Establishing Cognitive Legitimacy in Emerging Organizations: The Role of Prestige
AbstractEntrepreneurs with venture ideas must establish cognitive legitimacy so they can acquire essential resources needed for survival. We extend the concept of cognitive legitimacy by developing a model through which entrepreneurs in emerging high growth organizations attempt to establish and build cognitive legitimacy. This is based on the composition of their new venture team and advisory board. Novice entrepreneurs can draw on the prestige of their new venture team and advisory board to enhance perceptions of their emerging organization's cognitive legitimacy. Novelty of the venture idea moderates relationships between both new venture team prestige and advisory board prestige and cognitive legitimacy; thus entrepreneurs whose emerging organizations rely on highly novel products or services will likely need to establish higher levels of prestige to create cognitive legitimacy.
Aldrich, H. & Fiol, M. 1994. Fools rush in? The institutional context of industry creation. Academy of Management Review, 19(4): 645- 670.
Aldrich, H. & Martinez, M. 2001. Many are called, but few are chosen: An evolutionary perspective for the study of entrepreneurship. Entrepreneurship Theory and Practice, 25(4): 41-56.
Amabile, T.M. 1996. Creativity in context. Boulder, CO: Westview Press.
Amason, A.C., Shrader, R.C. & Tompson, G.H. 2006. Newness and novelty: Relating top management team composition to new venture performance. Journal of Business Venturing, 21: 125-148.
Athaide, G.A., Meyers, P.W., Wilemon, D.L. 1996. Seller-buyer interactions during the commercialization of technological process innovations. The Journal of Product Innovation Management. 13(5): 406-422.
Baron, R.A., & Ward, T.B. 2004. Expanding entrepreneurial cognition's toolbox: Potential contributions from the field of cognitive science. Entrepreneurship Theory and Practice. 28: 553-573
Belliveau, M., O'Reilly, C., & Wade, J. 1996. Social capital at the top: Effects of social similarity and status on CEO compensation. Academy of Management Journal, 39: 1568- 1593.
Bitektine, A. 2011. Toward a theory of social judgments of organizations: The case of legitimacy, reputation, and status. Academy of Management Review, 36(1): 151- 179.
Bonacich, P. 1972. Factoring and weighting approaches to status scores and clique identification. Journal of Mathematical Sociology. 2:113- 120.
Borgatti, S.P. 1995. Centrality and aids. Connections. 18(1): 111-113.
Certo, S. 2003. Influencing initial public offering investors with prestige: Signaling with board structures. Academy of Management Journal, 28(3): 432-446.
Chen, G., Hambrick, D.C., Pollock, T.G. 2008. Puttin' on the Ritz: Pre-IPO enlistment of prestigious affiliates as deadline-induced remediation. Academy of Management Journal, 51(5): 954-975.
Choi, Y.R., Levesque, M. & Shepherd, D.A. 2008. When should entrepreneurs expedite or delay opportunity exploitation? Journal of Business Venturing, 23: 333- 355.
Clarysse, B. & Moray, N. 2004. A process study of entrepreneurial team formation: the case of a research- based spin-off. Journal of Business Venturing, 19: 55-79.
Daily, C.M. & Dalton, D.R. 1992. The relationship between governance structure and corporate performance in entrepreneurial firms. Journal of Business Venturing, 7: 375-386.
Daily, C.M. & Dalton, D.R. 1993. Board of directors leadership and structure: Control and performance implications. Entrepreneurship Theory and Practice, Spring: 65- 81.
D'Aveni, R. A, 1990, Top managerial prestige and organizational bankruptcy. Organization Science, 1: 121-142.
Deeds, D. L., Mang, P. Y., & Frandsen, M. L. 2004. The influence of firms' and industries' legitimacy on the flow of capital into high- technology ventures. Strategic Organization, 2(1): 9-34.
Delacroix, J., Swaminathan, A., & Solt, M. 1989. Density dependence versus population dynamics: An ecological study of failings in the California wine industry. American Sociological Review, 54: 245-262.
Delmar, F. & Shane, S. 2004. Legitimating first: organizing activities and the survival of new ventures. Journal of Business Venturing, 19: 385-410.
Deutsch, Y. & Ross, T. 2003. You are known by the directors you keep: reputable directors as a signaling mechanism for young firms. Management Science, 49(8): 1003- 1017.
Dewar, R. & Dutton, J. (1986). The adoption of radical and incremental innovations: An empirical analysis. Management Science, 32(11), 1422-1433.
Dimov, D., Shepherd, D.A., Sutcliffe, K.M. 2007. Requisite expertise, firm reputation, and status in venture capital investment allocation decisions. Journal of Business Venturing, 22: 481-502.
Elfring, T. & Hulsink, W. 2003. Networks in entrepreneurship: The case of high-technology firms. Small Business Economics, 21(4): 409- 422.
Elfring, T. & Hulsink, W. 2007. Networking by entrepreneurs: Patterns of tie-formation in emerging organizations. Organization Studies, 28(12): 1849-1872.
Fiegener, M. S., Brown, B. B., Dreux, D. R., & Dennis, W. J. 2000. The adoption of boards by small private U.S. firms. Entrepreneurship and Regional Development, 12: 291-309.
Fischer, E. & Reuber, R. 2007. The good, the bad, and the unfamiliar: The challenges of reputation formation facing new firms. Entrepreneurship Theory and Practice, January: 53-75.
Florin, J., Lubatkin, M., & Schulze, W. 2003. A social capital model of high-growth ventures. Academy of Management Journal, 46(3): 374- 384.
Forbes, D.P., Borchert, P.S., Zellmer- Bruhn, M.E. and Sapienze, H.J. 2006. Entrepreneurial team formation: An exploration of new member addition. Entrepreneurship Theory and Practice, March: 225-248.
Fox, H. 1982. Quasi-boards: useful small business confidants. Harvard Business Review, 60(1): 158- 165.
Gabrielsson, J. & Winlund, H. 2000. Boards of directors in small and medium-sized industrial firms: the importance of board member activity and working style on board task performance. Entrepreneurship and Regional Development, 12(4): 311-30.
Gartner, W., Bird, B., & Starr, J. 1992. Acting as if: Differentiating entrepreneurial from organizational behavior. Entrepreneurship Theory and Practice, Spring: 13-31.
Hannan, M. & Freeman, J. 1986. Where do organizational forms come from? Sociological Forum, 1: 50-72.
Hite, J.M. & Hesterly, W.S. 2001. The evolution of firm networks: from emergence to early growth of the firm. Strategic Management Journal, 22(3): 275-286.
Huse, M. 1990. Board composition in small enterprises. Entrepreneurship and Regional Development, 2: 363- 373.
Huse, M. 2000. Boards of directors in SMEs: A review and research agenda. Entrepreneurship and Regional Development, 12: 271- 290.
Jack, S.L. 2005. The role, use and activation of strong and weak network ties: A qualitative analysis. Journal of Management Studies, 42(6): 1233- 1259.
Judge, W.Q. & Zeithaml, C.P. 1992. Institutional and strategic choice perspectives on board involvement in the strategic decision process. Academy of Management Journal, 35: 766-794.
Kamm, J.B. & Nurick, A.J. 1993. The stages of team venture formation: A decision-making model. Entrepreneurship Theory & Practice, Winter: 17-27.
Katz, J. & Gartner, W.B. 1988. Properties of Emerging Organizations. Academy of Management Review, 13(3): 429-441.
Kuratko, D.F. & Hodgetts, R.M. 2004. Entrepreneurship: Theory, process, practice. Mason, OH: South-Western College Publishers.
Lester, R., Certo, S., Dalton, C., Dalton, D., & Cannella, A. 2006. Initial public offering investor valuations: An examination of top management team prestige and environmental uncertainty. Journal of Small Business Management, 44(1): 1- 26.
Liao, J., and Gartner, W.B. 2007. The influence of pre-venture planning on new venture creation. Journal of Small Business Strategy. 18(2): 1-21.
Lynall, M., Golden, B. & Hillman, A. 2003. Board composition from adolescence to maturity: A multi-theoretic view. Academy of Management Review, 28(3): 416- 431.
MacMillan, I. 1986. To really learn about entrepreneurship, let's study habitual entrepreneurs. Journal of Business Venturing, 1: 241-243
March, J.G. & Shapira, Z. 1987. Managerial perspectives on risk and risk taking. Management Science, 33: 1404-1418.
Meyer, J.W. & Rowan, B. 1977. Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83: 340-363.
Morkel, A. & Posner, B. 2002. Investigating the effectiveness of corporate advisory boards. Corporate Governance, 2(3): 4-12.
Mueller, R. 1988. The care and feeding of advisory boards. The Journal of BusinessStrategy, July/August: 21- 24.
Murray, E. 2003. High performing advisory boards: CEO perspectives. Leading Growth Firm Series, No 9. Toronto, Canada: Ministry of Enterprise, Opportunity and Innovation.
Norton Jr., W.I., & Moore, W.T. 2006. The influence of entrepreneurial risk assessment on Venture launch or growth decisions. Small Business Economics, 26: 215-226.
Pennings, J., Lee, K., & Van Witteloostuijn, A. 1998. Human capital, social capital, and firm dissolution. Academy of Management Journal, 41: 425-440.
Pfeffer, J. & Salancik, G. 1978. The External Control of Organizations: A Resource Dependence Perspective. New York: Harper & Row.
Podolny, J. 1993. A status-based model of market competition. American Journal of Sociology. 98: 829-872.
Podolny, J.M. 1994. Market uncertainty and the social character of economic exchange. Administrative Science Quarterly. 39: 458--483.
Pollock, T.G., Chen, G., Jackson, E.M., & Hambrick, D.C. 2010. How much prestige is enough? Assessing the value of multiple types of high- status affiliates for young firms. Journal of Business Venturing. 25(1):6-23
Rao, H. 1994. The social construction of reputation: Certification contests, legitimization, and the survival of organizations in the American automobile industry: 1895-1912. Strategic Management Journal, 15: 29-44.
Ronstadt, R. 1984. Entrepreneurship: Text, Cases and Notes. Dover, Massachusetts: Consilience.
Scott, W.R. 1995. Institutions and Organizations. Thousand Oaks, CA: Sage.
Shane, S. & Cable, D. 2002. Network ties, reputation, and the financing of new ventures. Management Science, 48(3): 364-381.
Shepherd, D. & DeTienne, D. 2005. Prior knowledge, potential financial reward, and opportunity identification. Entrepreneurship Theory & Practice, 29(1): 91-112.
Shepherd, D. & Zacharakis, A. 2003. A new venture's cognitive legitimacy: an assessment by customers. Journal of Small Business Management, 41(2): 148-167.
Slater, S.F. 1993. Competing in high velocity markets. Industrial Marketing Management. 24(4): 255-268.
Stinchcombe, A. 1965. Social structure and organizations. In J.G. March (ed) Handbook of Organizations. 142-193. Chicago: Rand McNally.
Stone, M. M.. , & Brush, C. G. 1996. Planning in ambiguous contexts: The dilemma of meeting Needs for commitment and demands for legitimacy. Strategic Management Journal, 17(8): 633- 652.
Stuart, T., Hoang, H., & Hybels, R. 1999. Interorganizational endorsements and the performance of entrepreneurial ventures. Administrative Science Quarterly, 44: 315-349.
Suchman, M. 1995. Managing legitimacy: strategic and institutional approaches. Academy of Management Review, 20(3): 571-610.
Timmons, J.A., & Spinelli, S. 2007. New Venture Creation: Entrepreneurship for th e 21st Century (7th ed.). Boston, MA: McGraw-Hill/Irwin.
Ucbasaran, D., Wright, M., & Westhead, P. 2003. A longitudinal study of habitual entrepreneurs:, starters and acquirers. Entrepreneurship & Regional Development, 15: 207- 228.
Utterback, J.M. 1994. Mastering the dynamics of innovation. Boston: Harvard Business School Press.
Ward, J. & Handy, J. 1988. A survey of board practices. Family Business Review. 1: 289-308.
Washington, M. & Zajac, E.J. 2005. Status evolution and competition: Theory and evidence. Academy of Management Journal, 48(2): 282- 296.
Wasserman, S. & Faust, K. 1994. Social Network Analysis: Methods and Applications. New York, NY: Cambridge University Press.
Whisler, T. L. 1988. The role of the board in the threshold firm. Family Business Review, 1: 309-321.
Zimmerman, M. & Zeitz, G. 2002. Beyond survival: achieving new venture growth by building legitimacy. Academy of Management Review, 27(3): 414-431.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.