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Legitimacy theory for digitalization and international strategy of new venture capitalization

Author

Listed:
  • Kok-Bing Poh

    (Feng Chia University)

  • Fang-Yi Lo

    (National Sun Yat-sen University)

  • Kun-Huang Huarng

    (National Taipei University of Business)

  • Ing. Tatiana Masárová

    (Alexander Dubček University of Trenčín)

Abstract

Venture capital financing prioritizes new ventures with modern technology that are known for employing risky market disruptive business models. Configuring data on new ventures to the legitimacy theory, this research identifies 3. (1) to test the veracity of the classic legitimacy theory on new venture competition, (2) to derive key factors’ influence on the capitalization of new ventures, and (3) to define the Forbes database according to four legitimacy strategies: conformance, selection, manipulation, and creative legitimacy. Empirical data comprise Forbes top 500 startups whose observations are instrumental in linking their high funding needs in 2022. Venture capital demands evidence of the highest legitimization, creative legitimization, for startups pursuing a disruptive business model. This finding is consistent with (a) congruence of the legitimacy theory in explaining new ventures’ innovative competition model and (b) venture capital’s endorsements of the new ventures’ more inimitable digital competitiveness.

Suggested Citation

  • Kok-Bing Poh & Fang-Yi Lo & Kun-Huang Huarng & Ing. Tatiana Masárová, 2024. "Legitimacy theory for digitalization and international strategy of new venture capitalization," International Entrepreneurship and Management Journal, Springer, vol. 20(4), pages 3349-3372, December.
    • Handle: RePEc:spr:intemj:v:20:y:2024:i:4:d:10.1007_s11365-024-00979-1
    DOI: 10.1007/s11365-024-00979-1
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