Singh Rao, R., Chandy, R.K., and J.C. Prabhu (2008), The Fruits of Legitimacy; Why Some New Ventures Gain More From Innovation Than Others
24 important questions on Singh Rao, R., Chandy, R.K., and J.C. Prabhu (2008), The Fruits of Legitimacy; Why Some New Ventures Gain More From Innovation Than Others
Why is the ability to introduce successful new products critical to the survival and growth of new ventures in emerging industries?
What is an emerging industry?
What is a praticular challenge in emerging industries?
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What is the catch-22 situation?
In which way can new ventures can legitimacy?
What are the types of legitimizing actions? Two broad means
- External means: association with successful and established external entities
- Internal means
What is historical legitimacy?
What is strange when facing historical legitimacy?
What is scientific legitimacy?
What is market legitimacy?
What is locational legitimacy?
How to gain external legitimacy?
What are the downsides of alliances?
- An alliance could result in the loss of decision-making control and flexibility for the fledgling venture
- An alliance may also lead to lower rewards to the new venture from its product introductions as a result of sharing collaborative gains
- Because the new venture is likely to be smaller than the alliance partner and thus have less bargaining power, a larger share of the gains from product introduction may to the latter
Alliances can benefit in two ways
- An alliance can suggest that through its partner, the new venture has access to the capabilities and resources needed for successful product introduction
- The mere existence of the alliance carries its own endorsement. That the new venture was successful in attracting a larger, more established player in the first place suggests that the new venture and its new product have potential.
What would the resources needed for successful product introduction include?
- Marketing resources
- Scientific resources
- Financial resources
- Learning & skills
Internal legitimacy, external legitimacy, or both?
What is perhaps the most convincing way a new venture can gain internal legitimacy?
Which two benefits does historical legitimacy confers to the new venture?
- It suggests that the new venture has prior experience with product launch, thus increasing the likelihood of its success with future products.
- The large literature on “learning by doing” and adaptive learning shows that there are clear gains to learning through a process of trial and error.
Where is an alliance of ventrues that already possess historical legitimacy likely to?
- Confer fewer marginal benefits beyond those that its experience and knowledge already provide
- Do so at considerable additional cost
One way for new ventures to achievescientific legitimacy is by assigning leadership roles to scientists and academics, because scientists help invent new products and their presence in leadership roles in the new venture also confers at least three other benefits to the firm. Which three benefits?
- Technical credibility, suggesting that the new venture has the ability within itself to develop successful new products
- Access to outside knowledge the firm does not possess and cannot develop on its own
- Some assurance that the firm has the ability to absorb and leverage new knowledge acquired from outside entities.
What are the three core benefits on new ventures in the presence in top managment positions of experienced professionals from related fields?
- Their presence suggests to important stakeholders that the new venture understands customers well and that the firm is market oriented in its approach.
- Because of their past experience with commercializing products, experienced executives will provide new ventures with this important capability, thus improving stakeholder perception of the firm's likely success with its own products
- Such executives will be able to draw on their experience with picking market winners, again increasing the new venture's potential performance with its new products. Greater market knowledge confers a greater probability of success with new products
In which three ways can the presence of related firms help new ventures in these clusters gain legitimacy?
- Their presence in the cluster indicates to stakeholders that they have access through the cluster to specialized inputs and skilled labor pool
- It suggests that the new ventures have access to new technical and market knowledge as well as resources that can be shared
- It suggests that the new ventures can potentially gain from any complementarities that may result from working with or in the presence of related firms
But why do the authors argue that new ventures in emerging industries are likely to benefit rather than suffer from their presence in clusters?
Which kinds of legitimacy are most important?
- Historical
- Market
- Scientific
- Locational legitimacy
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