Predicting Entrepreneurial Performance: Can Legitimacy Help?

John H. Batchelor, Gerald F. Burch


Entrepreneurial organizations are “opaque” regarding the information necessary to evaluate the likelihood of their survival (Rutherford, Buller, & Stebbins, 2009).  Compared to publicly traded corporations, there is little information available to individuals when making judgments about private entrepreneurial organizations.  To overcome this problem, entrepreneurs should strive to establish themselves as legitimate organizations in the eyes their stakeholders.  Here, legitimacy serves as an evaluative tool, analogous to bond ratings.  With AAA rated bonds, there is no guarantee the bonds will not decrease in value but the rating does show that there is a consensus that they are of highest quality.  The same can be said of entrepreneurs that are perceived to be legitimate by their stakeholders. This study tests whether this legitimacy manifests itself as financial performance.

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