Reasons for green building differ between startups, existing firms

The motivations for entering the green construction industry differ between startups and existing companies, according to a study conducted at the University of Colorado in Boulder.

Cultural norms and trends motivate entrepreneurs to launch green building businesses. But economic conditions and government policies prompt existing firms to get into green building, the study found.

“What’s interesting is that we often think of these federal and state policies as driving opportunity for entrepreneurs and creating new jobs. It turns out we find no significant relationship between policies or economic conditions and entrepreneurial activity,” said Jeff York, an assistant professor at the Leeds School of Business at CU and lead author of the study.

Michael Lenox of the Darden Graduate School of Business at the University of Virginia co-authored the study.

The study evaluated various aspects of the green building industry, including light-emitting diode lighting and low-volatile organic compound paint manufacturing and sales.

In one part of the study, researchers looked state by state at the entry into the green building industry of startups and existing firms from 2000 to 2007. They then compared that activity to local economic conditions, government policies and social norms and movements.

“While we found that policies and healthy economic conditions — representing safe opportunities for growth in sales and purchasing power — drove significant entry by the incumbent firms, activity by social movement organizations promoting green building was a stronger predictor of entry by the entrepreneurs,” York said.

The findings offers pros and cons for entrepreneurial enterprises, York said.

“Entrepreneurs could perhaps pick a spot in the green building industry free of incumbent competitors who aren’t attuned to the sociocultural environment. They also can receive positive emotional feedback that helps give them greater resilience and perseverance. But these reinforcements could be misleading if it turns out the economics just aren’t there.”

The results of the study also suggest policymakers could have to change their focus, York said.

“If we’re really looking to get entrepreneurial startups going, perhaps our energy is better spent trying to impact social norms and the way individuals in a region perceive environmental issues rather than putting economic policies in place.”