The Rationality and Irrationality of Financing Green Start-Ups

Linda Bergset
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Linda Bergset: Department of Business Administration, Economics and Law, Institute of Business Administration and Business Education, Carl von Ossietzky University Oldenburg, Ammerländer Heerstr 114-118, DE-26129 Oldenburg, Germany

Administrative Sciences, 2015, vol. 5, issue 4, 1-26

Abstract: Green start-ups contribute towards a transition to a more sustainable economy by developing sustainable and environmentally friendly innovation and bringing it to the market. Due to specific product/service characteristics, entrepreneurial motivation and company strategies that might differ from that of other start-ups, these companies might struggle even more than usual with access to finance in the early stages. This conceptual paper seeks to explain these challenges through the theoretical lenses of entrepreneurial finance and behavioural finance. While entrepreneurial finance theory contributes to a partial understanding of green start-up finance, behavioural finance is able to solve a remaining explanatory deficit produced by entrepreneurial finance theory. Although some behavioural finance theorists are suggesting that the current understanding of economic rationality underlying behavioural finance research is inadequate, most scholars have not yet challenged these assumptions, which constrict a comprehensive and realistic description of the reality of entrepreneurial finance in green start-ups. The aim of the paper is thus, first, to explore the specifics of entrepreneurial finance in green start-ups and, second, to demonstrate the need for a more up-to-date conception of rationality in behavioural finance theory in order to enable realistic empirical research in this field.

Keywords: green; environmental; sustainable; entrepreneurship; start-up; entrepreneurial finance; behavioural/behavioral finance; rationality; venture capital; business angels (search for similar items in EconPapers)
JEL-codes: L M M0 M1 M10 M11 M12 M14 M15 M16 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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