Sustainable entrepreneurship

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Chapter 2 – Literature review

Chapter introduction

The purpose of this study is to explain how individuals faced with resource constraints engage in sustainable entrepreneurship. To do this, a review of the literature was one of the activities undertaken. True to the tradition of the case study approach, this has been an ongoing review, from the time the study was conceived, throughout data collection and analysis up to the writing of the final manuscript. This literature review explores how scholars have dealt with the nature of sustainable entrepreneurship to locate this study within current debates, identify gaps, highlight contested areas and explore those areas amenable to further development. As a result, it can be seen how the present study advances knowledge in the field. The review begins with a broad discussion of the field of entrepreneurship providing a brief overview of the research area. It continues with a discussion of resource constraints showing the advances in research in this area. The review then moves on to a discussion of sustainable entrepreneurship. In this regard the review highlights the absence of explanations of the mechanisms by which sustainable entrepreneurship occurs. The literature on passion is then reviewed positioning it in the entrepreneurial realm and discussing its relationships with entrepreneurial outcome variables. The review then delves into a discussion of effectuation theory, dwelling on the constructs and other related theories. The review establishes that there is a need for empirical testing of the study phenomena and that qualitative methods are appropriate for a theory at this stage of development. Throughout this review, past and recent research is referred to and gaps in this research are identified to situate the current study. Besides providing a theoretical framework for the problem to be investigated, this literature review demonstrates how this study advances what is already known in the field.


Entrepreneurship has attracted attention from practitioners, policy makers and scholars, as evidenced by the number of journals dedicated to entrepreneurship, the growth rate of the entrepreneurship division of the Academy of Management, and the number of entrepreneurship-related conferences, as well as a policy focus among donors and governments on the implementation of entrepreneurship projects. This interest may derive from the promise entrepreneurship holds to better the lives of people, but may also be related to a persistent lack of robust theoretical grounding.
The field of entrepreneurship is defined as the “study of the sources of opportunities and the processes of discovery, evaluation, and exploitation of opportunities; as well as the set of individuals who discover, evaluate, and exploit them” (Shane & Venkataraman, 2000, p. 218). Some scholars have concentrated their research on the process, while others have sought a better understanding of the individual. Others again focus on the opportunities. All these have become important and legitimate research streams in entrepreneurship scholarship.
It is the focus on opportunity-recognition that has helped position entrepreneurship research as distinct from the fields of management and strategy (Short, Ketchen, Shook, & Ireland, 2010). And it is this focus on opportunities and the consequent debate on the sources of opportunities that has led to the inclusion of effectuation as one explanation for opportunity recognition. This theory has shifted the focus of entrepreneurship research from business planning to include enactment (Arend et al., 2015).
A number of methodological approaches have been utilised in the field, with the positivist quantitative paradigm currently showing dominance (Leitch, Hill, & Harrison, 2010). Nonetheless, there have been calls to increase the qualitative focus (Bygrave, 2007) to illuminate contextual issues that may have eluded previous studies.
One main direction in current literature is the relationship between entrepreneurship and economic development (Van Stel, Carree, & Thurik, 2005). Significant studies have highlighted entrepreneurship’s importance for economic development via enterprise growth and consequent job creation (Delmar & Wiklund, 2008; Wiklund, Davidsson, & Delmar, 2003).
Additional research streams have studied the failure of entrepreneurial firms and learning from failure for subsequent enhanced efficiency (Mueller & Shepherd, 2014); as well as the role of entrepreneurial education (Martin, Mcnally, & Kay, 2012). This latter focus has given rise to the creation of entrepreneurship teaching programmes at both undergraduate and postgraduate levels. All these directions demonstrate the current breadth of entrepreneurship research, its diversity and atmosphere of lively debate – including but not limited to – the sources of entrepreneurial opportunity and entrepreneurial goals beyond economic gain.
Recognising business opportunities is amongst the most important abilities of a successful entrepreneur (Stevenson, Roberts, & Grousbeck, 1985). An understanding of how entrepreneurial opportunities develop is therefore important given the growth and role of entrepreneurship today (Tang, Kacmar, & Busenitz, 2012). In their seminal paper, Shane and Venkataraman (2000) make a compelling argument that entrepreneurial opportunity recognition and exploitation are what make entrepreneurship a distinctive research field, and thus present this area as a key focus for studies.
Entrepreneurs pursue opportunities using a unique set of scarce resources. Resources therefore play an important role in the development of ventures. For ventures with objectives broader than the profit-motive, resource constraints can severely affect the firm’s survival and the well-being of other stakeholders.

Resource constraints

Research in cognitive psychology and creative cognition shows that thinking within a frame of reference facilitates the creation of new ideas (Finke, Ward, & Smith, 1992; Stokes, 2007) such that individuals tend to be more creative when limited by constraints.
Since the works of Penrose (1959) the importance of resources in firm activities has been exhaustively discussed in the academic literature. Resources are converted into outputs that the firm takes to the market. It is therefore argued that the more resources available the better the performance of the firm. The resource based view of the firm proposes that firm performance is contingent upon the availability of inimitable resources that enable competitive advantage (Barney, 1991). Research in this regard has identified a number of resources that are considered crucial to a firm’s competitiveness. It has been ascertained that these resources are unique to the industry and the location of the firm. The literature has advanced to the discussion of slack resources which are described as potentially usable resources that can be redeployed for the achievement of organizational goals (George, 2005). As the literature has grown in this direction, it has sparked an interest in the outcomes of limited resources. Limited resources are a reality for entrepreneurial firms the world over which makes an understanding of how firms contend with this very important.
Studies on resource constraints show that the absence of resources has mixed entrepreneurial outcomes. On the one hand this absence leads to negative outcomes (Voss, Sirdeshmukh, & Voss, 2008); including smaller profit margins, staff layoffs and outright closure. Conversely, resource scarcity studies have shown that it may lead to positive organizational outcomes (Katila & Shane, 2005), such as innovation and rapid growth. A number of explanations have emerged for these mixed outcomes. In one of the explanations, it is argued that the level of resources determines the outcome (Bourgeois, 1981). In another explanation it is proposed that individual and team level characteristics such as knowledge vary this outcome (Hoegl, Gibbert, Mazursky, 2008). A third explanation is that the type of resource constraint has different effects on identifying new ideas (Mellahi & Wilkinson, 2010). Resource constraints it is therefore argued, result in a frugal mind-set reflected in the use of less costly resources (Scopelliti, Cillo, Busacca, & Mazursky, 2014). This may be explained by resource constraints resulting in business model adaptation that involves a process of continuous search, selection and improvement in value creation, value proposition and value capture based on the surrounding environment (Dopfer, Fallahi, Kirchberger, & Gassmann, 2017). In this way resource constraints force the firm to seek resources while seeking knowledge on how to operate within the limited available resources (Eshima & Anderson, 2017).
Businesses such as those run by sustainable entrepreneurs often contend with a distinct scarcity of resources (Austin, Stevenson, & Wei‐Skillern, 2006). This may be explained by the fact that sustainable entrepreneurs are committed to values that focus on conservation rather than consumption of resources. In a study on sustainable entrepreneurs, Burg, Podoynitsyna, Beck and Lommelen (2012) show that resource constraints direct entrepreneurs towards opportunities related to the constraints they are experiencing. The authors further assert that entrepreneurs are as much attracted to opportunities that are in line with their available resources as they are to those that align with their resource deficiencies
Resource constraints have also been identified as a moderator in the realization of sustainable entrepreneurship (Pinkse & Groot, 2015). The authors further propose that resource constraints require the entrepreneurs to use collective action. However, while their paper provides the basis for theorization that resource constraints induce the engagement in business partnerships, the study focus was on the outcomes of sustainable entrepreneurship.
The issue of resource constraints has therefore been the subject of interest in sustainable entrepreneurship research and been shown to determine the path of opportunity development in sustainable entrepreneurship. Two paths have been proposed. The insurgent path operates against an establishment that is not suitable for sustainability ideals which is typical of resource constrained contexts. The conformist path on the other hand operates in an enabling context (Muñoz & Dimov, 2015). While these paths do not specify the specific mechanisms undertaken to realise sustainable entrepreneurship, they provide insights on what could be expected in different contexts.
In a recent paper with a specific focus on sub-Saharan Africa, social embeddedness is advanced as a variable that enables the recognition of sustainable development opportunities in the face of exogenous shocks (Juma, James, & Kwesiga, 2017). However, while this focus on embeddedness may advance the understanding of sustainable entrepreneurship in sub-Saharan Africa an explanation of the mechanisms involved in realizing sustainable venture outcomes in this resource scarce context is still needed.
In summary, research on resource constraints continues to fascinate entrepreneurship scholars as to date there is no agreement on how resource constraints may influence entrepreneurial outcomes. The multiple objectives that sustainable entrepreneurs seek to pursue broadens the scope of resource constraints providing the opportunity for interesting insights on the creative processes of entrepreneurial action. This scarcity may well present opportunities for sustainable entrepreneurship development and growth.

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Sustainable entrepreneurship

Entrepreneurship has both positive and negative effects on society. Negative effects are most often seen in the environment and the community through pollution, over-exploitation of resources and unfair compensation of employees, among others. Positive impacts may be on individual livelihoods or national economic growth (Wright & Zahra, 2011). The tension between these different impacts has given rise to calls for consideration of the goal of ‘sustainability’, which preserves the positives while attempting to mitigate the negatives. Sustainability is defined in a number of ways, but a frequently used definition is that produced by the World Commission on Environment and Development (WCED). This expands the concept of sustainability to include sustainable development: “development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development, 1987, p. 43).

Chapter 1 – Introduction 
1.1 Background to the study
1.2 Research problem
1.3 Statement of purpose and research question
1.4 Sub-Saharan Africa context
1.5 Research approach
1.6 Rationale and significance
1.7 Limitations of the study
1.8 Chapter summary
Chapter 2 – Literature review 
2.0 Chapter introduction
2.1 Entrepreneurship
2.2 Resource constraints
2.3 Sustainable entrepreneurship
2.4 Passion
2.5 The theory of effectuation
2.6 Related theories
2.7 Sustainable entrepreneurship and qualitative research
2.8 Chapter summary
Chapter 3 – Methodology 
3.0 Chapter introduction
3.1 Research question
3.2 Research paradigm
3.3 Rationale for a qualitative research design
3.4 Rationale for case study methodology
3.5 Information needed to conduct the study
3.6 Overview of research design
3.7 The research sample
3.8 Ethical considerations
3.9 Trustworthiness of the research
3.10 Chapter summary
Chapter 4 – Results 
4.0 Chapter introduction
4.1 Model description
4.2 Resource constraints
4.3 Formation of alliances
4.4 Tolerance for failure
4.5 Willingness to change
4.6 Adaptation
4.7 Passion
4.8 Sustainable entrepreneurship
4.9 Chapter summary
Chapter 5 – Discussion 
5.0 Chapter introduction
5.1 Resource constraints
5.2 Formation of alliances
5.3 Tolerance for failure
5.4 Willingness to change
5.5 Adaptation
5.6 Passion
5.7 Sustainable entrepreneurship
5.8 Chapter summary
Chapter 6 – Conclusion
6.0 Chapter introduction
6.1 Synthesis of empirical findings
6.2 Theoretical contribution
6.3 Recommendations and practical implications
6.4 Policy implications
6.5 Areas for further research

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