Handle with care: Entrepreneurial reputation-borrowing in an emerging economy

Abstract

Owing to the lack of a track record, new ventures, by definition, tend to lack a strong reputation and often resort to reputation borrowing by affiliating with high-reputation actors. We study how entrepreneurial reputation-borrowing works in a context where reputation sources are scarce. We undertook an in-depth field study of a new venture in an emerging economy setting – specifically in Bangalore, India, at a time when a nascent entrepreneurial ecosystem was emerging. We examine the process and consequences of reputation-borrowing for this venture, which forged a relationship with a large Western multinational after entering a prestigious academic incubator. In terms of the process, we highlight the importance of high-status institutional intermediaries such as incubators in reputation-deficient contexts. In relation to the consequences, our study surfaces a tension: since successfully borrowing reputation is relatively rare in emerging economy settings, it may lead to hubris and (subsequent) lapses in judgment vis-à-vis the venture’s own altercentric uncertainty. Given this prospect of a “liability of a good reputation”, entrepreneurial reputation-borrowing in an emerging economy may need to be “handled with care” – in terms of reducing a new venture’s own uncertainty reduction during the process and not letting down its guard after reputation has been borrowed.