Research On Entrepreneurial Orientation, Legitimacy And New Venture Growth

Entrepreneurial orientation has always been a hot issue in entrepreneurship researches since 1980s. However, most of these researches explore the relationship between entrepreneurial orientation and firm performance based on environmental-Dependence theory or organizational behavior theory, which do not come out with a consistent conclusion; and the high entrepreneurial orientation firms in practice do not achieve rapid growth as expected. The fact is that in order to overcome the defects of "new" and "small", new ventures take high pro-active, innovative and risk-taking strategies to gain the growth of the firm, but they also face the problem that they may not be accepted or agreed by the markets(the legitimacy acquisition of new firms), which lead to the difficulty of the company handling entrepreneurial orientation and legitimacy acquisition. Thus, the relationship between entrepreneurial orientation and firm performance is not as simple as just positive or negative, we need solve the existing problems based on new theories and perspectives. Form the perspective of institutional embed to explore the relationship between entrepreneurial orientation and firm performance, is the key to solve the problem related above and guiding the entrepreneurship practice. In our study, we find that there are contradictions between entrepreneurial orientation and cognitive legitimacy, high entrepreneurial orientation can easily lead to the prejudice and missing of cognitive legitimacy. To compensate for problems caused by this defect, new enterprises must take strategies obtain the cognitive legitimacy.In this paper, firstly we define the definition of the legitimacy of new venture. Scholars believe that legitimacy is the value judgments and cognitiveness of whether the existence of the organization is rational for other social actors. However, previous research has ignored a reality: different from the mature enterprises, new ventures face severe constraints of cognitive legitimacy crisis because of the lack of available historical data and information (Aldrich & Fiol,1994), thus the primary task of new enterprises is to build information platform for the external evaluation to gain legitimacy, and deliver the relevant information, as well as make themselves familiar with the outside world with targeted actions. Tornikoski and Newbert (2007) suggest that new businesses rely on the conforming legitimacy and strategic legitimacy to display the reasonability of their existence, and use this as the channel for external support. This paper argues that the legitimacy of the new company not only refers to social cognition and the result of value judgments, but also includes the efforts that new business made to break the cognitive legitimacy. Combined with the research of Tornikoski and Newbert(2007), Suchman(1995) and other researches, we define the legitimacy which can reflect the special nature of of new venture: conforming legitimacy which objectively reflect the new corporate reasonability and information normatively; strategic legitimacy which actively display the new corporate value.Subsequently, the paper select the ISO quality certification as the index of conforming legitimacy, respectively, select market legitimacy as the index of strategic legitimacy, and verify the importance of entrepreneurial orientation in new venture growth. The innovativeness and proactiveness of entrepreneurial orientation promote new venture growth by the market legitimacy as medium variable. The relationship between risk-taking and market legitimacy is negative, but it still promote the growth of new venture. Conforming legitimacy has positive influence on the relationship between entrepreneurial orientation and new venture growth. We also discuss and analysis the conclusion, and provide countermeasures for new business conduct legitimacy strategy, and balance the relationship between entrepreneurial orientation and legitimacy, also provide advices to policy makers to improve relevant policies and regulations, so as to create a more perfect institutional environment for entrepreneurial activities.