文档介绍：Raghunath Singh Rao, Rajesh K. Chandy, & Jaideep C. Prabhu
The Fruits of Legitimacy: Why Some
New Ventures Gain More from
Innovation Than Others
This article examines rewards to product introduction by new ventures. The authors argue that the new ventures
that gain the most from innovation are those that adopt strategies that give them legitimacy in the eyes of
stakeholders. New ventures can gain legitimacy by creating associations with established entities; such
associations can be internal or external to the firm. The authors test these ideas by examining the stock market
gains of all products introduced between 1982 and 2002 by all public firms in the . biotechnology industry. The
results show that new ventures that acquire legitimacy externally by forming alliances with established firms gain
more from their new products than new ventures that do not form such alliances. Among new ventures that do not
form alliances, those that acquire legitimacy internally by creating a history of product launches or by hiring reputed
executives or scientists gain more from their new products than those that do not. In relative terms, it pays more to
have introduced a new drug before than to have a reputed executive on the firm’s board; in turn, adding a reputed
executive pays more than adding a reputed scientist to the firm’s board. Finally, although new ventures can gain
from either external or internal legitimacy, pursuit of external legitimacy by firms that already have internal
legitimacy leads to lower rewards to innovation.
Keywords: innovation, stock market returns, legitimacy, biotechnology, alliances, entrepreneurship
ew ventures play a crucial role in driving economic world are buzzing with activities that embody their hopes
growth (Schumpeter 1934). Economies with a and dreams. However, history suggests that only a few of
Nhigher proportion of new ventures grow faster than these dreams are likely to be fulfilled (Klepper 2002). Why
other