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Entrepreneurial orientation and its effect on sustainability decision tradeoffs: The case of sustainable fashion firms

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  • Amsterdam University of Applied Sciences

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We examined the entrepreneurial orientation and sustainability orientation, a persistent and conflicting duality, of sustainable entrepreneurs and their evaluation of competing priorities in sustainability decision making. We conducted an exploratory, mixed-method study of 24 sustainable fashion firms and collected data through structured surveys and rich in-depth interviews. Through our inductive and deductive analysis, we derive three sustainability decision making profiles (singular, flexible and holistic) with distinct prioritization logic (nested, ordered and aligned, respectively). We find different configurations of entrepreneurial orientation correspond to the sustainability decision making profiles. We extend the literature by showing how the reflexivity of entrepreneurial orientation interacts with sustainability orientation.
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Entrepreneurial orientation and its effect on
sustainability decision tradeoffs: The case of sustainable fashion firms
Lori DiVito
Amsterdam School of International Business
Amsterdam University of Applied Sciences, Netherlands
l.e.d.divito@hva.nl
René Bohnsack
UCP Católica-Lisbon, Portugal
r.bohnsack@ucp.pt
Accepted version 22 May 2017
Forthcoming Journal of Business Venturing
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Abstract
We examined the entrepreneurial orientation and sustainability orientation, a
persistent and conflicting duality, of sustainable entrepreneurs and their evaluation of
competing priorities in sustainability decision making. We conducted an exploratory,
mixed-method study of 24 sustainable fashion firms and collected data through structured
surveys and rich in-depth interviews. Through our inductive and deductive analysis, we
derive three sustainability decision making profiles (singular, flexible and holistic) with
distinct prioritization logic (nested, ordered and aligned, respectively). We find different
configurations of entrepreneurial orientation correspond to the sustainability decision
making profiles. We extend the literature by showing how the reflexivity of
entrepreneurial orientation interacts with sustainability orientation.
Keywords: sustainable entrepreneurship; entrepreneurial orientation; sustainability trade-
offs; environmental entrepreneurship; ecopreneurship, social entrepreneurship
JEL: L26 Entrepreneurship
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1. Executive Summary
We argue that founders of sustainable enterprises (green, social or both) have a
sustainability orientation comprising values that shape formally and informally the
decision making processes and policies of the firm and the logic they use to choose
between competing priorities. As entrepreneurs they also have an entrepreneurial
orientation, an indication of the firm’s processes, structures and behavior to exploit
opportunities (Lumpkin and Dess, 1996). Sustainable entrepreneurs, touted by the
literature to be change agents that have the capabilities to disrupt the established
unsustainable order of industries (Hall, Daneke and Lenox, 2010; Hockerts and
Wüstenhagen, 2010), have a dual orientation and make complicated entrepreneurial and
sustainability decision tradeoffs.
We investigated how entrepreneurial orientation interacts and effects sustainability
decision making by conducting an exploratory, mixed-method study using a multiple case
approach. We used a multi-dimensional measure of entrepreneurial orientation
(innovativeness, proactiveness, risk-taking and future orientation) and a multi-
dimensional measure of sustainability tradeoffs in decision making (economic, social and
ecological) and collected data from in-depth interviews. From our data, we derive three
types or profiles of sustainability decision making: singular, flexible and holistic. We
show that differential configurations of entrepreneurial orientation correspond to specific
sustainability decision making profiles and we uncover prioritization logics.
Singular decision making, which is hyperfocused on one sustainability dimension,
uses a nested prioritization and corresponds to an EO configuration of high risk taking.
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Flexible decision making, which accepts greater compromising among the three
sustainability dimensions, uses an ordered prioritization and corresponds to an EO
configuration of high innovativeness and proactiveness. Holistic decision making, which
integrates and balances all three sustainability dimensions, uses an aligned prioritization
and corresponds to an EO configuration of high proactiveness and risk taking. This paper
contributes to the growing literature on sustainable entrepreneurship. The findings have
practical implications for sustainable entrepreneurs and for policy makers to provide
support and incentives for sustainable entrepreneurship.
2. Introduction
There is increasing agreement that continuous economic growth of established economic
systems is unsustainable (Balakrishnan, Duvall and Primeaux, 2003; Pacheco, Dean and
Payne, 2010). An emerging branch of literature on sustainable entrepreneurship argues
that the Schumpeterian entrepreneurial process can contribute to solving complex social
and ecological issues and act as a catalyst for industrial transformation (Cohen and Winn,
2007; Hall et al, 2010; Hockerts and Wüstenhagen, 2010; Muñoz and Dimov, 2015;
Parrish, 2010; Schaltegger and Hansen, 2013). This breed of entrepreneur, the sustainable
entrepreneur, is dually oriented on one side towards entrepreneurial growth and on the
other towards sustainable development.
The notion that entrepreneurship can contribute to solving complex social and
ecological issues is very promising but debated in the literature (Hall et al, 2010). Like all
entrepreneurs, the sustainable entrepreneur has an entrepreneurial orientation, a
disposition or ability to recognize and exploit entrepreneurial opportunities (Lumpkin and
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Dess, 1996). Yet, the sustainable entrepreneur also has a sustainability1 orientation, a
conviction to grow his business in the most ecologically and socially responsible way
possible. Sustainable entrepreneurs are thought to challenge the established industrial
order through the innovation of more sustainable practices (e.g. alternative technologies,
waste conservation policies, recycled materials) and effect enduring change and
transformation (Hall, et al, 2010; Hockerts and stenhagen, 2010; Tilley and Young,
2006). The combination of an entrepreneurial orientation (EO) and a sustainability
orientation (SO) presents a duality of interdependent and conflicting values and is not
easily reconciled (Dean and McMullen, 2007; York and Venkataraman, 2010).
There is an assumption from an economics perspective that entrepreneurs are
driven by self-interest, profit-seeking motives (Parrish, 2010). Sustainable
entrepreneurship contrasts with this economics perspective and places shared, societal
interest on par with private, self interest (Freeman, Wicks and Parmar, 2004; Porter and
Kramer, 2011). The duality of entrepreneurial orientation and sustainability orientation
creates a paradox for the sustainable entrepreneur. The recognition, evaluation and
exploitation of entrepreneurial opportunities are complicated decision making judgments
about the expected benefits and impacts in the three sustainability dimensions: economic,
ecological or social (Byggeth and Hochschorner, 2006; Elkington, 1994; Figge and Hahn,
2012).
We argue that even though EO and SO may have conflicting orientations, there is
interdependency in that EO influences the recognition, interpretation and evaluation of
sustainability decision alternatives (Hahn et al, 2014). First, this is because founders of
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1 We use the term sustainability in reference to all three sustainability pillars: economic, ecological and
social (Elkington, 1994).
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sustainable enterprises (green, social or both) have values that imprint and shape formally
and informally the decision making processes and policies of the firm (Mathias, Williams
and Smith, 2015) and their entrepreneurial orientation (Suddaby, Bruton, and Si, 2015).
Second, decision making tradeoffs in sustainability dimensions are unavoidable and
sustainable entrepreneurs make decisions on multi-faceted entrepreneurial opportunities
and risks (Hahn et al., 2010). We posit that entrepreneurial orientation, as an indication of
the firm’s processes, structures and behavior to exploit opportunities, can help us
understand in more depth how sustainable entrepreneurs manage this paradox of
entrepreneurial enterprising within the boundaries of economic, ecological and social
responsibility. It is important to gain more insight into how they manage this persistent
dual orientation to understand the scope, limitations and promise of the systematic,
transformative sustainability change they can initiate, accomplish and sustain.
Our study is an exploratory, mixed-method study of 24 sustainable fashion firms.
We collected data about entrepreneurial orientation and sustainability tradeoffs using
Likert scale questions and held in-depth interviews. We conducted a cluster analysis
based on four entrepreneurial orientations (innovativeness, proactiveness, riskiness and
futurity) and three sustainability dimensions (ecological, social and economic). We
categorized the competing priorities in sustainability decisions and identified the
underlying entrepreneurial processes, structures and attitudes associated with making
sustainability decisions.
From our findings, we derive three types or profiles of sustainability decision
making: singular, flexible and holistic. We show that differential configurations of
entrepreneurial orientation correspond to specific sustainability decision making profiles
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and we uncover prioritization logics. Singular decision making, which is hyperfocused on
one sustainability dimension, uses a nested prioritization and corresponds to an EO
configuration of high risk taking. Flexible decision making, which accepts greater
compromising among the three sustainability dimensions, uses an ordered prioritization
and corresponds to an EO configuration of high innovativeness and proactiveness.
Holistic decision making, which integrates and balances all three sustainability
dimensions, uses an aligned prioritization and corresponds to an EO configuration of high
proactiveness and risk taking.
We provide the theoretical background in the next section, followed by the
methodology and findings sections. In the discussion, we present the three sustainability
decision making profiles and discuss the implications of our findings for the relevant
literature, practitioners and policy makers.
3. Theoretical background
3.1. Imprinting of sustainability orientation
There is much literature including the entrepreneurship literature that shows that founders
and their environments leave a lasting imprint on organizations (Marquis and Tilcsik,
2013; Stinchcombe, 1965). It is argued that imprinting occurs in new ventures because of
the founding conditions -- the unique backgrounds of the founders and their social and
political environments -- and has persistent long lasting effects on firm development even
in the midst of environmental changes (Mathias et al., 2015; Milanov and Fernhaber,
2009; Stinchcombe, 1965).
From an imprinting perspective, founders’ attitudes, beliefs and convictions, in
other words their values, about sustainability are imprinted on new ventures and shape
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sustainability orientation in an enduring and persistent manner (Fauchart and Gruber,
2011; Schaltegger and Wagner, 2011). Accordingly, this influences their decision making.
For instance, in the sustainable, social or green entrepreneurship literature, entrepreneurs
are motivated differently. The goal of the ecopreneur is to preserve nature (Dean and
McMullen, 2007) and pursue opportunities to resolve highly uncertain ecological
problems with ambiguous outcomes. Ecopreneurs are most likely to act and innovate
when profits can be gained, suggesting that ecopreneurs establish for-profit ventures
(York and Venkataraman, 2010). However, economic profit or growth provides only a
partial explanation of their motivation; Meek, Pacheco and York (2010) show that social
norms and government incentives also motivate ecopreneurship. For social entrepreneurs,
the goal is to enhance social wealth and the venture may be more mission-driven than
profit-driven (Mair and Marti, 2006; Peredo and McLean, 2010). The social entrepreneur
may create social wealth with no, or little, economic wealth (e.g. charity, non-profits) or
may create social as well as economic wealth (for-profit) (Zahra et al., 2009).
The initial imprinting of a firm’s structural organizational features not only guides
its decision making (Mathias et al., 2015) but can also constrain it, limiting the firm’s
sensemaking of opportunities that fall outside of its imprinted values (Suddaby et al.,
2015). Thus, we argue that the founders’ imprinting of sustainability orientation has a
lasting influence on the sustainability decision making of the firm.
3.2. Reflexivity of entrepreneurial orientation
We also draw on entrepreneurial orientation (EO) – the firm’s processes, structures and
behavior used to pursue innovative and risky (entrepreneurial) opportunities (Covin and
Lumpkin, 2011; Lumpkin and Dess, 1996; Miller, 1983) to elucidate sustainability
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decision making. EO captures innovativeness (the tendency to experiment and depart
from established practice), proactiveness (the propensity to act aggressively towards
rivals and take initiative) and risk taking (the willingness to assume high risks for high
rewards or losses) (Lumpkin and Dess, 1996; 2001). As a collection of processes,
structures and behavior over time, it follows that imprinting from the founder and
environment also influences the formation of an entrepreneurial orientation (Suddaby et
al., 2015), especially in first-generation firms (Cruz and Nordqvist, 2012; Jaskiewicz,
Combs and Rau, 2015).
Numerous studies have shown that high EO leads to improved firm performance
over time (Anderson, Covin and Slevin, 2009; Green, Covin and Slevin, 2008; Lumpkin
and Dess, 2001, Wiklund and Shepherd, 2003) and also has positive effects on increased
stakeholder values (Shahzad et al., 2016). But, there are inconclusive empirical results
between EO and firm performance (Wiklund, 1999). Wiklund and Shepherd (2005)
found that configurations of EO dimensions have differential advantages, suggesting that
EO differs depending on distinctive firm characteristics or strategies (Li et al., 2014;
Naldi et al., 2007; Tan, 2008).
Referring to the literature on sustainable entrepreneurship, which overlaps with
the green and social entrepreneurship, it claims that entrepreneurial action is needed to
identify opportunities, create innovations and generate economic rents while addressing
ecological and social challenges (Cohen and Winn, 2007; Shepherd and Patzelt, 2011).
Thus, sustainable entrepreneurs (including social and green entrepreneurs) have a dual
entrepreneurial and sustainability orientation, each with a set of organizational and
societal priorities that creates a tension in decision making. Entrepreneurial orientation
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provides reflexivity (Suddaby et al., 2015), the ability of the entrepreneur to assess the
constraints of the environment and envision or construct alternative opportunities or “new
social realities”, enabling the entrepreneur to act with agency in shaping the social,
political and economic conditions, or engage in institutional entrepreneurship (Hardy and
Maguire, 2008; Maguire, Hardy, and Lawrence, 2004). This coincides with the literature
that argues that sustainable entrepreneurs create and change institutions and social norms
to positively influence ecological and social impact (Meek, Pacheco and York, 2009;
Pacheco et al., 2010).
The reflexivity that manifests in entrepreneurial orientation is essential to the
decision making of sustainable entrepreneurs. Imprinting guides entrepreneurial and
sustainability orientations, firm identity and development, but also constrains on
individual and collective levels the perception of opportunities available to the firm
(Suddaby et al, 2015). EO, specifically the reflexivity in entrepreneurial orientation,
allows sustainable entrepreneurs to create and evaluate complicated and ambiguous
decision alternatives of tradeoffs between sustainability values and entrepreneurial
opportunities.
3.3. Competing priorities in sustainability decision making
Like other types of entrepreneurs, sustainable entrepreneurs make choices in allocating
resources and pursuing activities to achieve their strategic organizational goals. Their
dual orientation suggests that strategic choices or decisions involve competing tensions
not only between entrepreneurial and sustainability orientations but also between the
three specific dimensions of sustainability. These decision making tensions, or tradeoffs,
entail compromising (Byggeth and Hochschorner, 2006) or satisficing, choosing between
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two or more possible alternatives that best align with organizational goals (Simon, 1955;
Winter, 2000). The search, evaluation and selection of alternatives, and ultimately
decisions, constitute a dynamic entrepreneurial process and co-evolve with
experimentation (Winter, 2000).
The literature on sustainability gives the impression that there are win-win
situations that motivate sustainable entrepreneurs (Parrish, 2010); however win-win
situations in sustainability are too simplistic (Hahn et al., 2010) and tradeoffs are more
the rule rather than the exception (Byggeth and Hochschorner, 2006; Delmas and Blass,
2010; Figge and Hahn, 2012; Moeller, Dolnicar and Leisch, 2012; Pinkse and Kolk,
2010). From empirical studies, we know that sustainable-oriented entrepreneurs reach
limits in their entrepreneurial intentions, accepting lower profits and growth, but
contrastingly also decrease their sustainability orientation when they gain business
knowledge (Kuckertz and Wagner, 2010). Moreover, tradeoffs do not necessarily lead to
less favorable outcomes; relatively lower economic performance may result in greater
sustainability (Hahn et al., 2010).
Parrish (2010) argues that sustainable entrepreneurs interpret decision making
tensions, these competing priorities, with ‘perpetual reasoning’ rather than an integrative
process of decision making (Gibson, 2006). From a study by Wu and Pagell (2011),
organizations manage decision making uncertainty (e.g. incomplete information and
ambiguous outcomes) in sustainable supply chain management by adopting heuristics, or
simple decision making rules, to make choices that align with their organizational goals.
Despite the increasing interest in sustainability in practice and sustainable
entrepreneurship, we know very little about sustainable entrepreneurs, the dual
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orientation that drives them and the logics they use in deciding between competing
priorities.
Following the call in the literature, we aim to shed light on the sustainability
decision making and tradeoffs of sustainable entrepreneurs (Hall and Wagner, 2012;
Margolis and Walsh, 2003; Shepherd and Patzelt, 2011). Scholars have not yet
investigated the relation between entrepreneurial and sustainability orientations,
providing a rich research opportunity to gain insight about sustainability decision making
through established entrepreneurship theory and frameworks (Dacin, Dacin and Matear,
2010). While prior studies have provided insight separately into entrepreneurial
orientation, sustainable entrepreneurship and sustainability orientation, few have bridged
the gap in the literature and linked entrepreneurial orientation to sustainable
entrepreneurship. This is noteworthy since sustainable entrepreneurship involves
pursuing simultaneously organizational and sustainability goals and making complicated
decisions with competing priorities. Our study addresses this gap in the literature and
asks how entrepreneurial orientation effects sustainability decision tradeoffs.
4. Methodology
Our study adopts an exploratory mixed-method approach, combining a multiple-case
study (Eisenhardt, 1989; Yin, 1994) and qualitative and quantitative analysis, to study
entrepreneurial orientation and sustainable entrepreneurship. A mixed-method approach
is appropriate given the lack of empirical studies on sustainable entrepreneurship and our
aim to extend theory and uncover the mechanisms underlying decision making tradeoffs
rather than examining relations between performance outcomes. Our research design
adheres to a hybrid approach that is methodologically fit for ‘intermediate research’
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(Edmondson and McManus, 2007), an explanatory type of research located on a spectrum
between nascent and mature research fields. Our research aim is to show whether
entrepreneurial orientation, a well-established construct in the field of entrepreneurship,
can illuminate patterns of decision making behavior in sustainable entrepreneurship, a
new and largely underresearched field.
4.1. Empirical setting and case selection
Our research context is the apparel/fashion industry. Since the 1970s, apparel or
textile production has become increasingly fragmented and outsourced to foreign
suppliers (Gereffi, 1999), exacerbating control and transparency issues and leading to the
decline of apparel/textile manufacturing in developed countries (Lane and Probert, 2009).
The industry faces sustainability issues in all three sustainability dimensions (Dorado and
Ventresca, 2013) throughout the value chain (Brito, Carbone and Blanquart, 2008).
Economically, the consistent competitive pressure to reduce prices is particularly strong.
Ecologically, textile production has various impacts from excessive use of water in
growing cotton crops to the chemical pollutants in dyeing and finishing fabrics; the latter
also poses challenges for worker safety if not properly managed. Socially, the
fragmentation of the supply chain and widespread use of subcontracting makes it difficult
for firms to manage working conditions of suppliers and exposes them to multiple risks in
labor practices, such as the use of child labor, excessive overtime or forced labor.
Increasing focus on these issues has given way to greater public scrutiny of textile
production practices by consumers and non-governmental organizations (NGOs), such as
Clean Clothes Campaign and Greenpeace that increasingly pressure apparel firms to
become more ecologically and socially responsible.
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Moreover, trends in fast fashion that have shortened product life cycles have lead
to increasing consumption and excess waste without an industry infrastructure to recycle
and reuse discarded textiles. The current fashion economic system encourages
overconsumption as it is driven by speed, trends and planned product obsolescence.
Scholars suggest that if fashion consumption grows at its current rate, it poses threats to
the quality of life for future generations (Cataldi, Dickson and Grover, 2010).
Sustainability, although a constraint, also represents an opportunity in the apparel/textile
industry to make substantial changes to processes and routines internally to the firm and
externally in the supply chain (Ertekin and Atik, 2015).
The conditions in the industry have spawned many niche ‘sustainable fashion’
firms, providing an excellent research setting for our exploratory study. For these firms,
sustainability is a strategic asset but at the same time might inhibit them from growth.
They seek to implement sustainable practices throughout the supply chain (Brito et al.,
2008), but also through sustainability by design (Fletcher, 2008; Fletcher and Grose,
2012), or new concepts such as slow fashion (Clark, 2008; Ertekin and Atik, 2015;
Fletcher, 2010). These ventures are often owned and managed by their original founders,
facilitating the collection of rich data.
To select cases, we applied a convenience sampling approach to compile a list of
sustainable fashion firms. We used a list of firms that exhibited at a sustainable fashion
fair in the Netherlands and complemented the list with firms found from web searches
using specific key words: sustainable fashion, sustainability apparel, eco-friendly fashion,
socially responsible fashion. We reached a sample size of 26 sustainable fashion firms
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but discarded two cases due to incomplete data, giving us a sample size of 24 (see Table
1). Our sampled firms are small firms, the majority having less than 10 employees.
Insert table 1 here
4.2. Data collection and analysis
We gathered information through telephone interviews with the founders, production
managers or corporate sustainability managers of the 24 firms. We asked structured
questions about the firm (founding date, size, sales turnover, entrepreneurial orientation),
the founders (education, previous employment, motivation), and sustainability decision
making challenges and tradeoffs. We devised questions on EO by using prior literature
and employed a multi-dimensional approach (Covin and Slevin, 1989; Li et al., 2014).
Following Tan (2008), the questions on entrepreneurial orientation included
innovativeness, proactiveness, risk taking and futurity. We included questions on
ecological, social and economic tradeoffs (Venkataraman, 1989; Kuckertz and Wagner,
2010; Elkington, 1994). We used Likert scales to capture the different aspects of
entrepreneurial orientation and sustainability orientation. Simultaneously and
subsequently to the telephone surveys, we conducted semi-structured in-depth interviews
with a subsample of firms in order to better understand sustainability decision making
tradeoffs. Additionally, we drew on information from archival data, firm documents,
press articles, publicly available corporate sustainability reports and benchmarking
reports from the Fair Wear Foundation2 for data and triangulation (Denzin, 1978).
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2 Fair Wear Foundation is a non-profit organization that provides advice and support to its member firms on textile
factory working conditions and conducts audits of textile factories in various countries. Members are particularly small
firms that do not have the resources, knowledge or network to manage suppliers on their own.
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The data analysis involved iterative qualitative and quantitative analysis. We
coded the transcribed interviews by selecting phrases, sentences or groups of sentences
that provided information about sustainability orientation and entrepreneurial orientation.
From the transcripts we also created case narratives and in combination with the coded
constructs of SO and EO we searched for patterns within and across cases and for
emergent themes of sustainability decision tradeoffs. From this qualitative data analysis,
we identified and categorized the prioritization of sustainability dimensions and the
processes, structures and attitudes of EO.
We analyzed the descriptive statistics from the structured questions and conducted
an explorative factor analysis and cluster analysis. We used a rotated varimax factor
analysis and the maximum likelihood method. For item commonality we used 0.4 as a
cut-off point.3 Table 2 summarizes the results of the factor analyses.4 Standardized
factors were used in the cluster analysis to separately explore the relation between the
dimensions of EO and SO, from which three distinct clusters5 emerged (see Figure 1 in
section 6). As we iterated between the cluster analysis, pattern matching and sensemaking
analysis, we uncovered a deeper explanation of the characteristics and features of
sustainability orientation and entrepreneurial orientation and the link between them. We
validated our interpretation of the clusters and data with a selection of firms in our
sample and with experts in the industry (Wallendorf and Belk, 1989). The latter included
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3 Although 0.8 is often regarded as indicating high commonality, social science methodologists find that this is unlikely
to occur in real data and therefore magnitudes of 0.4 are justified to assume relatedness (Costello and Osborne, 2005,
Meek et al., 2010).
4 Two items in Table 4 have lower loadings than .4. Despite the low commonality we decided to keep the factors due to
the fact that they were related and loaded highest on the factor. In separate analyses we dropped the items to see
whether more meaningful clusters would emerge which was not the case.
5 To visually display the clusters, the standardized factor scores of the case companies were averaged per cluster.
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consultants specialized in textile sustainability and representatives from the Dutch
association of apparel and textile firms.
Insert table 2
5. Findings
We start with the qualitative analysis of the rich data from the in-depth interviews and
documentation. We first provide the data on the competing priorities in the sustainability
dimensions and then the underlying processes, structures and attitudes of entrepreneurial
orientation.
5.1. Competing sustainability priorities
Using the three dimensions of sustainability, there are nine possible sustainability
decision tradeoffs. We used quotations from our data to categorize the prioritization of
the sustainability dimension in the tradeoff decision (see Table 3). A simple count of
sustainability tradeoffs shows that tradeoffs occur primarily across the sustainability
dimensions (the prioritized dimension is underlined in Table 3). However, we also have
evidence of tradeoffs occurring within dimensions (the shaded boxes in Table 3). Below
we highlight selected quotations to illustrate these tradeoff priorities and provide a
selection of quotations in Appendix A.
Insert table 3 here
Along the economic dimension, our data shows a prioritization of the economic
dimension above the social and ecological dimensions. Focusing first on economic-social
compromises, one of the underlying reasons for making this tradeoff and prioritizing the
economic dimension centers on sustaining a competitive pricing level, as cited by several
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of our cases. Case 5 provides an example of this pricing rationale and the compromise
made on the social dimension:
One of the most difficult decisions was terminating one of our suppliers. They were
taken over by a wholesaler and the price levels increased greatly. The same products
cost much, much more and the price in the store would be too high. The demand would
definitely sag. We couldn’t change the supplier’s mind and were forced to end the
relationship. (Case 5)
Another reason to prioritize the economic dimension above the social dimension is
due to coordination and control of the supplier. The founder of Case 1 indicated that she
would have liked to work with artisan suppliers and local communities but that
communication and transportation difficulties prevented her from doing so.
At first I thought if I get my fabrics in India it would be great if Indian women could
earn something with it as well. But then I had to find a place that I could also control
and check the work environment. It’s a bit weird if you go for 100% recycled material
and child labor would be involved … I don’t have the scale or size to organize this well.
I had to [produce] closer to my home … (Case 1)
Similarly, firms gave primarily a pricing rationale for prioritizing the economic
dimension above the ecological dimension. However, this tradeoff decision was more
closely tied to scale as they stated the higher cost of more organic or ecologically
produced material at the volumes they were purchasing was unaffordable.
We have a ‘sand suit’ for small children and [we needed a] textile with more density
[and] coating so that no sand, dirt or mud gets through … we had to make a choice and
tradeoff, well actually there was not really an option to find that specific fabric
organically. Well okay you can, but then we have to buy large quantities. And if your
company is big enough and can afford it that would be an option. But in our case it was
not, so we had to look for another option … we are just a small company you cannot do
everything as you please, everything is financially related. (Case 3)
using ecologically produced material for a small brand is really hard to do. The
minimum quantity is too high and its too much to purchase … I prefer to only use
sustainably produced material but because I don’t have the volume or scale this material
is very costly. I would like to work more with sustainably produced fabrics, but this is
not very realistic for a small brand because we can only buy in small quantities. (Case
24)
There was also evidence in our data that the economic dimension was prioritized
above the ecological one for quality. The firms referred primarily to design aspects of
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quality, such as durability or texture (look and feel) of a fabric or material. Cases 8 and
16 provide evidence of placing quality paramount; an eco-friendly material of lesser
quality is not an option for these firms because of brand reputation and image. To
maintain quality standards, compromises in the ecological dimension were accepted.
If they [buyers] can choose between a shirt from organic cotton and regular cotton, and
the quality is the same but the price just a few cents higher, then they choose for the
organic variant. If the quality is less, then that’s another story. Because quality goes
above everything else You don’t want to compromise quality for sustainable fabric.
(Case 8)
[For] recycled cotton [it] is very difficult to make the fibers longer We have to make
tradeoffs. But on quality we do not want to make tradeoffs because our slogan is
‘quality wear for the next era’. In order to maintain the quality [of the cotton], we mix it.
(Case 16)
Moving on to the social dimension, our data shows prioritization of the social
dimension over primarily the economic dimension. There are also instances in our data
that show that satisficing occurs between two alternatives within the social dimension. A
good example of this is from Case 6 who terminated a relationship with a Turkish
supplier because “they were unwilling to be transparent about labor practices” and
presumably continued relationships with suppliers who did comply with their
transparency requirements. However, from our data, the locus of this tradeoff is between
the social and economic dimensions. The following quotes illustrate this.
[We are] not growing very fast but rather paying attention to the social aspect. We could
grow faster but then we would probably lose sight of our social purpose. (Case 21)
[We do] not negotiate on prices but want our suppliers to come with realistic prices that
cover production costs. This could mean that [we] decide to take less margin on a
product. If there are delays, [we] do not apply a penalty to suppliers for delayed delivery,
even though [we] might need to sell at a discount to clients because of the late deliver.
(Case 16)
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In the ecological dimension, we have four cases (8, 13, 16 and 22) that showed a
clear conviction to prioritize the ecological dimension. These firms had very strong
policies about sustainability or visible sustainability positioning (e.g. eco-friendly) and
could not credibly compromise the ecological dimension. Also, in this dimension some
tradeoffs were confined within the ecological dimension between two (or more)
ecological alternatives. Case 22 clearly explained the dilemma in deciding between
ecological alternatives.
The most difficult decision is between sustainably produced yarn (think about bamboo)
versus less sustainably produced yarns (viscose or polyamide). I tried first bamboo but
discovered that the sustainability in wear was poor. The bamboo yarns pilled more
quickly … eventually I decided to use a polyamide/viscose yarn blend … this yarn
lasted longer in wear. (Case 22)
Other quotations from Cases 13 and 16 showed how a strong conviction to
ecological principles led to compromises in the economic dimension, namely profitability.
choosing cheaper fabrics and less sustainable printing we could get more profit
We decided not to do so with the goal to prove that working ethically is possible. (Case
13)
It is unthinkable that [we] produce a product that is not [ecologically] sustainable. Profit
never takes precedent over sustainability. [We] take some economic risks in lower
margins. We’ll try a new wash (or something) knowing it’s more expensive but we
won’t put the product in the market at an unreasonable price. It has to be a commercial
price, something that will sell but we would sacrifice margin. (Case 16)
5.2. Processes, structures and behavior of entrepreneurial orientation
We also used our qualitative data to uncover underlying processes, structures and
behavior of the entrepreneurial orientation of our sampled firms. From our analysis,
primarily processes and attitudes related to the EO dimensions of innovativeness,
proactivity, risk taking and futurity emerged (Table 4). We see that the boundaries of EO
dimensions are unclear and that processes in one dimension may involve attitudes from
others. For example, some innovation processes may require attitudes of proactiveness,
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risk taking and futurity. Appendix B summarizes quotations from the data to support the
identification of these underlying EO processes, structures and related attitudes.
Insert table 4 here
In the innovative dimension, we identified several distinct processes and attitudes
related to search, experimentation, product development and design. Nearly all of our
cases engaged in varying degrees of search, either for materials or for suppliers. Case 6
provides an example of how the search process is embedded in sustainability values:
I only considered working with suppliers that fit with our [sustainability] mission. I
should emphasize again that we first searched for the right suppliers and then started [the
company]. Our mission is from inside out and not a trendy wave or twist. (Case 6)
Experimentation was captured in quotations from Cases 14, 16, 22, and 24. For
example, Case 22 gave an indication of her experimentation with bamboo yarns and eco-
friendly leather as well as with 3D printing. Case 16 stated that they also experimented
with 3D printing and tried “greener washes” in their denim finishing production. Search
and experimentation are processes that are closely integrated, especially when related to
materials. A central aspect to this dimension is the firm’s attitude towards these
innovative processes. For example, Case 16 stated, “…we try to innovate together with
the factories we currently are working with”, which shows an attitude towards search and
experimentation.
Beyond search and experimentation, we uncovered processes, structures and
attitudes towards product development and design. Case 3 provides an indication of
attitude towards product development and design processes.
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Our 'green' philosophy of no waste is supported by this way of producing. We design and
develop in close harmony with our factory; this is visible in the end result. (Case 3)
This attitude towards waste reduction was also apparent in other firms and in their
product development and design processes. Case 3 recombined and reused leftover stock,
essentially turning their products and materials into modular components, or inputs, for
new products or collections; whereas, Case 15 created an infrastructure to collect
garments and reuse or recycle them.
We are very creative. If in season one you sell 300 of the 1000 product you bought … We
do not want to discount [the rest] It is better to think of another sweater or something
so that it would be an interesting set to buy. (Case 3)
We started charging a deposit and introduced a lease concept. In this way, all our men’s
suits come back to us and we can responsibly reuse and recycle them. For years now, this
has differentiated us from the rest. (Case 15)
For the proactive dimension, we find that the main processes, structures and
attitudes emerging from the data are related to supply chain management and supplier
engagement. In our data, supply chain management was also linked to the innovative
dimension in some cases, and in other cases it was linked to risk taking, or rather risk
management. For example, Case 16 shows how proactive supply chain management is a
structure in supporting product development.
Product development takes place in close cooperation with suppliers; the planning is a
shared process with frequent feedback and communication. Forecast is shared in the
beginning stage after which fabric is reserved. For the factories in Italy and Tunisia, [we]
track every stage of production including the moment the fabric arrives, to the washing
and finishing. Delays are mostly anticipated and included already in the lead times. [We
know] the production capacity of our suppliers, including which production lines are used
for our order and the time needed for the different production phases such as stitching,
washing and finishing. (Case 16)
Case 6 shows how supply chain management is used to proactively manage
sustainability risks.
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[We] consistently evaluate the supplier base and discuss progress with suppliers. Two-
thirds of production takes places in Portugal at factories that are visited twice a year.
Social and environmental compliance are always part of the discussions. [We have a]
total production lead-time/work plan sheet to be able to know when decisions need to be
made without influencing the production lead-time in a negative way. [We] are in
constant communication with our factories to make sure there is no delay that might
cause production overtime in the factories. (Case 6)
Proactiveness was also captured in attitudes towards market changes and
opportunities. Data from documentation on Case 11 explained that the founding of the
firm was “born out of the frustration of the denim market disillusioned with
disposable high street fashion …”. Case 8 also exemplifies this proactive attitude in the
ability to adapt to market changes:
... if you don’t change, then you [don’t survive] … there are so many things that change in
the world that you just have to change. The cotton crops needs a lot a water, that is a
problem and just embrace the change. (Case 8)
In the risk taking dimension, our data shows mainly attitudes towards risk which
were embedded in firms’ values towards sustainability especially risk related to pricing
but it also shows processes and structures to manage or reduce sustainability risk. In
regards to pricing, quotations from Case 12 and 16 illustrate attitudes that accept high
economic risks in order to adhere to their social values.
[We have] calculated for each product a fair price for its workshops, its dealers and for
the customer [we don’t play into] fashion trends [or discount] our collections during
sales periods. (Case 12)
[We do] not negotiate on prices but want our suppliers to come with realistic prices that
cover production costs. This could mean that [we] decide to take less margin on a product.
If there are delays, [we] do not apply a penalty to suppliers for delayed delivery, even
though [we] might need to sell at a discount to clients because of the late deliver. (Case
16)
In this risk taking dimension, we also uncovered structures and attitudes towards
managing risk through supplier compliance and quality management. We identified these
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as preventive measures, which is also closely associated with the proactive dimension.
Certifications and industry standards6 guided the structures in place to manage supplier
compliance of sustainably sourced materials. Case 8 explained how they used standards
and certifications in managing sustainability risk of chemicals used by suppliers:
It is a little bit of finding a balance between standards for materials that are sourced and
for standards or quality that are less common, to test those. And to have the supplier sign
a statement that they do not use any restricted chemicals on the REACH list. (Case 8)
There are fewer certifications or standards for managing risk in the social
dimension of sustainability. To this end, our data shows that firms rely on a proactive
supplier engagement to monitor social conditions of factories. They relied on third parties,
as members of associations like Fair Wear Foundation, or on their own resources to visit
and monitor supplier sites. However, as Case 1 emphasized “[The work places] looked
and felt good but you do not know it for 100%”, risk in the social dimension remained
uncertain.
Lastly, the futurity dimension is difficult to isolate from the other EO dimensions.
The firms in our sample are all long-term oriented which is reflective of their values as
sustainable entrepreneurs and enterprises. The evidence from our data shows that this
long-term orientation, as an attitude, guided processes and structures in other EO
dimensions.
In the innovative dimension, words such as “slow” and “timeless” fashion were
used to describe products or collections, indicative of an attitude towards long-lasting
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
6 The Ecolabel index lists 108 standards for textile production. An example is the Global Organic Textile
Standard (GOTS). http://www.ecolabelindex.com/ecolabels/?st=category,textiles
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products and fashion, less consumption and less waste. The quotation below from Case 2
sums up this attitude:
Long term, imagine after four years pulling something out the closet and saying ‘oh, nice
jacket’. It has to have a long life and be timeless. Product and design that is geared to the
future. (Case 2)
We also saw this future orientation in the proactive dimension. Our cases hinted at
the long-term orientation in their firms’ vision, mission and goals that directs the way that
they interpret market opportunities and risks. Case 9 shows the embeddedness of this
future orientation in its vision and consequently in its attitude towards pursuing
opportunities.
We believe in a better world, more fair, sustainable and beautiful. To wait patiently for
others to realize our dream is not in our genes. We are taking the first steps to get the big
machine turning. We believe that every contribution on sustainability makes a difference.
(Case 9)
This long-term orientation was also apparent as an attitude towards long lasting
supplier relations, which connects to the other EO dimensions as well. For example, long-
term supplier relations supported processes in experimentation and product design
(innovative dimension), as Case 16 exemplifies, “In the future we try to innovate together
with the factories we currently are working with. The data also showed an aversion to
switching suppliers, which can be related to the proactive supplier management that our
cases engaged in. Case 8 exemplified this attitude, “[We] value long-term relations and
don't change production location easily.”
In short, the future orientation of our sampled firms was an overarching attitude
that provided direction and guidance to the other EO dimensions. It is to be expected
since we selected our sample of firms based on whether they were sustainable
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entrepreneurs, by which they would have a predisposition to the long term rather than the
short term.
In this section, we presented a selection of our data that supports the identification
and categorization of the competing priorities of the three dimensions of sustainability
and the underlying processes, structures and related attitudes of entrepreneurial
orientation. Additional selected evidence is provided in Appendix A and B.
6. Discussion – linking sustainability and entrepreneurial orientations
From our findings, we derived sustainability decision making profiles that illuminate the
persistent duality and interaction of sustainability and entrepreneurial orientations. The
cluster analysis we conducted on sustainability orientation and entrepreneurial orientation
suggested three clusters of firms (Figure 1). Our deeper analysis of the rich, qualitative
data showed that these three profiles have distinct sustainability prioritization norms
guided by specific EO configurations. We label these three decision making profiles:
singular (blue), flexible (red) and holistic (green).
Insert Figure 1 here
6.1 Sustainability decision making profiles
The singular profile suggests that in making sustainability decision tradeoffs there
is a conviction to prioritizing one sustainability dimension above the others. For this
profile then, firms are hyperfocused on adhering to their values in one dimension. This
could be any of the three dimensions; however in our data, it was the social dimension.
The priority placed on this one dimension overrides the other two dimensions, which
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become nested within the dominant dimension (see Figure 2). The entrepreneurial
orientation of this group of firms was captured primarily in the proactive and risk taking
dimensions. They showed proactiveness in managing and engaging with their supply
chain. They also displayed attitudes towards risk taking, especially in accepting lower
profitability or growth and compromising the economic dimension. Firms using this type
of singular sustainability decision making are bound by their values and strictly adhered
to their principles associated with their dominant sustainability dimension.
Case 1 Vignette. Case 1 was founded in 2012 as a ‘hobby’. The entrepreneur started
her company while working full time as a social worker. The founder is the sole
employee. She designs and sells women’s dresses from recycled silk that is sourced in
India. She engaged in a long search process to find exactly the right material and
suppliers and artisan workshops that match her strong sustainability values, especially in
the social dimension. The dresses are produced fairly and locally in a sewing studio in the
Netherlands. She sells the dresses exclusively through her own web shop. She places a
conscious and continuous emphasis on the social value of her products and accepts a slow
growth trajectory.
For the profile we call flexible, the sustainability tradeoffs are concentrated
primarily on two dimensions and there is a clear order of preferred benefits in
sustainability decision tradeoffs. However, this ordering is causally ambiguous, easily
changed, or in short, flexible (see Figure 2). In our data, this profile is clearly centered
on the ecological and economic dimensions but theoretically could also center on other
dimensions. The ordering logic is reflected in the search and experimentation processes
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28!
and attitudes of EO, as this cluster of firms showed an EO configuration that emphasized
innovativeness and proactiveness. These processes suggest a continuous evaluation of the
best options and sustainability compromises that are bounded by requirements for
product quality and costs. The product its materials, design, aesthetic is not
compromised and sustainability decision tradeoffs occur to ensure quality standards and
costing levels.
Case 22 Vignette. Case 22 is representative of flexible sustainability decision
making with ordered prioritization logic. Case 22 was founded in 2004 by a fashion
designer. After graduating from the fashion academy, she worked as a stylist for a mid-
market supplier to H&M. There are no other employees but she works with interns during
peak times in creating and producing collections. She designs and markets casual
women’s wear and works with suppliers in the Netherlands, Portugal, Italy, Columbia
and China. She holds product quality paramount and experiments continuously with
sustainable materials and fabrics. She is also aware of reducing waste and reuses
overstock and designs and produces long lasting products. She does not intentionally
brand her products as eco-friendly because she feels this has a negative impact on her
brand image as a designer but some of her retailers brand her products as ‘eco-friendly’.
She continuously changes the order of the dominant sustainability dimension between
ecological and economic dependent on the preferred benefits of the decision making
tradeoff.
The third type of decision making, holistic, approaches sustainability tradeoffs in a
more integrated way. Holistic decision making logic aligns the three sustainability
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dimensions, recognizing the interdependencies between them (see Figure 2).
Sustainability decision tradeoffs made in one dimension have consequences for another
and an aligning logic aims to balance the benefits and impacts equally among the three
dimensions. From our data, firms using aligning logic are risk takers and proactive. They
have created processes and structures to manage risk, to proactively engage with
suppliers and to search and experiment in product development and design.
Case 16 Vignette. Case 16 was founded in 2010 and is specialized in denim. The
founder had many years of work experience in the industry and started Case 16 with a
strong vision about sustainability and quality. There are currently 10 employees. Their
products are made from 100% organic cotton or recycled cotton mixed with organic
cotton. They work with long term suppliers in Italy, Spain, Japan and Turkey. Case 16
uses innovative techniques and technology such as ozone and laser technologies in order
to reduce the ecological impact of denim finishing. They work closely with their
suppliers to experiment and test new technologies to produce ‘greener’ products. In 2014
Case 16 became a member of the Fair Wear Foundation to ensure the social responsibility
and compliance of their suppliers and they also visit their suppliers regularly during
production runs to monitor the working environments. Case 16 is also growing steadily
with a distribution of their products in 250 retailers in 12 countries (mostly Northern
Europe) and online.
The different sustainability decision making profiles and corresponding
configurations of entrepreneurial orientation provide rationales and act as guidelines for
making choices among competing priorities. Entrepreneurial processes, structures and
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related attitudes, especially those associated with risk taking and proactiveness, create not
only the guides for sustainability decision making but also the reflexivity to recognize
and cope with the boundaries and limitations of sustainability decision making. The
reflexivity in their EO is a key feature of their ability to make choices among the
competing priorities in the sustainability dimensions. Figure 2 visually depicts the link
between sustainability and entrepreneurial orientations. The solid lines indicate a strong
effect from the corresponding EO dimension and the dotted lines indicate a weak effect.
The configuration of EO influences the prioritization logic used in making sustainability
decision tradeoffs leading to a distinct sustainability orientation. Table 5 summarizes the
decision making profiles and provides features of the firms associated with each one.
Insert Figure 2 here
Insert table 5
6.2 Implications for sustainable, eco and social entrepreneurship
Our study contributes to the literature on sustainable entrepreneurship, including the
related streams of eco and social entrepreneurship, by providing insight in understanding
the decision making logic these types of entrepreneurs use when making choices between
competing priorities (Schaltegger and Wagner, 2011).
The singular decision making profile, which has a dominant sustainability
dimension and a nested prioritization logic, confers with the literature in sustainable and
social entrepreneurship. Our findings provide support that these enterprises are mission-
driven rather than profit-driven and extend theory by showing that indeed sustainable
entrepreneurs are more risk taking and proactive individuals and firms. This is congruent
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with discussions in the literature about social entrepreneurs (Dacin et al., 2010; Zahra et
al., 2009).
The flexible profile and ordering rationale of prioritization that is associated with
the economic and ecological dimensions in our data aligns with the ecopreneurship
literature (York and Ventakaraman, 2010), which claims that there are entrepreneurial
opportunities in the environmental field that innovative entrepreneurs can exploit to gain
economic and non-economic rents (e.g. the preservation of nature) (Dean and McMullen,
2007). EO helps explain this prioritization rationale by drawing attention to trial and error
processes and attitudes (e.g. the continuous search and experimentation with new, eco-
friendly materials) that support innovation. This configuration of EO, high in
innovativeness and proactiveness and low in risk taking, is in line with studies from Li et
al (2014) and Kreiser et al (2013), both of which show positive effects from
innovativeness and proactiveness on, respectively, internationalization scope and
perceived sales growth, as well as a negative effect from a high or low position on risk
taking.
The holistic profile, with aligned prioritization logic, corresponds to the
sustainable entrepreneurship literature as it represents an integrated focus on balanced
sustainability tradeoffs (Dean and McMullen, 2007; Hockerts and Wüstenhagen, 2010;
York and Ventakaraman, 2010). Although the literature is inconclusive about the ability
of sustainable entrepreneurs to create systematic transformation of industry practices, our
findings point to an EO configuration that emphasizes proactiveness and risk taking and
is especially prevalent in the processes involving supplier management and engagement.
The strong proactive orientation towards inter-firm relations could generally aid this
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transformational change and supports the claim by Schaltegger and Hansen (2013) that
transformation to sustainable practices is an incremental and co-evolutionary process
requiring collective action among actors, including but not limited to sustainable
entrepreneurs and incumbent firms.
Our typology of sustainability decision making profiles centers on classifying the
logic used to choose among competing priorities and therefore also contributes to the
literature on sustainability tradeoffs (Hahn et al., 2010; Hahn et al., 2014; Margolis and
Walsh, 2003). The literature on sustainability tradeoffs, viewed from a paradoxical frame,
does not systematically emphasize one sustainability dimension over any other; it does
not offer unequivocal guidance on which aspect of a sustainability issue to prioritize. Our
findings provide a more nuanced view of the complex decision making tensions and
interdependencies between the three dimensions of sustainability and the reflexive
interaction of EO in recognizing, interpreting and evaluating decision alternatives.
It is also complementary to other typologies in the entrepreneurship literature. For
example, the typology from Fauchart and Gruber (2011) uses founder identity to classify
new venture creation. Muñoz and Dimov (2015) identify two configurations or paths and
conditional factors of sustainable entrepreneurship: conformist and insurgent. These
represent two extremes of a continuum where the insurgent has the capability of initiating
change. However, the most closely related typology is from Zahra et al (2009); it
classifies social entrepreneurs (social bricoleurs, social constructionists and social
engineers) according to the way they search and pursue opportunities and the social
wealth they generate. Although there may be some similarities between these typologies,
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they all examine the phenomenon from different perspectives and offer explanations that
illuminate different pieces of the puzzle.
6.2 Implications for entrepreneurial orientation
Our study also makes a contribution to the literature on entrepreneurial orientation. EO
has customarily been used as a proxy for entrepreneurial behavior on a firm level and
related to firm performance. We make novel use of the EO framework as a vehicle to
understand decision making about sustainability decision tradeoffs. In essence, we focus
on the sustainability decision as an outcome as opposed to firm performance. In this way,
we extend the use of EO as a framework and look at decision making from an
entrepreneurial angle and avoid a logic based on profit maximization or resource
optimization (Parrish, 2010).
Our deep dive into EO uncovers routines and attitudes and provides novel insights
into the EO construct. It unveils how the dimensions interact and potentially influence the
development of innovative, proactive or risk taking capabilities. We also build on the
notion of reflexivity in EO (Suddaby et al, 2015), showing that on the individual and firm
levels attitudes about the social, economic and ecological environment underpin the
ability to reflect on opportunities, constraints or impacts of decisions.
6.3 Implications to the literature on sustainable fashion
We also contribute to two tenets of the sustainable fashion literature: slow fashion
and sustainable supply chain management. Our findings can be related to the claim from
Fletcher (2010) that speed does not intrinsically influence social or ecologically friendly
products or production. From our sampled firms, speed was not top of mind when
considering the sustainability challenges of their business. On the contrary, some spent a
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prolonged period of time searching for suppliers or materials or incurred production
delays to continue working with trusted suppliers. Slow fashion principles manifested in
our firms in the way they designed their products, which was with durable material or
classic styles. In effect, they resisted the economic system of the (fast) fashion industry
by producing products with long life cycles that potentially reduce consumption and
improve sustainability.
Our findings also provide insight into the processes and routines associated with
sustainability in the apparel/textile supply chain (Caniato et al., 2012) and correspond
with findings from Brito et al (2008), which identified two groups of fashion firms and
stakeholders with distinct attitudes towards sustainability. The first refers to those who
resign to external pressure but ‘blame’ others for sustainability problems. The second
refers to those that strive for improvement, respond creatively to the problems and
internalize sustainability responsibilities, having an ‘integrated’ approach. Our findings
correspond to the second group, giving greater insights into sustainable strategies and
how firms (and other actors) may act and coordinate responsibly, ultimately creating new
competences across the supply chain to cope with sustainability challenges.
6.4 Implications for practitioners and policy makers
Our findings have implications for practitioners, particularly in assessing firm
entrepreneurial orientation and sustainability orientation. We provide insights into
prioritization logics in sustainability decision making and the corresponding
entrepreneurial orientation. As sustainable entrepreneurs develop their firms along slow
growth trajectories, it becomes important to be aware of the duality of sustainability and
entrepreneurial orientations and how that may affect sustainability decision making.
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Our findings also have strong implications for policy makers in developing
schemes and policies to increase ecological and social benefits. First, fiscal policies (e.g.
tax credits) could provide incentives for firms to choose more eco-friendly material and
for consumers to purchase more ecologically sustainable products. Policy makers could
also provide more support in the form of grants, contests or networking to increase
collaboration between suppliers and firms to produce novel eco-friendly materials or
improve production processes. Second, policy makers could stimulate sustainable social
and economic development in impoverished regions by incentivizing firms to employ
workers that have been marginalized in the labor market, or in emerging markets by
providing tax credits or international development funds to firms who work with
community cooperatives, small holder farmers and the like. All in all, policy makers
could create policy schemes to support and stimulate long lasting sustainable
entrepreneurship by taking into account the slow growth trajectory that is typical for
these firms.
6.5 Limitations and future research
Our research was designed to study a group of sustainable entrepreneurs in a specific
setting, the apparel/textile industry, which may pose limitations to the generalization of
the findings to a broader group of firms and entrepreneurs. However, we believe that the
findings are applicable to a wide range of manufacturing industries, and creative, design
and knowledge intensive industries, that have complex, fragmented or outsourced
production value chains that face multifaceted sustainability challenges. This pertains to
various agriculture industries (e.g. cacao, coffee, cotton), durable goods products (e.g.
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automobiles, computer hardware) and other high technology industries (e.g. renewable
energy, nanotechnology).
Our study is an initial step in understanding the microfoundations of sustainable
entrepreneurship and there are several future opportunities for research. To start, the
field would benefit from increased scrutiny of the relation between sustainable
entrepreneurship and innovative activity, for example the incentives and motivations (e.g.
the institutional triggers, collective action and legitimacy) for sustainable entrepreneurs to
pursue innovative activities to resolve sustainability challenges. Additionally, future
studies could explore in more depth EO and associated routines. Another opportunity for
future research is to further our understanding of how sustainable oriented firms develop
dynamic capabilities and change established practices to more sustainable ones over time.
As a nascent field more in-depth qualitative studies are needed as well as more large-
scale quantitative studies to uncover causal and relational variable performance.
7. Conclusion
We draw on entrepreneurial orientation to illuminate decision making in sustainable
entrepreneurship. We contribute to the literature by showing that sustainable
entrepreneurs (inclusive of social and green entrepreneurs) have persistent dual
entrepreneurial and sustainability orientations. We derive three sustainability decision
making profiles with distinct prioritization logic and corresponding EO configurations.
We extend the work in these two literatures by illuminating the relation between
sustainability and entrepreneurial orientations and how the reflexivity of EO helps to
overcome the competing priorities in economic, social and ecological sustainability. Our
findings provide insights to sustainable entrepreneurs that effect the allocation of
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37!
resources both internal and external to the firm (e.g. strategic partnerships, recruitment,
product development) through decision making that is aligned with their sustainability
orientation.
Acknowledgement
We express our gratitude to our field editor, Oana Branzei, and three anonymous
reviewers for providing insightful and constructive suggestions that lead to
transformative improvements in the paper. The paper also benefited from insightful
comments by Jonatan Pinkse and by participants at the 2016 AOM Annual Meeting, 2016
EGOS Conference, DRUID16 Anniversary Conference, the 2016 Annual Sustainability,
Ethics and Entrepreneurship Conference and the Leuphana Conference for
Entrepreneurship 2016. We also thank colleagues at LUISS Business School in Rome
and Utrecht School of Economics in the Netherlands for their helpful suggestions on later
versions of the paper. We extend our gratitude to two research assistants, Tuanh Lam and
Carlijn van Drenth, and to the sustainable entrepreneurs who participated in the project.
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Table 1: Overview of sample cases
Case
Product Segment
Country
Firm
Age
Still in
business
in 2016
Interviews
1
Women's dresses
NL
2
Yes
2
2
Women's casual wear
NL
3
Yes
1
3
Children's wear
NL
6
Yes
1
4
Web shop
NL
8
Yes
1
5
Web shop
NL
7
Yes
1
6
Casual wear
NL
9
Yes
2
7
Handbags
NL
1
No
1
8
Women's casual wear
NL
32
Yes
3
9
Women's casual wear
NL
9
Yes
3
11
Jeans
UK
8
Yes
1
12
Women's casual wear
FR
2
Yes
2
13
T-shirts
UK
2
Yes
1
14
Work clothing
NL
2
Yes
1
15
Women's casual wear
NL
2
Yes
1
16
Jeans
NL
4
Yes
3
17
Textiles
NL
27
Yes
1
18
Women's casual wear
NL
5
Yes
1
19
Women's casual wear
GY
7
Yes
1
20
Children's wear
NL
2
Yes
1
21
Knitted products
NL
2
Yes
1
22
Women's casual wear
NL
10
Yes
2
24
Women's casual wear
NL
2
Yes
2
25
Women's casual wear
UK
2
Yes
1
26
Women's casual wear
BE
7
No
1
NL= Netherlands, UK= United Kingdom, FR=France, GY=Germany, BE=Belgium
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45!
Table 2: Survey questions and factor loadings
Entrepreneurial Orientation
Loadings
Innovativeness (INN)
We always look for new opportunities and introduce new products to
the market.
.836
.184
.190
.074
Investments that will provide us with a competitive advantage are
emphasized.
.779
-.020
.071
.090
When making strategic decisions we respond to opportunities
quickly.
.664
.187
.006
-.136
Pro-Activeness (PRO)
New projects are approved without an approval process of various
stages.
.034
.973
-.162
.160
We always strive to improve our position in the market and
simultaneously challenge our competitors.
.216
.508
.182
-.063
Risk orientation (RISK)
We act on opportunities regardless the uncertainty of the outcome.
.074
.049
.207
.974
The strategic decisions we make with a focus on investment include
high risk and high return.
-.033
.005
-.123
.575
Future orientation (FUT)
Long term profitability gains precedence over short term
profitability.
.052
-.080
.991
.082
We think about the future when making strategic decisions.
.311
.323
.485
-.158
Sustainability decision tradeoffs
Economic (ECON)
We often face the challenge of being less sustainable but make more
money.
.968
.033
.247
We would accept less profit rather than offer less sustainable
products.
.253
-.022
.005
Social (SOC)
We (would) work with people who share the same values instead of
individuals who are less willing to act sustainable.
-.127
.883
-.028
We (would) choose high delivery and transport costs to support local
communities in emerging countries rather than produce locally or
nearby.
-.511
.360
.242
Ecological (ECO)
We (would) use less sustainable production methods and materials if
it saves costs.
-.274
-.395
.707
We sometimes use airfreight to transport goods instead of sea freight.
.027
.351
.584
When consumer demand is greater than our production capacity, we
choose for a less environmentally sustainable factory and offer a less
sustainable product.
.150
-.001
.476
!
46!
Table 3: Count of sustainability tradeoffs !
Compromised dimension
Economic
Social
Ecological
Economic
Economic-Economic
0
Economic-Social
8
Economic-Ecological
7
Social
Social-Economic
8
Social-Social
3
Social-Ecological
0
Prioritized
dimension1
Ecological
Ecological-Economic
4
Ecological-Social
1
Ecological-Ecological
5
1) The sustainability dimension that was prioritized in cross-dimension tradeoffs is underlined. The within-dimension
tradeoff possibilities are shaded.
Table 4: Identified processes, structures and attitudes of EO
Innovativeness
Proactiveness
Risk taking
Processes
Search
Experimentation
Product development
Design
Supplier monitoring,
controlling
Supplier compliance
Quality control
Attitude
(towards)
Search
Design modularity
Material quality
Market opportunities
Supplier collaboration
Supplier switching
Margin and pricing
Production delays
Brand reputation/image
Structure
Coordination and
organization
Supplier management
systems
Supplier engagement
Supplier management
systems
Supplier engagement
Table 5: Features of the sustainability decision making profiles
Singular
Flexible
Holistic
Prioritization Logic
Nested
Ordered
Aligned
EO Configuration
Innovativeness
Moderate
High
Moderate
Proactiveness
Low
High
High
Risk taking
High
Low
High
Futurity
Moderate
High
High
Case characteristics
Nr. of firms in profile
6
13
5
Firm age in 2014
- mean
3.8
6.8
9.6*
- standard deviation
2.9
6.7
12.9*
Nr. of firms that collaborate
with suppliers or competitors
4
7
4
Cases from sample
1, 4, 5, 14,
20, 21
2, 3, 6, 7, 11,
13, 15, 17, 18,
19, 22, 25, 26
8, 9, 12,
16, 24
* Due to one firm’s age of 32 years, the mean age is heavily skewed. If this firm is excluded, the mean age is 4
and the standard deviation 3.5.
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47!
Figure 1: Visual representation of clusters, hierarchical cluster analysis
Sustainability Decision Tradeoffs Entrepreneurial Orientation
Averaged standardized factors
Entrepreneurial Orientation
Tradeoffs
Cluster
N
INN
PRO
FUT
RISK
ECON
SOC
ECO
Cluster 1
13
-0,16
-0,54
-0,32
0,08
-0,23
-0,14
-0,55
Cluster 2
6
0,76
0,88
0,51
-1,10
-0,38
-0,22
0,78
Cluster 3
5
-0,28
0,43
0,26
0,74
0,83
0,48
0,54
!
48!
Figure 2: Sustainability decision making profiles, EO configurations, prioritization logic and SO
orientation
Entrepreneurial
Orientation
Sustainability
Orientation
Innovativeness
Proactivity
Risk taking
Singular
Decision Making
Dominant sustainability dimension
nests other two dimensions
Nested Logic
Flexible
Decision Making
Order of preferred sustainability
dimension changes continuously
Ordered Logic
Holistic
Decision Making
Simultaneous, integral and balanced
preference given to all sustainability
dimensions
Aligned Logic
EO dimension emphasized
EO dimension less emphasized
Prioritization
Logic
Decision Making
Profile
Dominant sustainability dimension
Nested sustainability dimensions
Preferred sustainability dimension
Less preferred sustainability dimensions
Balanced sustainability dimensions
Change of order of sustainability dimension
Futurity
Innovativeness
Proactivity
Risk taking
Futurity
Innovativeness
Proactivity
Risk taking
Futurity
EO dimension emphasized
EO dimension less emphasized
EO dimension emphasized
EO dimension less emphasized
!
49!
Appendix A Selected supporting evidence for categorization of sustainability decision tradeoffs
Tradeoff dimensions
(prioritized dimension is
underlined)
Selected evidence from qualitative data
ECON-ECON
ECON-SOC
ECON-ECOL
SOC-ECON
SOC-SOC
SOC-ECOL
ECOL-ECON
ECOL-SOC
ECOL-ECOL
Sometimes we produce less sustainably [cheaper labor] to make more money (Case 21)
!
One of the most difficult decisions was terminating one of our suppliers. They were taken over by a
wholesaler and the price levels increased greatly. The same products cost much, much more and the price in
the store would be too high. The demand would definitely sag. We couldn’t change the supplier’s mind and
were forced to end the relationship. (Case 5)
!
I initially wanted to work with high quality wool and import it from several countries. Because I knew if I
would work with handmade products, the work environment would be good. However, importing the wool
was really expensive; the shipping costs were too high. (Case 1)
!
!
... if someone in our production department thinks a partner is not open [fair], then we immediately say, this
is not working. But in reality, if a supplier delivers good quality, then who am I to say you can’t work with
that supplier. But it is remarkable, the better the quality, the more the supplier is open and willing to
cooperate, and the better the working conditions are. It goes hand in hand with each other. (Case 8)
!
!
We had to choose between organic [and less organic] materials but because the fabrics had [to have] density
and a finishing layer so that sand and mud would not get through the clothing. ... you find that specific
fabric organic … but then you have to buy large quantities. And if your company is big enough and can
afford it that would be an option. But in our case it was not, so we had to look for another option, the second
best one. (Case 3)
!
… using ecologically produced material for a small brand is really hard. The minimum quantity is too high
and it’s too much to purchase. I use stock fabrics but sometimes my customers [retailers] don’t want to buy it
because it’s not purely ecological or organic. I prefer to only use sustainably produced material but because I
don’t have the volume or scale this material is very costly. (Case 24)
!
... quality goes above everything else but still, of course, you consider the ecological impact. You don’t want
to compromise quality for sustainable fabric. In recycled cotton, the fibers become shorter when they are
spun and you run the risk of damage. Recycled polyester can feel stiff. (Case 8)
!
!
With recycled cotton, it is very difficult to make the fibers longer so often you have to mix it with organic
cotton. We do have to make tradeoffs. But on quality we do not want to make tradeoffs because our slogan is
‘quality wear for the next era’. In order to maintain the quality [of the cotton], we mix it. (Case 16)
!
I would like to work more with sustainably produced fabrics, but this is not very realistic for a small brand
because we can only buy in small quantities. I don’t want to have any excess. (Case 24)
!
... we don’t sell a lot of products since we started, mainly because of price. Since the beginning people tell us
to stop using organic and recycled fabric or to produce in foreign countries for lower cost. But we don’t want
to change our DNA, we really want to produce our collections in French factories and use eco-friendly
fabrics. (Case 12)
!
!
The relationship [that] we have with these workshops is growing in duration, transparency and trust. [We
trade] fairly and pay the workshop fairly and on time. (Case 26)
!
[We are] not growing very fast but rather paying attention to the social aspect. We could grow faster but then
we would probably lose sight of our social purpose. (Case 21)
!
[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]. (Case 24)
!
[We have] calculated for each product a fair price for its workshops, its dealers and for the customer … [we
don’t play into] fashion trends [or discount] our collections during sales periods. [Our products] are timeless
and made to last. (Case 12)
!
[We do] not negotiate on prices but want our suppliers to come with realistic prices that cover production
costs. This could mean that [we] decide to take less margin on a product. If there are delays, [we] do not
apply a penalty to suppliers for delayed delivery, even though [we] might need to sell at a discount to clients
because of the late deliver. (Case 16)
!
[We] asked several times but the supplier did not return a signed questionnaire and they were unwilling to be
transparent about their labor practices. Their lack of commitment and communication made us decide to end
the business relationship. (Case 6)
!
!
50!
If you take jobs away from a supplier because they don’t have the possibility to produce sustainable cotton,
you take away someone’s income and that ... is less socially responsible. (Case 8)
!
It is unthinkable that [we] produce a product that is not [ecologically] sustainable. Profit never takes
precedent over sustainability. (Case 16)
!
… the yarns that I usually buy have really high minimums, … so I buy overstock and leftovers and I try to
integrate this in my process … and I help other companies get rid of their overstock, less waste. (Case 22)
!
The most difficult decision is between sustainably produced yarn (think about bamboo) versus less
sustainably produced yarns (viscose or polyamide). I tried first bamboo but discovered that the sustainability
in wear was poor. The bamboo yarns pilled more quickly and were therefore less sustainable. Eventually I
decided to use a polyamide/viscose yarn blend from a certified supplier. This yarn lasted longer in wear.
(Case 22)
!
!
51!
Appendix B Selected supporting evidence for the identification of EO processes, structures and attitudes
EO dimensions
Selected evidence from qualitative data
INNOVATIVE
PROACTIVE
RISK TAKING
FUTURITY
PROCESS
STRUCTURE
ATTITUDE
SEARCH
I only considered working with suppliers that fit with our mission. I should emphasize again that we first
searched for the right suppliers and then started [the company]. Our mission is from inside out and not a
trendy wave or twist. (Case 6)
!
!
!
[We have] high quality products that fuse together thoughtful design details with low impact fabrics. But
[we] wanted … more than plain T-shirts with eco-friendly credentials, so [we searched for] a method of
digital printing that only uses water based inks. (Case 13)
!
!
!
[We] were the first with a recycled denim product. [We] continuously look for ‘greener’ washes, we’re
very innovative in that, production processes and methods, such as low impact washes and natural dye
techniques, low impact washes, where laser and ozone is used to substitute stonewash and bleach.
Sometimes we choose washes/techniques that might be more expensive and accept less margin, also as a
way to help suppliers promote their new technology and build scale. (Case 16)
!
!
!
!
EXPERIMENTATION
I try to work as much as possible with eco-friendly fibers, I experimented with bamboo yarns for example,
I worked with eco-friendly leather ... (Case 22)
!
!
I’ve experimented with personalized 3D printed buttons with initials. (Case 24)
!
!
!
In the future we try to innovate together with the factories we currently are working with. (Case 16)
!
!
!
!
PRODUCT DEVELOPMENT
Our 'green' philosophy of no waste is supported by this way of producing. We design and develop in close
harmony with our factory; this is visible in the end result. Together we achieve innovative knitwear ...
(Case 3)
!
!
!
[Our products] are timeless and made to last. (Case 12)
!
!
!
I am really a big believer in slow fashion, so to not buy every season so many new things but just
combining it in a nice way. (Case 22)
!
!
!
DESIGN MODULARITY
At a certain point there is a lot of stock in your warehouse and you need to use it in a way that it fits your
collection, although you do not want this. On the other hand you do not want your stock to pile up so you
have to do something like knitting something extra to it so that it can be sold in your collection. Or add
another print. (Case 3)
!
!
!
I find new ways to combine these yarns and still have a sellable product … if you keep some things the
same then people can see that's one line and you can still have lots of things but using only unique parts.
(Case 22)
!
!
I have decided to use fabric and yarn remnants. It is a good alternative and more sustainable and cheaper
than when I buy new fabric. (Case 24)
!
!
MARKET OPPORTUNITIES
... if you don’t change, then you [don’t survive] … there are so many things that change in the world that
you just have to change. The cotton crops need a lot of water, and that is a problem and just embrace the
change. (Case 8)
!
!
Because we first became a member of Fair Wear Foundation and then started [our company], sustainability
is anchored in our mission and business operations. (Case 6)
!
!
!
We believe in a better world, more fair, sustainable and beautiful. To wait patiently for others to realize
our dream is not in our genes. We are taking the first steps to get the big machine turning. We believe that
every contribution on sustainability makes a difference. (Case 9)
!
!
!
SUPPLY CHAIN SYSTEMS
In order to re-use a product tomorrow, we should know how we made it today. The Circular Content
Management System (CCMS) is a circular track and trace system in which all partners in the supply chain
are involved. Raw materials and products … can be followed through every stage of development. (Case
14)
!
!
!
[monitoring suppliers] is a constant process ... there are always reasons why at some moment you say, we
!
!
!
52!
can’t work with this supplier any more. Then we search for a new supplier It is a continuous process …
(Case 8)
We source fabrics together with suppliers and we give a list of our quality standards including
sustainability. I am now working on structuring this process, for example incorporating the REACH
restricted chemicals. (Case 8)
!
!
SUPPLIER SWITCHING
[We] produced almost twenty percent of our 2015 orders at a Turkish supplier, but decided to terminate the
relationship. [We] asked several times but the supplier did not return a signed questionnaire and they were
unwilling to be transparent about their labor practices. Their lack of commitment and communication
made us decide to end the business relationship. (Case 6)
!
!
[We] work with the same production agent in Portugal for more than 10 years and have long and steady
partnerships with their Portuguese suppliers. (Case 6)
!
!
[We] value long term relations and don't change production location easily. As a member of Fair Wear
Foundation, we can't change suppliers every year. [We] do what we do from years of experience, not by
taking a big risk on innovation. We have suppliers that we have worked with for 20 years, but also some
that we have worked with four or five years. (Case 8)
!
!
!
SUPPLY CHAIN ENGAGEMENT
[We] consistently evaluate the supplier base and discuss progress with suppliers. Two-thirds of production
takes places in Portugal at factories that are visited twice a year. Social and environmental compliance are
always part of the discussions. [We have a] total production lead-time/work plan sheet to be able to know
when decisions need to be made without influencing the production lead-time in a negative way. [We] are
in constant communication with our factories … to make sure there is no delay that might cause
production overtime in the factories. (Case 6)
!
!
!
it’s important that suppliers can deliver the quality we want for our brand. … it is really a question
of years of cooperation and making continuous improvements together. (Case 8)
!
!
During visits we check whether the products we expect to be made are actually being processed in the
production lines. (Case 16)
!
!
PRICING / MARGIN POLICIES
We tried a ‘Made in England’ range in 2011 … [and] produced a British designed and British made range.
The costs involved using the factory, and the net return meant we could not continue this range. (Case 11)
!
!
[We have] calculated for each product a fair price for its workshops, its dealers and for the customer …
[we don’t play into] fashion trends [or discount] our collections during sales periods.
!
!
!
[We do] not negotiate on prices but want our suppliers to come with realistic prices that cover production
costs. This could mean that [we] decide to take less margin on a product. If there are delays, [we] do not
apply a penalty to suppliers for delayed delivery, even though [we] might need to sell at a discount to
clients because of the late deliver. (Case 16)
!
!
QUALITY MANGEMENT / SUPPLIER COMPLIANCE
We visit especially the fabric suppliers, because that really determines the quality of the clothing … If you
are talking about fabrics from Europe, there are already strict regulations because otherwise the factory
would be shut down. So you have already ruled out a lot of risk. But fabrics that are sourced outside of
Europe, there is a greater risk there. (Case 8)
!
!
!
It is a little bit of finding a balance between standards for materials that are sourced and for some standards
or quality that are less common, to test those. And to have the supplier sign a statement that they do not
use any restricted chemicals on the REACH list. (Case 8)
!
!
To add new brands to the collection, we look at certifications, how is it produced? If it’s not good, then it’s
not good. The difficult part is the price. (Case 4)
!
!
!
!
... In fact, several authors argue that sustainable entrepreneurs create and change institutions and social norms to positively influence ecological and social impact Meek et al., 2010). It is found that the founders of green or social companies or both, imprint in their decisions and in the choice of priorities their own values of sustainability (Di Vito & Bohnsack, 2017). ...
... Eco-entrepreneurs have the conviction to grow their business in the most ecological and socially responsible way possible (Di Vito & Bohnsack, 2017). Therefore, they place social interest on the same level as private personal interest (Freeman et al., 2004;Porter & Kramer, 2011). ...
... It has been found that these entrepreneurs decide to start these types of activities largely due to personal motivations to improve environmental and social problems (Jayasinghe et al., 2021). As has been stated, entrepreneurs link their values related to sustainability to their decision making (Di Vito & Bohnsack, 2017). Or as this study indicates, their principles, with regard specifically to upcycling. ...
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Faced with an aggressive production model with the use of resources, initiatives such as upcycling arise that seek to extend the life of products. This paper analyzes the role of individuals’ principles and values as driving factors, something that has not been studied in depth to date. The study is based on a field work in which 830 subjects from 180 countries have participated in a survey, from September 2019 to September 2020. This large sample of participants at the international level is one of the key contributions of the work, since it allows us to contrast conclusions from the few previous works and issue new ones based on the sequence of analysis described below, which broadens the empirical base in this field of study. The data so collected was analysed using the statistical software Stata and estimating standard multiple linear regressions, ordered logit and logit regressions. The findings confirmed the chain of actions - doing, frequency, entrepreneurship - is decisively conditioned by personal values and principles. This sequence of analysis constitutes the main contribution of our work. With regards to entrepreneurship, this work provides evidence that having the intention to start up an upcycling business is more likely when individuals consider upcycling important for them and report themselves as having a high probability of upcycling; but it is less likely among women and the older age groups (more than 55 years old).
... This is confirmed by Saebi et al.'s (2019) prior review study, where the process stage has not been highlighted sufficiently. Some literature implies SE processes (see, for example, Divito & Bohnsack, 2017;Hervieux & Voltan, 2018;Smith & Besharov, 2019); however, when we further examined the terms within each cluster, as shown in Figure 3, and analyzed the publications as part of the systematic review, the process stage is predominantly discussed at the meso-level compared to micro-and macro-level discussions (e.g., 10 of 14 articles in the FT50 and Business and Society). ...
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Chapter
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