Industry Creation, Legitimacy and Foundings: the Case of the American Film Industry, 1896–1928

One of the earliest and most consistent claims of organization theory has been that organizations face a liability of newness (Stinchcombe, 1965). This claim has obvious relevance to the study of entrepreneurship and is reflected in the emerging consensus among organizational scholars of entrepreneurship that new firms and new industries face a legitimacy challenge. As Aldrich & Fiol (1994: 645) noted: ‘…founders of new ventures appear to be fools, for they are navigating, at best, in an institutional vacuum of indifferent munificence and, at worst, in a hostile environment impervious to individual action.’ They develop the argument that successful entrepreneurship requires the development of two types of legitimacy: cognitive and sociopolitical. Lounsbury and Glynn (2000) focused on the specific strategies that members of newly founded firms might take to use narrative to overcome the legitimacy problem by linking their enterprise with the larger social context. At the interorganizational level, specifically the population level of analysis, the field of organizational ecology has had a focus on a phenomenon of central interest to entrepreneurship: the founding of new firms.