Sustainable entrepreneurship: Entrepreneurial orientation and sustainability decision tradeoffs: The case of sustainable fashion firms

Findings from researchers at Amsterdam School of International Business and Católica Lisbon School of Business & Economics show that the entrepreneurial orientation (innovativeness, proactiveness, risk taking) of a firm/manager effects its sustainability orientation (economic, social, environmental or a combination thereof) and its related tradeoff decision making.

Amsterdam, Netherlands and Lisbon, Portugal, November 1, 2017 – More and more managers are faced with decision making tradeoffs between sustainability and entrepreneurial/firm growth. However, very little is known about sustainable entrepreneurs, the dual orientation that drives them and the logics they use in deciding between competing priorities. Two researchers at leading international business schools, Amsterdam School of International Business and Católica Lisbon School of Business & Economics, explored the paradox of sustainable entrepreneurs that are oriented on one side towards entrepreneurial growth and on the other side towards sustainable development. Furthermore, they give an insight into sustainability decision making and how entrepreneurial orientation effects sustainability decision tradeoffs.

With the fashion/apparel industry a critical industry was chosen because it faces sustainability issues in all three sustainability dimensions. Economically, the competitive pressure to reduce prices is particularly strong. Ecologically, textile production has various impacts on the environment. And also socially, it is difficult for firms to manage working conditions of suppliers due to the fragmentation of the supply chain and widespread use of subcontracting. Furthermore, trends have shortened product life cycles, which led to increasing consumption and excess waste. These conditions have supported the emergence of many niche “sustainable fashion” firms, providing an excellent setting for this study. Scholars suggest that if fashion consumption grows at its current rate, it poses threats to the quality of life for future generations. For sustainable fashion firms, sustainability is a strategic asset but at the same time might inhibit them from growth.

From the data, three types of profiles of sustainability decision making were derived: singular, flexible and holistic.

The singular profile suggests that in making sustainability decision tradeoffs there is a conviction to prioritizing one sustainability dimension above the others. Firms using this kind of singular sustainability decision making are bound by their values and strictly adhere to their principles. Further, they are mission-driven rather than profit-driven and extend theory by showing that sustainable entrepreneurs are more risk taking and proactive individuals and firms. They for example accepted lower profitability or growth compromising the economic dimension. According to the data the focus was on the social dimension like in the following example.

“[We] produce in the Netherlands because I want to be sure about the working conditions. We could produce elsewhere and it would be cheaper [but we don’t want to].”

Flexible decision making accepts greater compromising between the three sustainability dimensions, uses an ordered prioritization and corresponds to high innovativeness and proactiveness.

The holistic profile integrates all three sustainability dimensions, uses an aligned prioritization and corresponds to high proactiveness and risk taking.

Behind the Research Findings

The authors first conducted telephone interviews with founders, production managers or corporate sustainability managers of 24 small sustainable fashion firms. Subsequently, they conducted semi-structured in-depth interviews with a subsample of the firms. Furthermore, they drew on information from archival data, firm documents, press articles and publicly available corporate sustainability and benchmarking reports.

The transcribed interviews were coded by selecting phrases, sentences or groups of sentences that provided information on sustainability orientation and entrepreneurial orientation. They also looked for patterns within and across cases and for emergent themes of sustainability decision tradeoffs. Also, the prioritization of sustainability dimensions and the processes, structures and behaviors of entrepreneurial orientation were identified.

Different kind of analyses were used: rotated varimax factor analysis, explorative factor analysis, cluster analysis, maximum likelihood method, pattern matching and sensemaking analysis. The cluster analysis is based on four entrepreneurial orientations (innovativeness, proactiveness, riskiness and futurity) and the three sustainability dimensions (ecological, social and economic).