1 Introduction

Empirically, we see more and more entrepreneurs embracing entrepreneurial action to create social or environmental value as well as economic value. Scholars refer to entrepreneurship that aims to balance the triple bottom line of social, ecological, and economic development as sustainable entrepreneurship (Elkington 1994; Shepherd and Patzelt 2011). We draw on the definition provided by Shepherd and Patzelt (2011: 142) that sustainable entrepreneurship is “focused on the preservation of nature, life support and community in the pursuit of perceived opportunities… for economic and non-economic gain….” In efforts to balance these different dimensions of entrepreneurial activities, sustainable entrepreneurs face complex tradeoffs; for instance, decisions that benefit the environment may have unintended consequences for social or economic well-being (Hahn et al. 2014, 2015). In turn, sustainable entrepreneurs have to reconcile a persistent dual orientation—sustainability orientation and entrepreneurial orientation—from which they aim to do good while pursuing entrepreneurial opportunities (DiVito and Bohnsack 2017).

Sustainable entrepreneurship entails entrepreneurial exploration and exploitation activities in underdeveloped, developing, or developed markets with highly uncertain outcomes (Bank, Fichter, and Klofsten 2017; Muñoz and Cohen 2018; Shepherd and Patzelt 2011). Prior work argues that this kind of uncertain entrepreneurial action flourishes in entrepreneurial ecosystems where the benefits of interaction with ecosystem actors increases access to resources and knowledge, legitimizes entrepreneurial ventures, and reduces risk (Kuratko et al. 2017). Yet, we do not know whether entrepreneurial ecosystems, as they are currently theorized in the extant literature, support sustainable entrepreneurship.

We argue that sustainable entrepreneurship differs in significant ways than traditional entrepreneurship. For example, we know that the role of activists or stakeholder groups and the natural environment is more prominent in sustainable entrepreneurial ecosystems or eco-industrial parks (Cohen 2006). Additionally, the motivations to engage in entrepreneurship and innovation to resolve sustainability issues or pursue more sustainable opportunities may not be purely profit motivated placing constraints on financial resources (Dorado 2006; Mair and Marti 2006). Also, as the benefits and outcomes of sustainable entrepreneurship may accrue more collectively or focus on common goods, sustainable entrepreneurs may have difficulty capturing value from their innovations (Dean and McMullen 2007; York and Venkataraman 2010). It follows from this reasoning that sustainable entrepreneurs may require different ecosystems where actors interact and provide support in significantly different ways than in traditional entrepreneurial ecosystems (Autio et al. 2018; Neumeyer et al. 2018).

The recent literature on entrepreneurial ecosystems builds on established work on national and regional economic and innovation systems (Nelson 1993; Edquist 1997; Freeman 2002), which has shown that resources (e.g., knowledge, finance) are embedded in various actors and institutions and that innovation and entrepreneurship flourishes or fades within them (Zahra and Nambisan 2011). National, regional, and metropolitan areas develop specialized (technical) knowledge and expertise in industry clusters or ecosystems that function as anchors attracting talent and businesses, driving innovation and economic development (Edquist, 1997; Florida et al. 2008; Nelson 1993).

Recently, scholars have turned their attention to understanding entrepreneurship more holistically, as part of larger ecosystems of interactions between actors, such as institutions, firms, and individuals that engage in innovative and entrepreneurial activity (Audretsch and Belitski 2017; Autio et al. 2014). Ecosystems manifest on various levels, such as the national, regional, and local levels, and the boundaries are permeable as some resources, such as financing, can travel easily across geographic boundaries and others, such as tacit knowledge, do not. Geographic proximity of actors aids the transfer of highly tacit, sticky, locally embedded knowledge that is not easily accessed or transferred across borders (Gertler 2003).

We draw on innovation and entrepreneurial ecosystems literature to investigate and illuminate the systemic conditions that aid sustainable entrepreneurship. In doing so, we extend the current theorizing on entrepreneurial ecosystems to include a layer of sustainability. We ask the question: how does an entrepreneurial ecosystem become a sustainable entrepreneurial ecosystem?

To address this question, we conducted an inductive, single-case study of a specific innovation project in an industry specialized in a specific geographic context. Using a collaborative innovation project as the unit of analysis, we studied the interactions of entrepreneurial experimentation of the actors, which is indicative of the strength of innovative activity in an entrepreneurial ecosystem (Audretsch and Link 2017). Using data from semi-structured interviews and longitudinal observations over a period of 2 years and archival documentation, we find the presence of four conditions. These include (1) sustainability orientation of actors, (2) the recognition of sustainable opportunities and resource mobilization, (3) collaborative innovation of sustainability opportunities, and (4) markets for sustainable products. The conditions, which have embedded interactions and interdependencies among various actors in the ecosystem, are reinforcing and support the emergence of a sustainable entrepreneurial ecosystem. We contribute to the emerging literature on sustainable entrepreneurial ecosystems by showing that the interdependency of actors is salient and that opportunity recognition is distributed across different actors in the sustainable entrepreneurial ecosystem. We also contribute to the sustainable entrepreneurship literature by providing a more nuanced view of the innovative and entrepreneurial actions of sustainable entrepreneurs.

The paper is structured as follows. In the next section, we present the theoretical background. Following that, we explain the research method and the case context, and present the findings. In the final sections, we discuss the implications and conclusion.

2 Theoretical background

2.1 Sustainable entrepreneurship

The sustainable entrepreneurship literature argues that economic entrepreneurial action can contribute to solving complex social and ecological issues, and that these types of entrepreneurs act as a catalyst for industrial transformation (Cohen and Winn 2007; Hall et al. 2010; Hockerts and Wüstenhagen 2010; Muñoz and Dimov 2015; Parrish 2010; Schaltegger and Hansen 2013). Sustainable entrepreneurship builds on previous work in social entrepreneurship and ecological (or green) entrepreneurship, but it is also distinct from these fields. Ecopreneurs pursue opportunities to resolve highly uncertain ecological problems with ambiguous outcomes, long-term horizons, and high business uncertainty. Ecopreneurs are most likely to act and innovate when profits can be gained, suggesting that they establish for-profit ventures (Cohen and Winn 2007; Dean and McMullen 2007; York and Venkataraman 2010). Social entrepreneurship may be more mission-driven than profit-driven (Dorado 2006; Mair and Marti 2006), and there is much variance in how social benefits are incorporated in strategic organizational goals (Zahra et al. 2009). For example, the social enterprise may create social wealth with little, or no, economic wealth (e.g., charity, non-profits) whereas others may create social as well as economic wealth (for-profit). Sustainable entrepreneurship, however, takes a more integrated, holistic perspective in pursuing opportunities (Schlange 2009) and aims to balance tradeoffs more equally between the three dimensions of economic, ecological, and social sustainability (DiVito and Bohnsack 2017).

Scholars are increasingly studying sustainable entrepreneurship as distinct from traditional entrepreneurship (Belz and Binder 2017; Shepherd and Patzelt 2011). Sustainable entrepreneurs, inclusive of eco- and social entrepreneurs, are dually oriented toward social responsibility on the one hand and entrepreneurial exploration and exploitation on the other. They have to reconcile conflicting values and logic when making decisions and grapple with unique and persistent tradeoffs (De Clercq and Voronov 2011; Hahn et al. 2015) when compared to traditional entrepreneurs who do not have this dual orientation. Because sustainable entrepreneurs aim to address pressing societal challenges and improve societal well-being, they have the potential to create disruptive change and transform industry practices (Hall et al. 2010; Hockerts and Wüstenhagen 2010). However, scholars criticize this view for overpromising their potential as disruptive change agents and further point out that sustainable entrepreneurs cannot act in isolation (Hall et al. 2010; Schaltegger and Wagner 2011). As a recent phenomenon, extant literature has only just begun investigating sustainable entrepreneurship and the complex interaction between sustainable development and innovative, entrepreneurial activity. To understand sustainable entrepreneurship, scholarship needs to explore the pursuit of sustainability opportunities as embedded in entrepreneurial ecosystems, its interaction with various actors, and its manifestations at micro, macro, and geographic levels (Bischoff and Volkmann 2018; Meek et al. 2010; Simatupang et al. 2015).

2.2 Sustainability, innovation systems, and entrepreneurial ecosystems

The systems literature more generally—innovation systems, national business systems, entrepreneurial ecosystems—posits that economic actors are not isolated and that the institutional context in which they engage for entrepreneurial, innovative, and economic activity matters (Bergek et al. 2008a; Whitley 2000). Scholars have examined national, regional, and local systems of economic development and innovation and have shown that different contextual environments shape economic outcomes and innovation processes (Asheim and Coenen 2005; Asheim and Isaksen 2002; Soskice and Hall 2001). Prior work has also shown that the components of systems act in reinforcing ways; in other words, particular constellations of economic and innovation systems will be conducive or restrictive to particular patterns of economic or innovation behavior (Casper 2007a, 2007b; Casper and Whitley 2004) leading to economic and innovation specialization in areas of knowledge, workforce skills, and industries.

As has been pointed out more recently by scholars, innovation (eco)systems literature focuses on the dynamics and evolution of actors (e.g., cross-fertilization) as an interconnected process and network of public and private actors that preserves ecosystem resilience and survival (Lundvall et al. 2002; Roundy et al. 2017). In the innovation systems literature, scholars point out the lack of attention to the actions of the entrepreneur (Alvedalen and Boschma 2017). The exception is a study from Bergek and colleagues (2008a) which puts forth an analytical framework for innovation systems that includes several key systemic processes, one of which is entrepreneurial experimentation. They argue that entrepreneurial experimentation is essential to reduce uncertainty of technological innovation and without this key functional process an innovation system would stagnate. In this regard, entrepreneurial action is a central process in innovation systems.

The growing interest in entrepreneurial ecosystems addresses the gap in the literature to understand entrepreneurial action (new value creation and capture) in complex, multi-level economic systems (Acs et al. 2017; Neck et al. 2004; Simatupang et al. 2015). Entrepreneurial ecosystems emphasize the entrepreneur and his actions based on contextual characteristics and components of the systems (Glaeser et al. 2001; Glaeser et al. 2014; Isenberg 2010; Neck et al. 2004; Spigel 2015; Stam 2014; Stam 2015; Szerb et al. 2013; Woolley 2014). It stands to reason that ambitious entrepreneurship that engages in entrepreneurial experimentation to explore and exploit innovative opportunities (Bergek et al. 2008b; Smith and Raven 2012; Stam 2015; Wesseling and Van der Vooren 2017) arises from vibrant ecosystems where resources and knowledge flow easily among actors. These two literatures on innovation (eco)systems and entrepreneurial ecosystems have not yet been well linked, with the exceptions of studies from Bergek and colleagues (2008a, 2008b) and from Audretsch and Link (2017), who investigated how the governance of research joint ventures affects the inclusion of actors from the entrepreneurial ecosystem to engage in entrepreneurial experimentation or innovative activity.

We take the position that sustainable entrepreneurs engage in entrepreneurial experimentation to innovate products, business models, and institutions and in doing so engage in highly uncertain markets with ambiguous performance outcomes. As such, sustainable entrepreneurs draw on the strengths of innovation and entrepreneurial ecosystems. We consider innovation ecosystems and entrepreneurial ecosystems to be intertwined spatially as they share common components of public and private organizations. We posit, however, that sustainable entrepreneurship requires distinct configurations of institutions and actors in order to thrive in entrepreneurial ecosystems (Bischoff and Volkmann 2018).

We argue that sustainability in entrepreneurial ecosystems is unique for a few reasons. First, sustainable entrepreneurs seek solutions to grand societal issues—for example climate change, water preservation, or poverty. The time horizon for search, experimentation, and implementation is of a long-term nature and requires long-term inter-firm relations with actors in the entrepreneurial ecosystem. For example, Marsden and Smith (2005), in their study on ecological entrepreneurship in the food industry, claim that specialized regional and local networks form as collective responses to problems of sustainable development. These networked forms of ecological entrepreneurship encourage spatial relationships, or “socio-technological niches,” in which individuals and network actors respond entrepreneurially to competitive and global forces. Their study highlights the importance of the interaction between ecological entrepreneurs utilizing natural resources in new and innovative ways and the larger political and social environment.

Secondly, the recognition and exploitation of sustainability opportunities may require different actors—those that highlight the issues, those that invent alternative products or materials and those that take entrepreneurial action. Recent work on “activist entrepreneurship” highlights how actors as individuals or organized groups engage in “disruptive truth-telling” (Dey and Mason 2018: 85) to unleash transformative forces and change the collective imagination. They argue that disruptive truth-telling requires reflexivity and knowledge from other entrepreneurial actors (e.g., those that invent new products) to understand the social and political assumptions that activist entrepreneurs target and to experiment with possible alternatives.

Lastly, capturing value from the entrepreneurial action of sustainability opportunities is challenging due to the dispersed collective benefits and spillovers to other actors (Barnett 2006). This implies that entrepreneurial ecosystems focused on sustainable entrepreneurship may function differently than those focused on traditional entrepreneurship. Additionally, if sustainable entrepreneurs are likely to be change agents who disrupt industry status quo, then it stands to reason that they may engage in institutional entrepreneurship to a greater degree than traditional entrepreneurs. Their entrepreneurial actions within the ecosystem may have a direct effect on the course and evolution of the (sustainable) entrepreneurial ecosystem (Muñoz and Dimov 2015; Pacheco et al. 2010).

The literature to date has paid scant attention to the role of the sustainable entrepreneur in entrepreneurial ecosystems (Bischoff and Volkmann 2018). Our aim in this paper is to address this gap in the entrepreneurial ecosystem and sustainable entrepreneurship literatures. We investigate empirically sustainable entrepreneurial experimentation and uncover the distinctive conditions that support continued sustainable entrepreneurship. In our study, we ask the question how an entrepreneurial ecosystem becomes a sustainable entrepreneurial ecosystem.

3 Methods

We use an inductive, single-case study to address our research question. A case study design is appropriate because we aim to explore the becoming of sustainable entrepreneurial ecosystems. An inductive, qualitative approach of an entrepreneurial ecosystem allows us to dive deep into the phenomenon and uncover the sustainability conditions that influence activities, behavior, and interactions of entrepreneurial actors over time (Langley 1999) rather than reveal a relationship between variables (Langley et al. 2013).

We selected our case study in a specialized industry (denim) that has a strong concentration in a specific location (Amsterdam). Prior literature on entrepreneurial ecosystems often uses a case methodology based on parameters of location or industry (Bank et al. 2017; Etzkowitz and Klofsten 2005; Spigel 2015). Following the example of Audretsch and Link (2017), we use a case study of a collaborative innovation project with multiple units of analysis—the project, the actors, and the broader ecosystem. A collaborative innovation project highlights activities of high risk and uncertainty that are typically carried out by various actors in entrepreneurial ecosystems where spatial and cognitive proximity support innovative behavior. Using a case study method, we gain deep insights into the actors and the contexts in which they operate in order to extend and build theory (Eisenhardt 1989; Yin 2003).

3.1 Data collection

For the last 4 years, the authors have become increasingly involved and embedded in the denim industry in Amsterdam. Our higher education institution provides education and conducts research in the denim industry such that it is an actor in the local denim entrepreneurial ecosystem. From 2016 to 2018, we conducted a government funded research project that focused on improving the ecological sustainability impact of denim production. From this research project, we gained first-hand experiences and insights from our continued and regular contact with key local and international entrepreneurial actors.

For this paper, we collected data using a variety of sources including semi-structured interviews, direct observation, and publicly available documentation (Table 1). Our data collection was guided by protocols developed a priori from literature. We created a case study database so that we could chronologically follow the project and the associated documentation. We gathered data retrospectively about the start of the project and held in-depth interviews with the collaborating firms at two points in time over a 6-month period. During the 6-month period, we visited one of the entrepreneurial actors (Denim City) several times and observed how collaboration took place in physical space.

Table 1 Overview of data sources
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3.2 Data analysis

We transcribed the interviews and coded the transcripts. We created a narrative of the interviews to understand the time and sequence of events as they unfolded. We discussed and verified the narrative account with the respondents. Using these techniques and guided by theory, we devised analytical constructs with which to further analyze the data (Fig. 1). We derived inductively from our data first-order concepts, second-order themes, and aggregated explanatory constructs (Gioia et al. 2013). We moved iteratively between theoretical concepts, our data transcripts and analytical constructs using pattern matching and explanation building techniques (Pentland 1999). Explanation building is often used in conjunction with pattern matching and allowed us to uncover causal links and explain why or how a particular event or outcome occurred. Through this iterative, sense-making process, we moved from our surface observations to more abstract theory development, a reflexive process that allowed us to make a conceptual leap (Klag and Langley 2013). Lastly, we shared and discussed the findings of our analysis with our respondents.

Fig. 1
figure 1

Overview of concepts, themes, and analytical constructs

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4 The Amsterdam denim industry

The Amsterdam denim industry is a thriving entrepreneurial ecosystem that has a strong focus on sustainable innovation. Worldwide the denim industry, as a subsector of the fashion or apparel industry, represents a substantial proportion of the annual textile volume produced. As in the larger apparel industry, the denim industry faces grave and specific challenges in terms of social and ecological sustainability. Due to greater scrutiny of denim production by non-governmental organizations (e.g., CleanClothesCampaign) and consumer activist groups (e.g., Fashion Revolution), there is increasing pressure on denim industry actors to address sustainability issues. The reduction of water consumption, hazardous chemicals, and textile waste are particularly salient issues for the industry.

4.1 Actors in the Amsterdam denim industry

Specialized denim design organizations, such as brands and retailers, and denim production organizations, such as denim mills, laundries (cut, sew, and finishing factories), chemical manufacturers, equipment manufacturers, and consultants, are concentrated geographically. Table 2 provides an overview of these geographic specializations.

Table 2 Main geographic specializations of the denim industry
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In the last decade or so, the presence of denim designers and brands in Amsterdam has been increasing and approximately 30 denim brands have established either their headquarters or design and sales offices in the Amsterdam area. Additionally, international denim mills have established showrooms and have representatives in Amsterdam. Informal and formal networks have developed among peers and have led to new initiatives and ventures, with local young (boutique) brands spinning off and starting up. The mobility of actors allows for knowledge and talent to flow through these informal and formal networks.

As a location, Amsterdam has become a European hub for denim. Since 2014, Amsterdam has hosted Kingpins, a prestigious biannual denim trade fair to source denim fabric and production suppliers, and the associated Transformers seminar that highlights specific sustainability issues and innovations in the denim industry. Amsterdam also annually hosts Denim Days, an event for different stakeholders in the ecosystem with an emphasis on reaching the consumer. The Dutch consumer markets are receptive denim buyers; the informal, direct, and egalitarian culture of the Dutch embraces denim as a fashion item. The Dutch consumer owns on average five pairs of jeans and contributes to the rich denim ecosystem.

The Dutch local and national government policies also support the development and growth of the denim ecosystem. The municipality of Amsterdam provides access to physical spaces and buildings and there are two Amsterdam-based educational institutions that offer unique denim specializations, contributing to the local talent pool. Additionally there is a range of (national and international) support organizations and non-governmental organizations (NGOs) located in Amsterdam focused on the industry and sustainability issues. Figure 2 maps the actors in the Amsterdam denim entrepreneurial ecosystem.

Fig. 2
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Entrepreneurial ecosystem of Amsterdam denim industry. Actors shown in the diagram are examples and do not represent the entire ecosystem. The core actors involved in the PCRD project are in bold type and include Denim City, Denim Brand, Textile Collector, local consumers on the local level, Dutch subsidy provider on the national level, and Denim Mill and Yarn Spinner on the international level

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The focus on sustainability in the Amsterdam denim industry dates back to the early 2000s when the first Amsterdam sustainable denim brand started. However, sustainability became more central to the entrepreneurial ecosystem with the founding of House of Denim in 2009. House of Denim’s mission is to make the denim industry cleaner, dryer, and smarter. It is an internationally recognized innovation platform located in Amsterdam and aims to lead denim industry transformation in sustainability.

There are two main pillars in the House of Denim concept: Denim City and the Jeans School. Denim City, a physical space, offers laboratory space, store space, and educational space for industry workshops and networking. Denim City is a central support organization at the heart of the denim industry, bringing together denim actors to innovate collaboratively. Although locally embedded within the Amsterdam denim industry, the focus and reach is global in scale, as evidenced in its expansion to Los Angeles and Japan.

4.2 Our empirical case

We purposefully selected Denim City as a vehicle to study how actors interact in an entrepreneurial ecosystem and to understand in more depth how an entrepreneurial ecosystem becomes a sustainable entrepreneurial ecosystem. Denim City engages in various ecosystem activities; it provides training, store space, and a platform for local and international collaboration. As a central ecosystem actor, Denim City represents a revelatory case such that the researchers were able to observe over time a phenomenon that is not easily accessible and analyze aspects of sustainable entrepreneurial ecosystems. Furthermore, our case selection has methodological fit with nascent theory building (Edmondson and McManus 2007) and sheds light on a phenomenon that is little understood.

We focus specifically on a collaborative innovation project that Denim City initiated on post-consumer recycled denim (henceforth, PCRD). Denim City’s aim with the PCRD project was to collectively increase the volume of PCRD produced to lower the cost of production and aid a broader adoption in the industry. The sustainability benefits of PCRD related to taking the first steps toward a circular production process, in which discarded jeans are collected, shredded, and rewoven into new fabric, reducing textile waste and water consumption. There was also the added benefit of educating Jean School students in the process of producing and designing with PCRD.

The PCRD project had two distinct phases. The goal of the first phase was to use 20% recycled cotton in denim fabric production. It reached 18% and produced a collection in the spring of 2015. The second phase aimed to further reduce water consumption by adding the alternative material hemp into the fabric blend. The goal of the second phase was to increase the recycled cotton content to 25%, and use 25% hemp fiber and 50% organically grown virgin cotton. It achieved a result of 21%, 7%, and 72%, respectively, and produced a collection for spring 2016.

Using the PCRD project as an indicator of the behavior of an entrepreneurial ecosystem, we focus our analysis in the next section on the interactions of the four main actors of the PCRD project—the intermediary organization (Denim City), an Amsterdam-based denim brand (Denim Brand), an Amsterdam-based social entrepreneur (Textile Collector), and a European denim mill (Denim Mill)—highlighting the conditions that favor innovative and experimental collaboration for sustainability improvements and facilitate a transition to a sustainable entrepreneurial ecosystem.

5 Analysis of findings

From our analysis of the PCRD project, we identified the presence of four interrelated conditions of sustainability in an entrepreneurial ecosystem. We argue that these conditions underpin the processual formation and persistence of a sustainable entrepreneurial ecosystem. The conditions are (1) sustainability orientation of actors, (2) recognition of sustainable opportunities and resource mobilization, (3) collaborative innovation for sustainability, and (4) markets for sustainable products. The relations between the conditions and actors in the entrepreneurial ecosystem are illustrated in Fig. 3. Below, we outline the four conditions and discuss the implications. Table 3 provides selected quotations for each condition.

Fig. 3
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Relations between the conditions and actors of sustainable entrepreneurial ecosystems, the case of the Amsterdam denim industry PCRD project

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Table 3 Selected quotations for the conditions of sustainable entrepreneurial ecosystems
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5.1 Sustainability orientation of entrepreneurs

One of the conditional aspects of a sustainable entrepreneurial ecosystem is the presence of actors that have a sustainability orientation embedded in their organizations. These are the sustainable entrepreneurs who establish or work for organizations that are born sustainable or have sustainability values in their DNA. From our case, we observed a concentration in Amsterdam of denim brands as well as support organizations with strong sustainability orientations, which in turn attracted actors beyond Amsterdam that had ambitions to incorporate sustainability practices into their business models.

For the PCRD project, there were several partners that had established sustainability orientations. Denim City and Denim Brand were founded on principles of sustainability and these were embedded and integrated into their business models. The sustainability leadership of these firms was a main reason for Denim Mill to participate in the PCRD project. Denim Mill, located in Spain, referred to Amsterdam as a hotspot for sustainable denim. As an organization that aimed to transition to more sustainable production practices, Denim Mill was eager to collaborate with Denim City.

We observed from our data that not only was sustainability orientation of actors a necessary condition for the recognition and pursuit of sustainability opportunities, it was also widely dispersed among various actors in the entrepreneurial ecosystem. For the emergence of a sustainable entrepreneurial ecosystem, additional actors with sustainability orientations, other than entrepreneurs and firms, contributed to the prevalence of sustainability in the Amsterdam denim entrepreneurial ecosystem. The sustainable orientations of especially non-governmental organizations were significant. These kinds of organizations keep a watch on industry practices, bring to light a host of unsustainable social or environmental practices, and place pressure on an industry to act. Although these actors as activists highlight sustainability problems or issues in an industry and bring a sense of urgency to them, they do not craft a response to them. It is the sustainable entrepreneur who recognizes sustainability opportunities and mobilizes resources to collaboratively address sustainability issues.

5.2 Recognition of sustainability opportunities and resource mobilization

In the PCRD project, the actors in the denim ecosystem were keenly attuned to opportunities that afforded sustainability benefits. Denim City, as the main actor and initiator of the project, aimed to increase the volume of PCRD produced, which would create economies of scale, reduce the costs per meter, and increase broader adoption by the industry. It was driven from private interest for Denim City to produce denim for the Jeans School but also for the collective interests of the ecosystem and larger society to reduce water consumption in denim production.

Locational and cognitive proximity were key aspects of the actors’ recognition of the sustainable opportunity and the ability of the initiator, Denim City, to assemble resources. Denim City found partners quickly due to their similar sustainability orientations, which provided alignment of interests in goal setting. In assembling partners for resources, Denim City secured a government subsidy as well as access to corporate financing and raw materials (collected used jeans) from the Textile Collector. For technical expertise, Denim City drew on experience and resources from Denim Mill for the spinning and weaving of PCRD fabric. Denim Brand contributed design expertise and created two product collections from PCRD fabric to market to consumers. The complementary resources and skills from the various partners created an interdependence among the actors and reinforced the shared risks and benefits that is evident in ecosystems. Although Denim City acted as a catalyst for the PCRD project, recognizing the opportunity of scaling post-consumer recycled denim, the other engaged actors—Textile Collector, Denim Mill, and Denim Brand—also recognized the opportunity benefits for their own individual organizations.

5.3 Collaborative innovation of sustainability opportunities

To realize benefits from recognized opportunities, actors need to engage in exploration and exploitation activities. In entrepreneurial ecosystems, collaborative innovation by actors (for example, in the form of joint ventures or research projects) is indicative of the strength of the ties among actors and the ability to combine knowledge and resources to explore or exploit opportunities of high risk and uncertainty. Sustainability in the denim entrepreneurial ecosystem in Amsterdam rooted because the collaborative effort of actors focused on opportunities or problems that addressed a value proposition that improved sustainability in value chain production, providing (a promise of) collective or social benefits, as well as economic gains to individual organizations.

For the PCRD project, there was much iteration and experimentation in the process, or in getting to a “formula.” Denim Mill ran several production runs to test various strengths of recycled yarns and various blends (recycled yarns, hemp, and virgin cotton) until Denim Brand was satisfied with the end result. All of the PCRD partners learned from the knowledge exchange and iterative experimentation. This kind of experimental collaborative activity is not unique for innovation ecosystems. However, innovation for sustainability carries additional risks as it may require capital expenditure for technological equipment, the use of materials where the outcome is less known, and the development of uncertain markets.

5.4 Markets for sustainable products

Entrepreneurial action focuses on value creation and capture and the ability to appropriate rents from sustainable products is another important condition of sustainable entrepreneurial ecosystems. The founder of Denim City explained the vicious demand–supply cycle of the market: denim mills were not producing fabrics with PCRD because brands were not asking for it, and brands were not asking for it because consumers were not buying it. A primary aim of the PCRD project was to stimulate demand for PCRD in product and factor markets. In this way, the PCRD project was an initial start in getting mills to produce denim fabric with some recycled content and in getting brands to make collections and sell the story to the consumer.

Although the Amsterdam denim entrepreneurial ecosystem has both consumers that value sustainability in denim and denim brands that are producing sustainable products, two factors prevented the actors from capturing value from the PCRD project. First, there were limitations in technology to produce fabrics with recycled cotton that met consumers’ needs in terms of comfort (fit) and durability. Second, due to the experimentation in the process, and particularly with the second phase of PCRD which included hemp fibers in the blend, the price per meter of fabric increased to a level that eroded any economic benefit. However, with continued technological development, these limiting factors that suppressed demand in product and factors markets may fade.

6 Discussion of implications

Our study explores the question how an entrepreneurial ecosystem becomes a sustainable entrepreneurial ecosystem. This is a difficult question to address given that, in the extant literature, theorizing of entrepreneurial ecosystems is still largely debated (Alvedalen and Boschma 2017). Nonetheless, there is a general agreement that entrepreneurial ecosystems place entrepreneurial action, the creation and capture of value, at the heart of the ecosystem (Autio et al. 2014). From this perspective, we analyzed an entrepreneurial ecosystem using a collaborative innovation project within a specialized industry that is spatially concentrated in a geographic location. We identified and explained the presence of four conditions that enabled a sustainable entrepreneurial ecosystem to materialize. Table 4 summarizes these conditions.

Table 4 Conditional aspects of sustainable entrepreneurial ecosystems
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We make two main observations from our findings that are important contributions to the nascent literature on sustainable entrepreneurial ecosystems. The first observation of sustainable entrepreneurial ecosystems is that interdependency of actors is salient, where actors share risks but also benefits of pursuing opportunities that require substantial entrepreneurial experimentation (Audretsch and Keilbach 2007). Sharing risks and benefits of ambitious entrepreneurship binds actors together and makes the ecosystem stronger and more resilient (Roundy et al. 2017). As prior work has shown in regional innovation systems, knowledge sharing and transfer through networks, collaboration, and labor mobility have positive effects on the growth and development of an ecosystem (Autio et al. 2014; Saxenian 1996; Almeida and Kogut 1999). We see in our data that knowledge sharing was central to the PCRD project partners’ desire to collaborate together. In a geographically confined area as the Amsterdam metropolitan area, tacit knowledge travels easily across firm boundaries with the mobility of labor. This resonates with the established literature on Silicon Valley and the continued innovative activity of this regional innovation system (Autio et al. 2014; Saxenian 1996).

The innovation (eco)systems literature provides much insight about how to manage this interdependency through transaction cost perspectives, for instance governance structures and internalization strategies (Watkins et al. 2015; Wesseling and Van der Vooren 2017), and resource-based view perspectives, such as complementary resources and dynamic capabilities. The literature on entrepreneurial ecosystems, and by extension sustainable entrepreneurial ecosystems, has much to gain from using insights from innovation systems, especially for the experimentation or exploration phase of the entrepreneurial process (Bergek et al. 2008a). Our study is a first step in this line of inquiry as it uncovers conditions that are favorable for the exploration of sustainable opportunities or innovation.

Our second observation of sustainable entrepreneurial ecosystems is that the local proximity and presence of support or non-profit organizations facilitates the recognition of sustainable opportunities. In this way, opportunity recognition and creation requires the interaction of different actors in the entrepreneurial ecosystem, suggesting that actors also share the cognitive processes of seeing opportunities as well as the experimental processes of developing opportunities into innovative solutions (Kuratko et al. 2017). The entrepreneurship literature has long debated entrepreneurial agency in the discovery or creation of opportunities (Alvarez and Barney 2007). Our study shows not only the agentic nature of opportunity recognition but also that opportunities are recognized and created by the interaction and coming together of various actors in the entrepreneurial ecosystem. In a sustainable entrepreneurial ecosystem, this suggests the presence of expert organizations on sustainability issues that exert pressure to change, whether they are consumer activists, regulators, or solution providers for the industry and shows the importance of activist entrepreneurship in the recognition, exploration, and exploitation of sustainability opportunities (Dey and Mason 2018). This implies that opportunities are networked, socially constructed occurrences that require coordinated efforts in entrepreneurial ecosystems and resonates with the view of “ecosystems-as-structure” (Adner 2017) which places the joint definition and realization of a value proposition at the heart of an ecosystem.

Our study helps to shed light on the conceptualization of sustainable entrepreneurial ecosystems and contributes to the literature in this field. Furthermore, our study contributes to the emerging literature on sustainable entrepreneurship. As an empirical case study of a sustainable innovation project, we provide evidence that sustainable entrepreneurs are highly ambitious and innovative entrepreneurs (York and Venkataraman 2010). We show that sustainable innovation is not an isolated activity and that indeed sustainable entrepreneurs engage in institutional entrepreneurship (Pacheco et al. 2010). However, in our data, we see more nuance among the sustainable actors in a sustainable entrepreneurial ecosystem. Entrepreneurs of for-profit firms, even if they have a sustainable orientation, faced complicated tradeoffs in balancing the economic, social, and ecological dimensions of sustainable innovation. We saw that the sustainable institutional entrepreneurs were situated in non-profit organizations where changing the institutional status quo was a deep-rooted motivation. We also observed that sustainable entrepreneurs are resource constrained which limits their capacity to bring about transformational industrial change. In this way, our findings concur with scholars of sustainable entrepreneurship who claim that systemic sustainability change needs to come from, or in combination with, incumbent firms (Schaltegger and Hansen 2013).

6.1 Implications for practitioners and policy-makers

Our study has practical implications for actors within the ecosystem including entrepreneurs, managers, investors, educators, and policy-makers. Actors who initiate collaborative action within the ecosystem need to mobilize the advantages of having a strong sustainability orientation. Policy-makers should develop incentives and schemes that support the sustainability orientation of actors in entrepreneurial ecosystems, such as attracting support organizations to establish local offices, encouraging knowledge transfer for sustainability-oriented innovative activity, and stimulating the creation of new sustainability-oriented firms and products. Additionally, policy-makers should be aware of intrinsic local and regional sustainability-oriented conditional strengths and avoid duplicating other successful ecosystems like Silicon Valley without any local translation. Incentives for collaboration and innovation to improve sustainability impact, such as tax schemes, could support the specific efforts of actors in sustainable entrepreneurial ecosystems.

6.2 Limitations

Our study is not without limitations. As a qualitative case study based on a specific regional and local area and on a specific subsector (denim) of the apparel industry, the generalization of our findings may be limited. Despite this limitation, our findings about what makes an entrepreneurial ecosystem become a sustainable entrepreneurial ecosystem may apply to industries (such as the food industry or the chemical industry) that also face increasing pressure from sustainability activists and require transformative innovation from ecosystem actors. As a relatively new concept, there is much more research needed to fully understand the mechanisms and performance of sustainable entrepreneurial ecosystems. For example, how do we determine the performance of sustainable entrepreneurial ecosystems? It can be argued that the dependent variable often used in studies on entrepreneurial ecosystems, new firm creation or growth, may not capture the performance outcomes of sustainable entrepreneurial ecosystems. Additionally, more research could be done about the individual action of specific actors and how that interacts with the broader sustainable entrepreneurial ecosystem. Or, whether specific types of actors in sustainable entrepreneurial ecosystems are more likely to engage in institutional entrepreneurship. Lastly, research on the boundary conditions, geographically and organizationally, of sustainable entrepreneurial ecosystems could lead to more insight on the growth and success of sustainable entrepreneurial ecosystems.

7 Conclusion

Sustainable entrepreneurship is becoming increasingly important to study because various industries face dire sustainability concerns and business as usual is putting increasing strain on our planet’s resources and risking the well-being of future generations. However, sustainable entrepreneurship requires complicated tradeoffs and coordinated action among entrepreneurial actors. We show that actors in an entrepreneurial ecosystem pursue sustainable innovation and entrepreneurship when four conditions of sustainability are present. These conditions are sustainability orientation of actors, recognition of sustainable opportunities and resource mobilization, collaborative innovation of sustainability opportunities, and markets for sustainable products. The favorable presence of these conditions allows sustainable entrepreneurs to interact and engage in entrepreneurial experimentation that focuses on sustainable solutions, products, and innovations.