The Legitimacy Threshold Revisited: How Prior Successes and Failures Spill Over to Other Endeavors on Kickstarter

Abstract

How does the legitimacy conferred on entrepreneurial endeavors affect the legitimacy of subsequent ones? We extend the notion of a “legitimacy threshold” to develop and test a recursive model of legitimacy. Whereas extant research has focused on whether entrepreneurial endeavors garner sufficient support from key audiences to cross this threshold, we argue that the order of magnitude by which they succeed or fail is consequential for later entrants, too. Distinguishing “blockbuster” from “unsung” successes, and “path breaking” from “broken path” failures, we contend that recent successes and failures affect related subsequent endeavors in predictable, though sometimes counterintuitive ways. We test our hypotheses by examining 182,358 entrepreneurial endeavors pitched within 165 categories over a six-year period on Kickstarter, one of the most important crowdfunding platforms. We show that individual outcomes, taken collectively, generate legitimacy spillovers, either by encouraging audiences to repeatedly support other related endeavors or by discouraging them from doing so. Our research contributes to understanding the recursive nature of legitimacy, the competitive dynamics of entrepreneurial efforts, and crowdfunding platforms.

Keywords: legitimacy, entrepreneurship, crowdfunding, resourcing

JEL Classification: O31, L26