Doctoral Student at Indian Institute of Management Bangalore, India
Legitimacy can be a major issue for startups, especially within nascent categories. While the literature has often focused on startups’ internal efforts to gain legitimacy, in this paper, we complement such prior perspectives by focusing on the role of individual environmental concerns (IEC) as a source of external legitimation for startups. Our key argument is that startups suffer from sustainability liability, especially when the category is nascent, since they are often seen as prioritizing long-term good over short-term gains. Under such circumstances, individual environmental concerns influence other resource-providing stakeholders to invest in sustainability-focused startups through interactive agency. We find support for our arguments in the US food and agriculture setting. We find that sustainability-focused startups are less likely to get funded early on, but more likely to later when venture capitalists are influenced by individual environment concerns. Our findings have implications for the literatures on sustainability, entrepreneurship, and impact investing.
