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Aldrich H.E. and C.M. Fiol, (1994), Fools rush in? The Institutional Context of Industry Creation

30 important questions on Aldrich H.E. and C.M. Fiol, (1994), Fools rush in? The Institutional Context of Industry Creation

Which two forms of legitimacy are considered?

Cognitive legitimacy (How taken for granted the form is)
Sociopolitical legitimacy (The extent to which a new form conforms to recognized principles or accepted rules and standards)

What are the challenges facing all entrepreneurs?

Identifying opportunities
Assembling resources
Recruiting and training employees

Where are access to capital, markets and governmental protection all partially dependent on?

On the level of legitimacy achieved by an emerging industry

On which two dimensions do organizations raise its legitimacy?

Cognitive (knowledge about the new activity and what is needed to succeed in the industry)
Sociopolitical (the value placed on an activity by cultural norms and political authorities)

Where does cognitive legitimacy refer to?

To the spread of knowledge about a new venture. When an activity becomes so familiar and taken for granted, time and other organizing resources are conserved, attempts at creating copies of legitimated forms are common, and the success rate of such attempts is high.

How can cognitive legitimacy be measured?

By measuring the level of public knowledge about a new activity. The highest form is achieved when a product, process, or service is taken for granted

What is the producers view of cognitive legitimacy?

New entrants are likely to copy existing organizational forms, rather than experimentin with a new one

What is the consumers view of cognitive legitimacy?

People are knowledgeable users of the product/service

What is sociopolitical legitimacy?

The process by which key stakeholders, the general public, key opinion leaders, or government officials accept a venture as appropriate and right, given existing norms and laws

How can sociopolitical legitimacy be measured?

By assessing public acceptance of industry, government subsidies to the industry or the public prestige of leaders

Which four levels of social context within which founding entrepreneurs build trust, reliability, reputation, and institutional legitimacy are proposed?

Organizational
Intraindustry
Interindustry
Institutional

The social contexts present entrepreneurs with many constraints, such as?

They represent not only patterns of established meaning, but also sites within which renegotiations of meaning take place

Where is the role of trust central to?

To all social transaction where there is ignorance or uncertainty about actions and outcomes

What are methods of attaining cooperation based on increasing familiarity and evidence?

Trust
Reliability
Reputation

What are organizational strategies?

Entrepreneurs need strategies for encouraging a trusting party's beliefs in the shared expectations, reasonable efforts, and competence of the aspiring entrepreneur. Due to the absence of information and prior behavior concerning a venture in a new industry, pioneering founders cannot base initial trust-building strategies on objective external evidence. Instead, they must concentrate on framing the unknown in such a way that it becomes believable.

What about the cognitive legitimacy of organizational strategies?

Perceptions and evaluations of risk are highly subjective. The framing of an issue, rather than its actual content, often determines whether it is seen as a "foolish risk," especially in the absence of objective standards. When external tests of reliability are unavailable, cooperation is possible if issues are simplified, stylized, symbolized and given ritual expression --> coded in convention:

Appeal to a common bond with followers;
Use high levels of abstraction (broad framing)

What about intraindustry strategies?

Intraindustry processes constrain the legitimacy of new industries by structuring the immediate environment within which new organizations operate. Once founding entrepreneurs have developed a basis of understanding and trust at the level of their organizations, they must find strategies for establishing stable sequences of interaction with other organizations in their emerging industry.

What about the cognitive legitimacy in intraindustry strategies?

Frequent mistakes happen when no accepted standards are available. Lack of convergence on dominant design affects reliability of founding firms. Agreement on dominant design, common standards increase level of shared competencies within industry.

When is convergence toward an accepted design facilitated?

If new ventures choose to imitate pioneers, rather than seek further innovation. Implicit agreement on a dominant design, common standards, and the interfirm movement of personnel made possible by conditions of imitability increase the level of shared competencies within an emerging industry.

Where does an venture's ability to imitate others depend on?

On whether what is being copied is protected by legal instruments: patents, copyrights, and trade-secrets + whether the innovation is codified

What about the sociopolitical legititimacy in intraindustries?

Collective action is extremely difficult to organize early in the life of an industry due to free rider problems. To the extent that mistakes are frequent and a consistent body of knowledge emerges very slowly, and thus collective action is impeded, sociopolitical approval may be jeopardized (in gevaar).

What are several conditions that are common to new industries that impede the collective action needed to gain sociopolitical approval?

Intense competition over designs and standards may prevent any particular firm from growing much faster than the rest of the industry, thus reducing the chances that an industry champion will emerge to energize efforts toward collective action.
If competing designs emerge and subgroups form around them, conflict among the subgroups may cause confusion and uncertainty for potential stakeholders. Dissension and diversity within an industry may thus be mirrored by a similar pattern externally, hampering an industry champion's ability to form coalitions promoting the total industry.

What about the interindustry strategies?

Interindustry processes affect the distribution of resources in the environment and the terms on which they are available to entrepreneurs. Even after a new industry develops into a recognized entity, other industries may withhold recognition or acceptance of it. If a critical mass of founders unites and builds the reputation of their new industry as a visible and taken-for-granted entrant into the larger community, gaining sociopolitical approval is more likely.

What about the cognitive legitimacy in interindustry?

Established industries that feel threatened by a newcomer may undermine a new venture's cognitive legitimacy through rumors and information suppression or inaccurate dissemination. Though sometimes a low level of cognitive legitimacy may be an advantage for a new venture (when the activity is not taken as a serious threat), it is a detriment when older, competing firms spread rumors that a product or technology is unsafe, costly, or of inferior quality.

What can play a critical role in helping entrepreneurs promote an industry's cognitive legitimacy?

Interfirm linkages such as trade associations

What is sociopolitical legitimacy regarding interindustry?

Insufficient cognitive legitimacy renders a new industry vulnerable to interindustry processes that may jeopardize its normative acceptance. Established organizations in related industries often strongly oppose the rise of new ventures seeking to exploit similar resources, and they may try to block these new ventures at every turn, including questioning their compatibility with existing norms and values.

Why is the emergence and growth of new industries partly dependent on the severity of attacks from established industries that may resist encroachment?

They may raise doubts about the new activity's efficacy or its conformity with societal norms and values and, thus, change the terms on which resources are available to emerging industries. Beyond recognition, new industries need reliable relationships with other, established industries. Once cognitive legitimacy is achieved, tacit approval in the form of economic transactions is more likely. Some forms of interindustry cooperation emerge as the unintended consequences of competing industries pursuing their self-interests, whereas other forms are more deliberate.

What about institutional strategies?

Institutional conditions may constrain the rate at which an industry grows by affecting the diffusion of knowledge about a new activity and the extent to which it is publicly or officially tolerated.

What about cognitive legitimacy in institutional strategies?

Established industries enjoy an enormous benefit via the institutionalized diffusion of knowledge about their activities. The "social space" an industry has achieved in a society is sustained, in part, by a widespread understanding of how it fits into the community.

What about the sociopolitical legitimacy for institutional industries?

Lack of institutional support for the diffusion of knowledge about new industries also may undercut an industry's efforts to secure sociopolitical approval. Most forms of business enterprise have enjoyed at least institutional tolerance of their existence when they first emerged, but this apparent easy success has blinded us to the occasions on which such support has not been forthcoming or has been lost. Low sociopolitical legitimacy is still a critical barrier to many potential business activities today.

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Artikelen Innovation & Entrepreneurship 2016

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