One size does not fit all: Sustainable innovation, climate policy, and startups' growth aspirations

Abstract

Prior research suggests that the growth aspirations of startups are critical to their success. Meanwhile, as concerns about our natural environment and social injustices grow, sustainable innovations from startups seeking to address these issues become more urgent. Thus far, however, previous research has paid little attention to how the successful introduction of sustainable innovations affects the development of startups, in particular, in the form of their resulting growth aspirations. In this study, we empirically explore the relationship between sustainable innovation and startups' growth aspirations, and, drawing on institutional theory, how climate policy moderates this relationship. By investigating a sample of 1430 startups from 32 countries from the Flash Eurobarometer, we find that startups that have introduced a sustainable innovation in the past 12 months have higher growth aspirations. Additionally, our results show that stronger climate policy negatively moderates this relationship. Our findings offer a set of concrete implications for research and practice.