In the previous post I concluded that public policy as a driver for change is a necessity if one wishes for a paradigm shift towards sustainability. However major changes in economic paradigms tend to take a long time and include many actors (Perez, 2010). Public policy, as part of the legal system, can however be seen as an institution and thus being “the humanly devised constraints that shape human interaction”(North 1990, p.128). Thus being an actor who shapes human interaction gives the means to incentivize actors within the economy to incrementally strive towards sustainability thus, in the long term, create a paradigm shift. Before going into depth I will connect sustainability to entrepreneurship, thus showing how these concepts are interrelated.
According to Schaltegger & Wagner (2010) a market system requires entrepreneurs who can achieve social and environmental goals through sustainable innovation in order to achieve sustainable development. Sustainable innovations are often radical in their nature meaning they are “characterized by creating new-to-the-world markets that are disruptive for both customers and manufacturers” (Markides and Geroski, 2005, p. 17). Radical innovations thus disrupt equilibrium and can lead to new technological revolutions (Dodgson et al., 2010). Technological revolutions can in turn bring about a large transformation in terms of a techno economic paradigm which eventually modifies the way in which socio-institutional structures are organized (Perez, 2010). The action to realize sustainable innovations aimed at the mass market which provides benefit to the larger part of society is the essence of sustainable entrepreneurship.
The term sustainable entrepreneurship thus combines sustainability and entrepreneurship (Schaltegger & Wagner, 2010), the latter being “an activity that involves the discovery, evaluation, and exploration of opportunities to introduce new goods and services, ways of organizing markets, processes, and raw material through organizing efforts that previously had not existed.”(Troilo, 2011; p.159). Schaltegger & Wagner (2010) argue that the sustainable entrepreneur is mainly an individual or a small group of individuals but that such an actor can exist within a large organization as well. However even though large organizations have resources and reach mass market they also tend to be at a disadvantage in operationalizing radical innovation. The disadvantage is partly explained by their rigid routines and high levels of administration and bureaucracy (Schaltegger & Wagner, 2010). It can thus be assumed that sustainable entrepreneurs are small or medium sized innovative actors who are “supplying environmentally and/or socially beneficial products and services with the potential to conquer a large part of the market.”(Schaltegger & Wagner, 2010; p.226). Halme & Korpela (2013) point out that small and medium-sized enterprises (SMEs) are more agile to innovate and they create most of the new jobs. Further a growing number of small entrepreneurs defy the notion of “profit first” and are instead motivated by sustainability goals, which is why existing and potential sustainable entrepreneurs and SMEs would be interesting to analyze and incentivize from a public policy perspective.
Dodgson, M., Gann, D. & Salter, A. (2008). The management of technological innovation: strategy and practice. ([2. ed.], completely rev. and updated). Oxford: Oxford University Press.
Markides C, Geroski P. 2005. Fast Second. How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets. Jossey-Bass: San Francisco.
North, D., Institutions, Institutional Change and Economic Performance(Cambridge: Cambridge University Press, 1990).
Troilo,M.,(2011) Legal institutions and high-growth aspiration entrepreneurship, Economic Systems 35 p.158–175