The legitimacy of corporate entrepreneurship: a structured literature review

Corporate entrepreneurship is an umbrella term for all entrepreneurial activities of incumbent firms at the individual-team or organizational-unit level (Bouchard and Fayolle 2017; Zahra et al. 2000), which have the potential to create competitive advantages (Corbett et al. 2013; Covin and Miles 1999; Teng 2007). Therefore, corporate entrepreneurship functions as a special form of entrepreneurship and represents an independent concept that transmits entrepreneurial behavior of the individual to the organizational level (Bouchard and Fayolle 2017). Renewing established companies enables them to remain viable. This can occur through utilizing various innovation-based initiatives (Corbett et al. 2013), including, for example, corporate venture capital and corporate venturing, as well as general innovations and strategic renewal approaches (Röhm 2018; Weiss and Kanbach 2021; Zahra et al. 2000). The great potential for companies to renew their strategy or develop new ideas through corporate entrepreneurship entities has led to increasing interest in this approach. Many companies have already recognized that a basic entrepreneurial attitude is advantageous when it comes to dealing with the challenges of an increasingly turbulent business environment (Skarmeas et al. 2016).

In its initial phase, corporate entrepreneurship was not recognized as a separate field of research. Previous research shows that it took about 10 years for this research field to become established (Sakhdari 2016). Over the past few years, corporate entrepreneurship has attracted considerable attention that the changing economic and globalized environment has driven (Teng 2007). Due to its increasing relevance, corporate entrepreneurship research has attracted the attention of many scholars from the social sciences, particularly in terms of a common understanding of the field, its antecedents and outputs, the boundary conditions, or the scope of this construct (Hitt et al. 1999; Hornsby et al. 2002; Sakhdari 2016). However, with the emergence of this field, researchers have created a great deal of uncertainty by utilizing various definitions and demarcations. Scholars have tried to define the field of CE over the past few decades. In the beginning, mixed views appeared on the scope of corporate entrepreneurship because it was not clearly differentiated from the phenomenon of innovation or new product development within firms (Corbett et al. 2013; Sakhdari 2016). This is why such terms as intrapreneurship (Skarmeas et al. 2016), corporate venturing (Burgelman 1985; De Bettignies and Chemla 2008; Gutmann 2019), or strategic renewal (Hitt et al. 2011) are often synonymous with corporate entrepreneurship. This circumstance contributes to the great complexity of this field.

Despite much research devoted to corporate entrepreneurship, “there remains a greater need for further research about corporate entrepreneurship in organizational settings” (Kuratko et al. 2015: 245). Prior research identifies conditions that support corporate entrepreneurship behavior (see Marvel et al. 2007): (1) rewards, (2) management support, (3) resource availability, (4) organizational structures, and (5) risk acceptance or risk-taking culture. Kuratko et al. (1990) reduce these five factors from prior research to three—(1) managerial support, (2) organizational structure, and (3) reward and resource availability—while Hornsby et al. (2002) identify five factors that foster entrepreneurial activity within established companies: (1) management support, (2) work autonomy, (3) rewards, (4) time availability, and (5) organizational boundaries. These results already indicate that resources and top management are crucial elements within the domain of corporate entrepreneurship. Some researchers suggest that these conditions encourage experimentation and, therefore, impact employees' motivation to develop and commercialize their innovations (Hornsby et al. 2002; Marvel et al. 2007). As legitimation is crucial for the allocation of resources, we expect the concept of legitimacy to help us structure findings on the organizational settings and to guide future research on the development of corporate entrepreneurship (Clark and Ramachandran 2019; Ito 2018; Wang et al. 2017).

Organizational theorists have long discussed how important it is for a company to gain legitimacy in its respective environment, to ensure its organizational survival (Ito 2018; Suchman 1995). Legitimacy allows the corporation to attract important resources from stakeholders in the organizational context (Clark and Ramachandran 2019; Zimmerman and Zeitz 2002). However, similar to corporate entrepreneurship, a multitude of different definitions of the concept of legitimacy exist. Suchman (1995) even speaks of a surprisingly weak conceptual anchoring and criticizes the lack of an examination of the definition of legitimacy. Referring to Suchman’s (1995) underlying definition, we assume that an organization that achieves legitimacy appears to various stakeholders as more meaningful and trustworthy. Accordingly, legitimacy affects how people act toward an organization. In the case of new entrepreneurial ventures, this results in the provisioning of resources from various stakeholders—financial, intellectual, or relational capital alike (Zimmerman and Zeitz 2002).

Following Kostova and Zaheer (1999), Kostova and Roth (2002), and Drori and Honig (2013), we distinguish internal legitimacy from external legitimacy. In the context of CE, internal legitimacy is particularly important. In the case of internal legitimacy, the object that gains legitimacy is not the organization itself but an organizational entity, e.g., a practice, program, unit, or strategy. Frandsen et al. (2013) investigate the internal legitimacy of sustainability programs, whereas other authors focus, for example, on marketing departments (Park et al. 2012), purchasing departments (Tchokogué et al. 2017), or subsidiaries (Kostova and Roth 2002). All these studies conclude that the actions of an organizational entity must comply with the socially constructed system of norms, values, beliefs, and definitions. The literature often recognizes internal legitimacy as a prerequisite for helping to preserve resources for internal objects (Clark and Ramachandran 2019; Ito 2018; O’Kane et al. 2015; Wang et al. 2017). For example, in the context of technology transfer offices (TTOs) of universities, legitimation plays a major role for the allocation of resources. Once legitimate, TTOs may have greater access to resources, while failure to establish legitimacy may result in the withdrawal of resources (O’Kane et al. 2015). However, external legitimacy also plays a role when it comes to corporate entrepreneurship units. Not only the organization but also the respective CE entity must undertake legitimation efforts to appear beyond organizational boundaries as a meaningful element.

Besides the different definitions and foci, a distinction is made between different forms of legitimacy. Suchman (1995) identifies three types of organizational legitimacy: (1) pragmatic legitimacy, (2) moral legitimacy, and (3) cognitive legitimacy. Suddaby et al. (2017, p. 454) note that pragmatic legitimacy “arises from an organization’s capacity to achieve practical outcomes [for stakeholders] in its immediate environment”. A company acquires pragmatic legitimacy in light of its importance for realizing the self-interests of reference groups and, according to a balance of incentives and contributions, when it creates a direct and/or indirect benefit for stakeholders who assign legitimacy to the company (Suchman 1995). The moral (or normative) legitimacy of a company refers to the normative evaluation of its actions by stakeholders.¹ Therefore, the basis of the assessment is not a specific benefit derived from an interaction with the company, but rather the stakeholders’ moral value system. For example, an organization can gain normative legitimacy by demonstrating that it addresses certain norms and values, such as fair treatment of employees, profitability, or networks, and thus receives resources (Zimmerman and Zeitz 2002). A company acquires cognitive legitimacy if it implements meaningful measures from the observer's point of view, i.e., behaves rationally in terms of the relevant environment (Suchman 1995). In the case of cognitive legitimacy, a new venture tries to signal that its identity supplies what is needed or desired and will succeed in the business sector where it is allegedly active. For example, the assumption that a qualified founder and top management team will be advantageous to the new venture may lead to achieving cognitive legitimacy (Zimmerman and Zeitz 2002).

Aldrich and Fiol (1994) identically describe these three types of legitimacy, but they add one more: regulative legitimacy, achieved when a company is operating according to rules, regulations, standards, and expectations. Thus, it often involves sanctions. Regulatory legitimacy is particularly important for new corporate ventures, but also for established companies. Failing to acquire regulatory legitimacy may prevent new ventures from operating legally, limiting their access to resources (Zimmerman and Zeitz 2002). Presumably, the legitimacy of the established organization affects the legitimacy of the CE entity; the withdrawal of an organization’s regulatory legitimacy makes it difficult to maintain for the CE entity that belongs to the company.

Based on these descriptions, this paper distinguishes between four types of legitimacy: (1) pragmatic, (2) normative, (3) cognitive, and (4) regulative legitimacy.

To legitimize their activities, CE entities can make various efforts to gain and maintain acceptance inside the corporation. In this section, we aim to synthesize the strategies of CE entities that align with the different types of legitimacy. In our case, managers of a CE entity use legitimation strategies to influence the allocation of resources.

Regulative legitimacy is an urgently required condition for organizations and entities within an organization that want to act on the market and create trust within an ecosystem. For this reason, regulative legitimacy provides the basis for every CE entity action. One strategy for new (internal) ventures demonstrating that the CE unit is operating according to rules, regulations, standards, and expectations, thus gaining regulative legitimacy, refers to business registrations or industrial and professional certifications (Wang et al. 2017). An internal corporate venture signaling its compliance with guidelines and regulations reduces uncertainty, and the corporate venture can gain regulative legitimacy. When it comes to innovative products, one major barrier is the ambiguity that a lack of standards causes (Ravasi and Turati 2005; Wang et al. 2017). Therefore, regulative legitimacy can help CE entities to overcome those barriers and exploit new business opportunities. During our research, we noticed fewer findings on regulatory legitimacy than on the other types of legitimacy. Therefore, these results are less comprehensive in the context of corporate entrepreneurship.

Strategies for achieving cognitive legitimacy intentionally indicate that a CE entity implements meaningful measures and contributes to the organization’s performance. Our analysis shows that if top management must decide whether to support an internal corporate venture, one decisive factor is corporate fit (Behrens and Patzelt 2016; De Sarbo et al. 1987; Shrader and Simon 1997). Strategic direction from top management determines new product opportunities in which to invest and which to abandon (De Massis et al. 2021; Spanjol et al. 2011). This strategic direction serves (for instance) as a filter for potential champions to decide whether they support a new entrepreneurial opportunity. Projects that could create greater resistance receive less support from management (Bertels et al. 2020). Thus, a strategy for managers of CE entities is to comply with the strategic direction from top management and ensure a corporate fit. Furthermore, Behrens and Patzelt (2016) identify the balance of a CE portfolio as an important factor in continuing CE activities. Managers of CE entities must ensure pursuing not only incremental but also radical CE projects. The progress of the CE entity is particularly important for achieving cognitive legitimacy inside the organization. Continuous reporting to top management can thereby increase its acceptance (McGrath 1995). This reporting should inform top managers on different dimensions, e.g., market worth, firm worth, and competitive insulation, to holistically update the progress of a CE entity (McGrath 1995). To increase the effect of the legitimation effort, managers of CE entities can try to establish a direct reporting line to top management. SLR findings also show that high levels of reporting to top management tend to diminish the performance of a new venture, in terms of cost and quality advantages; the highest venture performance occurred in subsamples with low reporting levels (Miller et al. 1991). Our SLR shows that to maintain the acceptance of top managers, showing them results is more likely to get them involved (Vandermerwe and Birley 1997).

The existing literature on corporate entrepreneurship attributes great importance to top management support, but our SLR shows that meeting the requirements of other stakeholders is also necessary to gain cognitive legitimacy (Kuratko et al. 2015, 2017). Consequently, our research reveals that these stakeholders must be continuously convinced to provide the necessary resources to the CE entity (Di Domenico et al. 2010). Stories can be an effective way for CE entities to communicate the activities in a favorable and convincing manner (Lounsbury and Glynn 2001). Specifically framing stories to the expectations of the stakeholders can secure the resource flow (Fisher et al. 2017) and create a distinctive image. Lounsbury and Glynn (2001) find that entrepreneurs must intelligently construct a story that makes clear what the company stands for and how their resources will lead to future benefits for the stakeholders, to gain legitimacy and access to resources. Hence, we see the development of stakeholder-specific stories, to gain and maintain cognitive legitimacy from these stakeholders, as an additional strategy for managers of CE entities.

Moreover, one possible strategy for achieving cognitive legitimacy is endorsement, where positive press reports or endorser competencies (Ito 2018) signaling that the entity is trustworthy can impact the legitimation process. Results from Ito (2018) show 13 examples of resource mobilization through endorsement by external individuals or firms. Decisive factors were: (1) credibility of the evaluation of the new business’s technology or products by a prominent firm or individual, (2) credibility of the evaluation of the need for the new business or its commercial potential, due to a prominent firm initiating business discussions or becoming a customer, and (3) referencing and using an endorser’s economic and/or social status. Another strategy that we identified through the SLR is the participative strategy-making for a CE entity that includes the CE managers and its different stakeholders. Chirico et al. (2011) identify the importance of this in the context of multigenerational family firms, where different resource commitments require different family generations.

The strategies for achieving normative legitimacy show some overlaps with strategies for achieving cognitive legitimacy. If an organization can prove that it deals appropriately with norms and values, such as fair treatment of employees, endorsement and networks, or profitability, it can gain normative legitimacy and, thus, access to resources. We identify corporate fit, in the sense of conformance with the norms and values of a corporation, as an important strategy for CE entities (De Sarbo et al. 1987; O’Kane et al. 2015). Stakeholder-specific storytelling can help to convince stakeholders to accept potential differences between values and norms of the overall organization and those of the CE entity (Lounsbury and Glynn 2001; O’Kane et al. 2015).

Furthermore, pragmatic legitimacy is important to the allocation of required resources to CE entities. As discussed, the corporate entrepreneurship entity acquires pragmatic legitimacy by its importance for reference groups realizing their self-interests and, according to a balance of incentives and contributions, creating a direct and/or indirect benefit for stakeholders who, in turn, assign legitimacy to the organization (Suchman 1995). McGrath (1995) shows that the development of an early linkage between the CE entity and the firm can result in acceptance by the parent organization. Thus, we see developing an early linkage as a potential strategy for CE entities. Moizer and Tracey (2010) show that an increase in social action can lead to an increase in organizational legitimacy. In turn, this leads to an increase in community support, which is then reflected in larger stocks of capital that can be re-invested in social actions. Moizer and Tracey (2010) refer to this as the organizational legitimacy loop. Notably, a time lag exists between social action and its resulting benefits. The findings on the organizational legitimacy loop align closely with the work of Venugopal and Viswanathan (2019), describing the phenomenon of organizations often entering local contexts by connecting themselves with high-status gatekeepers. By connecting with legitimate actors in the local ecosystem, they can gain legitimacy (Venugopal and Viswanathan 2019). Therefore, presumably, social actions, bootlegging (Globocnik and Salomo 2015), and bricolage (Halme et al. 2012) can strongly impact CE entities in terms of pragmatic legitimacy. The literature shows that bricolage seems to be one possible answer to different kinds of resource shortages (Halme et al. 2012). In this case, bricolage describes how employees, as soon as they encounter difficulties, bundle and combine their own resources to push their idea forward: “When faced with constraints the bricoleur draws upon resources at hand to overcome the obstacles, perhaps in an unconventional way” (Halme et al. 2012, p. 5). Moreover, they are often so motivated that they use their own free time, take risks regarding their career, and ask for no compensation for their efforts. Hence, some overlaps with bootlegging behavior—employees engaging in activities without official permission or supervision—appear (Augsdorfer 2005; Globocnik and Salomo 2015). They provide their own resources, with the intention of remaining unnoticed, and ignore formal communication channels to promote their ideas. Bootlegging activities are hidden and, therefore, difficult to control through managerial measures (Globocnik and Salomo 2015). Because the organization does not legitimize those activities, employees lack formal access to resources.

To gain legitimacy, CE entities can implement different strategies. Interestingly, most strategies discussed focus on conformance with the set of rules or norms that different stakeholders develop. CE entities enhance their legitimacy with a strong corporate fit, the adherence to regulative and normative rules, or direct benefit for their stakeholders. Sparse research discusses the manipulation of conditions in favor of the activities that CE entities develop. Zimmerman and Zeitz (2002) identify conformance and manipulation as relevant strategies for new ventures that are highly important also in the context of corporate entrepreneurship. Furthermore, the results of bootlegging behavior and bricolage indicate that specific conditions can provoke unorthodox or even rule-breaking behavior, where a CE entity risks its legitimacy in one dimension (e.g., normative legitimacy) to build its legitimacy in another dimension (e.g., cognitive legitimacy). We describe these constellations as trade-offs between different legitimacy types and different stakeholders, which managers of CE entities must consider when deciding on a particular strategy. Biniari (2011) shows this trade-off with the example of envy. One department getting more support than another, perhaps through strong cognitive legitimacy, may cause envy that could risk its normative legitimacy. The observations by top management of envy between organizational members and the corporate entrepreneurs could lead to skepticism and possibly influence the perceptions and behavior of top management toward the venturing program, thus influencing its normative legitimacy (Biniari 2011). In another example, Sykes and Block (1989) show that if a company only promotes socially compatible individuals (normative legitimacy), the CE entity might risk the loss of innovators, which could result in lower performance and, thus, a loss of cognitive legitimacy. These legitimacy trade-offs between legitimacy types and stakeholders as sources of legitimacy are an important aspect of corporate entrepreneurship, which future research should address.

Depending on the successful implementation of the described legitimacy strategies, CE entities either lose or gain resources. Based on our SLR, we can differentiate the sources and types of resources, as well as the resource dynamics that internal acceptance of the CE entity and its operations induce. In this context, we must consider the constant interaction between individual actors. Every stakeholder decides on the allocation of resources, whereby trade-offs often occur between allocating the resources to the core company or to the new venture (Basu and Wadhwa 2013). Within our framework, we subdivide the outcomes into three categories: (1) resource source, (2) resource type, and (3) resource dynamics.

CE entities can receive necessary resources from various sources of resources within an organization. Thus, organizational embeddedness can lead to various benefits, such as access to tangible resources through the network or learning benefits, emotional support, and legitimacy. To build and maintain organizational legitimacy, new companies can find engaging with local stakeholders advantageous (Moizer and Tracey 2010). Venugopal and Viswanathan (2019) describe the phenomenon of organizations often entering local contexts by associating themselves with high-status gatekeepers (e.g., elected representatives, traditional leaders, government representatives). Given the high barriers to commercialization of scientific knowledge, intermediaries can have special importance for entrepreneurial units and be helpful when companies need to resolve financial constraints. Thus, organizations that manage to exist in highly developed institutional environments and succeed in becoming isomorphic with the environment acquire the legitimacy and resources necessary to exist in the long term (Meyer and Rowan 1977). Hence, when it comes to gaining legitimacy and access to resources in order to achieve a degree of integration within the organization, the entrepreneurial process depends to a large extent on different organizational members (Biniari 2011). As a result, our research distinguishes between various sources of resources that a CE unit can use. It can receive resources through resource orchestration in family firms (Chirico et al. 2011), top management (Hornsby et al. 2009; Rogan and Mors 2016; Srivastava and Lee 2005), and middle management (Halme et al. 2012; Hornsby et al. 2002; Kuratko et al. 2005), use its own resources (e.g., through employees) (Globocnik and Salomo 2015; Tenzer and Yang 2020), or tap external resources outside the corporation through external networks or complementary stakeholders (Clarysse and Bruneel 2007; Teng 2007). The willingness of each stakeholder to provide resources to the CE entity can vary according to the individual knowledge of the stakeholder (Dalziel et al. 2011).

Based on our SLR, we further identified different resource types of particular importance. As stated, support from management plays a major role in the provision of resources. Research shows that top management support, including the provision of financial resources, positively relates to the number of entrepreneurial ideas generated (Greene et al. 1999; Heavey and Simsek 2013; Hornsby et al. 2009). Moreover, top management support positively relates to organizational performance (Martin-Rojas et al. 2019). Also, top and middle managers play an important role in setting an organizational vision or environment that encourages innovation and benefits corporate entrepreneurship activities, hence, providing inspirational resources (Heavey and Simsek 2013; Hitt et al. 1999; Hornsby et al. 2002). Furthermore, top management support can result in additional human resources, with the assignment of talented managers or employees to the CE entity (De Bettignies and Chemla 2008). Whereas top managers are needed to support high-uncertainty/high-risk ventures, middle managers are critical to the identification and acquisition of the right resources at the right time (Kuratko et al. 2005). Hence, managers must set the organizational conditions that support the entrepreneurial activities and provide (physical) infrastructure to support the entrepreneurial activities (Greene et al. 1999; Vandermerwe and Birley 1997). However, middle and top managers will only engage or support entrepreneurial behavior when the outcomes of these activities meet or exceed their expectations: “We expect, that the more positive this relationship [between entrepreneurial activities and expected outcomes] is perceived to be, the stronger is the resulting motivation to encourage entrepreneurial actions, either in the form of continued pursuit of the current projects or initiation of new projects” (Kuratko et al. 2005, p. 709). Furthermore, political resources—i.e., the support in political processes to mobilize scarce resources (Fulop 1991) or to protect the CE entity when breaking the rules (Greene et al. 1999)—are of great importance for a CE entity. Moreover, the time availability of critical stakeholders (Bertels et al. 2020; Hornsby et al. 2009) is a crucial resource type, in the context of corporate entrepreneurship. Knowledge is another critical resource for CE entities (Gassmann and Becker 2006; Gurău and Dana 2020). Intellectual capital and top management team diversity have a positive influence on innovation and venturing activities (Hayton 2005; Srivastava and Lee 2005). Thereby, top managers try to grow beyond the limits set by the resources they currently control, with the aim of acquiring more technology investment in their firm. Exploiting technologically skilled people and the development of technologically distinctive competencies increases corporate entrepreneurship (De Bettignies and Chemla 2008; García-Morales et al. 2014). However, managers invest not only company resources but also (individual) social resources in building beneficial relationships that have a positive impact on resource allocation. Individual engagement often realizes a wider network, resulting in more diverse opportunities (Rogan and Mors 2016). A (social) network is useful for finding further resources and offering trust, whereby bricoleurs especially make use of their various networks to mobilize resources (Teng 2007; Greene et al. 1999).

The different resource dynamics that the management or employees within an organization use can lead to either deployment (Basu and Wadhwa 2013) or withdrawal (O’Kane et al. 2015; Teng 2007) of resources. If a CE entity succeeds in convincing the management or stakeholders of its business idea, resource deployment will take place at different organizational levels. If the behavior or strategies of the organizational unit may increase the uncertainties, withdrawal of resources is one possible consequence. Apart from these two possibilities, employees often use the exploration of new combinations of resources as an alternative to further advance their innovative ideas, which also constitutes a qualifying characteristic of entrepreneurial action. In order to further develop their ideas despite the lack of resources, employees often make use of the organizations’ hidden resources or generate their own resources (Burgelman 1983; Globocnik and Salomo 2015; Halme et al. 2012). Based on the perceived support the CE entity receives (Bertels et al. 2020; Zampetakis et al. 2009), the managers of a CE entity will choose their legitimacy strategies. Thus, CE managers will presumably repeat successful and avoid unsuccessful legitimacy strategies.

The CE entity receiving resources from stakeholders will lead to further consequences, such as the continuation of entrepreneurial activities, and ultimately to entrepreneurial outcomes. If a company receives the required resources, it can use them for the innovative project, which results, for example, in new venture growth. In addition, the literature review shows that entrepreneurial innovations seem more concerned with the exploration of new combinations of resources than with the optimization of existing ones (Westhead and Wright 1998). Bundling different resources rather than similar ones will allow new ways of doing business (Teng 2007). Firms owning a wide range of complementary resources are therefore more likely to achieve competitive advantages (first-mover benefits) (Srivastava and Lee 2005). Once a company has achieved legitimacy and gained access to all necessary resources, it can establish its entrepreneurial ideas on the market. The continuation of both entrepreneurial activities and outcomes also affects the legitimacy of CE entities. Hence, feedback mechanisms are significant in the context of legitimation.