A new venture often faces daunting odds because it does not control all the requisite resources needed to run effectively. Thus, its survival will depend heavily on its founding team’s abilities to convince external stakeholders to invest resources (Shepherd, Douglas, & Shanley, 2000). Internally, the team also may have difficulty running the venture efficiently until managerial roles are agreed upon and cooperation develops among team members. Collectively, these “liability of newness” (LoN) challenges must be successfully overcome to increase the probability of a new venture’s success (Stinchcombe, 1965).
When studying LoN issues, researchers have generally employed, individually or collectively, four related literatures, including legitimacy (e.g., Zott & Huy, 2007), reputation (e.g., Fischer & Reuber, 2007), trust (e.g., Aldrich & Fiol, 1994), and organizational routines (e.g., Scott & Foo, 1999) as theoretical foundations. Although these literatures overlap, each has a central construct with distinct elements that distinguishes it from the others (Deephouse & Carter, 2005). Moreover, each central construct can be multifaceted (e.g., socio-political and cognitive legitimacy, e.g., Aldrich & Fiol, 1994) and multi-level (e.g., firm and industry-level reputations, e.g., Winn, Macdonald, & Zietsma, 2008).
As a result, researchers have also conceptualized LoN as a multifaceted, multi-level construct. To date, however, limited research has been devoted to fully examining LoN’s complexity by examining both the overlaps and distinctions among the central constructs of legitimacy, reputation, trust, and organizational routines that undergird this research. Consequently, LoN remains a rather nebulous construct, suggesting the need for clarification. Moreover, LoN operationalizations in empirical research have tended to focus only on a relatively narrow range of what Stinchcombe (1965) originally proposed as a multifaceted construct. Finally, although the underlying constructs can overlap, at times they can suggest conflicting strategic paths for new ventures.
Lohrke, Franz; Nagy, Brian; Bird, Barbara; Fischer, Eileen; and Reuber, Rebecca
"ARE NEW VENTURES ILLEGITIMATE, DISREPUTABLE, UNTRUSTWORTHY, OR ROUTINELESS: A LIABILITY OF NEWNESS REVIEW AND RESEARCH AGENDA (SUMMARY),"
Frontiers of Entrepreneurship Research: Vol. 29
, Article 4.
Available at: http://digitalknowledge.babson.edu/fer/vol29/iss10/4