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This experiment is a part of our paper "Your ancestors worked hard for this legitimacy!: Theory and experiment on the inauthenticity of second movers." In this experiment, participants will be given information about a nascent industry where there are two firms—a first mover firm and a follower firm. Participants will be given information that, as it begins, the nascent industry suffers from the lack of legitimacy. They will be told that a follower firm enters this industry, either shortly after the first firm (i.e. when the industry still lacks legitimacy) or a while after the first firm entered (i.e. when the industry is perceived to be much legitimized than before). When the follower firm enters shortly after the first firm, they jointly put a lot of effort into legitimizing it. When the follower firm enters after the industry is largely legitimized, it suggests that the follower firm does not participate in such effort. The key idea we aim to show is that audiences may give a different level of authenticity-based penalty to follower firms, depending on whether or not those follower firms participated in legitimizing the nascent industry (i.e. whether they engaged in legitimation work). We theorize that when audiences recognize that follower firms had put significant effort into industry legitimation, they will gain in perceived authenticity and thereby a lower market penalty.

The study addresses when and why people in the US may prefer startups over an established firm with bigger scale and scope. The general theory to be tested is that people generally prefer startups (as confirmed in a pretest) but that is partly because people see startups as exceeding the minimum quality threshold required for firms to provide safe / functioning products to customers. Therefore, if the context is one where it is in question that firms are meeting the threshold, people will prefer the established firm with bigger scale and scope more than in the context where people do not have to worry about the firms meeting the threshold.

International audience; Is being the first entrant in a nascent industry an advantage or a disadvantage? Both institutional theory and population ecology suggest that in a nascent industry an increase in the number of firms legitimize all industry members. However, late entrants may suffer penalties because audiences interpret their late entry as a lack of authenticity associated with low customer commitment. In this paper, we theorize and test how the order of entry shapes firms’ competitive outcomes. Using an experimental approach, we disentangle two at times countervailing forces–audiences’ simultaneous preference for authenticity and legitimacy. We distinguish between “core value” and “symbolic features” in products or services, and argue that the penalty for follower firms is likely to arise when the late entrant firms share even the symbolic features of their predecessor. We test our theory with an online experiment using examples of startup companies in the healthcare industry. The results show that a late entrant suffers from lower levels of market selection when it shares both the business model (core value) and the website design (symbolic features) with the first entrant, but this “copycat discount” is significantly alleviated when the late entrant does not share the first mover’s symbolic features. However, while direct measures of legitimacy show a strong effect on market selection, we do not find support that this is impacted by density.