You Cannot Live of Love Alone – The Interrelation of Legitimacy and Effectuation in Nascent Markets

2015

Franziska Günzel-Jensen Morten Rask

This paper explores how success in legitimacy building can create restrictions and problems for new venture’s development in highly volatile settings. Through a longitudinal single in-depth case study in the nascent e-mobility market, we uncover unwanted effects of this process. In a nascent market entrepreneurs need to engage in legitimization activities targeted both at the emerging firm and the emerging industry in which it operates. The gaining of legitimacy from various stakeholders had two consequences: overconfidence which led to misunderstanding of commitment and a lack of learning as well as the loss of flexibility due to premature contractual and identity commitment. Through a longitudinal study, we illustrate how the gaining of legitimacy can blind entrepreneurs towards understanding their stakeholder’s motivations as well as their customer’s feedback, and highlights limits of the dynamic model of effectual transformation. We finish the paper by offering propositions for the refinement of effectuation and legitimization theory.

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