to reduce consumption and production.
• organizational: dominant organizational innovation change component (e.g. changing the fiduciary
responsibility of the firm)
o Re-purpose the business for society/ environment: Prioritizing delivery of social and
environmental benefits rather than economic profit (i.e. shareholder value) maximization,
through close integration between the firm and local communities and other stakeholder
groups. The traditional business model where the customer is the primary beneficiary may
shift.
o develop scale-up solutions: Delivering sustainable solutions at a large scale to maximize
benefits for society and the environment.
Discussion
Although each can be applied in isolation, different archetypes may be combined and real sustainability
almost certainly demands combinations of archetypes (e.g. deliver functionality rather than ownership, while
maximizing material and energy efficiency).
(Hocksterst & Wuestenhagen, 2010) Greening Goliath vs. emerging Davids – theorizing about the role of
incumbents and new entrants in sustainable entrepreneurship
• Sustainable entrepreneurship = the discovery and exploitation of economic opportunities through
the generation of market disequilibria that initiate the transformation of a sector towards an
environmentally and socially more sustainable state (definition according to this article).
• non-market strategies = the set of activities that firms use to influence social, environmental and
political stakeholders.
Table 1. characteristics of Davids and Goliaths
Criteria Davids Goliaths
Age Rather new Old, incumbent
Size Small Large
Objective function Social and/ or environmental objectives at Economic objectives dominating, social/
least as important as economic objectives environmental objectives complementary
*we use the term sustainable entrepreneurship to describe activities by small or large firms that represent disruptive, rather than incremental
innovation.
Fig. 1. Emerging Davids and Greening Goliaths (Wustenhagen, 1998) (left)
Fig. 2. Co-evolution of sustainability start-ups and market incumbents towards the sustainability transformation of an industry
(right)
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, Table 2. Delineation of sustainable entrepreneurship
Davids Goliaths
Disruptive innovation Sustainable entrepreneurship Sustainable corporate entrepreneurship
Incremental innovation Bioneers, social bricoleurs Sustainability management systems, CSR, eco-
efficiency
4.Literature review
Sustainable development and entrepreneurship
Cohen and Winn (2007) point to four types of market failure as possible explanations:
1. benefits are privatized while the costs are often externalized
2. natural capital is undervalued by society since we are not fully aware of the real cost caused
3. Information asymmetry.
4. many firms are not perfect optimizers.
Firm size and the diffusion of sustainable innovation
• Large firms: using economies of scale argumentation large firms have been hypothesised to be
more innovative because of their broader resource base which allows them to pursue higher levels
of R&D.
• Small firms: are more flexible and therefore avoid some of the organizational inertia that
characterizes large firms, leading to a negative correlation between firm size and innovation.
Innovation scholars with an evolutionary economics perspective have highlighted that large and small
firms play differing roles in different phases of industry evolution.
In terms of industry development:
• a technological paradigm change is usually characterized by a high degree of variation, i.e. a large
number of new entrants experimenting with new product designs.
• As soon as a dominant design emerges, there is a shift from variation to selection, i.e. industry
consolidation and an increasing number of exits.
• When it comes to the diffusion of sustainable innovation, firms are faced with additional challenges
because of a double externality problem:
o technological spill over prevents the innovator from appropriating the full value of an innovation.
o In the case of sustainable innovation, second externality: the lack of internalization of
environmental or social cost for incumbent technologies. The presence of external costs has two
important effects:
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