The quest for legitimacy in nascent industries: Exploring the interplay across institutional actors in the emergence of renewable energy sectors

This study suggests that the legitimacy and growth of nascent industries is not only a product of market conditions, but of the collective institutional efforts of distinct and multiple actors. Specifically, this work distinguishes across the initiatives of firms in nascent industries, social movement organizations, and firms in competing industries, to assess how the interdependent actions of these parties influence the normative, regulatory, and cognitive legitimacy of an emerging industry and its subsequent growth. I argue that the ability of firms in emerging industries to shape the legitimacy of their industries is dependent upon the strength and structure of the social movements that surround them and the responses of firms in competing industries. I examine these relationships in the context of the solar and wind energy sectors, both of which provide rich opportunities for investigating highly active institutional environments. Through a longitudinal study across all 50 U.S. states (48 states for the wind energy sector), I find that the participation of firms in trade associations is less effective at promoting the regulatory and cognitive legitimacy of their sectors when they are surrounded by highly active environmental social movements and by strong support from competing firms. In addition, the opposition of competing firms reduces the ability of trade associations in the wind and solar energy sectors to bring about regulatory legitimacy. Finally, the results of this study reveal that the acquisition of regulatory and cognitive legitimacy is subsequently related to the growth of these sectors by means of new firm foundings.