Abstract

A nascent industry emerges when small numbers of firms begin to develop category-defying products and services based on new technologies or new ideas about consumer demands. In this ambiguous situations entrepreneurs set out to design and evaluate new market offerings and corresponding business models. Institutional theory scholars have argued that due to the low number of firms, the industry lacks legitimacy. Therefore, entrepreneurs in nascent industries may employ symbolic strategies to help legitimate their firms and the industry. The challenges that an entrepreneurial venture faces when engaging in sense-giving activities and gaining legitimacy on firm and industry level have not yet been explored. This paper takes a starting point here by exploring how the gaining of legitimacy of an entrepreneurial firm in a nascent industry affects the development of the firm negatively and how it limits effectual decision-making.

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