A New Venture's Cognitive Legitimacy: An Assessment by Customers

Abstract

Many legitimacy problems associated with new ventures appear to stem from a lack of customers’ knowledge and understanding of the new venture. Of particular concern to entrepreneurs is cognitive legitimacy. The findings of this article suggest that customers appear to have a preference for greater rather than lesser information about a new venture's product, organization, and management (holding the content of that information constant). Furthermore, customers appear to use a contingent decision policy. For an independent startup business that is perceived as new on all three dimensions, priority should be given to building customer knowledge in the product, followed by building customer knowledge in the organization. Less attention should be given to building the customer's knowledge in the management team, although such actions still will build cognitive legitimacy.

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