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Adm. Sci. 2015, 5(4), 260-285; doi:10.3390/admsci5040260

The Rationality and Irrationality of Financing Green Start-Ups

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
Academic Editor: Jacob Hörisch
Received: 29 July 2015 / Revised: 24 October 2015 / Accepted: 3 November 2015 / Published: 10 November 2015
(This article belongs to the Special Issue Advances in Sustainable Entrepreneurship)
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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. View Full-Text
Keywords: green; environmental; sustainable; entrepreneurship; start-up; entrepreneurial finance; behavioural/behavioral finance; rationality; venture capital; business angels green; environmental; sustainable; entrepreneurship; start-up; entrepreneurial finance; behavioural/behavioral finance; rationality; venture capital; business angels
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Bergset, L. The Rationality and Irrationality of Financing Green Start-Ups. Adm. Sci. 2015, 5, 260-285.

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