Social Embeddedness Strategies of Sustainable Startups: Insights from an Emerging Economy

Abstract

Social embeddedness describes the extent to which firms are integrated into a social network in different situations and is an important concept in the entrepreneurship literature. Much of the existing research on embeddedness focuses on how entrepreneurs integrate into their host countries or the business activities of transnational entrepreneurs who operate across both their host and home countries. While a limited number of studies have examined sustainable entrepreneurs, previous studies have not sufficiently examined the nature of entrepreneurs’ social embeddedness and its effect on their sustainable entrepreneurial activities. This study seeks to understand how sustainable entrepreneurs utilize their social embeddedness when navigating business challenges. This study followed a multiple-case study approach based on data collected from in-depth inquiries into eight founders of sustainable startups in Nigeria. The findings show that sustainable entrepreneurs use social embeddedness as a strategy to navigate challenges encountered at different stages of their business. The findings make a theoretical contribution by describing how sustainable entrepreneurs use social embeddedness as a strategy to navigate business challenges in a developing country context. The findings offer implications for policymakers of emerging economies and sustainable entrepreneurship support organizations.

1. Introduction

In entrepreneurship studies, embeddedness [1,2] refers to the economic relationships between individuals who leverage social and business networks [3] to impact economic activities and business outcomes [4]. Polanyi first introduced embeddedness [5] as a concept while studying how economic activities are affected by social structure. Embeddedness reflects the degree to which firms are integrated into a social network in different situations [4]. High-quality relational embeddedness enables firms to develop dynamic and valuable capabilities [6,7].

Though several empirical studies have investigated embeddedness in various fields such as the high-tech industry [8], family business [9,10], professional entrepreneurship [11], refugee entrepreneurship [12], social entrepreneurship [13,14,15], and migrant entrepreneurship [1], very few have explored the phenomenon in sustainable entrepreneurship; this is among the first empirical studies to explore the phenomenon of the embeddedness of sustainable startup entrepreneurs in a developing country context using a multiple-case study approach.

Since the publication of the first foundational works on sustainable entrepreneurship [16,17], the field has gained considerable interest from scholars, practitioners, and institutions [18] across a wide range of sectors and disciplines, yet there is still a need for more research to understand the nature of the phenomenon [19]. Embeddedness has been shown to create opportunities and improve firm performance [20,21]. While the majority of research on embeddedness has focused on conventional entrepreneurs, research on the embeddedness of sustainable entrepreneurs has investigated how embeddedness makes firms operate more sustainably [22,23]. It is therefore crucial for researchers to thoroughly investigate the concept of ‘embeddedness’ of sustainable entrepreneurs. Following the calls for entrepreneurship research to become more sensitive to contextual issues [24,25], this paper examines the use of social embeddedness as a strategy in sustainable entrepreneurship in an emerging country context. By presenting real-life evidence in this study, I provide insights that deepen our understanding of this phenomenon.

In Nigeria, the social embeddedness of entrepreneurs often emerges as a strategic response to weak formal institutions, regulatory inefficiencies, and corruption, highlighting how institutional voids shape entrepreneurial behavior and resource mobilization [26,27,28]. Nigeria is an appropriate context to examine this phenomenon due to its combination of rich natural resource endowments and acute environmental and institutional challenges such as widespread pollution, energy insecurity, weak regulatory enforcement, and high unemployment [26,27]. This unique mix creates a dynamic environment where sustainable entrepreneurship is not just a choice but often a necessity-driven response to systemic gaps, offering valuable insights into how entrepreneurs navigate institutional voids to create social and environmentally beneficial ventures [26,28,29]. Also, this study concentrates on sustainable entrepreneurship due to its critical role in advancing sustainable development [30]. Understanding how sustainable entrepreneurs are embedded while exploiting opportunities in sustainability-focused industries in the context of relatively weak institutional support may thus exceed the generalization of previous studies.

In this study, I examined eight cases of sustainable enterprises in Nigeria. My findings indicate that sustainable entrepreneurs use social embeddedness as a key business strategy during their business lifecycle. Three social embeddedness dimensions are identified in this study and were strategically utilized by sustainable entrepreneurs at various stages of their business to navigate the challenges they encountered. This paper makes several contributions to the sustainable entrepreneurship literature. An understanding of how social embeddedness can assist entrepreneurs in sustainability-focused industries [22] in navigating business challenges is important. Further, by providing empirical evidence about the role of social embeddedness in the exploitation of opportunities in sustainability-focused industries, this paper contributes to both the social network and sustainable entrepreneurship studies. Finally, investigating how sustainable entrepreneurs embed themselves into the local market can provide insights into market entry strategies, helping to understand how sustainable entrepreneurs navigate challenges like regulatory environments and competition.

This paper is structured as follows: The first section presents the theoretical concept that guides this study. Following that, I detail the research methods employed, along with the findings and discussion. The final section examines how these findings contribute to the ongoing scholarly discussions in the field of sustainable entrepreneurship, practical implications, limitations, and suggestions for future research.

2. Theoretical Background

2.1. Social Embeddedness

Social embeddedness helps us understand the influence of social hierarchies on economic activities [31]. It reflects the extent to which firms are integrated into a social network in different situations [4]. The degree to which businesses engage within their networks is described by their level of embeddedness in those networks. Social embeddedness is important in entrepreneurship as it enables entrepreneurs to recognize social resources, which are crucial for establishing organizations [32]. Additionally, being embedded in a social context provides greater access to support throughout the entrepreneurial process and can also lead to higher levels of entrepreneurial activity [33]. Nahapiet and Ghoshal’s paper on social capital [34] provides an appropriate conceptual framework for examining the social embeddedness of sustainable entrepreneurs. Their work describes three key dimensions of social capital, which can be useful in understanding how sustainable entrepreneurs leverage their social embeddedness to enhance their ventures.

2.2. Relational, Structural, and Transnational Embeddedness

Relational embeddedness refers to personal relationships such as friendships that individuals have formed through interactions with other people that influence their actions [3,20]. In entrepreneurship literature, it emphasizes the role of strong, often informal connections such as friendships, family ties, or long-term professional relationships in shaping entrepreneurial behavior and decision-making.

Structural embeddedness refers to the extent to which economic or social behavior is influenced by the overall structure of relationships in a network [34], not just by direct ties between individuals or organizations. In the entrepreneurship literature, structural embeddedness refers to how entrepreneurs engage with formal institutions such as government agencies, regulatory bodies, and support organizations.

Transnational embeddedness refers to how individuals, organizations, or networks are simultaneously embedded in multiple national contexts, typically across borders, and how this dual embeddedness shapes their behaviors, opportunities, and strategies [35]. It blends aspects of structural and relational embeddedness, but in a globalized, cross-national framework.

3. Methods

This paper investigates embeddedness in an attempt to further our understanding of the sustainable entrepreneurial process. This study employs a multiple-case research design given the importance of the method in examining complex and under-explored phenomena [36]. Multiple-case studies are very effective research methods used to explore the perspectives of relatively new phenomena [7] such as sustainable entrepreneurship. Compared to a single-case study, multiple-case studies are generally considered more robust [37], as multiple cases enable cross-case validation for replication logic [38]. In the entrepreneurship literature, the qualitative case study approach provides an opportunity to explore new phenomena and develop new theoretical explanations for the observed phenomenon [39]. The multiple-case study approach is an appropriate research design used to gain concrete, contextual, in-depth knowledge about a specific real-world subject. It allows researchers to explore the salient characteristics, meanings, and implications of the case.

Furthermore, there is limited knowledge of the embeddedness of sustainable entrepreneurs, and, as a result, there are no clearly defined concepts or frameworks for assessing how sustainable entrepreneurial activities interact with this setting. This gap highlights the need for an in-depth qualitative research approach that enables researchers to explore the phenomenon within their real-world environment [40]. Since embeddedness remains a relatively new and under-explored concept in the sustainable entrepreneurship literature, this paper will adopt a multiple-case study approach to explore the phenomenon in sustainable entrepreneurship.

3.1. Case Selection

This study employed purposive and snowball sampling methods [41,42] to assess startups operating in the sustainable sector in Nigeria. Snowball sampling identifies potential participants through recommendations from others [43]. Purposive sampling allows the researcher to intentionally select participants who possess the relevant characteristics to address the research questions and objectives effectively. Nigerian sustainable entrepreneurs are suitable cases for this study as they face just about the most extreme infrastructural and resource-scarce challenges possible. Indeed, the Nigerian setting represents an intensification of some of the challenges that sustainable entrepreneurs face in general. This includes a shortage of resources, and poorer access to human and financial forms of capital [44].

The multiple-case study approach relies on the use of information-rich cases [45]. Such cases are hard to find without the use of knowledgeable individuals familiar with the setting and population [44]. Specifically, I recruited Nigerian sustainable entrepreneurs through referrals from the Lagos Business School Sustainability Centre and the Nigerian Climate Innovation Centre. As the cases were identified with the help of experts, it was essential that the cases varied in important dimensions including the size and location, as well as the industry, experience, etc., of the entrepreneurs. Such variety enhances the robustness of the findings through a literal replication logic [40]. All the ventures are relatively small and could easily be classified as small businesses. Three main criteria were used to select cases. First, all chosen businesses were based in Nigeria and founded by Nigerians. Further, the firms must have been operating for over two years, with the founders actively managing business operations. Finally, all selected businesses operated within the sustainable sector, including renewable energy, carbon management, and recycling industries.

Eisenhardt asserts that a number between 4 and 10 cases works well [46]. With fewer than four cases, developing a theory is typically challenging, and the empirical basis may be weak. While, when analyzing more than ten cases, it often becomes overwhelming due to the data’s complexity and volume [46]. Eight cases were selected for this study, and data saturation occurred after six cases as there were no new insights observed in the data.

3.2. Case Description: Overview of Case Study Firms

Case A was established in 2020 by a Nigerian who earned a master’s degree in environmental technology in the United Kingdom (UK) in 2017, before returning to Nigeria that same year. The company focuses on recycling plastic waste into by-products for manufacturing firms. Case B is a waste management and recycling company founded in 2016 by a Nigerian who previously obtained an international sustainability certificate in Germany. Case C specializes in sustainability consultancy and recycling plastics, aluminum, and paper. Founded in 2022, it was established by a founder who returned from the UK after completing a master’s degree in sustainability and environmental management. Case D recovers improperly disposed plastic waste from various locations, processing it into washed flakes and pellets for reuse in manufacturing, thus reducing reliance on virgin materials. Founded in 2019, the company was started by a Nigerian who grew up in the US and obtained an MBA there before returning to Nigeria in 2017. Case E is a renewable energy company that manufactures portable power stations to serve various needs, particularly for remote communities without electricity. The company was founded in 2021 by a Nigerian, who completed her master’s degree in sustainable energy and environment in the UK that same year. Case F operates within the circular economy, utilizing technology to collect, process, and upcycle plastic waste into valuable products. Founded in 2019 by a Nigerian who earned a Bachelor of Arts degree in the UK in 2012, the company features a network of tech-enabled recycling centers. Case G is a clean energy FinTech that offers financing and payment solutions for distributed clean energy providers across Africa. The company was co-founded in 2021 by a Nigerian who lived in the US; he holds a master’s degree in electrical engineering and returned to Nigeria in 2017 after over twelve years of work. Case H is a renewable energy firm providing affordable cleantech solutions to off-grid and underserved communities, as well as commercial clients. Founded in 2014, it was established by a Nigerian who obtained a master’s in civil and structural engineering in the UK in 2011 before returning to Nigeria that same year.

Table 1. Summary of the cases.

Name	Sector	Year Founded	Job Title	Education
Case A	Recycling	2020	Founder	Master’s Degree
Case B	Recycling	2016	Founder/CEO	Advanced Certificate
Case C	Recycling	2022	Founder/CEO	Master’s Degree
Case D	Recycling	2019	Founder/CEO	Master’s Degree
Case E	Renewables	2021	Founder/CEO	Master’s Degree
Case F	Recycling	2019	Founder/CEO	Bachelor’s Degree
Case G	Renewables	2021	Co-Founder	Master’s Degree
Case H	Renewables	2014	Founder/CEO	Master’s Degree

provides a summary of the cases.

3.3. Data Collection

For the purpose of methodological rigor [47], I employed different data collection techniques through three stages. First, I conducted in-depth semi-structured interviews using open-ended questions organized by different topic areas. Given the exploratory nature of this study, I followed relevant methodological literature to facilitate flexible but structured conversations, allowing for a deeper understanding of the interviewees’ insights and opinions [36]. Since English is Nigeria’s official language, all interviews were conducted in English, lasting between 40 and 100 min, resulting in over 20 pages of transcripts. Except for two participants, all interviews were audio-recorded. The interviews covered areas such as basic firm data, challenges encountered, the entrepreneurs’ interaction with the social and institutional environment, and the role and importance of network ties. The participants were assured of their anonymity to encourage open and objective discussions.

Following ethical principles of anonymity and identity protection [48], the real names of the participants and their organizations were replaced with fictional names, as agreed upon prior to the formal interviews. The interviews were conducted either at the participant’s workplace or online via Zoom. For those who consented, the interviews were audio-recorded and transcribed verbatim. For the participants who did not consent to audio recording, detailed notes were taken during the interview.

In addition to the interviews, the analysis is informed by sustainability documents obtained from the firm’s website, online articles, and government websites. The interviews serve as the primary data source, while the documents constitute the background material. This supplemented the data from the case study interviews with secondary sources. As Denzin notes [47], each method reveals a different aspect of reality. Using multiple data sources allows for cross-validation, and facilitates deeper exploration, thus enhancing the study’s credibility and validity [36].

The data were gathered in the period between spring 2023 and fall 2024. Each interviewee was selected because they founded a sustainable startup, although their specific approaches varied. Interviews have the benefits of granting access to the “narratives” [49] and “lived experiences” [50] of the respondents. I have focused on the stories about their experiences while operating their sustainable startup. All the interviews were semi-structured and focused on the challenges related to operating a sustainable startup.

3.4. Data Analysis

The data were coded following standard procedures for qualitative theory development, involving both the analysis of individual cases and cross-case comparisons to uncover patterns of similarities and differences [51]. The interview data were manually coded through a content analysis that focused on the expression and explanation of speech content so that logical deductions could be made according to the context of the speech and what was intended [52,53]. Hence, the focus was on the meaning of the words spoken, and how they related to embeddedness. I stored all interview transcripts as Word documents and repeatedly reviewed them to enhance familiarity with the data. Next, guided by the interview guide and research question, I manually coded the interviews, identifying codes for each case and across all cases [54].

After being recorded and transcribed, the interviews were analyzed using a two-stage process. In the first stage. I began by carefully reading all the transcripts in order to gain an overview of the reoccurring codes. This allowed me to gain a sense of the dominant narratives, as they repeatedly emerged throughout the interviews. I then assigned labels to central quotes and iteratively grouped the responses under various categories. I ended up constructing eight categories; local connections; ethnic connections; professional connections; local resources; engaging with regulatory bodies; engaging with private support organizations; global connections; and global resources. After I had organized the materials into different categories, I was able to compare the interviewees’ responses by examining how they addressed similar topics. While the respondents touched upon similar topics, they presented multiple narratives [55].

In the second phase of the coding process, I tried to identify the main challenges the respondents experienced and the different tactics they used to address them. Across the five categories, I identified a common set of challenges experienced in relation to the operation of sustainable startups, especially the liability of newness, poor access to funding, weak policy implementation, weak infrastructures, and poor market reach. Then, I looked at the tactics that the respondents employed to deal with these challenges, focusing on social embeddedness tactics. Here, I used Nahapiet and Ghoshal’s [34] work on social capital and organizational advantage as an analytical approach for interpreting the material. I ended up identifying three social embeddedness tactics used by sustainable startups to address various challenges. In analyzing the data, I followed Tracy’s suggestion to move past applying existing theories and instead use the data to provide new conceptual insights that carry theoretical significance [56]. To arrive at my analysis, I did not follow a rigid analytic procedure, but, rather, informed by the concept of social embeddedness, attempted to make sense of the material. As such, I employed the concept of social embeddedness as an analytic lens through which I could explore the tactics used by respondents to navigate business challenges. As such, it should be stressed that other analytic approaches would lead to different interpretations of the material. Rather, I have focused on three types of social embeddedness tactics employed by the respondents.

4. Findings

The findings show that three social embeddedness dimensions were tactically used by startups at different stages of their business: (1) relational embeddedness in the early startup stage; (2) structural embeddedness in the early development stage; and (3) transnational embeddedness in the growth stage.

4.1. Relational Embeddedness

The importance of local connections, ethnic connections, professional connections, and local resources for the entrepreneurs and their ventures is a strong and recurrent thematic code in the data. From the data coded in these categories, I grouped the categories into the theme ‘relational embeddedness’. Relational embeddedness refers to the personal relationships that individuals have formed through interactions with other people [3]. This concept focuses on the particular connections, such as friendships, that shape and influence people’s actions [34]. In the early stage of their business, the sustainable entrepreneurs faced challenges related to the liability of newness and poor access to funding [57] and utilized these networks to navigate those challenges. The sustainable entrepreneurs tried to structure and embed themselves into four social groups in their home countries at the early stage of their business, including (1) personal networks; (2) professional networks; (3) ethnic networks; and (4) competitors in their home country. The evidence from the eight case studies shows that once the entrepreneurs started their sustainable business, they invested time and resources to choose different networks to embed within the country.

4.1.1. Personal Networks

Personal networks consisting of family, friends, and acquaintances offer sustainable entrepreneurs emotional support, startup capital, and informal guidance. They build social capital through personal connections with family and friends, professional ties with former colleagues, suppliers, customers, and investors, as well as intermediary connections gained by attending events such as conferences or seminars [58,59].

Case D and Case G received seed funding from friends and family in the form of angel investment when starting their sustainable enterprise. For Case F, the financial support he received from family and friends enabled him to pay salaries and test business concepts during the early stages of the company.

‘Yeah, for sure. So, the lead investors in our seed round, it was family and friends that helped. We were growing and we needed more funding, so their help came at a very critical time for us… We were doing what we call the seed round of funding, I think for us we had run a different business before, so there were so many nuances with that. I would say pre-seed, we got angel funding. So, funds in the middle kind of tied with the broader seed round that we did’.

[Case G]

‘I would say when we started. That’s especially when we needed it the most right. When you start a project, you need to pay salaries, you must pay for some things. Yeah, I would say the early stages when we set out to figure out what we were trying to do and needed the resources to prove our concept. It was important to have support. I mean, it’s still important but it’s probably less financial these days’.

[Case F]

Faced with difficulties in obtaining bank loans, Case E sought financial assistance from friends and family in the form of loans to start her sustainable business.

‘Yes, I have received support from friends and family. So, when I wanted to enter the market in January, I got some loans from friends, like short-term loans and we’ve been able to pay most of them back. That’s how we were able to get into the market because we needed to manufacture a particular target for the economics to make sense. So, we had to source money from friends and family. Again, we went to Nigerian banks. They were not forthcoming, and this is one of the issues that Nigeria needs to address’.

[Case E]

At the early stage of his business, Case B obtained short-term loans from friends but is now primarily financed through international funders.

‘Yes, I have received support especially in the beginning before we got connected to the international supporters/funders. But those are casual friends whom I can easily collect small lumps and then pay back’.

[Case B]

4.1.2. Professional Networks

Further, the entrepreneurs also leveraged their professional networks by joining several sustainable professional associations (e.g., Renewable Energy Association of Nigeria, Recyclers Association of Nigeria, etc.) during the early stage of their business.

For Case B, professional networks offer a platform for knowledge sharing, support in addressing challenges, and access to funding for his business.

‘Yes, of course. We have an association, the Recyclers Association of Nigeria, through which we support ourselves through information sharing, expertise, funding, and helping through challenges’.

[Case B]

For Case A, professional networks serve as a way to connect with other professionals in his line of sustainable business. Case F believes that professional networks enable the sharing of business information in the short term.

‘Yes, I do have an association but it’s mainly for people that are into recycling, particularly plastic recycling’.

[Case A]

‘Occasionally, I like to use it to receive and disseminate information primarily. That is the purpose of what I see it as. I’m also a board member of one or two organizations, industry organizations. But yeah, primarily, in the short term, that’s what I think they are useful for and to an extent, it does the job’.

[Case F]

4.1.3. Ethnic Networks

Additionally, they also embed into ethnic networks in their home country. Ethnic networks provide sustainable entrepreneurs with access to resources, cultural familiarity, business advice, and support, helping them navigate the challenges of the liability of newness.

Case C normally collaborates with ethnic networks for sustainability-related community initiatives. While Case A procures raw materials for his business utilizing ethnic supply networks.

‘But when I organized a tree planting campaign some time ago, we did that there. I organize tree planting campaigns at different times and in different locations. So, on that occasion, we decided to do it in my community, and I had to reach out to them, they promised to support and well, some of them came out in person physically to join the planting’.

[Case C]

‘Well, I can’t really say support, but we do business with them. They supply me with materials I need, and I pay for them, so it’s just regular business’.

[Case A]

4.1.4. Competitor Networks

Sustainable entrepreneurs often collaborate with other local sustainable entrepreneurs when partnering for sustainability-related initiatives.

Cases G, C, and F adopt a collaborative strategy while dealing with competitors as a means to gain competitive advantage.

‘Again, we are taking a very collaborative approach, so the way we think about is they haven’t been able to effectively deploy funds into the renewable energy space and I think we’re doing a decent job with that. So, collaborating with them means they can channel funds to us’.

[Case G]

‘The ultimate goal is to raise an army of like-minded individuals like when you’re all doing these things coherently, in unison. Like I tell people, as an individual, I’m like a drop of water but when we come together, we form an ocean. As an individual, my effect and impact would create a little ripple but together, we will create a wave. That’s the ultimate goal for me. To have everybody understand and embrace this as a lifestyle, culture’.

[Case C]

‘I still struggle to call them my competitors because less than ten percent of the market is being collected and processed and the former market is less than half of that. So yeah, I maintain a good relationship with all of them and we are also having conversations with them around providing our solution to them as well’.

[Case F]

Further, experienced sustainable entrepreneurs often act as mentors for entrepreneurs starting in sustainable entrepreneurship. These mentors provide valuable insights into the local sustainable industry, including opportunities, trends, and challenges, and offer best practices for sustainable operations. They also assist them in understanding local regulations and policies related to environmental standards and sustainability.

‘I actually have about five. I have met some and even visited their crushing site. Some in Abuja, some in Kano before I set up mine’.

[Case A]

‘Yes, that’s exactly how I have been able to stay afloat… Monetarily, in every way. Even the land we currently operate on, it’s my mentor (who) gave it to me. He wanted to use that place for some incineration’.

[Case C]

‘So yeah, everything I know in the industry is by testing and learning and by speaking to people. So yeah, I so have some mentors’.

[Case F]

In summary, it is evident that sustainable entrepreneurs embed into different social networks during their firm’s startup phase. By integrating into these networks, they acquire the necessary resources required to set up their sustainable businesses.

4.2. Structural Embeddedness

The benefit of engaging with regulatory bodies and private support organizations for the entrepreneurs and their ventures is a strong and recurrent thematic code in the data. From the data coded in these categories, I grouped the categories into the theme ‘structural embeddedness’. Structural embeddedness refers to how entrepreneurs engage with formal institutions such as government agencies, regulatory bodies, and support organizations [60]. In Nigeria, entrepreneurs face a difficult challenge as they navigate the institutional environment. They must comply with local environmental regulations, which can be inconsistent and underdeveloped [61,62]. Sustainable entrepreneurs attempt to navigate these regulations while advocating for stronger environmental governance. After progressing beyond the early startup phase, they placed themselves in certain networks as their business progressed to the ‘early development’ stage. After establishing their business after starting up, sustainable entrepreneurs embedded themselves in specific institutional networks as their business progressed into the ‘early development’ stage.

The entrepreneurs attempted to build strong relationships with the local government in order to secure the institutional support essential for their sustainable business success. This perception may stem from Nigeria’s high power distance in business practices, as the interviewees emphasized that maintaining a good relationship with the government was crucial for their business survival.

For Case A, establishing a strong relationship with the local government could result in access to subsidized infrastructure, which would support the growth of his business.

‘I believe if we have a good relationship with those government organizations, our business will flourish more’.

[Case A]

For Case G, maintaining a good relationship with government agencies could enhance his firm’s ability to make a greater impact as a company.

‘I think it’s definitely helpful and beneficial to have a good relationship with the government. Because one, there’s a lot of capacity that the government can make, you could also help the government see things from the private sector perspective, the government also has certain resources at their disposal including policy making that can actually expand our impact as a private sector company. So, I think whenever we can collaborate with the government, it’s more than welcoming actually’.

[Case G]

Cases F and C suggest that maintaining a good relationship with government agencies is essential for sustaining a sustainable enterprise in Nigeria, as they enforce the regulations necessary for sustainable businesses to operate. Case E believes that running sustainable businesses is less difficult when the government fulfills its expected responsibilities.

‘You need to have a good relationship with regulators otherwise they shut you down. But more importantly, I said earlier that my role is to support the government especially in technology and the advancement in technology. No matter how developed we get as entrepreneurs, if the government is not aware of how to enforce or control, the impact won’t be as pronounced. So yeah, for me, with management, it is primarily local. It’s not even state or nationwide. But the point is regulators, local governments, which is local, you can’t do without them’.

[Case F]

‘I remember every program, every outreach program we want to carry out, we have to write to the government. To the appropriate office, the appropriate ministry and on every occasion, they tell us that there is no fund for us, but they are giving us permission to go ahead and do it, and we will say thank you’.

[Case C]

‘Not necessarily a relationship. We just want the government to do what they are supposed to do. Every other thing becomes easier’.

[Case E]

The entrepreneurs encountered challenges due to Nigeria’s inconsistent and underdeveloped policies on sustainable entrepreneurship and needed to work with the local government to help shape policies in this sector.

‘The government policy around sustainable waste management, plastic waste collection and recycling is still being drafted…, so there was no government policy then when I initiated the business’.

[Case B]

‘But for me, I would say I support the government more than the government supports me. That’s because right now, regulation in this sector is being developed and I am in a case where I might have a bit more insight than they do because of the work I do and also because of the data I have access to’.

[Case F]

In Nigeria, institutional voids due to the weakness of formal market-supporting institutions, such as regulatory frameworks, legal enforcement, infrastructure, and access to finance, create significant challenges for sustainable entrepreneurship. As a result, the public sector frequently fails to provide the enabling environment needed for sustainable ventures to thrive. From the perspective of neo-institutionalism, which emphasizes how organizations conform to social norms, cultural expectations, and institutional pressures to gain legitimacy, private sector organizations often fill these institutional gaps. This is not only out of economic self-interest, but also due to normative pressures to be seen as responsible and aligned with global sustainability agendas. By providing targeted support, these private institutions influence the strategic direction of sustainable firms.

For Case E, all financial support has come from private international organizations, with no help from the government. Also, Case E introduced a second product following training sponsored by a private organization.

‘Not at all. It’s always private institutions, international organizations you know. All of the money that we’ve gotten…, from different organizations is not exactly the government giving money. And I think this is where the government needs to put in more work right. If you look at developed countries, when you want to start a business, they give you a grant to start the business whether you fail or not, they still give you the grant either way because to start a business requires so much. When you are doing well, you get access to more grants, and more loans. All of these are not accessible in Nigeria… Again (company name) didn’t just support us in the establishment of our business, but have played a huge role in helping us continue our business… So, take for example (company name) recommended us for the (name of program) Program…that knowledge transfer helped us build a second product which we will be launching shortly’.

[Case E]

While his business was in its early development stage, Case C had to run multiple community outreach programs to inform the public about the advantages of recycling, with funding for these initiatives sourced from private organizations.

‘The recycling is the business and then I noticed that to get people to understand it, we need to go out and sensitize and advocate and the company cannot render those advocacy services. So, we had to set up the NGO and with the NGO, we didn’t just limit the operations and services to recycling advocacy. We organized environment documentary screenings at different places and for most of these programs and events, we’ve gotten funding… from a couple of companies’.

[Case C]

The entrepreneurs needed to integrate into the local institutional environment during the early development stage of their business by building relationships with both private and public institutions. They encountered difficulties due to weak policy formulation and implementation and often worked with authorities to develop sustainable entrepreneurship policies. Furthermore, with limited or no government support, they depended on assistance from private organizations within Nigeria. In addition, in Nigeria, there is a strong and ongoing public discourse on the need to reverse the environmental degradation that is thought to have occurred mainly because of the activities of the private sector, particularly with respect to oil and gas exploration. These discourses have a normative effect on private multinational organizations, causing them to support sustainable sector initiatives which, in turn, benefit the startups.

4.3. Transnational Embeddedness

The importance of accessing global connections and global resources for entrepreneurs and their ventures is a strong and recurrent thematic code in the data. From the data coded in these categories, I grouped the categories into the theme ‘transnational embeddedness’. Transnational embeddedness describes how entrepreneurs leverage cross-border networks, diaspora connections, foreign markets, and global institutions to access resources, knowledge, legitimacy, and opportunities that are unavailable or limited in their home country [35,63]. While their business is in the early development stage, Nigerian entrepreneurs face additional challenges due to poor market reach, weak infrastructure, and lack of additional funding to expand [64]. To overcome these challenges and grow their business, sustainable entrepreneurs embed transnationally by leveraging their international networks, knowledge, and resources while adapting to local institutional frameworks. By tapping into these global connections, they acquire the expertise and resources essential for the growth of their business.

Case B uses expertise from international networks to overcome business challenges. Case D, who produces and exports recycled materials, relies on his global connections to secure export clients. Case H utilizes international networks to obtain necessary funding for his firm’s growth. Case F accesses crucial information for business expansion through these networks. Case E sees international markets as crucial for scaling her business, driven by the greater purchasing power abroad.

‘Oh yeah, I did receive that, especially expertise… my friends living abroad… So, some of them are researchers in their fields. Some of them are also environmental scientists and some of them are business consultants. So, if you have any business challenge… they can support us from there’.

[Case B]

‘Yeah, exactly, one hundred percent. It has a positive impact because of course, I did a lot of experimentation. I tried to move around a bit, especially in entrepreneurship and did a few different things and even understanding that access to information is the most important thing. Like, money is not even that important. Information is the key and sometimes, without that access, you can’t do anything so yes, I realize that that is one of the privileges [of international networks] that this helps with’.

[Case F]

‘We came back to Nigeria to implement right; we are still implementing, and people are still buying our product, but it is time to expand so that we can be able to augment all of these losses. The truth is that Nigeria has a big market, but the purchasing power is low. [The] UK has a smaller market, but the purchasing power is high so doing that helps us. Then, when we finish in the UK, we will spread to the US and offer our products to a specific range of people’.

[Case E]

In summary, sustainable entrepreneurs often maintain connections to international markets and expertise, which helps them access global capital, technology, and business practices. At the same time, they build relationships with local stakeholders, including government bodies, private institutions, and communities, to gain legitimacy and navigate the domestic environment. This combined approach enables them to create businesses that incorporate global perspectives, fostering innovation and competitiveness in the sustainable sector.

5. Discussion

The findings demonstrate how sustainable entrepreneurs leverage social embeddedness from the early startup phase to the growth stage of their businesses in contexts where formal institutional support for entrepreneurship is limited.

Understanding how sustainable startups establish and integrate businesses is a significant and valuable area of research. However, few studies have explored this topic, especially with an emphasis on sustainable firms. This study aims to address this gap by presenting key insights, as illustrated in Figure 1 below.

This research identified three distinct social embeddedness dimensions, relational, structural, and transnational embeddedness, with each beginning at different stages of the firm’s development. It is evident that founders of sustainable startups make deliberate strategic choices about which networks to integrate into in their home country during the setup phase.

The choices sustainable entrepreneurs make regarding which social networks to embed in while operating in Nigeria are shaped by a mix of enabling and limiting factors rooted in the country’s institutional environment, socio-cultural environment, and resource landscape. Factors such as cultural affiliations, community ties, and transnational ties enable their choices, while factors such as institutional voids and resource constraints limit their choices.

Entrepreneurs facing market failure, regulatory gaps, or limited access to formal finance turn to informal networks, local norms, and community ties to mobilize resources, gain legitimacy, and reduce business costs [61,62]. This aligns with effectuation theory [65], where entrepreneurs create opportunities by leveraging means at their disposal, often embedded within their social and institutional contexts. In regions marked by institutional voids, such as poor governance, regulatory corruption, and limited infrastructure, embeddedness becomes an adaptive response that supplements weak institutions.

In line with network theory, they acknowledged that embedding into the local social structure assisted in building social capital [66]. Since the firms typically face resource constraints [67], deciding where to embed and how to structure their initial networks is necessary in the early startup phase [7]. In addition to personal networks of family and friends, it was also beneficial for sustainable entrepreneurs to be embedded in ethnic and professional networks during the setup stage of their business.

Further, this study argues that structural embeddedness plays a key role in the early development of sustainable enterprises. The lack of formalized regulations and support from the local government posed significant challenges to the startups. The findings indicate that sustainable entrepreneurs are strongly supported by private multinational companies as part of their corporate social responsibility. By providing targeted support, these private organizations also influence the strategic direction of the firms.

In addition, transnational embeddedness enables sustainable entrepreneurs to leverage international networks, gaining access to valuable resources, knowledge, and markets. International networks help sustainable firms grow by providing access to diverse resources, such as funding, market information, and advanced technologies. These connections offer valuable knowledge, best practices, and innovation opportunities from global markets. Additionally, international networks facilitate partnerships, and expand market reach, enhancing their competitiveness and growth potential. This study therefore highlights a key pathway for sustainable entrepreneurs to transition into transnational entrepreneurship.

Finally, the sustainable entrepreneurs continue to be relationally embedded even after the early startup phase of their business; they also continue to be structurally embedded after the early development stage of their business. Each embeddedness dimension once introduced continues to be utilized by the entrepreneurs as they operate their sustainable business. Investigating the effect of relational embeddedness on early-stage development and structural embeddedness during the growth phase is beyond the scope of this paper.

6. Conclusions

This study tried to understand the social embeddedness of sustainable entrepreneurs. The findings reveal that sustainable entrepreneurs prioritize different forms of embeddedness at various stages, starting with selecting networks during the early startup phase to achieving deeper embeddedness through institutional processes. Notably, established networks in both the entrepreneur’s home country and abroad provide crucial resources and support, which contribute to their firm’s development.

The findings of this research make several significant contributions to the literature on sustainable entrepreneurship. First, to the best of my knowledge, this is among the first empirical studies to explore the phenomenon of embeddedness of sustainable startups in a developing country context using a multiple-case study approach. Though several empirical studies have investigated embeddedness in various fields such as the high-tech industry [8], family businesses [9,10], professional entrepreneurship [11], refugee entrepreneurship [12], social entrepreneurship [13,14,15], migrant entrepreneurship [1], international entrepreneurship [68], the high-tech Silicon industry [69], transnational entrepreneurship [70], and rural entrepreneurship [44], there has been no empirical study investigating the phenomenon in sustainable entrepreneurship in a developing country context. Thus, this paper contributes to the development of the field of sustainable entrepreneurship.

Second, the study findings contribute to the embeddedness literature by conceptualizing the relationship between sustainable entrepreneurship and embeddedness, identifying it as a strategic resource with three distinct dimensions. Few studies have examined how sustainable firms develop their embedded structures from a strategy-oriented perspective, none in a developing country context.

Further, the study findings can serve as a practical guide for sustainable entrepreneurs who might benefit from tactically utilizing social embeddedness to navigate business challenges while operating their sustainable startups.

Finally, the findings provide important insights for policy and practice aimed at encouraging sustainable entrepreneurship and nurturing the potential of sustainable entrepreneurs. This research emphasizes the need to build an enabling environment that addresses regulatory challenges, improves resource access, and promotes collaboration among sustainable entrepreneurship stakeholders. Policymakers should consider the following initiatives: (i) improving funding mechanisms and implementing regulatory reforms; (ii) providing resources for practitioners and ecosystem builders, including mentorship platforms and diaspora engagement programs; and (iii) proactively supporting sustainable entrepreneurs at every stage of their business lifecycle.

7. Limitations and Areas of Future Research

Despite its contributions, this study has some limitations. First, while Nigeria is an emerging economy, it differs from developed countries, which have comparatively better infrastructure. As mentioned earlier, developed countries provide greater institutional support for sustainable activities than Nigeria. Therefore, replicating this study in other economies is essential to verify if the findings are consistent. Second, the insights in this paper are based on qualitative interviews, and future research could extend these findings by developing testable hypotheses through quantitative surveys. Combining a qualitative approach with a questionnaire survey could help both in theorizing and testing the effects of different contexts outside Nigeria. Finally, future studies can investigate the effect of relational embeddedness on early-stage development and structural embeddedness during the growth phase of sustainable startups.