An ethnographic study of new venture and new sector legitimation

Abstract

This study explores the process of legitimation of international new ventures from an emerging economy and the effect such ventures have on the process of creation and legitimation of a new industry in that economy. It is a longitudinal ethnographic case study. Following an inductive theory building approach, data were collected over an eleven year period via in-depth interviews, participant observations, and unobtrusive data. Data reveal three different contexts in which legitimation takes place: legitimation of the new industry and of the new venture domestically and internationally. A new venture drives the process of industry legitimation by achieving legitimacy threshold first nationally at meso and micro levels as well as internationally. The challenge therefore for such a venture is to establish legitimacy in the absence of any precedents at the organization, industry or international levels. Unless at least one new venture achieves legitimacy threshold in a new industry there is no possibility for that industry to become institutionalized. The authors advocate for further research at the intersection between legitimation, international entrepreneurship and emerging markets in order to further advance the emergent theory. The data suggest that in order for an international new venture to achieve cognitive legitimacy and socio-political legitimacy in an emerging industry located in an emerging economy, and successfully internationalize, it shall (i) design a robust business model targeting both internal and external stakeholders, (ii) engage in persuasive argumentation invoking familiar cues and scripts, (iii) engage in political negotiations promoting and defending incentive and operating mechanisms, and (iv) overcome the country-of-origin effect by pursuing technology legitimation strategy. Governments and NGOs may wish to see new industries emerge but they lack the means and mandate to establish and lead them themselves, instead rely on enabling actions, such as investment in capacity building. However, building capacity for an as-yet non-existent industry in an emerging economy may prove to be counter-productive, driving a brain drain of qualified workers who are forced to migrate to find suitable work. Our work leads us to speculate about whether there may be a role for investment in programmes of industry legitimacy building in pursuit of public policy objectives. The study puts forward a process model of new industry legitimation. The model theorizes the process of change from an initial condition in which an industry does not exist to a final condition in which it is institutionalized. The model addresses the case where the initial catalyst is the formation of an international new venture that is the seed for the birth of the industry. Since both the new venture and the new industry lack cognitive and socio-political legitimacies, the model theorizes temporal emergence of these at organizational and industry levels, leading ultimately to institutionalization.

autoethnographic inquiry into the emergence of new forms and ways of organizing

“…Through the lenses of legitimation theory (Aldrich & Fiol, 1994;Johnson et al, 2006;Suddaby et al, 2017;Turcan, 2018), the paper explores (1) how Bridge-Moldova acquired cognitive legitimacy (knowledge about the new form of organizing and new activity and what is needed to succeed in a respective sector), and socio-political legitimacy (value placed on the new form of organizing and new activity by its multiple stakeholders); and (2) what legitimation strategies Bridge-Moldova developed and adopted to legitimate its new forms and ways of organizing in the eyes of its multiple stakeholders. Although the research on legitimation of international new ventures is emerging, it has yet to form a central line of inquiry in the context of such entrepreneurial ventures (Cavusgil & Knight, 2015;Turcan & Fraser, 2016). This paper aims to contribute to this development.…”

“…Two, a consensus that substantive and dynamic capabilities research lacks empirical data and respective knowledge about processes, mechanisms and outcomes associated with substantive and dynamic capabilities is scarce (Easterby-Smith & Prieto, 2008;Easterby-Smith et al, 2009). Three, an observation that little is known how entrepreneurial ventures acquire legitimacy during their emergence from 'no-venture' to an 'embryonic' venture (Turcan & Fraser, 2016).…”

Institutional Effects on the Internationalization of Entrepreneurial Firms

“…Gaining legitimacy is certainly more difficult for small, young firms than for large, mature ones. Two studies provide intriguing insights into the process of legitimation of smaller entrepreneurial firms in international markets (Turcan & Fraser, 2016;. Turcan and Fraser (2016) argue that empirical research on the internationalization and legitimation of international new ventures from emerging economies is scarce.…”

“…Two studies provide intriguing insights into the process of legitimation of smaller entrepreneurial firms in international markets (Turcan & Fraser, 2016;. Turcan and Fraser (2016) argue that empirical research on the internationalization and legitimation of international new ventures from emerging economies is scarce. They explain that there are three different forms in which legitimation can happen: legitimation of the new industry, legitimation of the new venture domestically, and legitimation of the new venture internationally.…”

“…They explain that there are three different forms in which legitimation can happen: legitimation of the new industry, legitimation of the new venture domestically, and legitimation of the new venture internationally. Symbolic legitimation strategies for new ventures are: credibility (personal capability and personal commitment to the venture); professional organizing (professional structures and processes); organizational achievement (products and technologies), age of the venture and the number of employees; and quality of the stakeholders (Turcan & Fraser, 2016).…”