All of these – like many others – are new ventures’ strategies identified by entrepreneurship research to gain legitimacy, i.e. credibility and acceptance from their stakeholders. Legitimacy may not sound as concrete as financing or customers, but in practice, it is the key to acquiring them. When a company is considered legitimate, it is more likely to gain access to financiers, partners, skilled employees, and paying customers.
Here are examples of effective legitimation strategies:
1. Impactful storytelling
Businesses can build their credibility by creating stories that connect their product or service to familiar cultural meanings. Carefully crafted stories are not "just marketing" – they genuinely increase the company's chances of success, for example, in crowdfunding campaigns, because it is easier for investors to understand the purpose and value of the company (Snihur et al., 2022).
2. Recruitment of authoritative board members
When companies appoint well-known and respected people to their boards, they not only acquire expertise but also lend the credibility that these people have already gained. In particular, this increases investors' confidence in the company and improves the likelihood of obtaining financing in the form of investments (Certo, 2003).
3. Escalating and polarizing rhetoric
Even if intuition would guide you to avoid blatant confrontation, research has shown that strongly polarizing rhetoric can be an effective way to emphasize a company's identity and stand out from the competition. A clear juxtaposition helps stakeholders understand why the company in question is valuable and relevant, which strengthens a loyal following (Ruebottom, 2013).
4. Creative combination in fragile operating environments
Institutional bricolage refers to the creative combination of existing resources and institutional elements in situations where clear structures guiding operations are missing or weak. Such a strategy helps companies build credibility even in unstable and unpredictable environments (Desa, 2012).
5. Visual and symbolic communication
Building a company's credibility is not just about words. Businesses also benefit from visual communication, such as a thoughtfully designed work environment, visual branding, and professional attire, all of which positively impact stakeholders' first impressions and trust in the company (Clarke, 2011; Santos, 2023).
6. Emphasizing social impact
Companies can also consciously emphasize the social benefits and positive social impacts of their operations, which legitimizes the company, especially among investors and customers who emphasize social responsibility in their operations (Molecke & Pinkse, 2020).
7. The signal value of a professional business plan
The mere existence of a carefully prepared business plan can increase the credibility of a new company, even if the plan is not even actively used in daily operations. A business plan serves as a signal to investors and partners that the company follows accepted and professional practices (Rannikko et al., 2022).
8. Use of metaphors and metaphors
Businesses can also increase their legitimacy by using thoughtful metaphors that make the new product or service easier to understand and feel more familiar to the target audience. For example, a technology company can legitimize a completely new kind of application by comparing it to a well-known and popular service, which helps investors and customers understand what the service is about (Cornelissen, Clarke & Cienki, 2012).
9. Creative use of resources in a narrative form
New companies can enhance their legitimacy by describing their own use of resources as particularly creative and skillful. For example, a startup can show how it can operate efficiently with small resources and thus convince investors of its ability to cope with challenging situations (Fisher, Neubert & Burnell, 2021).
These and numerous other legitimation strategies were discussed in my master's thesis on the legitimation strategies of new ventures. You can read my thesis (Meriläinen, 2024) here: Perspectives on new venture legitimation: A review and research agenda.
Author: Iikka Meriläinen, M.Sc. (Econ.), project researcher, doctoral researcher, University of Oulu Kerttu Saalasti Institute, micro-entrepreneurship research group MicroENTRE
Photo: Miguel Á. Padriñán, Pexels
References:
Certo, S. T. (2003). Influencing initial public offering investors with prestige: Signaling with board structures. Academy of Management Review, 28(3), 432–446.
Clarke, J. (2011). Revitalizing entrepreneurship: How visual symbols are used in entrepreneurial performances. Journal of Management Studies, 48(6), 1365–1391.
Cornelissen, J. P., Clarke, J. S., & Cienki, A. (2012). Sensegiving in entrepreneurial contexts: The use of metaphors in speech and gesture to gain and sustain support for novel business ventures. International Small Business Journal, 30(3), 213–241.
Desa, G. (2012). Resource mobilization in international social entrepreneurship: Bricolage as a mechanism of institutional transformation. Entrepreneurship: Theory and Practice, 36(4), 727–751.
Fisher, G., Neubert, E., & Burnell, D. (2021). Resourcefulness narratives: Transforming actions into stories to mobilize support. Journal of Business Venturing, 36(4).
Meriläinen, I. (2024). Perspectives on new venture legitimation: A review and research agenda.
Molecke, G., & Pinkse, J. (2020). Justifying social impact as a form of impression management: Legitimacy judgements of social enterprises’ impact accounts. British Journal of Management, 31(2), 387–402.
Rannikko, H., Buffart, M., Isaksson, A., Löfsten, H., &
Tornikoski, E. T. (2022). Mobilising finance and achieving early growth in new technology-based firms: A legitimacy perspective. International Journal of Entrepreneurial Behaviour and Research, 28(6), 1532–1555.
Ruebottom, T. (2013). The microstructures of rhetorical strategy in social entrepreneurship: Building legitimacy through heroes and villains. Journal of Business Venturing, 28(1), 98–116.
Santos, F. P. (2023). Showing legitimacy: The strategic employment of visuals in the legitimation of new organizations. Journal of Management Inquiry, 32(1), 50–75.
Snihur, Y., Thomas, L. D. W., Garud, R., & Phillips, N. (2022). Entrepreneurial framing: A literature review and future research directions. Entrepreneurship Theory and Practice, 46(3), 578–606.
In Kerttu Saalasti Institute's blog we write about the topics of the Institute's research groups, micro entrepreneurship education and the Institute's general topics. The authors are researchers, experts and members of networks.
Our topics are: micro entrenepreneurship, future manufacturing technologies, regional excellence, micro entrepreneurship education