From propriety to validity in new ventures: A nine-year study of three startup companies

Abstract

New ventures introducing new technological innovations must, to survive, negotiate legitimacy with stakeholders who provide critical resources (e.g., Zimmerman and Zeitz, 2002). Legitimacy - “a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (Suchman, 1995, p. 574, p. 574)—is important for all organizational forms, but particularly challenging for new ventures introducing innovative technologies, because of their inherent liabilities (Stinchcombe, 1965; Aldrich and Fiol, 1994). Being perceived as appropriate represents a critical precondition for resource acquisition, growth, and survival; fortunately, extant research has provided an increased understanding as to how legitimacy is constructed and maintained (e.g., Suddaby et al., 2017). For example, we now understand that creating legitimacy increases new ventures’ chances of survival (Delmar and Shane, 2004), that new ventures can employ various strategies to acquire validity (Tornikoski and Newbert, 2007), and that one or more thresholds of legitimacy likely exist (Fisher et al., 2016; Rutherford et al., 2016).