The liability of newer than newness: aspiring entrepreneurs and legitimacy

Abstract

PurposeThe purpose of this paper is to return to Stinchcombe’s original emphasis on emerging vs existing organizations by examining the cognitive legitimacy challenges aspiring entrepreneurs face vis-à-vis entrepreneurs with existing businesses.Design/methodology/approachThe data collection included content analysis of profiles of an online crowdfunding, peer-to-peer lending market leading to a sample of 507 business loan requests, 123 of which were requests to support new business ideas rather than existing businesses. Negative binomial regression was used to test hypotheses regarding whether aspiring entrepreneurs seeking convenience-based support for their new business ideas would be less successful than their counterpart entrepreneurs seeking support for their existing businesses.FindingsThe findings show that aspiring entrepreneurs received less convenience-based support for their new business ideas from key resource providers than their peer entrepreneurs asking for support for existing businesses. The findings also suggest that this liability of newer than newness may be able to be mitigated by reputational signals such as the creditworthiness of the entrepreneur making the request.Originality/valueThis study focuses on the original insights Stinchcombe introduced when he described the social conditions that produce the liability of newness. Moreover, this study offers explicit theory as to the key mechanisms that cause the liability of newness by focusing on an aspiring entrepreneur’s ability to secure convenience-based support and potential ways an aspiring entrepreneur may offset that liability.