External legitimation in international new ventures: toward the typology of captivity

Abstract

This paper explores within the framework of new venture legitimation how and why international new ventures acquire external legitimacy and strive for survival in the face of critical events. Following a longitudinal multiple-case study methodology that was adopted for the purpose of theory building, the paper introduces the typology of captivity, and the four types that have emerged: captive industry supplier, captive dyadic partner, captive market leader, and free market leader. The effects of captivity types on the acquisition of external legitimacy and its survival, on reaching legitimacy threshold, and on the valuation of the venture are discussed and respective propositions are put forward to guide future research.

International New Venture Legitimation: An Exploratory Study

“…Recent attempts to explore this intersection highlighted a number of challenges that await entrepreneurs in the process of INV legitimation [7,[33][34][35]. How legitimacy and identity are constructed over time, and whether the legitimacy threshold is ever reached are considered major challenges in INVs research [7].…”

“…INVs seek to mitigate liabilities of newness, smallness and foreignness by partnering or affiliating with highly regarded organizations [34,35]. Such partnerships or alliances allow INVs to enter international markets, enhance their market position and authority, acquire resources and skills, as well as mitigate the risks associated with rapid internationalization-eventually leading to INV legitimation and legitimation threshold.…”

“…However, such partnerships are not always successfully implemented, as Groen et al [34] found, due to tensions within the entrepreneurial team, disappointments and inefficiencies in running the venture, loss of application opportunities due to the alliance breakdown, delay in bringing the technology to the market due to insufficient funding, or lack of support from the network. By forming such partnerships or alliances, INVs may find themselves in captivity as a captive industry supplier, captive dyadic partner, or captive market leader [35]-a state that may decrease the likelihood INV survivability. According to Turcan [35], the dynamics in the relationship between the captive INV and its reputable partner may also change when INV potential is realized, i.e., legitimacy threshold is reached: INV may exit the partnership and continue on its own, including through an IPO; it can be internalized by its partner, or acquired by another organization.…”

“…For example, what entrepreneurs discovered was that large enterprise players demand exclusive partnerships, thus making them captive to such relationships, with no practicable alternative but to sell their products via a single enterprise player [35]. This effect questions Johanson and Vahlne's ( [59], p. 1411) conjecture that -… insidership in relevant network(s) is necessary for successful internationalization‖.…”

Empirical Studies on Legitimation Strategies: A Case for International Business Research Extension

“…Overall, legitimation theory is employed in these papers to provide a conceptual understanding of the studied phenomenon (e.g., Rutherford & Buller, 2007;Turcan, 2012). Along with legitimation theory, organizational symbols (Glynn & Marquis, 2004), organizational scripts and life-cycle theory (Drori, Honig, & Sheaffer, 2009), and symbolic management (Zott & Huy, 2007) are also used as theoretical foundations/backgrounds.…”