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Understanding Entrepreneurial Legitimacy in the digital space: The Where, The Who and The How

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Universitat de Barcelona. Facultat d'Economia i Empresa

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[eng] The Industry 4.0 revolution is undergoing a profound transformation due to the unstoppable digitalization of our society. This historic dynamic is characterised by hyperconnectivity, where the Technosphere, the natural world, and the human world are interconnected (Park, 2018).

As a result, entrepreneurship as a social, temporal, and spatial process (Anderson, Warren and Bensemann, 2019; Wadhwani et al., 2020) is being challenged by new generations of entrepreneurs who are disrupting markets with their digital business models based on more incremental technological innovations (Obschonka and Audretsch, 2020). 

Digital entrepreneurship emerges as a phenomenon in which new digital artefacts, platforms, and infrastructures are used to pursue innovative and entrepreneurial opportunities (Davidson & Vaast 2010; Nambisan 2016). It is defined as the sale of digital products or services over electronic networks, assuming that some or all of what would be physical in a traditional business has been digitised (Kraus et al., 2019). 

By this definition, the foundations of entrepreneurship need to be rethought (Dodd, Anderson and Jack, 2021; Welter and Baker, 2021). The academic community is called upon to interrogate the new horizons of entrepreneurship that emerge from technological advances. Importantly, we need to address the important implications of digitization for critical processes for entrepreneurship, such as legitimacy.

In entrepreneurship, legitimacy is widely associated with entrepreneurial success in terms of acquiring resources from the context for survival and growth purposes (Zimmerman and Zeitz, 2002; Shepherd and Zacharakis, 2003; De Clercq and Voronov, 2009; Überbacher, 2014; Lent et al., 2019). The definition of entrepreneurial legitimacy is based on Suchman's seminar work. He stated that legitimacy is “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” (Suchman, 1995, p.574). 

In the entrepreneurship literature, there are two important types of legitimacy— institutional and strategic traditions. Institutional legitimacy emphasises the influence of external pressures on social actors [entrepreneurs] to comply with regulations, legal pressures, or values and expectations of their operating context (Lent et al. 2019; Suchman 1995; Überbacher 2014; DiMaggio and Powell 1983; Scott 2014. Strategic legitimacy is a managerial tool for pursuing organisational goals [acquiring resources] through the manipulation and use of suggestive symbols to gain social support (Suchman 1995; Lent et al. 2019; Zimmerman and Zeitz 2002).

Recent studies on entrepreneurial legitimacy mainly assume an integrative framework(Suchman, 1995; Lent et al., 2019).  A good example is the work of De Clercq and Voronov (2008), whose claim that legitimacy in entrepreneurship should take into account the essence of entrepreneurial behaviour: Innovation and change. Legitimacy should thus be linked not only to the ability of entrepreneurs to adhere to existing institutional arrangements (institutional legitimacy), but also to the ability to convey that they are innovators or change agents (strategic legitimacy) (De Clercq and Voronov, 2009). 

This approach to legitimacy suggests that the acquisition of resources depends on where is "entrepreneuring", who and how it does (Fisher, Lahiri and Kotha, 2016; Fisher et al., 2017); it is less clear whether we can understand legitimacy for digital entrepreneurship in light of this:

i.	Our understanding of the context of digital entrepreneurship is still in its infancy.  The context of digital entrepreneurship is characterised by a less bounded, flexible and fluid space (Nambisan, 2017), where the absence of place-based institutions poses a real challenge to entrepreneurial success. The influence of context on entrepreneurship is widely recognised as key to understanding when, how and why entrepreneurship occurs and who is involved (Welter, 2011; Anderson, Warren and Bensemann, 2019). However, little attention has been paid to exploring the complex spatial-institutional nature of digital space, making it difficult to understand how digital entrepreneurial practices and interactions play out. 

ii.	We have made assumptions about what the expectations of appropriate entrepreneurship are. Until now, the legitimised figure of the entrepreneur has been rooted in neoliberal ideology. It promotes the empowerment of people to embrace the entrepreneurial promises of freedom and flexibility, improvement of socio-economic circumstances (Ogbor, 2000; da Costa and Saraiva, 2012; Scharff, 2016; Nicholls and Teasdale, 2017) through the creation of new opportunities and the implementation of new concepts in an uncertain and unknowable environment (Kuratko and Morris, 2018). Authentic neoliberal entrepreneurs are seen as heroes who are motivated by their ability to take risks, challenge circumstances through a positive attitude, and emphasise their individuality (Anderson and Warren, 2011; Hytti and Heinonen, 2013; Scharff, 2016)

Based on these assumptions, this thesis aims to investigate the legitimacy of digital entrepreneurship. To achieve this further, we pursue three specific objectives:

i.	To examine ‘where’ digital entrepreneurship takes place, we mean to map the ideology of digital entrepreneurship by examining the values embedded in entrepreneurial discourses.
ii.	To develop our account of 'who' an entrepreneur should be in the digital; this means analysing (1) the hegemony of neoliberal discourse versus other emerging discourses and (2) the differences within each entrepreneurial discourse (neoliberal/emerging) in different contexts. 
iii.	To explore "how" legitimacy works in digital entrepreneurship; we mean to understand the legitimacy of AI-startups. We explore how ethical principles relate to AI-startups' pursuit of legitimacy for their technological developments.

Theoretically, we understand legitimacy in entrepreneurship as a socially embedded process for securing the acquisition of resources (Zimmerman and Zeitz, 2002; Zott and Huy, 2007; De Clercq and Voronov, 2009). However, our focus is on explaining the legitimacy of digital entrepreneurship as the interplay between entrepreneurs and the digital context (Fisher, Kotha and Lahiri, 2013; Fisher et al., 2017; Anderson, Warren and Bensemann, 2019).  

Digital entrepreneurship needs to (1) incorporate themes at multiple or cross-cutting levels of analysis and (2) encompass ideas and concepts from multiple fields/disciplines (Nambisan, Wright and Feldman, 2019). We believe that the theory of ideology (Van Dijk, 2001; van Dijk, 2006) offers powerful theoretical elements for observing the legitimacy of digital entrepreneurship. 

Van Dijk defines ideology as "foundational beliefs that underlie the shared social representations of specific social groups. These representations are, in turn, the basis of discourse and other social practices. It has also been assumed that ideologies are largely expressed and acquired by discourse" (van Dijk 2006, p.121).  In other words, ideology involves 'qualities' that are valued in society; values are the meanings assigned to the digital context that determine what is appropriate (Anderson and Smith, 2007). Ideology defines entrepreneurship and entrepreneurs.

In this sense, our approach is underpinned by the following assumptions:

i.	THE WHERE: Dood, Anderson, and Jack (2021, p.8) point out that “if institutions are socially constructed, they form and are formed by ideology, an ideology centred on values.” Then for us, ideology in entrepreneurship, though, is “a system of belief that shapes behaviour individually and collectively” (Johannisson and Huse, 2000; Davidson, 2014). It serves the social function of defining norms and values that are expressed, enacted, and reproduced through discourses of entrepreneurship worldview (Smith and Anderson, 2004; van Dijk, 2006; Anderson, Warren and Bensemann, 2019).  
The space for digital entrepreneurship takes on the nature of a “virtual location”. Websites are seen as windows that reveal underlying values, beliefs, assumptions, and capturing social practises (Perren and Jennings, 2005; Bansal and Kistruck, 2006), such as entrepreneurial discourse (van Dijk, 2006; Hjorth and Steyaert, 2013; Garud, Gehman and Giuliani, 2014; Ugoretz, 2017). Then, entrepreneurship in the digital context is being narrated (Hjorth and Steyaert, 2013). 
ii.	THE WHO: Entrepreneurial identity (Hytti, 2005; Hytti and Heinonen, 2013; Anderson, Warren and Bensemann, 2019) is seen as the individual action to fit the expectations associated with being appropriately entrepreneurial (Stryker and Burke, 2000), delineated by the values associated with the ideology of entrepreneurship. In this sense, Down (2008) argues that entrepreneurial narratives are a key element in formulating an entrepreneurial identity. Entrepreneurship identity is essentially ideological dominated by discourses of individuality, heroism and masculinity (Ogbor, 2000; Anderson and Smith, 2007; Drakopoulou Dodd and Anderson, 2007; Larty and Hamilton, 2011; Hytti and Heinonen, 2013). 

Consequently, entrepreneurial meanings are rooted in individualistic values. The heroic and masculine figure is valorised to bring about economic improvement (Anderson and Warren, 2011) through his ability to take risks, the need for achievement, dominance, aggression, independence, courage, ambition but lacking compassion and empathy (Hytti and Heinonen, 2013). However, some work points to the emergence of new and challenging meanings of entrepreneurship that demystify the individualistic assumption of entrepreneurship (Drakopoulou Dodd and Anderson, 2007). These new identities include more social/human values such as respect for the environment, diversity or community engagement (Hytti and Heinonen, 2013; Muñoz and Cohen, 2018). 

iii.	THE HOW: We appoint the role of espoused values as a bridge between entrepreneurs and the digital context. Espoused values are declarations of what entrepreneurs deem to be important; values underpin ethics and shape morals; they perform the function of communicating how entrepreneurs engage with their entrepreneurial ecosystem.




The application of our theoretical lens contributes to an integrative framework of legitimacy in digital entrepreneurship. This assertion has led us to consider legitimacy as a critical factor for growth and success that depends on where is "entrepreneuring", who and how 'entrepreneurship' occurs (Fisher, Lahiri and Kotha, 2016; Fisher et al., 2017). From this perspective, legitimacy is the outcome of a bidirectional process shaped by context and the ability of entrepreneurs to understand the rules of the game and obtain resources from their context (Stryker and Burke, 2000; Drakopoulou Dodd and Anderson, 2007; Nambisan, 2017; Anderson, Warren and Bensemann, 2019).

Accordingly, our main objectives were centred on understanding how digital ventures strive for legitimacy by focusing our attention on contextualising digital entrepreneurship and profiling the entrepreneurial identities operating there. To this end, in Chapter 1, we explored the 'where' of digital entrepreneurship and its particular spatial-institutional contextual factors(Welter, Baker and Wirsching, 2019; Baker and Welter, 2020; Welter and Baker, 2021). In Chapter 2, we developed our representations of digital entrepreneurial identities. Finally, Chapter 3 explored entrepreneurial legitimacy conditioned by technological progress and associated negative expectations (Rutherford, Buller and Stebbins, 2009; Owen et al., 2013; Genus and Iskandarova, 2018).

The main argument of the present thesis state that living in the digital age means that social practises are also transferred to the "digital". In terms of the legitimacy of digital entrepreneurship, the interactions between the context and the entrepreneurs take on a new dimension. Based on our conceptualisation, one way to capture the socio-spatial nature of digital entrepreneurship is through the various symbolic elements that manifest themselves in "digital space". Our main argument is to understand digital space as an immaterial space, but one that does not lack socio-normative institutions. These norms and values determine the conditions under which entrepreneurs perform symbolic actions that make them part of the entrepreneurial ecosystem and thus benefit from acquired legitimacy. 

Thus, the complexity of the digital reaches a new terrain; we have analysed our studies from the perspective of ideology. We argue that the ideology of digital entrepreneurship is an observable phenomenon that emerges through the discourses and values embedded in digital spaces. For us, entrepreneurship in the digital context is being narrated (Hjorth and Steyaert, 2013). In essence, websites - like windows that reveal underlying values, beliefs and assumptions (Perren and Jennings, 2005; Bansal and Kistruck, 2006)—, articulate discourses as expressions of what values are accepted in entrepreneurial digital practises. (van Dijk, 2006; Hjorth and Steyaert, 2013; Garud, Gehman and Giuliani, 2014; Ugoretz, 2017). As a result, entrepreneurial practises that are socially legitimised can be addressed.

Following Van Dijk's (2006) theoretical move towards a theory of ideology, we think that digital entrepreneurial legitimacy as a process can be accessed through the values embedded in discourses. In particular, we propose to work with the most visible and accessible forms of organizational values: espoused values (Bourne, Jenkins and Parry, 2017). This unit of analysis explains what entrepreneurs deem to be important; values underpin ethics and shape morale (Anderson and Smith, 2007).  

Espoused values demonstrated that they can link both realities of entrepreneurship: the context and the entrepreneurs. On the one hand, the literature traditionally refers to the term "espoused" to those organizational values formally espoused by top management as a statement of intent about organisational behaviour (Kabanoff, Waldersee and Cohen, 1995; Bansal, 2003; Bourne and Jenkins, 2013). More so, they have been conceptualised as public representations of top managers' values (Kabanoff, Waldersee and Cohen, 1995; Jonsen et al., 2015; Bourne, Jenkins and Parry, 2017). 

Therefore, espoused values can be seen as a tool that enables organisations to achieve their legitimacy goals (Hofstede, 1984; Gray and Balmer, 1998; Kabanoff and Daly, 2000; Schein, 2004; Jonsen et al., 2015; Bourne, Jenkins and Parry, 2017). Particularly in digital ventures, espoused values can help overcome vulnerability to ethical judgements(Owen et al., 2013). Thus, technological validation requires profound cultural change and the transformation of social values (Mendoza, Rodriguez Alfonso and Lhuillery, 2021). This fact is a sine qua non to ensure digital venture survival.

The insights gained in developing this thesis provide an integrative framework for understanding the legitimacy of digital entrepreneurship. Its explanatory elements lie in the crucial role of the digital context (the where) in shaping the entrepreneurial identity of digital enterprises (the who), which create validation and acceptance for resource holders (the how).

Our key findings were to observe emerging discourses as a breaking point in the legitimation process in the digital context. The social realities shaped by technological progress are changing the ethical principles in the mechanism for entrepreneurial survival. In particular, we analyse the case of artificial intelligence (AI), that is, its cultural sensitivity and the potentially harmful risks for society. Validation and trust in the positive capabilities of AI are sine qua non for the legitimacy of digital entrepreneurship.

As we see, the petrified in the archetypal hero myth (Drakopoulou Dodd and Anderson, 2007; Anderson and Warren, 2011) is beginning to show cracks.  We are facing the emergence of other values for entrepreneurship (Hytti, 2005; Hytti and Heinonen, 2013). The notion of the authentic digital entrepreneur is not universal. These considerations are in line with Drakopoulou and Anderson (2007) and their call for demystifying the taken-for-granted figure of the entrepreneur.

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(c) Arroyo Carrasco, Lizbeth Elaine, 2022

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Tesis Doctorals - Facultat - Economia i Empresa

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Understanding Entrepreneurial Legitimacy in the digital space: The Where, The Who and The How