Liability Of Newness Research Articles

Lean manufacturing and production efficiency of the food and beverages sector in Nigeria

The dilemma of waste management across man, material and money has remained a burden especially in the food and beverage industry in Nigeria. This constituted the academic enquiry into understanding the power of lean manufacturing to engender production efficiency. Secondary data were collected from the dominant manufacturing companies: Unilever, Nestle and Cadbury Nig. Plc. Data envelopment analysis efficiency frontier software was used to test the assumption that lean manufacturing system affects operational efficiency. The results showed that the operational efficiency of Nestle and Cadbury Nigeria Plc improved vis-a-vis Unilever that first instituted lean thinking. The study recommends institutionalisation of lean manufacturing to drive operational efficiency but gradual adoption is preferred to escape the liability of newness and enhance a harvesting of experience gained during the learning process.

The liability of rurality and new venture viability

Abstract This paper integrates imprinting theory and insights from rural/spatial entrepreneurship research to develop the concept “liability of rurality”. In the paper I argue why increasing rurality of geographical space should be considered a penalty for entrepreneurs. Further, I propose how rurality – as a liability - may influence the emergence, survival and growth prospects of new ventures. This includes a theoretical integration between the liability of rurality and the universal liabilities of newness and smallness. The paper ends with a research agenda discussing how the liability of rurality can add to and rejuvenate spatial and rural entrepreneurship research.

The liability of newer than newness: aspiring entrepreneurs and legitimacy

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.

Building institutional legitimacy in impact investing

Purpose Impact investing denominates an investment logic that combines social and environmental goals, financial returns as well as personal values. The purpose of this paper is to consider the concept of legitimacy to be an appropriate way to understand how actors in the impact investing market influence discourse in order to overcome the inherent liability of newness – based on hybrid institutional logics – through their financial and non-financial communication. Design/methodology/approach Based on two theoretically defined sets of codes, a thematic discourse analysis is conducted by analysing meaningful units derived from documents produced by case-selected actors in the impact investing industry, which are then categorised into rhetorical strategies for legitimacy building. Findings The paper finds that actors use diverse legitimisation strategies based on their relative positioning in the impact investing market. These strategies determine the actors’ main discursive foci and, in turn, are affected by the overall organisational activities, governance and mission. This study proposes and discusses eight legitimacy creating strategies of relevant archetypes of impact investing actors in their financial and non-financial communication. Following these interconnected discursive engagements, a communication gap can be demonstrated between investors, intermediaries and social entrepreneurs. Originality/value Such discursive engagement gaps can provide a theoretical lens to explain the almost non-functional market and, as practical implications, show the need for convergence and harmonisation in financial and non-financial reports and communiques. This research further contributes to theory by providing insights into the discursive creation of legitimacy, and by promoting a better understanding of the emerging field of impact investing.

Sustainable firms and legitimacy: Corporate venture capital as an effective endorsement

ABSTRACT This empirical study investigates the legitimizing effects of the presence of different investor types supporting entrepreneurial ventures. These effects may differ for sustainable ventures that face greater liabilities of newness due to powerful incumbents and negative halo effects of prominent failures. Drawing on institutional theory, this study developed and tested a model of investor legitimization with data on 184 entrepreneurial ventures using negative binomial regression. Findings suggest that the legitimizing effects of investor types for sustainable ventures differ from those of other ventures. In particular, corporate venture capital seems to legitimize sustainable ventures in a manner unlike other venture types.

Antecedents and consequences of strategic patenting for legitimacy: Evidence from China

ABSTRACTThis article provides an overview of strategic patenting for legitimacy. Using the act of prior patent publication as the proxy variable, it empirically examines the antecedents and consequences of firms’ choice of strategic patenting for legitimacy in an integrated framework. Based on Chinese industrial enterprises and a patent database, the results suggest that firms with liabilities of newness, smallness, or privateness are more likely to patent strategically for legitimacy. Meanwhile, the interactions of these characteristics positively impact the ratio of firm to patent strategically for legitimacy. Furthermore, the results also suggest that such strategic patents increase the probability of firms obtaining government sponsorships, high-tech certifications, and venture capital investments rather than enhancing their new product sales. The findings contribute to the literature on patent strategy and firm innovation.

Editorial Team Introduction

Editorial Team Introduction

High-Status Affiliations and the Success of Entrants: New Bands and the Market for Live Music Performances, 2000-2012

Newcomers often have trouble being taken seriously, or even noticed in the first place. This challenge, often referred to as the “liability of newness” (Freeman et al. 1983, Stinchcombe 1965), underscores the idea that to survive and thrive, new entrants must be recognized as legitimate by their audiences — employees, investors, customers, analysts, or simply followers. One way for new entrants to gain legitimacy is by leveraging affiliations. Such connections can increase the likelihood that the new entrant will be recognized as legitimate because they can affect whether audiences notice the new entrant, thereby allowing for its evaluation, such that affiliations act as market signals (Kim and Jensen 2013, Spence 1974). In this regard, a sizeable literature has looked at whether and how affiliations can enhance a new entrant’s visibility, with a particular focus on prominent affiliates (Chen et al. 2008, Jensen 2003, Pollock et al. 2010). A recurring line of argument in this area draws from the literature on social capital (Adler and Kwon 2002, Coleman 1988) to suggest how affiliations are assumed to provide distinct advantages to new entrants by acting as attention filters (Benjamin and Podolny 1999), providing them with access to information or resources (Ingram and Baum 1997, Podolny 2001), and shielding them from failure (Fischer and Pollock 2004, Miner et al. 1990). Furthermore, prominent affiliates often have signaling value, functioning as endorsements to actors who need legitimacy such as newlyestablished organizations like startups (e.g. Stuart et al. 1999). In other words, an affiliation “between two market actors is an informational cue on which others rely to make inferences about the underlying quality of one or both of the market actors” (Podolny 2001: 34).

Dynamic Bundle of Capabilities and Firm’s International Performance: A Configurational Analysis

International new ventures need a variety of capabilities to tackle the liability of newness and foreignness to perform well in international markets. However, previous studies neglect the complex ...

The Categorical Conundrum: Legitimacy in Flux and Interpretive Uncertainty during Category Emergence

Extant theory has emphasized the disciplining force of the categorical imperative which compels new firms and markets to fit existing categories. Those that do not fit existing categories are theorized to suffer from the liability of newness that thrusts on them an illegitimacy discount jeopardizing survival and success. However, new categories are endlessly being created by entrepreneurs in unceasing gales of creative destruction. In this article I reconcile this fundamental contradiction by offering a new theory of category emergency. In order to do so, I juxtapose the dimensions of audience evaluations of legitimacy (homogeneous and heterogeneous) and category borders (permeable and impermeable) to posit four types of category emergence: divergence, dilution, disruption, and dissolution. I propose that the former two types of category emergence – divergence and dilution – are the domains of much of extant research focused on the illegitimacy discount. The latter two types of category emergence – disruption and dissolution – are comparatively uncharted territory that delineate contexts where legitimacy is in flux and the source of uncertainty. My theory further offers propositions linking types of category emergence with specific forms of uncertainty. In doing so I offer new insights into legitimacy, category emergence, and uncertainty.

Is Foreign Expansion an Effective Way to Boost Sales and Profits?

This paper posits, based on the data set covering an 8‑year period between 2006 and 2013, that Polish firms show an inverted U-curve relationship between multinationality and performance. At the beginning of internationalization a short stage of rising performance might be observed, however, quickly rising costs stemming from the liability of newness and foreignness lead to a fall in performance. This is not only contrary to the predictions resulting from the traditional S-curve analysis but also indicates that executives’ high expectations regarding foreign expansion might be a sign of a “global illusion”.

Reputation Enhancing Through Patent Portfolios: An Exploration of Lapsed Patents and IPOS

The path between the patenting of an innovation and the actual commercialization of a new product or technology can be long and costly. Research shows that more than half of issued patents lapse before the end of their term due to missed maintenance fees. Since patents can help overcome the liabilities of newness faced by new ventures by reducing information asymmetries, pre-IPO firms may apply for patents as they near their IPO date as a reputation-enhancing strategy. Once a firm IPOs, it may no longer require the patent, thus letting it lapse. Drawing on the reputation literature and signaling theory, this study investigates whether there is a relationship between lapsed patents and a firm’s IPO date. The results suggest that as a company gets closer to its IPO date, the more likely it is to increase its patenting activity, but the more likely it is for these patents to lapse.

Developing relationships early: How new ventures fill their capability gap

In light of the resource-base view of the firm, liability of newness appears as a capability gap. Several studies claim that collaborating with others is an effective strategy for bridging this gap. However, none of them demonstrates that, against a capability gap declared by the new venture at its birth and filled at the end of the start-up phase, this result was achieved by resorting to relations with external actors.The paper aims at answering this research question analyzing both the case of a marketing and technological capability gaps. The empirical section presents the results based on an original dataset on about 400 Italian new ventures. Results show that collaboration with external partners is the only determinant in reducing both capability gaps, whereas the profile of the new venture as well as its size, its location and the founders' education are not relevant. New ventures use external relationships to develop both technological and marketing capabilities.

Tehlikeli Özellikler: Türkiye Süper Ligdeki Futbol Kulüplerinin Sağ Kalım Analizi

European football is the most popular sports among the ball sports. Survival in the top-tier league is vital for the clubs. This study analyzed the factors that effected the survival of the clubs in Turkish Super League by employing a survival analysis for recurrent event model on the data set from 1990 to 2017. The most important finding was the existence of the liability of newness. The risk of relegation for the teams in their first year in the Super League was 20.7 times higher than existing teams. The new teams in the Super League suffered from being fresh to the league. New teams faced a higher risk of relegation than older ones. Other than that, the number of prior relegations in the club history increased the risk, while each additional foreign player decreased the risk. In addition, each year of experience decreased the hazard ratio by 10%. Briefly, regional location of the club base and existence of another team in the same city did not have significant effects on their survival in Turkish Super League.

The role of regulatory focus and cognitive style in business angels’ evaluation of an investment opportunity

ABSTRACTThis paper investigates how two cognitive mechanisms of business angels – regulatory focus and cognitive style – contribute to the process of evaluating an investment opportunity. Analyzing both qualitative and quantitative data collected from an international sample of business angels, indicates that both promotion and prevention regulatory foci are directly associated with the greater likelihood of a business angel positively evaluating an opportunity, and that planning cognitive style moderates these relationships. This research contributes to the existing literature on the phases of business angels’ investment process. The findings are also important for understanding the cognitive underpinnings of an early evaluation of an investment opportunity. Prior research has suggested that a business angel’s early evaluation of an investment opportunity critically influences success in raising equity financing, which is of critical importance for start-up firms in overcoming the liability of newness in their early stages of development.

Good times, bad times: innovation and survival over the business cycle

High-potential new ventures are a source of economic growth, which policy makers call upon in times of crisis when entrepreneurship is seen as a remedy to economic downturn. Yet at these times new ventures face intensified selection, and survival hinges on heterogeneous capabilities. We examine how the innovative capabilities of new firms created in the Netherlands in 2001-2006, affected their survival likelihood before, during and after the 2007-2008 global financial crisis. We estimate a piecewise exponential model linking survival times, observed in the time period from 2001 to 2015, to longitudinal innovation data from the CIS. Our results show that new ventures innovating within two years from founding benefit of a long-term adaptive survival premium during and after the crisis. This premium and its duration over the stages of the crisis are contingent to the form of innovation: technological innovations entail a more effective and enduring premium, as compared to managerial innovations, which can be even detrimental for survival. Our study has implications for entrepreneurial management, by highlighting how the development of innovative capabilities at founding, lays the foundations for organisational adaptation and resilience in the longer term. Furthermore, our results can inform a policy approach that aims at sheltering from the storm of a financial crisis, those new ventures that do possess the specific and necessary adaptive capabilities, but that are also vulnerable because of the liabilities of newness and smallness. Such an approach could help to maintain alive the process of entrepreneurial experimentation during the crisis, and to boost economic recovery, without dispersing precious resources.

ENHANCING SUPPLIER’S INVOLVEMENT IN STARTUP’S INNOVATION THROUGH EQUITY OFFERING AND TRUST BUILDING

External partners, such as suppliers, are important in the case of innovation by entrepreneurial startup firms. Due to their limited resources and liability of newness, these startups must rely on outside partners for resources and legitimacy to succeed and indeed to survive. Yet, few studies have specifically examined, or provided guidance on, how startups can increase supplier involvement in their innovation projects. Drawing from Transactional Cost Economics and supplier involvement literature, this study develops a contingency model, in which supplier’s equity share and supplier’s trust moderate the relationship of supplier’s involvement in a startup’s innovation with supplier’s specific investment and startup’s effort in qualification of supplier’s ability. We empirically test the model using data collected from 166 innovation projects of 166 startups. Our results show that supplier involvement is pivotal to startup’s product innovation performance, which is consistent with prior literature on supplier involvement. Interestingly, our results further reveal that supplier’s specific investment and startup’s effort in qualification of supplier’s ability lead to higher levels of supplier involvement only when supplier’s equity share and supplier’s trust are sufficiently high.

Explaining Survival and Growth of Women Entrepreneurship: Organizational Ecology Perspective

Sociological perspectives about organizational founding, survival and growth under organizational ecology theory offer research avenues to look into their implications for new organizational forms. Women entrepreneurship or female run businesses in developing countries risk the liability of newness due to lack of their presence in commercial business activities. Though the presence and role of women in rural economy of these developing countries is more than significant yet the urban sector still lacks the luster of new social values to accept and value this new organizational form. There is need to explore into sociological processes involved in the growth of women entrepreneurship. The present study, using qualitative exploratory research design, elaborates the key sociological processes postulated by ecology theory by which female run businesses make their way to create inclusive markets and shared growth in a socially constrained business environment. The organizational ecology framework is postulated to study the women entrepreneurship process i.e. birth, survival, and growth of female run businesses through change in the social value structure of the society. This perspective treats women entrepreneurship as a distinct organizational form and depicts it as a social process involving the population of organizations than the individual process targeting the women entrepreneurs themselves. The propositions resulting from the postulated linkages can be tested using quantitative methods. The theoretical framework developed here nonetheless offers fresh insights into the women entrepreneurship, its process and outcomes.

Sharing my way to success: A case study on developing entrepreneurial ventures using social capital in an OSS community

While Open Source Software (OSS) communities provide opportunities for knowledge creation, we have a limited understanding of how entrepreneurs leverage OSS communities for their entrepreneurial ventures. Using social capital theory in a mixed methods case study, we compare entrepreneur and non-entrepreneur behaviors to investigate how entrepreneurs build social capital within an OSS community. This study shows that entrepreneurs differentiate themselves from non-entrepreneurs by focusing on cognitive and relational capital building activities, which in return makes it possible for them to leverage their social capital to influence and shape the environment in which they are operating. Our findings suggest that entrepreneurs strategically select which activities within the community to expend their limited resources on (e.g., developing code over participating in email conversations) and build their social capital more through their actions than through their words (e.g., showing their commitment to the community through code commits, bug fixes, and documentation). Given the liabilities of newness and smallness as well as other challenges faced by entrepreneurs, applying an open innovation strategy in OSS communities could be one approach where entrepreneurs, by developing and freely revealing their intellectual property to the community, share their way to success via OSS-infused entrepreneurial business ventures.

Designed entrepreneurial legitimacy: the case of a Swedish crowdfunding platform

ABSTRACTDigital entrepreneurs face the liability of newness, like any other entrepreneur. However, this liability of newness is manifested differently: it is mediated by an artefact, in this case a platform. This paper examines how a digital entrepreneur mediated by a platform can build legitimacy, something hitherto thought to be embedded within a social relationship (that is, one that a digital platform may be unable to have). Based on a qualitative research design, we develop the concept of “designed legitimacy”, and we point to how trust may not be enough to overcome the liability of newness. Rather, legitimacy is needed to attract users and resources, and thus for growth and success. We further highlight the means through which a platform may come to be seen as legitimate, namely by designing with legitimacy in mind: by using symbols in design, asymmetric legitimacy building, and sequential two-stage legitimacy building. We end the paper with propositions for further study and the implications of this research for digital entrepreneurship and platforms.