Toward a theory of international new venture survivability

Abstract

In this longitudinal study, we explore in-depth how entrepreneurs acquire legitimacy for their new ventures in an attempt to internationalise and survive before and after the dot.com bubble. We adopted a longitudinal multiple-case study methodology for the purpose of theory building. Five firms were selected on the basis of purposeful sampling logic from a homogeneous empirical context: they were small, software firms from Scotland that internationalised and struggled for survival between 1999 and 2001. To explore these companies’ critical events and episodes, the method of critical incident technique was employed. The method of constructing typologies by reduction was employed to advance the typology of hype defined as the overall sentiment of the environmental context, within which the firm is embedded, about the future. Grounded in data, there emerged a middle-range theory of international new venture survivability that postulates that the closer the new venture is to the hype, the higher the likelihood of failure. Several implications to the theory of new venture legitimacy could be singled out. The paper makes an attempt to understand the nature of a legitimacy threshold. The data in the study points to the continuous nature of the legitimacy threshold and suggest that it may be defined by the time when the emergent industry moves away from hype towards risk decision making settings. A set of propositions is put forward to stimulate future research in the area of new venture legitimacy.