Crossing the threshold & exiting nascency: Antecedents to gaining full-fledged legitimacy

Abstract

New entrepreneurs experience the liability of newness in the nascent stage of their competitive activity. In many industries, the exit from this stage takes place through an explicit decision of a core mediator that allows the new entrepreneur to enter the market as a fully legitimate competitor. The construction of full legitimacy denoted by the decision of the core mediator, can itself be affected by signals about the entrepreneur while still in the nascent stage. In the setting of the contemporary visual arts, we use a unique longitudinal data set to analyze third party signals as predictors of the first affiliation with an art gallery, who in this empirical context is the core mediator. We find that signal diversity and evaluator credibility are strong determinants of the core mediator’s decision to allow the new competitor to cross the legitimacy threshold and exit the nascent stage.