Social Reconstruction of New Ventures' Liabilities of Newness and Smallness: An Example From the French Technology Sector

Dmitriev, Viatcheslav (2016). Social Reconstruction of New Ventures' Liabilities of Newness and Smallness: An Example From the French Technology Sector. PhD thesis The Open University.



New entrepreneurial ventures are intrinsically stigmatized by liabilities of newness and smallness that lead to lack of legitimacy. The legitimacy problem complicates new ventures’ access to external resources. Overcoming these liabilities means gaining legitimacy in the eyes of significant audiences (Stinchcombe, 1965; Singh, Tucker & House, 1986). To date, the research on new ventures’ legitimation has mainly taken one of the following two perspectives: the neo-institutional perspective, in which scholars view new ventures legitimation as a product of conformity with institutional norms and standards, and the strategic perspective, in which scholars focus on new ventures’ proactive symbolic actions aimed at manipulating audiences’ perceptions. Although existing studies of liabilities of newness and smallness rest on the assumption that new ventures’ lack of legitimacy is inter-subjective, the social-constructionist aspect of this phenomenon has not been sufficiently investigated. For instance, extant studies have overlooked entrepreneurs’ subjective experiences ensuing from their ventures’ lack of legitimacy.

Emerging literature on the sensemaking of entrepreneurial failures partly fills this knowledge gap. These studies have examined how entrepreneurs cognitively process and narratively construct their ventures’ failures (e. g. Cardon et al, 2011; Mantere et al, 2013). However, these studies focus on ultimate failures, rather than failed attempts to acquire external resources. Continued inability to acquire key resources, being a direct premise of entrepreneurial failures, has not been studied as a subject of sensemaking.

Therefore, this study seeks to understand how entrepreneurs make sense of and narratively construct experienced hardship of resource acquisition at the early years of their ventures’ existence. Furthermore, although scholars acknowledge that public perception influences the way entrepreneurs’ make sense of their ventures’ failures (e. g. Cardon et al, 2011), extant literature failed to explain what constitutes public perception of entrepreneurial failures. Therefore, this study also seeks to understand how entrepreneurs’ narrative construction of failures and hardship affects public perception.

To fulfil the research objectives, this study is based on a synthesis of the literatures on new ventures legitimation, entrepreneurial failures and social movements (e. g. Benford & Snow, 2000). Social movement approach provides suitable theoretical and methodological framework for the research endeavour. Social movement studies explore how collective discontent is made sense of, grievances are articulated and framed as injustice by social actors in pursuit of social change (Turner, 1995).

In this study, narratives of entrepreneurs whose ventures’ development is hampered by inability to access external resources are examined. The empirical investigation is focused on the new ventures’ attempts to establish collaborative technology partnerships with incumbents. Frame analysis (Goffman, 1974; Creed et al, 2002a) is adapted to critically examine entrepreneurs’ narratives collected through very in-depth interviews. The data set comprised narrative interviews with 35 entrepreneurs and 16 top managers of private and public organizations in France.

The findings of this study suggest that failed attempts to establish technology partnerships with incumbents trigger entrepreneurs’ sensemaking of their own experiences and also broader reinterpretation of technology partnership as a patterned social interaction. It was found that the entrepreneurs whose ventures’ development is hampered by inability to access incumbents’ resources are likely to frame their hardship as injustice rather than simple misfortune or mistake. The findings also indicate that injustice frame plays twofold role in the entrepreneurial dynamics. Besides being an interpretive and blame externalizing mental model, injustice frame also plays a sensegiving role. It is demonstrated that when framing their hardship as injustice, entrepreneurs employ contextually embedded discourse to construct collective identities of new ventures and incumbents that ascribe role expectations to resource-holding incumbents. Furthermore, relevance to experience and cultural resonance of the injustice frame determines its appropriation by other actors and, therefore, its impact on the public discourse.

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