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Success Determinants for Green Startups
Before Market Entry
Author: Steven Tromp Student number: 10667164
MSc. In Business Administration – Entrepreneurship & Innovation Faculty of Economics and Business
University of Amsterdam
Supervisor: Dr. Y.Song
Second supervisor: Dr. Tsvi Vinig Date: June 16, 2015
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Statement of originality
This document is written by student Steven Tromp who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
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Abstract
This research seeks to predict the success of green startups based on factors that can be observed at the time of startup. The factors examined in this study are the ecopreneur’s green motivation, the thoroughness of preparation and the background of the ecopreneur. These three factors are relatively easy to assess before market entry. Also, the amount of capital and time spent is still limited at this period.
Green startups are established by a new breed of entrepreneurs, called ecopreneurs. The ecopreneur discovers environmentally relevant market failures which represent opportunities for achieving profitability while simultaneously reducing environmentally degrading economic behaviors (Dean and McMullen, 2007). However, green startups do not differ that much from ordinary startups, besides the fact that it offers more sustainable products or services and the founder is motivated to create green value. Most of the normal entrepreneurial laws are also valid for green startups (Linnanen, 2002).
This study is based on data collected from 66 founders of green startups. Participants filled out a 24-item online questionnaire. The results of the regression analysis show that successful green startups are established by multiple cofounders. Also, ecopreneurs who set up their green business full-time are more successful than ecopreneurs who set up their business part-time. Moreover, the results of the bivariate analysis show that prior management experience and initial financial capital is positively and significantly correlated with green startup success.
This is one of the first studies which combines the literature of ecopreneurship and new venture success. This study provides interesting insights for both body of literatures and offers practical implications for nascent ecopreneurs and venture capitalists. Ecopreneurs should not be ignored as they will play a vital role in the inevitable transformation to a more sustainable world.
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Table of content
Abstract ... 3 1. Introduction ... 6 1.1 Background ... 6 1.2 Research purpose ... 7 1.3 Research questions... 7 1.4 Relevance ... 8 1.5 Structure ... 9 2. Theoretical framework ... 10 2.1 Success... 10 2.1.1 Green success ... 10 2.1.2 Financial success ... 10 2.2 Ecopreneurship ... 112.2.1 The entrepreneur, the sustainable entrepreneur and the social entrepreneur ... 12
2.2.4 The ecopreneur ... 12
2.2.5 Green startups ... 13
2.2.6 Ecopreneur’s green motivation ... 13
2.3 Human capital ... 15
2.3.1 General background ... 16
2.3.2 General work experience ... 16
2.3.3 Specific work experience ... 17
2.4 Business planning ... 18
2.4.1 Time spent on planning ... 19
2.4.2 Marketing mix... 19
2.4.3 Part-time or full-time planning ... 19
2.4.4 Financial capital ... 19
3. Conceptual model and hypotheses ... 21
3.1 Ecopreneur’s green motivation ... 21
3.2 Human capital ... 22
3.2.1 General background ... 22
3.2.2 General work experience ... 22
3.2.3 Specific work experience ... 23
3.3 Business planning ... 23
3.4 Conceptual model and overview hypotheses ... 24
4. Research methodology ... 26
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4.2 Pilot study ... 26
4.3 Data collection process ... 26
4.4 Dependent variable: green business success ... 27
4.5 Factors contributing to green business success. ... 29
4.5.1 Ecopreneur’s green motivation ... 29
4.5.2 Human capital... 30 4.5.3 Business planning ... 30 4.6 Data ... 31 5. Results ... 32 5.1 Descriptive statistics ... 32 5.2 Bivariate analyses ... 33 5.2.1 Spearman correlation ... 33 5.2.2 Kruskal-Wallis test ... 36 5.2.3 Independent-means t-test ... 36 5.3 Multiple regression... 37
5.3.1 Assumptions multiple regression ... 38
5.3.2 Analysis multiple regression ... 38
5.4 Summary of significant results ... 41
6. Discussion of results ... 43
6.1 Ecopreneur’s motivation ... 43
6.2 Human capital ... 44
6.3 Business planning ... 45
7. Practical implications ... 46
8. Limitations and suggestions for future research ... 47
9. Conclusion ... 50
10. References ... 51
Appendix 1: Survey ... 55
Appendix 2: SPSS output ... 57
Appendix 2a: Normal distribution tests... 57
Appendix 2b: Kruskal-Wallis test ... 59
Appendix 2c: Independent means t-test ... 59
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1.
Introduction
1.1
Background
Why do some green startups become successful and others fail miserably? The effect of green motivation, human capital and business planning on new venture success will be examined in this research. These three determinants are relatively easy to assess before market entry, which makes them even more valuable.
The three success determinants are related to the first two phases of establishing a new venture. According to Wilken (1979) setting up a new business consist of three phases: 1) the stage of motivation, when an entrepreneur discusses the idea and develops the business concept; 2) the stage of planning, when the entrepreneur prepares to establish the new firm, and 3) the stage of creation, when the entrepreneur establishes and begins managing the new firm, focusing on day-to-day operational management.
Green startups are established by a new breed of entrepreneurs, called ecopreneurs. These unique entrepreneurs are increasingly seen as being in the vanguard of a shift to a new form of capitalist development that can help to address fears over global warming, climate change and their associated negative environmental impacts (Gibbs, 2009). Moreover, the ecopreneur discovers environmentally relevant market failures which represent opportunities for achieving profitability (Dean and McMullen, 2007). Most of the normal entrepreneurial laws, such as the correlation between risk and profit, the right timing for market entry and the need for adequate financial and human capital are valid for these green startups (Linnanen, 2002).
The first examined determinant related to new venture success is the green motivation of an ecopreneur. It is linked to Wilken’s (1979) first phase, the stage of motivation. Ecopreneurs vary in motivations when establishing a new venture. Especially, the balance between profitability and green value differs. Some ecopreneurs just want to exploit market failures, while others have the intrinsic motivation to contribute to a greener society. Does the level of green motivation affect green startup success?
The second tested determinant associated with startup success is the human capital of the founding ecopreneur. Numerous researchers hold the belief that the firm is an extension of the entrepreneur and that the entrepreneur or better the entrepreneurial team is key to the success of new ventures (Stuart and Abetti, 1987). This has led many researchers to examine the character traits of the entrepreneur (Gilbert et al., 2006). Examples are: need for achievement, locus of control, autonomy, etc. Next to the psychological characteristics, there are biographical characteristics. These focus on
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background experiences like education, industry experience, entrepreneurial parents, etc. This research will solely focus on the biographical characteristics of the lead ecopreneur, because it is argued that these characteristics are responsible for the majority of the startup’s human capital. Business planning is the final examined determinant which is likely to affects startup success. It is related to Wilken’s (1979) second phase of establishing a new firm, the stage of planning, and is associated with the level of preparation. The value of business planning before market entry is given by the expected benefit of being able to make better start-up decisions, in particular by terminating poor venture projects before start-up (Chwolka and Raith, 2012).
1.2
Research purpose
The purpose of this research is to identify which factors of the pre-startup phase can explain green startup success. The effects of the following three main determinants and eleven accompanying variables are examined:
The founder’s green motivation 1. Type of ecopreneur The founder’s human capital
2. Educational level 3. Entrepreneurial parents 4. Prior management experience 5. Number of cofounders
6. Prior industry experience 7. Startup experience Business planning
8. Working at another job 9. Total hours planning 10. Intensity marketing mix
11. Invested capital before market entry
If these variables could predict startup success, it could help nascent ecopreneurs setting up successful green ventures. Identifying the effect of each variable in the motivation and planning phase would be valuable, because the amount of capital and time spent is still limited during this period. It could also be of value for investors who can use it as a tool to label start-ups. Even though, there are dozens of other factors which influence startup success, it will be useful.
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Research questions
Thus, the questions discussed in this thesis are: What is the effect of the ecopreneur’s green motivation on new green venture success? What is the effect of human capital on green startup success? What is the effect of business planning on green startup success?
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1.4
Relevance
This research is relevant from multiple points of view. Two are discussed, starting with the relevance of identifying success determinants. Thereafter, the relevance of ecopreneurship is explained.
New ventures have a significant impact on unemployment rate. It is often thought that the large multinationals are responsible for the lion share of new jobs. The contrary is true. In the period 2002-2010, 58% of the new jobs were created by mirco-ventures, ventures which have ten or less employees, in Europe (European Commission, 2012). Startups alone, firms which do not longer exist than five years, have been responsible for 33% of the new jobs in the Eurozone in the same time frame. Though, the failure rate of these startups is high. 63% of the ventures which were established in 2007 were still in business in 2010 in the Netherlands (CBS, 2013). In 2012, this number had decreased to 54% (Spijkerman, 2012).
The value of startups has also been discussed in many academic articles and lots of research has been carried out to examine which determinants affect startup success. However, the overall findings have not been consistent (Jo and Lee, 1996). The more research is done on this topic the more consistent the results will be.
The ecopreneur is a new emerging kind of entrepreneur who did not receive much attention in the literature, yet. Ecopreneurship began to receive some research attention in the late 1990s. However, it was noted as being a field that is still in its infancy (Cohenn and Winn, 2007). While there has been an increasing research interest discussing ecopreneurs from a conceptual perspective, there remains little empirical research to date (Kirkwood and Walton, 2009). This enables great opportunities for researchers.
Furthermore, ecopreneurs have a positive impact on society. Milton Friedman argued in his famous New York Times Magazine article that the social responsibility of business is to increase its profits (Schwartz and Saiia, 2012). This mentality has generated prosperity and improved the quality of life, but not without undesirable environmental and social consequences (Sabeti, 2011). Solving these social and environmental problems has been ceded to governments and, to some, extent to Non-Governmental Organizations (NGOs) (Porter and Kramer, 2011). However, a countertrend is emerging on the business front. Many ecopreneurial businesses are established because of strong values and beliefs of the founders and intentions to change the industry towards a more sustainable one (Isaak, 2002). This shift is necessary to limit the global pollution and restrain the depletion of natural resources, especially when the world’s population hits 9.6 billion in 2050 (United Nations News, 2013). Therefore, green startups support the European Commission (EC) in accomplishing its set environmental goals. To lower the drag on the environment the European Commission (EC) has set the
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“20-20-20” targets. The three key objects for 2020 are: 20% reduction in EU greenhouse gas emissions from 1990 levels, raising the share of EU energy consumption produced from renewable resources to 20% and 20% improvement in the EU's energy efficiency (European Commission, 2011).
1.5
Structure
This first chapter presented the main topic, focus and purpose of this thesis. It also provided the relevance and main research questions of this study. The other sections of this thesis are structured as follows. Firstly, the theory section discusses success, ecopreneurship, human capital and business planning. Secondly, the conceptual model is presented and hypotheses are formulated on the basis of the discussed theory. Thirdly, the methodology section will clarify how these hypotheses are tested. Fourthly, the findings are presented in the results section. Fifthly, the results will be discussed and checked whether these are in line with the existing literature. Thereafter, the practical implications and limitations are explained. Lastly, the final conclusions of this study are presented.
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2.
Theoretical framework
Before identifying which determinants affect green startup success, it is important to consider the theoretical background on this topic. This theoretical framework starts at the core and discusses how startup success is measured. Next, the literature on the ecopreneurship is reviewed. Thereafter, the theories about the effect of human capital and business planning on startup success are presented.
2.1
Success
What is the appropriate metric to test ecopreneurial success? Is it enhanced environmental value, generated economic value or a combination of both?
2.1.1 Green success
Because this thesis examines green startup success, next to financial indicators, green value should be measured. However, integration of the financial and ecological indicators has proven to be difficult, if not impossible (Linnanen, 2002). Researchers who examined ecopreneurship did not measure green value, because of the lack of clarity on sustainability criteria. Green or sustainable value can be measured in numerous ways: life cycle assessment (LCA) improvements, water savings, electricity usage reduction, fewer Co2 emissions, etc. The main problem is to measure these accurately. Another problem is that water savings cannot be compared with a reduction in electricity use. One cannot tell if saving one liter of water is more green value than saving one kWh.
Moreover, the savings in resources that green startups could offer to their customers differ. One customer might enjoy a 30% reduction in electricity use, while at other customers only a 10% reduction is achieved. This is another reason why it is not easy to compare green startups success in relation to added green value. Due to these complications we will not use green value as a measurement of success.
2.1.2 Financial success
On the contrary, financial indicators are easier to measure and more accurate. Furthermore, financial success is usually positively correlated with environmental value. For example, when a green venture is doing well financially, it means that it is selling its resource saving products or services which again adds green value. Therefore, this research will merely focus on economic values.
Still, the question remains how economic success should be measured. It is hard to measure the performance of startup ventures due to the many changes in business activities that occur in the earlier stages (Jo and Lee, 1996). Additionally, the way success is measured differs in many studies. Often it is related to profit, revenue, customer base, cash flow, market share or employment growth.
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Yet, another way to measure success is to divide it in mutually exclusive categories: failure, marginal survival and growth (Cooper et al., 2004) or in survival and non-survival (Gartner et al., 1998). The drawback of these categorizations are that it is almost impossible to track down startups which are already bankrupt and it is even harder to receive data from these already closed firms, because they are less likely to participate. In the article of van Gelderen et al. (2006) a solution for this problem is provided. Van Gelderen et al. (2006) selected nascent entrepreneurs who were questioned on a periodic basis over long period of time. However, one have to follow the nascent entrepreneur for over a year to receive relevant data on success which is not realistic for this project.
For these reasons, it was determined to use financial indicators to measure success. In this research two measurement tools were carefully selected, revenue growth and employment growth. Although employment growth is surely not a criterion directly reflecting financial performance, it definitely mirrors a secure growth path of new firms, since taking on personnel is a far-reaching decision and requires good business prospects (Schutjes and Wever, 2000). Employee growth has also the advantage of being a measure of economic contribution and is usually not regarded as confidential information (Cooper et al., 1994). The drawback of this measured tool is that there is a time lag and it is industry dependent. When a business is doing well, it is often not immediately translated to an increase in employees. Capital intensive industries are also more reluctant to take on personnel than labor intensive industries when sales increase.
Revenue growth is the most commonly used indicator of new venture growth (Gilbert et al. 2006; Duchesneau and Gartner, 1990). It indicates that customers are increasingly accepting the products or services offered by the business (Robinson, 1998). Furthermore, when sales growth occurs, a venture is supplied with revenues that can be reinvested into resource expansion or capability development (Gilbert et al. 2006).
Therefore, employee growth and revenue growth are the metrics used for green startup success in this research. These financial metrics are usually positively correlated with the environmental value, because when a green venture is doing well financially, it means that it is selling its resource saving products or services which again adds green value. But, what are the characteristics of ecopreneurs who establish green startups? This question will be answered in the next section.
2.2
Ecopreneurship
Ecopreneurs are a subset of entrepreneurs who may differ in the way they start businesses, particularly in their motivations for becoming entrepreneurs (Kirkwood and Walton, 2010). This section will discuss different types of ecopreneurs which are related to various levels of green motivation. The motivation determinant is associated with Wilken’s (1979) first phase of establishing a firm. To grasp the
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ecopreneur, it is import to understand the ordinary entrepreneur. To get an even better perspective, two other value-driven entrepreneurs, the social entrepreneur and the sustainable entrepreneur, are also briefly discussed before arriving at the ecopreneur.
2.2.1 The entrepreneur, the sustainable entrepreneur and the social entrepreneur
Eckhardt and Shane (2003) define entrepreneurship as the discovery, evaluation and exploitation of future goods and service. Schumpeter describes the entrepreneur as disruptive, destroying the pre-existed state of equilibrium by combining already existing resources in creative ways (Kirzner, 1999). Although the literature remains imprecise, most authors accept that all types of entrepreneurship are based on innovations that require changes in the pattern of resource deployment and the creation of new capabilities to add new possibilities for positioning in the market (Stopford, Baden-Fuller, 1994). Increasingly consumers – as well as employees, shareholders, the financial community, media and Non-Governmental Organizations (NGOs) – yearn for something meaningful in their consumption activities and look to companies to offer meaning by exemplifying credible, value-laden and authentic traits (Vallaster et al., 2012). Some entrepreneurs focus on creating social value, others underline the importance of adding environmental value, yet others excel in both.
The sustainable entrepreneur is the kind of entrepreneur who pursuits a combination of economic, social and environmental value (Hockerts and Wustenhagen, 2010; Cohen and Winn, 2007). This combination is also called the triple bottom line.
The social entrepreneur leaves the environmental aspect out of the equation. In contrast to traditional entrepreneurial models, social value creation appears to be the primary objective for the social entrepreneur, while economic value creation is often a by-product that allows the organization to achieve sustainability and self-sufficiency (Seelos and Mair, 2005).
2.2.4 The ecopreneur
In this thesis the emphasis is put on the last breed of value-driven entrepreneurs which are called ecopreneurs. Ecopreneurs are not only driven by profit, but also by a concern for the environment (Schuyler, 1998). They discover environmentally relevant market failures which represent opportunities for achieving profitability while simultaneously reducing environmentally degrading economic behaviors (Dean and McMullen, 2007). Most of the normal entrepreneurial laws, such as the correlation between risk and profit, the right timing for market entry and the need for adequate financial and human capital are valid also for environmental ventures (Linnanen, 2002).
The ecopreneur did not receive much attention in the literature, yet. Ecopreneurship began to receive some research attention in the late 1990s. However, it was noted as being a field that is still in its infancy (Cohenn and Winn, 2007). While there has been an increasing research interest discussing
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ecopreneurs from a conceptual perspective, there remains little empirical research to date (Kirkwood and Walton, 2009).
2.2.5 Green startups
Green startups are established by ecopreneurs. Are green startups any different from ordinary startups? Yes and no might be the correct answer. Green startups are no different than any other startup, besides the fact that it offers more sustainable products or services and the founder is motivated to create green value. Kirkwood and Walton (2010) agree with this statement. These researchers claim that green businesses operate in eco-friendly markets not only to make profits, but also because of the strong underlying green values. Moreover, as mentioned before, most of the normal entrepreneurial laws are also valid for green startups (Linnanen, 2002).
These green startups can, just like any other startup, be classified into different business segments. These business segments are: providers of environmental management services, producers of environmental technology and manufacturers of environmentally friendly products (Linnanen, 2002). Firstly, providers of environmental management service are mostly consultancies. Examples of these companies are Green Consultant and Clear Green Consultancy. Suggestions on how to transform their organization to a more sustainable one are provided by these consultancies.
Secondly, producers of environmental technology are driven by legislative pressure on communities or industrial enterprises to reduce their environmental load on water air and soil. Examples of these environmental technology companies are: Greeniant, Exergyn, RHS. Greeniant provides insight in the energy consumption of electrical devices, Exergyn’s technology converts waste heat into electronical power and RHS developes water solutions for water waste in the food and service industry.
Lastly, the manufacturers of environmentally friendly products. Such products are differentiated from existing products by their better environmental performance over the product life-cycle (Linnanen, 2002). Examples of these companies which produce environmentally friendly products are: Roetz, Seepje and Pure Jute. Roetz produces recycled bikes, Seepje sells laundry detergent extracted from plants and Pure Jute manufactures products from organic cotton instead of plastic.
Overall, resources are saved and the impact on the environment is lowered when using products or services of green startups. Now that the ecopreneur and green startups are defined, it is time to discuss the green motivation of the ecopreneur in the next section.
2.2.6 Ecopreneur’s green motivation
So, green startups are no different than any other startup, besides the fact that the founders are motivated to create green value and the ventures offer more sustainable products or services.
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However, this motivation differs among ecopreneurs. Some ecopreneurs just want to exploit market failures and focus on maximizing profit, while others have the intrinsic motivation to contribute to a greener society and care less about profit maximization.
This is what we call green motivation in this thesis. So, green motivation is defined as the commitment of the ecopreneur to create green value in relation to generating profit. Some ecopreneurs strive to maximize profit, others want to maximize green value and again others opt for a combination of both. Thus, there are different motivation related, movements among ecopreneurs. These movements are labelled by numerous researchers. Two classifications are presented in the following section of which the second one is the most important.
Firstly, according to Pastakia (1998) there are two groups of ecopreneurs who differ in green motivation: ‘commercial ecopreneurs’ and ‘social ecopreneurs’. A ‘commercial entrepreneur’ is an individual/group or corporation that seeks to maximize personal gains by identifying green business opportunities (eco-friendly products and processes) and converting them into viable business ventures (Pastakia, 1989). ‘Social ecopreneurs’ are those who seek to promote eco-friendly ideas, products or technology either through the market or non-market routes.
Secondly, Linnanen (2002) presented four other typologies which relate to the ecopreneur’s green motivation: non-profit ecopreneur, idealist, self-employer and opportunist. They are positioned in a two by two matrix shown in table 1. The criteria for categorization is the desire to change the world and/or desire to make money.
Table 1. Source: Linnanen, 2002
Desire to make money
Desire to change the world
Low High
High Non-profit
business
Idealist
Low Self-employer Opportunist
These last four typologies are more comprehensive than those suggested by Pastaki (1998), Isaak (2002) or Schlagter (2002). However, they are not mutually exclusive. Both the willingness to generate profit and the urge to have a positive impact are captured in this model. Only the ‘idealist’ and the ‘opportunist’ are eager to grow and expand their business, because capital is necessary to scale the business.
The ‘opportunist’ recognizes business opportunities due to market imperfections and profit generation is the main goal (Cohen and Winn, 2004). This kind of ecopreneur can be compared to the ‘commercial entrepreneur’ of Pastaki (1998). The ‘self-employer’ is satisfied with a certain cash flow level and does
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not want to grow the business. The ‘non-profit business’ has a strong commitment to change existing business and consumer behavior. Good citizenship often overtakes the quest for high-performance financial results (Linnanen, 2002).
The ‘idealist’ tries to find the right balance between making money and creating value. This ecopreneur discovers environmentally relevant market failures which represent opportunities for achieving profitability while simultaneously reducing environmentally degrading economic behaviors (Dean and McMullen, 2007). Their green motivations are tied to their monetary motivations (Kirkwood and Walton, 2009). Moreover, the ‘idealist’ is motivated to create new markets, because of one’s desire to improve the world. This creates a cycle and is enforced by positive feedback from customers and other stakeholders, providing additional momentum for positive business results and further strengthening the entrepreneurial motivation (Linannen, 2002).
Thus, the green motivation, the commitment of the ecopreneur to create green value in relation to generating profit, is different for every entrepreneur. Some ecopreneurs strive to maximize profit, others want to maximize green value and again others opt for a combination of both. Has this effect on new venture success? This relation has not been researched yet. However, the relation between human capital and startup success has been researched extensively, but the overall findings have not been consistent (Jo and Lee, 1996). The literature on this topic is discussed in the next section.
2.3
Human capital
Most of the normal entrepreneurial laws, such as the correlation between risk and profit, the right timing for market entry and the need for adequate financial and human capital are valid for environmental ventures (Linnanen, 2002). Therefore, relevant theory about the effect of human capital on green startup success is searched in the extensive body of literature of the ordinary entrepreneur.
Human capital variables are likely to affect future success of green startups. For example, start-up experience provides the nascent entrepreneur with learning opportunities that can be exploited; work experience provides skills that might function in the accomplishment of the many tasks that setting up a business entails; industry experience can be helpful in the perception and valuation of new business ideas (van Gelderen 2006). Other researchers of entrepreneurship have stated that the entrepreneur or better the entrepreneurial team is the key to the success of new ventures (Stuart and Abetti, 1987). Venture capitalists also consider the founders as the most important attribute when investing in a startup (Vinig and Haan, 2002).
Human capital of the ecopreneur is divided into three pillars: general background, general work experience and specific work experience (Cooper et al., 1994). Each pillar is linked to two variables.
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Both the positive and negative effects of each variable are discussed to get a comprehensive view on the topic.
2.3.1 General background
The ecopreneurs’ general background is the first pillar of human capital. It comprises the ‘level of education’ and if one is ‘raised by entrepreneurial parents’.
2.3.1.1 Level of education
Education is often related to knowledge, skills, problem-solving ability, discipline, motivation and self-confidence (Cooper et al., 1994). It can also provide founders with skills necessary to launch a venture, particularly if the venture is in a technically oriented industry (Barringer et al., 2005). Furthermore, the years spent obtaining a college education help embed an individual in a social network that is helpful in launching a business venture. Therefore, it is argued that profit tends to be higher when entrepreneurs are well educated (Jo and Lee, 1996).
However, not all researchers find positive relationships between educational level and startup success. Van Beest et al. (1997; cited in Schutjes and Wever, 2000) claim that there is no significant relationship between the two. In the longitudinal study of Schutjes and Wever (2000) the same conclusion is drawn which even they think is surprising. Besides insignificant results, negative associations are also found. An example is provided in the article of Stuart (1990) who states that advanced education beyond the bachelor's degree is negatively related to venture performance.
2.3.1.2 Entrepreneurial parents
The results about the effect of having entrepreneurial parents is more conclusive. Entrepreneurial parents appear to provide nascent entrepreneurs with more realistic expectations from self-employment and the kinds of attitudes and behaviors necessary for surmounting the crisis of entrepreneurship (Duchesneau and Gartner, 1990). Also, Cooper (1994) argues that having parents who had owned a business contributes to marginal survival.
2.3.2 General work experience
‘General management experience’ and the ‘number of cofounders’ when establishing a startup are related to the general work experience of an ecopreneur.
2.3.2.1 Management experience
Similar to education, management experience may also serve as a proxy for greater motivation and aptitude for solving problems (Cooper et al. 1994). The results of Sykes’ (1986) research confirm this claim and show a high correlation between the level of prior general managerial experience and financial success. Moreover, according to Lee and Tsang (2001) the entrepreneur’s managerial experience is the dominating factor affecting new venture growth.
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Though, a negative relationship between managerial experience and performance is found in the research of Jo and Lee (1996). Prior managerial experience can be a stumbling block when change is required, or an entrepreneur with prior manager experience can be conceited and have a negative influence on profitability.
2.3.2.2 Number of cofounders
Besides management experience, establishing a firm with a partner or multiple partners also effects startup success. Larger teams possess more talent, resources and professional contacts than a sole entrepreneur (Barkman, 1994). Cressy (1996) arrives at the same conclusion and states that multi-owner firms have higher probabilities of survival than single-multi-owner firms. Furthermore, it is not only the extra knowledge and network that will help increase the new venture success, it is also the psychological support that the cofounders of a new business can offer one another (Fesser and Willard, 1990).
On the contrary, some researchers did not find any significant difference between startups that were founded by sole entrepreneurs or by teams (Barringer et al., 2005 and Wagner, 1994). Others arrived at some inconclusive results. An example: the number of business partners can contribute to new venture growth, but not to survival (Cooper, 1994).
2.3.3 Specific work experience
The third and last pillar of human capital is specific work experience which consists of ‘industry and startup experience’.
2.3.3.1 Industry experience
It is assumed that prior industry experience has a positive effect on business success. Entrepreneurs with experience in the same industry as their current venture will have a more mature network of industry contacts and will have a better understanding of the subtleties of their respective industries (Barringer et al., 2005). Cooper et al. (1994) argues that industry-specific know-how contributes to both survival and growth of newly established ventures. Jo and Lee (1994) even claim that experience in the line of business has a more positive influence on profitability than all other experiences. However, research has also established a negative link between the two. Starr and Bygrave (1992; cited in Gartner et al. 1998) suggest that entrepreneurs with prior industry experience can suffer from biases and blinders, strong ties, the ‘success syndrome,’ and the liabilities of staleness, sameness and costliness that makes it difficult to navigate the uncharted waters of a new startup. Similar results are presented in the article of Schutjes and Wever (2000) who state that prior industry experience often is a liability rather than a benefit. Industry experience may be of value in managing functional aspects of the business where the ‘rules of the game’ have not been changed, but this is often not the case.
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2.3.3.2 Startup experience
Next to industry experience, also startup experience affects the success of new ventures. According to Singer (1995) it is even one of the most consistent predictors of startup performance. Launching a new venture is a complex task and entrepreneurs with prior startup experience have a distinct advantage. In addition, experienced entrepreneurs are more likely to avoid costly mistakes than entrepreneurs with no prior entrepreneurial experience (Barringer et al., 2005).
One may think that startup experience is desirable, but no distinction was found between high- and low-growth startups in the article of Siegel et al. (1993). Jo and Lee (1996) even claim a negative relationship between startup experience and success.
So, the human capital of the ecopreneur consists of three pillars: general background, general work experience and specific work experience. The overview of the human capital literature showed that at each of these three pillars the results remain inconclusive. The next section will discuss the effect of business planning on new venture success.
2.4
Business planning
The first phase of establishing a venture described in the research paper of Wilken (1979), is already discussed in the second section of the literature review. Phase two, the planning phase, will be elaborated in this section.
Green startups do not differ that much from any other startup. The main difference is the strong values and beliefs of the founders and intentions to change the industry towards a more sustainable one (Isaak, 2002). Therefore, relevant theory about the effect of business planning on green startup success is searched in the extensive body of literature of the ordinary entrepreneur.
The value of business planning before market entry is given by the expected benefit of being able to make a better start-up decision, in particular by terminating poor venture projects before start-up (Chwolka and Raith, 2012). Brüderl et al. (1996; cited in Schutjes and Wever, 2000) demonstrate on the basis of an extensive retrospective study that the making of a business plan, the number of months and the type of preparation could all have a positive influence on the chances of success. It would also enhance founders’ product development and venture organizing activities and would reduce the hazard of venture disbanding (Delmar and shane, 2003).
However, it is also argued that entrepreneurship is more about ‘acting’ instead of ‘planning’. In a longitudinal study Carter et al. (1996) followed nascent entrepreneurs and checked the status of the development of their firm: (1) still working on putting the business in place; (2) given up, do not expect to start that business; (3) the business is now in operation, up and running. The still trying entrepreneurs were devoting their short-term efforts toward activities internal to the start-up
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process (e.g., saving money and preparing a plan) and less effort towards activities that would make the business real to others. This group may use planning as a form of procrastination. Moreover, famous start-up entrepreneurs like Bill Gates, Steve Jobs, and Michael Dell did not write business a plan before starting their businesses.
The variables related to business planning examined in this study are: time spent on planning, part-time or full-part-time planning, the marketing mix and the amount of financial capital.
2.4.1 Time spent on planning
Successful firms spent more time planning (237 hours) than unsuccessful firms (85 hours) (Duchesneau and Gartner, 1990). This time is needed to do market and competitive research and are required to identify opportunities and reduce marketplace risks. Time spent on business planning is thought to be a waste of time in highly complex and dynamic markets. However, the contrary is true. Especially, in highly dynamic environments, entrepreneurs get the most value out of planning when they focus on specific activities such as information gathering, marketing-mix and customer relationship planning (Gruber, 2007).
Although, it is assumed that entrepreneurs of successful new ventures spend more time preparing than unsuccessful startups, other researchers could not find evidence to support this claim, in terms of profitability (Honig and Karlsson, 2004). Especially, individuals with low levels of prior knowledge of the new business activity may engage in higher levels of planning in an effort to compensate for their lack of knowledge (Dencker et al. 2009).
2.4.2 Marketing mix
Founders who spend more time on planning are also more likely to do this more elaborately. Planning of the marketing mix (product, promotion, price and place) is important, because the marketing-mix elements determine the positioning of an offering in the product-market space and its attractiveness vis-à-vis competitive offerings (Gruber, 2007). Intensive planning of the marketing mix is positively related to successful product launches (Hockerts and Wüstenhagen, 2010)
2.4.3 Part-time or full-time planning
Furthermore, entrepreneurs who start their venture part-time may have a disadvantage over entrepreneurs who do fully commit to their newly established business, because there is not a single focus on the business (van Gelderen et al., 2006). This is in line with the research of Schutjes and Wever (2000) who claim that full-time starters are usually more successful.
2.4.4 Financial capital
Next to invested time and effort, financial endowment also has an impact on new venture success. Financial capital is one of the most visible resources: it can create a buffer against random shocks, buy
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more time and allow the pursuit of more capital-intensive strategies, which are better protected from imitation (Cooper et al, 1994). Overall, higher levels of initial capital are clearly associated with firm success (Duchesneau and Gartner, 1990).
In this theory section the effects of the ecopreneur’s green motivation, human capital and business planning on startup success were discussed to get a comprehensive view on these topics. The next section will present the conceptual model and hypotheses.
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3.
Conceptual model and hypotheses
This section will present multiple hypotheses on the basis of the discussed literature review. Though, the theory section is quite broad, only a few emerging questions are answered in this study. One hypothesis is specially related to green startups. The other hypotheses could also be applied to any other startup. This is so, because green startups do not differ that much from any other startup. The main difference is the motivation of the founder to change the industry towards a more sustainable one (Isaak, 2002). Before a hypothesis is formulated the related theory is briefly explained. Subsequently, the emerged conceptual framework is presented and an overview of all examined hypotheses is given.
3.1
Ecopreneur’s green motivation
The ecopreneur’s green motivation is defined as the commitment of the ecopreneur to create green value in relation to generating profit. Some ecopreneurs just want to exploit market failures and focus on maximizing profit, while others have the intrinsic motivation to contribute to a greener society and care less about profit maximization. Thus, there are different motivation related, movements among ecopreneurs. These movements are labelled by numerous researchers.
Four typologies are related to the level of green motivation according to Linnanen (2002): non-profit business, idealist, self-employer and opportunist. These are positioned in a two by two matrix shown in table 2.
Table 2. Source: Linnanen, 2002
Desire to make money Desire to change the world
Low High
High Non-profit
business
Idealist
Low Self-employer Opportunist
The ‘idealist’ tries to find the right balance between making money and creating green value and is motivated to create new markets, because of one’s desire to improve the world. This creates a cycle and is enforced by positive feedback from customers and other stakeholders, providing additional momentum for positive business results and further strengthening the entrepreneurial motivation (Linannen, 2002). The ‘self-employer’ was left out, because it is not a realistic typology and is only of theoretic use. Based on the this theory the following hypothesis is created:
- Hypothesis 1a: the ‘idealist’ is more successful than the ‘opportunist’ and the ‘non-profit
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3.2
Human capital
Most of the normal entrepreneurial laws, such as the correlation between risk and profit, the right timing for market entry and the need for adequate financial and human capital are valid for environmental ventures (Linnanen, 2002). Therefore, relevant theory about the effect of human capital on green startup success is searched in the extensive body of literature of the ordinary entrepreneur.
Researchers of entrepreneurship have stated that the entrepreneur or better the entrepreneurial team is key to the success of new ventures (Stuart and Abetti, 1987). The human capital of the ecopreneur is divided into three areas: general background, general work experience and specific work experience (Cooper et al., 1994).
3.2.1 General background
The ‘level of education’ and if one is raised by ‘entrepreneurial parents’ are related to the general background of the ecopreneur. Education is often related to knowledge, skills, problem-solving ability, discipline, motivation and self-confidence (Cooper et al., 1994). However, as discussed in the theory section, there are also opposing views on this topic. Overall, more positive than negative relationships are found between educational level and startup success. Therefore, the following hypothesis is presented:
- Hypothesis 2a: ecopreneurs who have a master’s or PhD degree have a higher chance of
success than ecopreneurs who only have a bachelor’s or high school degree.
Also, entrepreneurial parents appear to provide nascent entrepreneurs with more realistic expectations from self-employment and the kinds of attitudes and behaviors necessary for surmounting the crisis of entrepreneurship (Duchesneau and Gartner, 1990). This leads to the following hypothesis:
- Hypothesis 2b: being raised by entrepreneurial parents has a positive effect on startup success.
3.2.2 General work experience
The second pillar of human capital is general work experience which comprises ‘management experience’ and ‘number of business partners’. The entrepreneur’s managerial experience is the dominating factor affecting venture growth according to Lee and Tsang (2001). In general, the results on this topic are predominantly positive. Therefore, the following hypothesis is presented:
- Hypothesis 2c: management experience has a positive effect on startup success.
Besides ‘management experience’, the number of cofounders also affects new venture success. Larger teams possess more talent, resources and professional contacts than a sole entrepreneur (Barkman,
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1994). Though, some researchers could not find a significant result (Barringer et al.,2005 and Wagner, 1994). Still, the following hypothesis is formulated:
- Hypothesis 2d: the number of cofounders has a positive effect on green startup success.
3.2.3 Specific work experience
The last pillar of human capital is ‘specific work experience’ and consists of ‘industry and startup experience’. Entrepreneurs with experience in the same industry as their current venture will have a more mature network of industry contacts and will have a better understanding of the subtleties of their respective industries (Barringer et al. 2005). Therefore, the following hypothesis is presented:
- Hypothesis 2e: prior experience in the same industry has a positive effect on firm success. Next to ‘specific industry experience’, ‘entrepreneurial experience’ is one of the most consistent predictors of future startup performance (Singer, 1995). Many research papers state that ‘startup experience’ has a large positive effect on new venture success which is why the following hypotheses is formulated:
- Hypothesis 2f: startup experience has a positive effect on firm success.
3.3
Business planning
Green startups do not differ that much from any other startup. The main difference is the strong values and beliefs of the founders and intentions to change the industry towards a more sustainable one (Isaak, 2002). Therefore, relevant theory about the effect of business planning on green startup success is searched in the extensive body of literature of the ordinary entrepreneur. The effect of business planning on new venture success will be elaborated in this section and comprises four variables: time spent on planning, part-time planning, marketing mix and financial capital.
According to the research of Duchesneau and Gartner (1990) successful firms spend more time planning than unsuccessful firms. This time is e.g. used for the planning of the marketing mix. Planning of the marketing mix (the 4 P’s) is important, because the marketing-mix elements determine the positioning of an offering in the product-market space and its attractiveness vis-à-vis competitive offerings (Gruber, 2007). Some ecopreneurs chose to do this kind of planning part-time. However, setting up a business part-time may be a disadvantage, because there is not a single focus on the business (van Gelderen et al., 2006). Also, financial capital plays an important role in the planning phase. It can create a buffer against random shocks, buy more time and allow the pursuit of more capital-intensive strategies, which are better protected from imitation (Cooper et al, 1994). Therefore, the following hypotheses regarding business planning are proposed:
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- Hypothesis 3a: The total amount of time spent on planning will have a positive effect on new
green business success.
- Hypothesis 3b: intensive marketing mix planning will have a positive effect on green startup
success.
- Hypothesis 3c: working at another job while setting up the venture will have a negative effect
on new startup success.
- Hypothesis 3d: probabilities of success increase with the level of initial financial capital.
3.4
Conceptual model and overview hypotheses
The next model appears when the variables of each determinant (left: human capital, middle: green motivation, right: business planning) for startup success are put together. All variables, except the variable ‘another job’, is expected to have a positive a positive effect on green startup success. One hypothesis is specifically related to green startups. The other hypotheses could also be applied to any other startup. This is so, because green startups do not differ that much from any other startup. Ecopreneurs are entrepreneurs who enter eco-friendly markets not only to make profits, but also having strong, underling green values (Kirkwood and Walton, 2010). So, ecopreneurs operate in eco-friendly markets and the founder is less profit-oriented. Most of the normal entrepreneurial laws are valid for green startups (Linnanen, 2002). The main difference is the motivation of the founder to change the industry towards a more sustainable one (Isaak, 2002). The main difference is tested in hypothesis 1a. At other aspects the ecopreneur looks like any other entrepreneur. Therefore, the other hypotheses are related to the theory of the ordinary entrepreneur.
- Hypothesis 1a: the ‘idealist’ is more successful than the ‘opportunist’ and the ‘non-profit
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- Hypothesis 2a: ecopreneurs who have a master’s or PhD degree have a higher chance of
success than ecopreneurs who only have a bachelor’s or high school degree.
- Hypothesis 2b: being raised by entrepreneurial parents has a positive effect on startup success. - Hypothesis 2c: management experience has a positive effect on startup success.
- Hypothesis 2d: the number of cofounders has a positive effect on green startup success. - Hypothesis 2e: prior experience in the same industry has a positive effect on firm success. - Hypothesis 2f: startup experience has a positive effect on firm success.
- Hypothesis 3a: total amount of hours spent on business planning will have a positive effect on
new green business success.
- Hypothesis 3b: intensive marketing mix planning will have a positive effect on green startup
success.
- Hypothesis 3c: working at another job while setting up the venture will have a negative effect
on new startup success.
- Hypothesis 3d: probabilities of success increase with the level of initial invested capital. This section presented the conceptual model and an overview of all the hypotheses that will be examined in this research. The next section will explain how these are tested.
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4.
Research methodology
This section describes the research methods used to investigate the empirical effect of green motivation, human capital and business planning on green startup success.
A quantitative research method was chosen instead of qualitative research method to answer the research questions and hypotheses. In a quantitative descriptive research, pre-selected variables will be studied and conclusions are drawn from the results of statistical tests (Sandelowski, 2000). Qualitative methods describe situations, events, people, interactions, and observed behaviors; the use of direct quotations from people about their experiences, attitudes, beliefs, and thoughts; and the analysis of excerpts or entire passages from documents, correspondence, records, and case histories (Patton, 1990a). Moreover, qualitative inquiry typically focuses in depth on relatively small samples and even single cases. Quantitative methods typically depend on larger samples selected randomly (Patton, 1990b). Many respondents are needed to test the hypotheses and to arrive at reliable conclusions. Thus, the most suitable research method for this study is the quantitative method.
4.1
Sample selection
As explained, this research is not about any startup, but about green startups which are established by ecopreneurs. Sample selecting was done by scouting sustainable business platforms. Examples of these platforms are: DJ100, Oneplanetcrowd, Stichting DOEN, Crunchbase, MKB top 100, Dam prijs, De groene zaak, Spotrocket, Groene tulp, Sustainable hero challenge, etc. It was necessary to select participants on these platforms, because these companies are very hard to find due to their small size and still limited reputation.
As explained in the theory section green startups are providers of environmental management services, producers of environmental technology or manufacturers of environmentally friendly product. By using the products or services of these startups less resources are used and the impact on the environment is lowered.
4.2
Pilot study
To test the survey it was sent to several startups. Their feedback was used to make minor modifications in the survey. Overall, this short study confirmed that the questionnaire was useful. These participants were not retained and analyzed in the study, because of the modifications made in the model and not all startups in the pilot study were green startups.
4.3
Data collection process
Data was collected using an online questionnaire, in the period March and April of 2015. It was carried out by the following process. Firstly, green ventures were identified. As explained, this was done by searching on sustainable business platforms. In total, a list of 274green startups was compiled.
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Secondly, the year of establishment was verified. Most of the time, this information was provided on the company website. When this was not the case, online articles provided the answer.
Thirdly, the founder of the business was identified, because the questionnaire had to be addressed directly to the founders. This kind of information was sometimes provided on the company website. Subsequently, it was verified at the social media platform Linkedin.
Fourthly, the contact address of the ecopreneur was traced. This kind of information was almost never provided on company websites. Therefore, multiple channels were used to get in contact with the specific ecopreneur. The first method, sending an email to the general company address, was the least successful method to get in touch with the founder of the business, even though most ventures were still limited in size. The second method, contacting the ecopreneur via Facebook was also not effective. Messages usually end up in the spam box when one is not connected. A few responses were received when sending the survey to the company Facebook page. The third method, reaching the ecopreneur via Twitter worked in some cases. A more successful way, was to send a personal Linkedin message (even though, a friendship invitation was needed to send such a message). On the same social media platform, the questionnaire was posted on specific fora for ecopreneurs. The most reactions were received from the fifth and sixth method. These methods involved calling the ecopreneurs directly and sending emails to their personal email address. In some cases personal cellphone numbers were shown on company websites. Personal email addresses were guessed most of the time. Although this was time consuming, it was relatively easy, because most founders use their first name in front of the general company email address. Subsequently, this personal email address had to be verified.
As expected, most ecopreneurs who were in the compiled list did not respond the first time. So, the questionnaire was sent to personal and company email addresses, and it was shared on Linkedin, Twitter and Facebook. We also got back to a few participants who did not complete the entire questionnaire. In the end, the 24-item online survey was sent to 274 ecopreneurs of whom 78 filled out the questionnaire. However, some participants did not complete the entire survey. Cases with too much missing data were deleted. In the end, 66 cases could be used for analyses. This resulted in an effective response rate of 24,09%. In the next section, all the items in the survey are discussed extensively.
4.4
Dependent variable: green business success
Although, success is most commonly linked to revenue growth (Gilbert et al.,2006), it was dropped as a success indicator, because numerous participants considered this information as too confidential. Too many participants did not fill out this item. A quote from a participant:“ Sorry for not sharing the
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revenue. This is particular and confidential at the moment.” Other researchers who also asked for performance data experienced similar problems.
The data on employment growth was easier to get hold on, because this measure of economic contribution is usually not regarded as confidential information (Cooper et al., 1994). The original plan was to measure employment growth over multiple years, but the majority of the startups just filled out the number of employees hired in the first year for various reasons. Therefore, it was decided to measure startup success in terms of employee growth in the first year of existence.
The employment growth in the first year is closest to the preparation phase. The preparation phase will have a less strong effect on the company’s profit, revenue or employment growth in the second or third year. Some startups hire no people the first year, while others hire multiple employees. This reflects the success of the startup.
Furthermore, employment growth, revenue growth and green value are interlinked. More employees are hired when the revenue is increasing. An increase in revenue is the result of an increase of green products or service sales. This again leads to an increase in green value. Although employment growth is surely not a criterion directly reflecting financial performance, it definitely mirrors a secure growth path of new firms, since taking on personnel is a far-reaching decision and requires good business prospects (Schutjes and Wever, 2000). Therefore, it is used as a success indicator, measured in FTE. The more individuals (FTE) were hired in the first year, the more successful the green startup was. We tried to measure success in survival or non-survival (Gartner et al., 1998). However, this was not possible due to numerous next reasons. The drawback of this categorization is that it is almost impossible to track down startups which are already bankrupt and it is even harder to receive data from these already closed firms, because they are less likely to participate in the study. Selecting nascent entrepreneurs who will be questioned on a periodic basis was also no option, because nascent ecopreneurs have to be followed for over a year to receive relevant data on success.
It was also not possible to measure green startup success in relation with green value due to the current lack of clarity of sustainability criteria (Linnanen, 2002). Added green or sustainable value can be measured in numerous ways: life cycle assessment (LCA) improvement, water savings, electricity usage reduction, less Co2 emission, etc. The main problem is to measure these accurately. Another problem is that water savings cannot be compared with a reduction in electricity use. One cannot tell if saving one liter of water is more green value than saving one kWh. Moreover, the savings in resources that a green startup could offer to their customers differs. One customer might enjoy a 30% reduction in electricity use, while at other customers only a 10% reduction is achieved. This is another reason why it is not easy to compare green startups in relation to added green value.
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So, for very different reasons, success was measured in relation to employment growth in the first year. The item related to employment growth is presented in Appendix 1. Next the variables that affect the dependent variable are explained.
4.5
Factors contributing to green business success.
This section discusses all independent variables which are: ecopreneur’s green motivation, human capital, business planning.
4.5.1 Ecopreneur’s green motivation
Some ecopreneurs just want to exploit market failures and focus on maximizing profit, while others have the intrinsic motivation to contribute to a greener society and care less about profit maximization. Thus, there are different motivation related, movements among ecopreneurs. These movements are labelled below.
Type of ecopreneur. The goal was to label each ecopreneur as a ‘non-profit ecopreneur’, a ‘idealist’ or
an ‘opportunist’. (1=Non-profit, 2= idealist, 3=opportunist). The ‘self-employer’ which is part of the conceptual model of Linnanen (2002) was left out, because it is not a realistic typology and is only of theoretic use. The criteria for categorization is the desire to change the world and/or desire to make money. Simply asking in which category each ecopreneur belongs would not be effective, because no ecopreneur would classify himself as an ‘opportunist’. Therefore, nine measurement items were used to classify the ecopreneurs. These items were derived from the studies of Linnanen (2002) and Hockerts and Wüstenhagen (2010).
Example items for testing green motivation were: ’my strong underlying green values were the key motivator for establishing this business’, and ‘I am strongly motivated to spread my green values to others’. This was measured on a five-point scale (“strongly disagree” to “strongly agree”). Ecopreneurs fall in the category ‘non-profit’ or ‘idealist’ when they have a high green motivation.
Next, the desire to make money was tested to complete the classification. Example items were: ‘the goal is to generate profits’, and ‘seeing a gap in the market was the key motivator for establishing this business’. Ecopreneurs fall in the category ‘opportunist’ or ‘idealist’ when they have a high desire to make money.
So, an ecopreneur could be green orientated, profit orientated or both. To check if the ecopreneur was placed in the correct category, participants were asked to position the goal of the company on a scale from 1 to 9. 1 if the company is ‘green’ orientated. 9 if the company is ‘profit’ orientated. The total list of items related to green motivation is presented in Appendix 1.
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4.5.2 Human capital
The following section discusses the entrepreneur’s human capital in relation to success. In total six measurement items of Jo and Lee (1996), Cooper et al. (1994) and van Gelderen et al. (2003) were used.
- Level of education. This item used the study of Jo and Lee (1996) as an example. The
educational level was measured on a five point scale ranging from “less than high school to PhD”. Subsequently, a dummy variable was created. (1 = less than high school, high school and bachelor’s degree. 2 = master’s and PhD degree),
- Prior management experience. Participants filled out their management experience in number
of years, before new venture establishment. No scale was used.
- Prior industry experience. Participants filled out their prior industry experience in number of
years. Also no scale was used for this item.
- Cofounders. The study of Cooper et al. (1994) was used for this item. The number of
cofounders is measured. Again no scale was used.
- Startup experience. Startup experience was measured on a five-point scale. Participants were
asked how many businesses they had previously started. Participants could tick the boxes ‘0,1,2,3 or more than 3. Subsequently, a dummy variable was created. (1 = No startup experience, 2 = startup experience.)
- Entrepreneurial parents. This item followed the study of Cooper et al. (1994). Whether or not,
the parents of the ecopreneur had owned a business (1 = Yes, 2 = No).
4.5.3 Business planning
The last part of this section discusses the business planning efforts by the entrepreneur, during the time the firm was established. Questions dealing with business planning were constructed from measures taken from research instruments used by Gruber (2007), Duchesneau and Gartner (1990), Cooper et al. (1994) and van Gelderen et al. (2003).
- Time spent on planning. The measurement item of the duration of business planning followed
the study of Duchesneau and Gartner (1990). The total amount of weeks and the average amount of hours per week were filled out. Weeks and hours were multiplied to get the total amount of hours used for business planning.
- Planning of the marketing mix. This measurement item followed the study of Gruber (2007).
This construct was based on four items measuring the intensity with which the four components of the marketing mix (price, product, promotion, place) were analyzed and planned (five-point scale:“not at all” to “extremely”) (Gruber, 2007). The sum of these items was taken and divided by four to get the average.
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- Working at another job during preparation period. This item tested the commitment of the
ecopreneur. The ecopreneur was asked if he/she had another job while setting up this business. It was measured with a yes or no answer. (1 = Yes, 2 = No).
- Total amount of invested financial capital before first sale. This item followed the study of
Cooper et al. (1994). Participants filled out the total amount of capital invested by the time of first sale.
In Appendix 1 the entire questionnaire is shown.
4.6
Data
The online questionnaire was filled out using the program Qualtrics. Subsequently, data was exported to SPSS. At first, the data was checked for missing values. If there was too much missing data, cases were dropped from analyses. Especially, when the dependent variable was not filled out. After this check, the data was screened for errors. Next, categorical and dummy variables were created. The variable ‘total hours’ was constructed by multiplying the number of weeks and the hours per week. The scores of the marketing mix items were summed up and divided by four to get the average. After these steps, we continued with the descriptive phase of the analysis.
