Born with a silver spoon of legitimacy but struggling for identity? The paradox of emerging spin-offs in a new sector

Abstract

This study examines one paradox of the spinning-off process—on one hand, a spin-off's affiliation with the parent firm provides legitimacy that it can leverage for success; on the other hand, a stronger affiliation with the parent firm makes it difficult for a spin-off to resolve identity ambiguity and develop its novel identity in a new sector. The context of this study is a spin-off created by a reputable manufacturing firm but venturing in the software sector. I highlight challenges faced by the executives in leveraging spin-off's legitimacy at the same time it seeks to move away from the parent for developing a new identity. I find that a combination of the processes of sensegiving by a proactive leadership and applied sensemaking by the members is critical in resolving identity ambiguity. The study further develops propositions that synthesize the findings and contribute to the literatures of identity, legitimacy, and entrepreneurship.