New venture legitimacy and its role in supplier selection decision making

Abstract

This study investigates how buying firms perceive and assess new ventures in supplier selection decision making. Drawing on the legitimacy perspective within institutional theory, we argue that the perceived legitimacy of a new venture serves as an important basis for buying firms’ judgments whether the new venture is appropriate, desirable, and capable. The results, obtained from the analysis of 150 individual selection decisions, suggest that new venture legitimacy increases the probability of being selected as a supplier and that firms’ prior experiences with new ventures mitigates the effect of new venture legitimacy. Our study provides a micro-level analysis of new venture legitimacy which contributes to an improved understanding of the relationship between buying firms and new venture and provides insights into formation, use, and underlying dynamics of legitimacy judgments.