The downside of legitimacy building for a new firm in a nascent industry

This paper explores how entrepreneurs' efforts to legitimate a firm and a nascent industry affect the internal development of the firm. Through a three-year case study of a firm in the nascent smart cities industry, we uncover unexpected effects of leaders' legitimation efforts. Leaders engaged in a set of legitimation activities aimed at helping external stakeholders understand and appreciate the firm and its industry. These activities had three unintended cognitive consequences for firm employees -- constrained attention, overconfidence, and identity commitments -- that affected the firm's ability to learn: attend to, reflect on, and dynamically respond to information and changes in its environment. Our longitudinal research reveals a downside of legitimacy-building and highlights unique challenges of competing in a nascent industry.