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Innovation & Entrepreneurship > Lecture 2 > Flashcards

Lecture 2 Flashcards

1
Q

Legitimacy defenition

A

Generalized perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and definitions.

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2
Q

What needs to be legitimate?

A

Depends on the innovation:

  1. Product -> the product/service
  2. Process -> the new process…
  3. Organizational -> ……
  4. Business model -> the new ways to generate value
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3
Q

Who grants legitimacy?

A

Course uses a stakeholder perspective.

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4
Q

Stakeholder definition

A

“Any group or individual that can affect or is affected by the firms objective”

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5
Q

Some examples of stakeholders

A
  1. Governments
  2. Investors
  3. Political groups
  4. Customers
  5. Communities
  6. Employees
  7. Suppliers
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6
Q

Three reasons why legitimacy is important

A
  1. To attract customers -> Mac Donalds
  2. To attract other stakeholders (and their resources)
  3. Governmental approval or protection -> legislation or subsidies
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7
Q

Sources to create legitimacy

A

That can be either external or internal.

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8
Q

External ways to create legitimacy

A

Alliances with other companies

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9
Q

Internal ways to create legitimacy

A
  1. Via the market -> expert on board
  2. Via science -> expert on board
  3. Via history -> successful history
  4. Via location -> e.g. silicon valley
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10
Q

Cognitive legitimacy

A

Refers to the spread of knowledge about a new venture. Highest form of cognitive legitimacy is when a new product, process or service is taken for granted.

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11
Q

Socio-Political legitimacy

A

Refers to the process where key stakeholders accept a venture as appropriate and right. Given existing laws and norms. Like the general public or governmental officials.

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12
Q

Inter-industry meaning

A

The nature of relations between industries whether it is competing or cooperating.

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13
Q

Intra-industry meaning

A

Processes constrain the legitimacy of new industries by structuring the immediate environment.

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14
Q

How can entrepreneurs signal legitimacy?

A

Via symbols. There are traditional symbols and visual symbols.

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15
Q

Examples of traditional symbols

A
  • education of entrepreneur
  • business techniques used
  • certificates and endorsement
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16
Q

Example of visual symbols

A
  • setting (office, locations etc…..)
  • way of dressing (formal vs. informal)
  • expressiveness, etc.
17
Q

Level of analysis for cognitive and socio political legitimacy

A
  1. Organizational
  2. Intra-industry
  3. Inter-industry
  4. Institutional
18
Q

Decisions entrepreneurs need to make when founding a company:

A
  1. Number of founders
  2. Split of shares
  3. Joint CEO approach vs. decision making approach
  4. Founders on board
19
Q

Ways of organizing transactions

A
  1. Markets
  2. Hierarchy
  3. Network
20
Q

Organizational level of legitimacy

A

Entrepreneurs need strategies for encouraging a trusting party’s beliefs in the shared expectations, reasonable efforts and competence of the aspiring entrepreneur.

21
Q

Institutional level of legitimacy

A

Institutional conditions may constrain the rate at which an industry grows by affecting the diffusion of knowledge about a new activity and the extent to which it is publicly or officially tolerated.

22
Q

Market transactions

A

Benefits are clearly specified, no trust required and agreements are bolstered by the power of legal sanction.

23
Q

Hierarchie transactions

A

Communication is in terms of routines/employment. Particularly suited for mass production and distribution. Strengths are reliability and accountability.

24
Q

Network transactions

A

Entail indefinite, sequential transactions within the context of pattern of interaction and reciprocity.

25
Q

Number of founders -> Solo when….

A
  • Founder has deep human, social and financial capital
  • Strong preference for maintaining full control
  • No strong need for validation or support
  • Small and slow moving industry
26
Q

Number of founders -> a team when…

A
  • Founder has holes in human, social and financial capital
  • Prefers to change his tasks overtime
  • Prefers collaborative style
  • Desire for support and validation
  • Fast moving industry, with first mover advantage
27
Q

Factors to consider with the split of equity

A

1) Past contribution
2) Opportunity costs
3) Future contributions
4) Motivation & preferences

28
Q

Egaliterian (equal) adv. & disadv.

A 
Adv: 
- Trust among strangers
- Affirms equal treatment
Disadv:
- consensus-building is time consuming
- accountability is less clear
29
Q

Hierarchical adv. & disadv.

A 
Adv:
- Decision-makers can mobilize quickly
- Clear accountability
Disadv:
- Input by more specialized people leads to better decisions.
30
Q

Founders on board (after they leave) adv. & disadv.

A 
Adv:
- Human & social capital help new CEO
- Teaching the new CEO
Disadv:
- Resist changes suggested by new CEO
- Encourage their loyalists to leave

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