Entrepreneurs & Gaining Legitimacy
Tuesday, September 21st, 2010
Hopefully you’ve already read the Definition of a Nascent Entrepreneur, the Four Abiding Elements of Entrepreneurs, the article on Entrepreneurs and their R&K Strategies and Entrepreneurs & the Environment. This is the point to discuss the issue of legitimacy.
Entrepreneurs & New Ventures Need Legitimacy
An interesting point to be aware of in the discussion about entrepreneurs and new ventures is the need to tick off certain boxes and fulfill a requirement for legitimacy.
There are two types of legitimacy that are both required… failing to meet any of the legitimacy requirements is a road fraught with trouble. The first type is cognitive legitimacy – in other words this means that your market must know you exist. There is no use making the best kick-ass websites in the world if people don’t know you make websites… or they believe you write greeting cards or that you probably take photographs.
The second half of the legitimacy requirement is called socio-political legitimacy – in other words society must deem the business and the product to be acceptable on a social level. Socio-political legitimacy consists of moral acceptance and regulatory acceptance. Losing either will lose socio-political legitimacy and people will avoid the business or product.
To recap… cognitive legitimacy + socio-political legitimacy are required. Socio-political legitimacy can be broken down into two parts… moral acceptance and regulatory acceptance. An example that comes to mind is the singer who promotes heavy drug use and loses either moral acceptance or, more likely, regulatory acceptance and becomes banned from performing in certain locations.
Entrepreneurs & Spinning Out
New Ventures come from four main camps. There is the spin-out business where employees break away to create their competitor company. There is the non-spinout business where someone just starts a new venture out of nowhere. There is incumbent backed where a business supports the new venture and there is the diversifying firm.
