Structure as Strategy? How Organizational Form Influences New Venture Legitimacy Strategy

Abstract

Unlike traditional corporations, public benefit corporations stipulate that they will pursue non-financial goals in addition to maximizing economic profits. Combining work in both hybrid organizations and new venture legitimacy strategies, we seek to clarify to what extent new ventures use organizational form to seek and gain legitimacy. Our research aims to contribute to the nascent stream of benefit corporation literature by investigating legitimacy strategies associated with this new organizational form. In our study, we explore the extent to which new ventures use legal form to seek legitimacy, and from whom. Specifically, we ask: How do legitimacy strategies of new ventures of the same organizational form differ? What are the potential consequences of differing legitimacy strategies? We build a novel database of over 450 public benefit corporations and find organizations use the public benefit corporation form for different legitimacy strategies. In investigating this process, we develop nuanced legitimacy strategies based on two dimensions, transparency and robustness. We suggest that public benefit corporations may actually take longer to achieve legitimacy despite widespread adoption and institutional-level legitimacy. We also begin to see how varying degrees of robustness and transparency either hinder or help PBCs gain legitimacy to different audiences.