C. Marlene Fiol

Fools Rush in? The Institutional Context of Industry Creation

Now organizations are always vulnerable to the liabilities of newness, but such pressures are especially severe when an industry is in its formative years. We focus on one set of constraints facing entrepreneurs in emerging industries-their relative lack of cognitive and sociopolitical legitimacy. We examine the strategies that founders can pursue, suggesting how their successful pursuit of legitimacy may evolve from innovative ventures to broader contexts, collectively reshaping industry and institutional environments. Founding a new venture is risky business under any conditions, but especially so when entrepreneurs have few precedents for the kinds of activities they want to found. Early ventures in the formative years of a new industry face a different set of challenges than those that simply carry on a tradition pioneered by thousands of predecessors in the same industry. Such foundings are risky, but are they also foolish? From an institutional and ecological perspective, founders of new ventures appear to be fools, for they are navigating, at best, in an institutional vacuum of indifferent munificence and, at worst, in a hostile environment impervious to individual action. In addition to the normal pressures facing any new organizations, they also must carve out a new market, raise capital from skeptical sources, recruit untrained employees, and cope with other difficulties stemming from their nascent status. Among the many problems facing innovating entrepreneurs, their relative lack of legitimacy is especially critical, as both entrepreneurs and crucial stakeholders may not fully understand the nature of the new ventures, and their conformity to established institutional rules may still be in question. We capture these problems by using the term legitimacy in two related senses: (a) how taken for granted a new form is and (b) the extent to which a new form conforms to recognized principles or accepted rules and standards. The first form of legitimacy is labeled cognitive, and the second, sociopolitical. In this article, we examine the social processes surrounding the emergence of new industries, from the early pioneering ventures through the early stages of ∗ Originally published in Academy of Management Review, 1994, 19(4): 645–670. Reprinted by permission of Academy of Management Review via the Copyright Clearance Center. ∗ growth, when the form proliferates as the industry becomes established. Legitimacy is not the only factor influencing whether an industry successfully moves beyond the stage of a few pioneers to fully realized growth. Clearly, many other factors are important to a new industry’s success, such as the state of the economy, latent demand for the product or service, competitive pressures from related industries, and the skills of new venture owners and workers. Because only a few theorists have examined failed industries (e.g. Astley, 1985), and we have no systematic research in this area, our article is necessarily speculative. However, we believe that legitimacy is a more important issue than previously recognized, and so we focus our arguments and propositions on factors affecting an industry’s legitimacy and on legitimating strategies pursued by innovating entrepreneurs. Our aim is to identify factors hindering and supporting the progression from the founding of a completely new activity, in an institutional void, through its development as a legitimate industry. Our focus is on the development of independent new ventures that are not sheltered by sponsoring organizations. By definition, such ventures cannot rely on existing institutions to provide external legitimacy. Throughout the article, we refer to new activities as specific product/process innovations, one aspect of what ecologists refer to generally as new organizational forms; new ventures are independent organizations initiating the new activity; and industries are groups of organizations with similar products/processes.

Managing Culture as a Competitive Resource: An Identity-Based View of Sustainable Competitive Advantage

How can organizations manage the cognitive processes by which a firm invests in resources for competitive advantage? Studies of organizational culture, as currently framed, have not provided adequate answers to this question. By focusing either on culture as underlying beliefs or on culture as behavioral manifestations, these studies have overlooked the critical links between beliefs and behaviors that are at the very core of managing cognitive processes for sustained advantage. This article reframes the culture concept to highlight the role of contextual identities in linking behaviors and their social meaning in organizations. Drawing on theories from cultural linguistics and structural anthropology, it argues that cognitive processes in organizations do not directly reflect either behaviors or underlying beliefs. Rather, they represent the interface between the two. To manage cognitive processes for competitive advantage requires that we attend to the identities by which people make sense of what they do in relation to a larger set of organizational norms.

Capitalizing on Paradox: The Role of Language in Transforming Organizational Identities

A strongly identified workforce presents a paradox during times of radical organizational change. Though it may bind people together behind the change initiative, strong organizationwide identification often blinds and potentially blocks the view of new possibilities. Prior research on identity change has tended to either ignore the paradox or resolve it by advocating some middle ground such as hybrid organizational identities or group-level identifications. This paper presents an identity transformation model that capitalizes on the paradoxical tensions over time by unpacking the processes by which individual and organizational levels of identity interact. It operationalizes the model by suggesting linguistic markers that describe the different stages of the process and rhetorical techniques that leaders can use to guide people through the process. To illustrate the model and its application, the paper highlights moments across a 10-year period at Tech-Co, a high-technology company undergoing a significant identity transformation.

Identification in Face-to-Face, Hybrid, and Pure Virtual Teams: Untangling the Contradictions

Identification is a persons sense of belonging with a social category. Identification in virtual organizational teams is thought to be especially desirable because it provides the glue that can promote group cohesion despite the relative lack of face-to-face interaction. Though research on virtual teams is exploding, it has not systematically identified the antecedents or moderators of the process by which identification develops, leaving a number of gaps and apparent contradictions. The purpose of this paper is to begin to untangle the contradictions and address some of the gaps by tracing the mechanisms and moderating processes through which identification develops in hybrid and pure virtual settings, and the ways that these processes differ from face-to-face settings.

Revisiting an identity-based view of sustainable competitive advantage

Those of us who contributed to the Journal of Management’s 1991 special issue on a resourcebased view of the firm began with the assumption that it is possible for a firm to gain and maintain a sustainable competitive advantage. Based on that general premise, we presented various arguments suggesting that a firm’s resources represent a major source of that potential advantage. Ten years later, I begin this revisit of my identity-based view of sustainable advantage by questioning our premise that it is possible to gain a sustainable advantage based on any particular core competency, no matter how inimitable. I then review what we have learned during the past decade about organizational identities and identification and their role in creating and destroying a firm’s temporary competitive advantages.

Guiding Organizational Identity Through Aged Adolescence

In this article, the authors reflect on the past two decades of research on organizational identity, looking to its history and to its future. They do not provide a review of the literature, nor do they promote a particular perspective on the concept. Instead, they advocate pluralism in studying organizational identity while encouraging clarity and transparency in the articulation of definitions and core theoretical suppositions. Believing there is no one best approach to the study of organizational identity, their intent is to establish a reference point that can orient future work on organizational identity. They focus on three questions they feel are critical: What is the nomological net that embeds organizational identity? Is organizational identity “real” (or simply metaphoric)? and How do we define and conceptualize organizational identity? Last, they try to anticipate organizational identity issues on the horizon to suggest future directions for theory and research.

Charismatic leadership: Strategies for effecting social change

Abstract Because of their unique relationship with followers, charismatic leaders can be powerful agents of social change. Current theories of charismatic leadership have emphasized primarily the personality and behavior of leaders and their effects on followers, organizations, and society. This emphasis fails to uncover why and how the charismatic leader/follower interaction can generate social change. Our study draws on theories of social meaning to develop a process model of charismatic leadership. Empirical exploration of our model suggests that charismatic leaders employ a set of consistent communication strategies for effecting social change.

Corporate Communications: Comparing Executives' Private and Public Statements

People frame and make sense of their worlds through the use of cognitive categories, which researchers can only indirectly access. Public corporate statements are easily accessible and comparable a...

When Hot and Cold Collide in Radical Change Processes: Lessons from Community Development

A groups tendency to protect its identity often inhibits it from initiating radical change. For this reason, external interventions are typically needed to engage a group in reexamining and moving beyond its current identity. If threatened by these external interventions, however, identity beliefs can become emotionally heated and resistant to the cognitively rational efforts of outsiders. At the same time, the insider groups emotional energy is essential to mobilize and sustain radical change. This paper draws on community development theories and practices, as well as identity theories, to develop a model that traces the dynamic processes by which hot emotional interpretations and relatively colder cognitive interpretations interact to initiate, mobilize, and sustain radical change. It highlights the roles that emotion and cognition play as both barriers and essential facilitators of the change at different stages of the process, and proposes a set of strategies for managing them.

Thought worlds colliding: the role of contradiction in corporate innovation processes

Contradiction Is the home of creativity. Creative breakthroughs most often result from the juxtaposition of widely divergent bodies of knowledge and experience. This article develops a model of corporate Innovation that identifies contradictory knowledge components and ways that they combine over time for creative activities to be initiated and developed in large organizations. It illustrates the applicability of the model In the case of a successful corporate new-venture development process. The results support the central argument: Large, multi-functional organizations provide fertile grounds for the seeds of entrepreneurial activities in that they encompass the contradictions needed for creative thought and action.