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Is green the new gold? Venture capital and green entrepreneurship

Boris Mrkajic (), Samuele Murtinu () and Vittoria G. Scalera ()
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Boris Mrkajic: Politecnico di Milano School of Management
Vittoria G. Scalera: University of Amsterdam Business School

Small Business Economics, 2019, vol. 52, issue 4, 929-950

Abstract: Abstract We test whether born-to-be-green represents a signal toward potential venture capital (VC) investors on a sample of Italian, independent, unlisted, high-tech entrepreneurial firms. We employ several identification strategies by controlling for the major potential signals and the alleged selection bias between green and non-green entrepreneurs. We exploit firm-level information about the “active search for VC financing.” Alternatively, we exploit the cross-local community variation in the awareness about environmental issues in an instrumental variable setting. Our results show that neither running a business based on green technologies nor positioning a business in a green sector per se are strongly correlated with the likelihood to get VC. Instead, we find that born-to-be-green can be a reliable signal for investors only when entrepreneurs perform activities based on green technologies/products and position their business in a green sector, at the same time. Further, we present three contingencies that moderate the association between green business propositions and the likelihood to get VC, namely the technical/scientific education of the founder(s), the origin of the firm as academic spin-out, and the presence of corporate shareholders into the venture’s equity. The paper offers relevant managerial implications.

Keywords: Entrepreneurship; Green ventures; Venture capital; Signal; Green technology; Green product; G24; L26; M13; M21; O35; Q55 (search for similar items in EconPapers)
Date: 2019
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