Filling the legitimacy void: The value of sustainability orientation across investor segments in venture financing

Abstract

When and why does sustainability attract entrepreneurial funding? Drawing on legitimacy theory, we argue that prior institutional backing segments ventures into distinct contexts in which public investors value sustainability orientation differently. Without such backing, sustainability can compensate for missing commercial validation by providing an alternative source of moral legitimacy. When institutional backing already certifies pragmatic legitimacy, sustainability may conflict with return-oriented expectations. Examining 2222 token-based crowdfunding campaigns, we find that sustainability orientation is positively associated with funding among non-backed ventures but negatively associated with funding among institutionally backed ventures. Consistent with this segmented valuation logic, non-backed ventures display stronger sustainability orientation. An LLM-based decomposition shows no statistically significant difference between the extent to which substantive and symbolic sustainability attenuate the funding disadvantage of non-backed ventures; their greater sustainability orientation is most clearly concentrated in symbolic social content. Our findings position sustainability not as a universally beneficial cue, but as a compensatory source of legitimacy whose value depends on what other types of legitimacy ventures already possess.