IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v9y2017i10p1815-d114396.html
   My bibliography  Save this article

Reveal or Conceal? Signaling Strategies for Building Legitimacy in Cleantech Firms

Author

Listed:
  • Ekaterina S. Bjornali

    (NTNU Business School, Norwegian University of Science and Technology, 7491 Trondheim, Norway)

  • Ferran Giones

    (The Mads Clausen Institute, University of Southern Denmark, 6400 Sønderborg, Denmark)

  • Anders Billstrom

    (Nord University Business School, Nord University, 8049 Bodø, Norway)

Abstract

New entrants in technology-intense industries are in a race to build legitimacy in order to compete with established players. Legitimacy has been identified as a driver of venture survival and growth; it helps mitigate third-party uncertainty and so facilitates access to resources, engagement with customers and other stakeholders. Nevertheless, we know little about how legitimacy is built and how new entrants build legitimacy in complex technology-intensive industries. In this research we explore how Norwegian cleantech firms use signaling and strategic actions to build legitimacy. We analyze five cases while investigating their actions in different phases of the venture’s evolution. The results suggest that, contrary to signaling theory expectations, young clean-tech firms do not always build legitimacy by conveying information on their strengths. Instead, we observe that they use signaling strategies to address the specific concerns of different stakeholders. This is very much contingent upon the evolutionary stage of the venture and the firm’s current weaknesses.

Suggested Citation

  • Ekaterina S. Bjornali & Ferran Giones & Anders Billstrom, 2017. "Reveal or Conceal? Signaling Strategies for Building Legitimacy in Cleantech Firms," Sustainability, MDPI, vol. 9(10), pages 1-19, October.
    • Handle: RePEc:gam:jsusta:v:9:y:2017:i:10:p:1815-:d:114396
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/9/10/1815/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/9/10/1815/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lowell W. Busenitz & James O. Fiet & Douglas D. Moesel, 2005. "Signaling in Venture Capitalist—New Venture Team Funding Decisions: Does it Indicate Long–Term Venture Outcomes?," Entrepreneurship Theory and Practice, , vol. 29(1), pages 1-12, January.
    2. Janney, Jay J. & Folta, Timothy B., 2006. "Moderating effects of investor experience on the signaling value of private equity placements," Journal of Business Venturing, Elsevier, vol. 21(1), pages 27-44, January.
    3. York, Jeffrey G. & Venkataraman, S., 2010. "The entrepreneur-environment nexus: Uncertainty, innovation, and allocation," Journal of Business Venturing, Elsevier, vol. 25(5), pages 449-463, September.
    4. Baum, Joel A. C. & Silverman, Brian S., 2004. "Picking winners or building them? Alliance, intellectual, and human capital as selection criteria in venture financing and performance of biotechnology startups," Journal of Business Venturing, Elsevier, vol. 19(3), pages 411-436, May.
    5. Fisher, Greg & Kuratko, Donald F. & Bloodgood, James M. & Hornsby, Jeffrey S., 2017. "Legitimate to whom? The challenge of audience diversity and new venture legitimacy," Journal of Business Venturing, Elsevier, vol. 32(1), pages 52-71.
    6. Masini, Andrea & Menichetti, Emanuela, 2012. "The impact of behavioural factors in the renewable energy investment decision making process: Conceptual framework and empirical findings," Energy Policy, Elsevier, vol. 40(C), pages 28-38.
    7. Loock, Moritz, 2012. "Going beyond best technology and lowest price: on renewable energy investors’ preference for service-driven business models," Energy Policy, Elsevier, vol. 40(C), pages 21-27.
    8. Elitzur, Ramy & Gavious, Arieh, 2003. "Contracting, signaling, and moral hazard: a model of entrepreneurs, 'angels,' and venture capitalists," Journal of Business Venturing, Elsevier, vol. 18(6), pages 709-725, November.
    9. Jeff Dyer & Wujin Chu, 2011. "The determinants of trust in supplier–automaker relations in the US, Japan, and Korea: A retrospective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 42(1), pages 28-34, January.
    10. Øyvind Bjørgum & Øystein Moen & Tage Koed Madsen, 2013. "New ventures in an emerging industry: access to and use of international resources," International Journal of Entrepreneurship and Small Business, Inderscience Enterprises Ltd, vol. 20(2), pages 233-253.
    11. Andrea Masini & E. Menichetti, 2012. "The impact of behavioural factors in the renewable energy investment decision making process: Conceptual framework and empirical findings," Post-Print hal-00651706, HAL.
    12. Julie Battilana & Bernard Leca & Eva Boxenbaum, 2009. "How actors change institutions : Towards a theory of institutional entrepreneurship," Post-Print hal-00576509, HAL.
    13. Vohora, Ajay & Wright, Mike & Lockett, Andy, 2004. "Critical junctures in the development of university high-tech spinout companies," Research Policy, Elsevier, vol. 33(1), pages 147-175, January.
    14. Hoenig, Daniel & Henkel, Joachim, 2015. "Quality signals? The role of patents, alliances, and team experience in venture capital financing," Research Policy, Elsevier, vol. 44(5), pages 1049-1064.
    15. Baoshan Ge & Dake Jiang & Yang Gao & Sang-Bing Tsai, 2016. "The Influence of Legitimacy on a Proactive Green Orientation and Green Performance: A Study Based on Transitional Economy Scenarios in China," Sustainability, MDPI, vol. 8(12), pages 1-20, December.
    16. Hsu, David H., 2007. "Experienced entrepreneurial founders, organizational capital, and venture capital funding," Research Policy, Elsevier, vol. 36(5), pages 722-741, June.
    17. Garry D. Bruton & Salim Chahine & Igor Filatotchev, 2009. "Founders, Private Equity Investors, and Underpricing in Entrepreneurial IPOs," Entrepreneurship Theory and Practice, , vol. 33(4), pages 909-928, July.
    18. Vincenzo Franzitta & Domenico Curto & Daniele Milone & Marco Trapanese, 2017. "Energy Saving in Public Transport Using Renewable Energy," Sustainability, MDPI, vol. 9(1), pages 1-19, January.
    19. Hyytinen, Ari & Pajarinen, Mika & Rouvinen, Petri, 2015. "Does innovativeness reduce startup survival rates?," Journal of Business Venturing, Elsevier, vol. 30(4), pages 564-581.
    20. Roberto Rivas Hermann & Karin Wigger, 2017. "Eco-Innovation Drivers in Value-Creating Networks: A Case Study of Ship Retrofitting Services," Sustainability, MDPI, vol. 9(5), pages 1-27, May.
    21. Zhang, Wei & White, Steven, 2016. "Overcoming the liability of newness: Entrepreneurial action and the emergence of China's private solar photovoltaic firms," Research Policy, Elsevier, vol. 45(3), pages 604-617.
    22. Stiglitz, Joseph E, 1985. "Information and Economic Analysis: A Perspective," Economic Journal, Royal Economic Society, vol. 95(380a), pages 21-41, Supplemen.
    23. Srivastava, Joydeep, 2001. "The Role of Inferences in Sequential Bargaining with One-Sided Incomplete Information: Some Experimental Evidence," Organizational Behavior and Human Decision Processes, Elsevier, vol. 85(1), pages 166-187, May.
    24. Daily, Catherine M. & Certo, S. Trevis & Dalton, Dan R., 2005. "Investment bankers and IPO pricing: does prospectus information matter?," Journal of Business Venturing, Elsevier, vol. 20(1), pages 93-111, January.
    25. Sune Solberg Hjorth & Alexander Michael Brem, 2016. "How to Assess Market Readiness for an Innovative Solution: The Case of Heat Recovery Technologies for SMEs," Sustainability, MDPI, vol. 8(11), pages 1-16, November.
    26. Stefania Naty & Antonino Viviano & Enrico Foti, 2016. "Wave Energy Exploitation System Integrated in the Coastal Structure of a Mediterranean Port," Sustainability, MDPI, vol. 8(12), pages 1-19, December.
    27. Truls Erikson & Nicolai S Løvdal & Arild Aspelund, 2015. "Entrepreneurial Judgment and Value Capture, the Case of the Nascent Offshore Renewable Industry," Sustainability, MDPI, vol. 7(11), pages 1-14, November.
    28. Ranjay Gulati & Monica C. Higgins, 2003. "Which ties matter when? the contingent effects of interorganizational partnerships on IPO success," Strategic Management Journal, Wiley Blackwell, vol. 24(2), pages 127-144, February.
    29. Boyd D. Cohen & Thomas J. Dean, 2005. "Information asymmetry and investor valuation of IPOs: top management team legitimacy as a capital market signal," Strategic Management Journal, Wiley Blackwell, vol. 26(7), pages 683-690, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Robert Davtyan & Wojciech Piotrowicz, 2021. "Cleantech: State of the Art and Implications for Public Procurement," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 19(3 (Fall)), pages 185-207.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simon Kleinert & Christine Volkmann & Marc Grünhagen, 2020. "Third-party signals in equity crowdfunding: the role of prior financing," Small Business Economics, Springer, vol. 54(1), pages 341-365, January.
    2. Julian Bafera & Simon Kleinert, 2023. "Signaling Theory in Entrepreneurship Research: A Systematic Review and Research Agenda," Entrepreneurship Theory and Practice, , vol. 47(6), pages 2419-2464, November.
    3. Massimo G. Colombo & Benedetta Montanaro & Silvio Vismara, 2023. "What drives the valuation of entrepreneurial ventures? A map to navigate the literature and research directions," Small Business Economics, Springer, vol. 61(1), pages 59-84, June.
    4. Gry Agnete Alsos & Elisabet Ljunggren, 2017. "The Role of Gender in Entrepreneur–Investor Relationships: A Signaling Theory Approach," Entrepreneurship Theory and Practice, , vol. 41(4), pages 567-590, July.
    5. Ko, Eun-Jeong & McKelvie, Alexander, 2018. "Signaling for more money: The roles of founders' human capital and investor prominence in resource acquisition across different stages of firm development," Journal of Business Venturing, Elsevier, vol. 33(4), pages 438-454.
    6. Evila Piva & Cristina Rossi-Lamastra, 2018. "Human capital signals and entrepreneurs’ success in equity crowdfunding," Small Business Economics, Springer, vol. 51(3), pages 667-686, October.
    7. Paolo Gubitta & Alessandra Tognazzo & Federica Destro, 2016. "Signaling in academic ventures: the role of technology transfer offices and university funds," The Journal of Technology Transfer, Springer, vol. 41(2), pages 368-393, April.
    8. Xirong (Subrina) Shen & Heeyon Kim & Jizhen Li, 2022. "Funding ventures similar to one of us: How status dynamics within heterogeneous groups affect venture evaluation," Strategic Management Journal, Wiley Blackwell, vol. 43(10), pages 2135-2155, October.
    9. Hoenen, Sebastian & Kolympiris, Christos & Schoenmakers, Wilfred & Kalaitzandonakes, Nicholas, 2014. "The diminishing signaling value of patents between early rounds of venture capital financing," Research Policy, Elsevier, vol. 43(6), pages 956-989.
    10. Jung, Eunjun & Lee, Changjun & Hwang, Junseok, 2022. "Effective strategies to attract crowdfunding investment based on the novelty of business ideas," Technological Forecasting and Social Change, Elsevier, vol. 178(C).
    11. Taj, Saud A., 2016. "Application of signaling theory in management research: Addressing major gaps in theory," European Management Journal, Elsevier, vol. 34(4), pages 338-348.
    12. Christos Kolympiris & Sebastian Hoenen & Nicholas Kalaitzandonakes, 2018. "Geographic distance between venture capitalists and target firms and the value of quality signals," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 27(1), pages 189-220.
    13. Hoenig, Daniel & Henkel, Joachim, 2015. "Quality signals? The role of patents, alliances, and team experience in venture capital financing," Research Policy, Elsevier, vol. 44(5), pages 1049-1064.
    14. Scheaf, David J. & Davis, Blakley C. & Webb, Justin W. & Coombs, Joseph E. & Borns, Jared & Holloway, Garrett, 2018. "Signals' flexibility and interaction with visual cues: Insights from crowdfunding," Journal of Business Venturing, Elsevier, vol. 33(6), pages 720-741.
    15. Shamir, Noam & Zvilichovsky, David, 2022. "Dynamic reputation, project selection and market efficiency: The importance of small projects," International Journal of Production Economics, Elsevier, vol. 248(C).
    16. Yang, Shu & Kher, Romi & Newbert, Scott L., 2020. "What signals matter for social startups? It depends: The influence of gender role congruity on social impact accelerator selection decisions," Journal of Business Venturing, Elsevier, vol. 35(2).
    17. Krukowski, Kipp A. & Pollack, Jeffrey M. & Rutherford, Matthew W., 2023. "Winning the opportunity to pitch: Piquing startup investors’ interest by sending the right signals in executive summaries," Business Horizons, Elsevier, vol. 66(1), pages 75-86.
    18. Jörn Block & Lars Hornuf & Alexandra Moritz, 2018. "Which updates during an equity crowdfunding campaign increase crowd participation?," Small Business Economics, Springer, vol. 50(1), pages 3-27, January.
    19. Butticè, Vincenzo & Di Pietro, Francesca & Tenca, Francesca, 2020. "Is equity crowdfunding always good? Deal structure and the attraction of venture capital investors," Journal of Corporate Finance, Elsevier, vol. 65(C).
    20. Ashish Vazirani & Titas Bhattacharjee, 2021. "Entrepreneurial Finance in the Twenty-first Century, a Review of Factors Influencing Venture Capitalist’s Decision," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 30(2), pages 306-335, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:9:y:2017:i:10:p:1815-:d:114396. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.