The role of institutional forces in unlocking successful sustainability-driven entrepreneurship in the Western Cape. A macro perspective on success factors of sustainability-driven entrepreneurship in the Western Cape region of South Africa.

Abstract

Purpose – The main purpose of this study is to contribute to a better understanding of how different dimensions of the institutional climate in the Western Cape region in South Africa are perceived by sustainability-driven entrepreneurs (SdEs) and to evaluate the relationship between perceptions and business performance based on the triple bottom line.

Design – Acknowledging earlier work on institutions, where Kostova (1997) classified the formal and informal institutions that impact entrepreneurial activity into normative, cognitive and regulatory categories, this study builds in this direction by investigating how the perceptions of sustainability-driven entrepreneurs of the three dimensions of the institutional framework influence the level of success of sustainability-driven entrepreneurs. The level of success is expressed in terms of the triple bottom line, integrating the three pillars of ‘prosperity’, ‘people’ and ‘planet’.

Findings – A total of 38 participants were included in this study, of which the majority was interviewed and also completed a questionnaire. In-depth interviews were conducted to support and help interpret the results of the quantitative data analysis. Using linear regression modelling on data from 31 filled out questionnaires, it was found that entrepreneurs’ assessment of the institutional environment is not significantly related to the level of financial, social and environmental success. The only institutional factor that does influence the environmental success of SdEs is part of the normative dimension and measures entrepreneurs view on the status that comes with entrepreneurship and society’s need to become more sustainable, as perceived by the general public. The fact that entrepreneurs’ perception of the three dimensional institutional framework does not show a significant statistical relationship with the level of success of SdEs suggests that there is a gap between institutional bodies and entrepreneurs. This finding has potential implications for policy makers as well as academics and requires more attention.

Originality/value – Literature about institutional theory and sustainability-driven entrepreneurship has been descriptive and fragmented. A large part of research on institutions and entrepreneurship is based on case studies or predominantly examined either the formal (governments’ role) or informal (national culture’s role) institutional environment. This research adds to the existing literature in that it looks at the functioning of both formal and informal institutions as perceived by sustainability-driven entrepreneur at an intra-country basis, whereas the majority of studies investigate the functioning of institutions as perceived by entrepreneurs at a cross-country basis.