Your Ancestors Worked Hard for this Legitimacy! Theory and Experiment on the Inauthenticity of Second Movers

Why do first movers into a new industry sometimes gain an advantage simply because of the fact that they are perceived by audiences to be more authentic than second movers, whereas in other contexts such second movers are perceived as no less authentic than first movers? We theorize that this difference hinges on the amount of costly, risky “legitimation work” that entrants are perceived to have conducted in their efforts to establish that the new organizational form is reliable and acceptable. Whereas a first mover must expend great effort to reassure skeptical audiences that the new form coheres with their norms and that it can meet and even exceed their standards, later arrivals are often able to appropriate such legitimacy once it has been established. But such appropriation by the second mover makes its (often implicit) claim of original insight or vision seem less authentic than that of the first mover. In three complementary online experiments on audience reactions to online healthcare startups, we find support for our prediction that followers suffer from a lower consumer preference because they are perceived to have done less work in establishing the new form’s legitimacy. Our results show that when follower firms show evidence of participation in legitimation work, it may overturn the default interpretation and reduce the authenticity discount.