Regional Legacy Effects on Radically Innovative New Ventures’ Risks

Abstract

Innovative new ventures (INVs) cope with the lack of legitimacy and liability of newness that may hinder their likelihood of survival. Those risks increase with the novelty introduced by the INV. Radically INVs are the ones that have the highest degree of novelty, and, consequently, face the highest risks. Understanding the elements and mechanisms that sustain radically INVs is of paramount importance due to the great benefits they bring to society. This article explores how the regional legacy, defined as the combined effect of regional business and industrial practices and culture, supports those ventures in facing those risks. The regional culture and tradition create a sense of familiarity in stakeholders that facilitates the understanding of the radically INV, lowering the lack of legitimacy. Meanwhile, the shared culture within a region favours the creation of a collaborative climate that allows the radically INVs to access relevant resources and, finally, reduce the liability of newness.

Keywords

Regional legacy entrepreneurship innovative new ventures legitimacy liability of newness

Innovative new ventures (INVs), defined as those ventures characterised by some degree of novelty in the value offered to customers (Bruyat & Julien, 2001; Dyer et al., 2008), represent one of the main topics of interest within the entrepreneurship research field (Shepherd et al., 2021), since they are deemed to be the true source of economic growth and a relevant driver of regional development (Gu & Qian, 2019; Xu et al., 2021). In fact, INVs are associated with job creation, technological development, increased competitiveness and innovation within a region (Berlemann & Jahn, 2016; Brixy, 2014). The survival of INVs represents an important issue since the likelihood of ceasing their business activities in the aftermath of their founding is high (Hyytinen et al., 2015) due to the superior risks they face compared with more traditional ventures (Koellinger, 2008). For this reason, academia and governments have been looking for factors that sustain the INVs when facing risks that threaten their survival (Samuelsson & Davidsson, 2009). Extant studies suggest that the main challenges that reduce the likelihood of survival of INVs derive from the lack of legitimacy (Aldrich & Fiol, 1994) and the liability of newness (Stinchcombe, 1965) affecting these firms. On the one hand, the lack of legitimacy is the risk that stems from the lack of knowledge and understanding about the INVs (Suchman, 1995; Zimmerman & Zeitz, 2002) that may lead crucial stakeholders (e.g., investors, suppliers and customers) to underestimate the potential of the INVs (Zimmerman & Zeitz, 2002), hence hindering the successful exploitation of the opportunity they identified. On the other hand, the liability of newness is related to the lack of resources and capabilities that leads INVs to suffer a competitive disadvantage in comparison with incumbent firms (Stinchcombe, 1965). The extent of these risks is not equal among all INVs, but it varies with the novelty of an INV along a continuum (Shepherd et al., 2000). In particular, radically INVs, being based on a unique value proposition (VP; Dyer et al., 2008; Kumar et al., 2000), are characterised by the highest degree of novelty, and, accordingly, they face the highest lack of legitimacy and liability of newness. Therefore, research on elements and mechanisms that sustain the survival of these ventures is particularly important since their failures potentially limit their largest impacts on society. For this reason, this analysis is focused on radically INVs, as they bring higher benefits to society while facing higher risks.

In particular, whereas extant studies mainly focused on the entrepreneurs’ characteristics (Baumol et al., 2009; Koellinger, 2008; Schmitt et al., 2018; Vivarelli, 2013), investigations about how the context affects INVs have been increasingly gaining prominence (Autio et al., 2014; Garud et al., 2014; Muñoz et al., 2022). Following this line of investigation, this study focuses on the context surrounding the INVs and, specifically, on the cultural elements and business and industrial traditions of the regional context in which the INV is embedded. In fact, the work shows that the relevance of these elements is paramount to better investigate the dynamics affecting the survival of the INVs (Fritsch & Wyrwich, 2018). To better characterise these elements, Aoyama (2009) introduced the concept of the regional legacy (RL), defined as the combined result of the regional culture with the business and industrial traditions of the region. The RL plays an important role for the INVs since it shapes the creation of new opportunities (Messeni Petruzzelli & Savino, 2015), and influences both entrepreneurial intention (Donaldson et al., 2021; Huggins & Thompson, 2016; Wigren-Kristoferson et al., 2022) and entrepreneurial action (Hayton & Cacciotti, 2013). Despite investigating several aspects related to the survival of INVs, the extant literature has overlooked the relationship between the RL and the extent of the risk faced by the INVs, with few notable exceptions (e.g., Kuratko et al., 2017). In particular, Kuratko et al. (2017) analysed the strategies to achieve different levels of legitimacy within and beyond a regional context but did not investigate the role of the RL in sustaining the INVs and mitigating the risks. Therefore, a systematic understanding of how the regional context influences the risks INVs face needs further exploration. This study aims to address this gap by answering the following research questions: How does the RL sustain a radically INV in gaining legitimacy? (RQ1), and how does the RL sustain a radically INV in reducing the liability of newness? (RQ2).

To answer these RQs, the research investigates how the RL influences the effectiveness of radically INVs in facing risks. To do so, a qualitative single case study was performed on Astroscale, a radically INV in the space industry, endowed with a unique and novel VP in the on-orbit services that makes it suitable for addressing the research questions. The analysis of the case study shows that the RL-backed Astroscale is gaining legitimacy by leveraging the cultural and traditional elements of a region and overcoming the liability of newness by providing the knowledge and resources necessary to survive.

This study provides theoretical contributions to the entrepreneurship literature and, in particular, to the lineage of studies focusing on the survival of INVs. First, by highlighting new elements and mechanisms that can support radically INVs in gaining legitimacy and reducing the liability of newness, the article enhances the understanding of the dynamics that contribute to the survival of radically INVs. Second, the study advances the comprehension of the relationship between the regional context and the likelihood of survival of radically INVs, highlighting the relevance of the context in coping with the risks these firms face. In particular, the work describes how the RL becomes increasingly paramount for INVs characterised by the highest degree of innovativeness.

On the practical side, the study offers insight for entrepreneurs and policymakers. In the process of starting a radically INV, entrepreneurs can leverage regional elements to communicate their VP to customers and stakeholders and gain legitimacy. Furthermore, entrepreneurs can decide to start the radically INV where the culture and tradition are in line with the value proposed by exploiting the RL of the area. On the other side, for policymakers, nurturing the culture and tradition of the region can help to create the right environment for the survival of radically INV.

The article is organised as follows: The second section reviews the main literature on the survival of INVs and the related risks, and presents the RL and its role in the entrepreneurship field. In third section, the methodology and background of the case study are outlined. The forth section describes the case study and findings and presents the propositions. Finally, the fifth section illustrates the main implications and limitations of the work, as well as avenues for future research.

Theoretical Background

A new venture is a firm newly created that is in the process of exploiting the entrepreneurial opportunity identified and turning it into viable business (Davidsson & Gruenhagen, 2021). The survival of new ventures is a critical topic in the entrepreneurship literature due to the losses that entrepreneurs, investors and society can suffer if the new venture does not survive (Soto‐Simeone et al., 2020). The concept of survival is strictly related to failure, which indicates the termination of the new venture as an economic entity (Chrisman et al., 1998). Accordingly, the authors consider the survival of a new venture as the achievement of financial viability (Davidsson & Gruenhagen, 2021; Newbert, 2005; Soto‐Simeone et al., 2020). The topic is increasingly important for INVs since their likelihood of survival is lower than their counterpart (i.e., imitative new ventures that replicate extant business practices; Hyytinen et al., 2015). INVs are characterised by introducing a different degree of novelty in terms of new products, services, processes or organisational structures (McGrath, 2001) to create new value for customers (Bruyat & Julien, 2001). These ventures exhibit an exploratory propensity leading them to anticipate future demands and create and shape the business environment (Li et al., 2018). INVs are recognised as a driver of economic growth within a region (Gu & Qian, 2019), providing wealth for entrepreneurs and society (Shepherd et al., 2021). In addition, the literature found that INVs are sources of solutions to societal issues (Williams & Shepherd, 2016), technological improvement (Vivarelli, 2013), job creation and prosperity (Koellinger, 2008; Vivarelli, 2013). Finally, INVs are responsible for the disruptive effects on existing markets (Trabucchi et al., 2019) that may lead to the emergence of new sectors (Aldrich & Fiol, 1994; Schumpeter, 1942). All those features have attracted the attention of scholars and policymakers who are looking for mechanisms that sustain the survival of INVs (e.g., Shepherd et al., 2000; Soto‐Simeone et al., 2020; Zimmerman & Zeitz, 2002).

The Risks Associated with the INVs: Lack of Legitimacy and Liability of Newness

An INV faces a certain level of risk, which increases with its innovativeness (Koellinger, 2008). In particular, the major risks that threaten the survival of INVs are the lack of legitimacy (Aldrich & Fiol, 1994; Zimmerman & Zeitz, 2002) and the liability of newness (Stinchcombe, 1965).

The lack of legitimacy derives from the poor understanding of the nature of the INVs (Aldrich & Fiol, 1994; Suchman, 1995). There are two types of legitimacy that ventures have to gain to foster their chances of success and survival: cognitive and sociopolitical (Aldrich & Fiol, 1994; Bitektine, 2011; Zimmerman & Zeitz, 2002). Cognitive legitimacy refers to the common understanding of what an INV does (Aldrich & Fiol, 1994; Zimmerman & Zeitz, 2002). The sociopolitical legitimacy, instead, is the perception of an INV as not desirable, proper or appropriate in respect of the extant principles, rules and standards by critical stakeholders (Zimmerman & Zeitz, 2002). Lacking legitimacy may hinder the capacity of the venture to retrieve capital, receive governmental support and convince sceptical customers about its offering (Aldrich & Fiol, 1994). Consequently, the INVs may not be able to successfully exploit the opportunity identified (Zimmerman & Zeitz, 2002), relegating themselves to a niche market (Ansari et al., 2016) or even not surviving (Aldrich & Fiol, 1994). To overcome the lack of legitimacy, INVs can implement strategies that help to gain legitimacy. A strategy is conforming, which refers to aligning practices and norms with existing ones (Kuratko et al., 2017; Zimmerman & Zeitz, 2002). However, such a strategy is not always fully adoptable by radically INVs that create new practices and norms. Another strategy is manipulating, according to which the INVs try to make changes in the established set of practices, values and norms in such a way that the INVs appear appropriate (Kuratko et al., 2017; Zimmerman & Zeitz, 2002). Finally, storytelling, in which the INV draws stories to build an identity and gain legitimacy (Lounsbury & Glynn, 2001).

The other risk that threatens the survival of INVs is the liability of newness that arises from the lack of resources and capabilities required to compete with incumbents (Stinchcombe, 1965). INVs’ lack of a structured internal organisation, such as the definition of roles, relationships, incentives and established routines (Soto‐Simeone et al., 2020). In addition, INVs’ lack of resource endowment and the acquisition of the necessary resources and capabilities can become costly and time-consuming processes that may lead to temporary inefficiencies (Stinchcombe, 1965). All those elements limit the ability of an INV to successfully exploit the opportunity identified, thus leading to its failure. The extant literature recognises the importance of social capital and the construction of a network for INVs in reducing the liability of newness (Soto‐Simeone et al., 2020; Zhou et al., 2010). The magnitude of those risks increases with the novelty of the INVs. INVs cannot build legitimacy on their history (Marquis & Battilana, 2009), but they may lean on ventures that present traits of similarity (Hannan & Freeman, 1984). Therefore, the more an INV detaches itself from existing VPs, practices and standards, the greater the lack of legitimacy it faces (Bitektine, 2011). Similarly, the more an INV differentiates itself from existing practices and routines, the more it struggles to establish new organisational roles and systems, thus facing a higher liability of newness. However, INVs have been analysed as a single typology of firms (e.g., Cliff et al., 2006; Koellinger, 2008; Samuelsson & Davidsson, 2009). To better understand the complexity of the phenomenon, the literature has characterised the innovativeness of INVs along a continuum that goes from incremental to radical, according to the degree of differentiation with respect to the existing practices (Herrmann, 2019; Kumar et al., 2000). In particular, this article focuses on radically INVs, those ventures with a unique VP that is dramatically different from existing ones (Kumar et al., 2000), since they are subjected to those risks.

Regional Legacy

Research activities on INVs have focused on the characteristics of the context in which INVs are embedded (Autio et al., 2014; Dahl et al., 2010; Garud et al., 2014; Muñoz et al., 2022) to better understand their dynamics (Marquis & Battilana, 2009). In particular, studies investigated the local or regional level, which is considered the most proximate geographical area of the INVs (Spigel, 2013). Studies in this stream focused on how elements of a regional context, such as industries (e.g., Aoyama, 2009; Fritsch & Falck, 2007; Gherhes et al., 2020), clusters (e.g., Davidsson, 1995), embedded knowledge (e.g., Agarwal et al., 2010), culture (e.g., Aoyama, 2009; Arrak et al., 2020; George & Zahra, 2002; Kalisz et al., 2021; Sweeney, 1991) and tradition (e.g., De Massis et al., 2016; Messeni Petruzzelli et al., 2020; Messeni Petruzzelli & Savino, 2015) play a paramount role in the creation, emergence and survival of INVs. To highlight the combined effect of culture, industrial and business tradition, Aoyama (2009) introduced the concept of RL, which is the result of the combined effect of a region’s dominant business, industry practices and regional culture. The RL influences INVs since it shapes and frames business opportunities, entrepreneurial insights and expectations through the definition of potential risks, incentives, dominant norms and practices of interaction among actors in the region (Aoyama, 2009). Specifically, the RL represents the context surrounding entrepreneurs (Spigel, 2013), which influences individuals (Castaldi & Dosi, 2006) and, consequently, the decision to start acting on the entrepreneurial opportunity (Huggins & Thompson, 2016; Wigren-Kristoferson et al., 2022). In fact, it shapes personal motivation, institutional environment and external business culture, which are elements that frame the entrepreneurship process (Nijkamp, 2003).

The cultural aspect of the RL is a supportive element of entrepreneurial action, in particular, to stimulate creative and innovative behaviours, and it favours the acceptance of uncertainty and risk-taking (Hayton & Cacciotti, 2013). The cultural proximity among individuals living in a region contributes to the development of context-specific ‘know-how, know-why, know-what and know-who’, forming the regional knowledge base (Hussler, 2004, p. 525). At the same time, new ventures may also use the regional culture as an asset to facilitate resource inflow (Lounsbury & Glynn, 2001) and appropriate the value created (Messeni Petruzzelli et al., 2020).

Tradition, the other element comprising the RL, is associated with the rate of new venture creation (Fritsch & Falck, 2007), the emergence of new industries (Aoyama, 2009; Binz et al., 2016) and the creation of new opportunities (Messeni Petruzzelli & Savino, 2015). The emergence of a new industry is strongly contingent on the historical industrial structure of a region (Binz et al., 2016), since the practices and structures of current entrepreneurial activities echo cultural elements imprinted decades earlier (Audretsch et al., 2017). Finally, the mindsets, values and practices developed within a regional industry can span sectoral boundaries and influence entrepreneurship in a new industry in the same region (Aoyama, 2009).

In conclusion, the RL is explicative of the importance of regional culture and historical economic development. It describes the result of the evolution of the regional culture, how it affects new entrepreneurial activities (Hervas Oliver et al., 2017; Spigel, 2013) and the emergence and establishment of new industries (Aoyama, 2009; Sweeney, 1991). Despite recognising the importance of INVs, the role of RL in supporting INVs in dealing with the risks they face has received scarce relevance in the literature. For this reason, this work aims at addressing this gap by answering the RQs previously identified.

Methodology

This work adopted a single-case study research methodology. This methodology is very useful for developing a rich understanding of complex phenomena (Eisenhardt & Graebner, 2007; Javadian et al., 2020), and it helps to address the ‘how’ and ‘why’ questions (Yin, 2009). The mechanisms that govern the relationship between RL and the risks of INVs are the results of a complex phenomenon that lacks a systematic understanding, and the qualitative approach offers the possibility for deep exploration and effective theory building (Eisenhardt, 1989). The research design is described hereafter and is composed of three steps: case selection, data collection and data analysis.

Case Selection

To answer the research questions, Astroscale was selected as the case study for several reasons. First, the venture, operating in the space industry, exhibits a high degree of novelty in terms of VP, being a pioneer in the on-orbit service. Second, Astroscale is a ‘survived’ new venture since it has signed contracts with several customers for different missions, hence becoming a viable business. Third, Japan, the regional context surrounding the venture, is characterised by distinct and peculiar elements that are sharply identifiable. For those reasons, Astroscale represents an ‘extraordinary’ case that is a suitable choice to investigate and answer the research questions (Siggelkow, 2007).

Astroscale was founded in 2013 in Singapore. Its founder, the Japanese entrepreneur Nobu Okada, was living in Singapore during that period, and he saw the ‘neutral’ position of Singapore in the space sector as an element to avoid contrast with other space agencies. In fact, one of the worries of the Japanese entrepreneur was that the technology developed by Astroscale could have been seen as a threat by the US, China and Russia. After 2 years of the establishment of the new venture, the core functions of Astroscale were moved to Tokyo. The venture selected a location that was more in line with the business opportunity they wanted to exploit (Zimmerman & Zeitz, 2002). The vision of Astroscale is to ensure that future generations can access a safe and sustainable space environment. Astroscale is a pioneer in the space industry, being one of the first ventures to offer on-orbit services (e.g., in situ space situational awareness, satellite life extension and end-of-life management and active debris removal) with the intent to protect satellites’ operations, help to manage regulatory risk and reduce insurance premiums. Hence, the VP of Astroscale can be deemed as radically novel with respect to the market in which it operates. Nowadays, Astroscale has subsidiaries in the United Kingdom, the United States, Israel and Singapore since it gained global recognition, creating a new market. In 2021, Astroscale successfully tested its technology, End-of-Life Service by Astroscale-demonstration (ELSA-d), demonstrating the ability to capture defunct spacecraft. ELSA-d consists of a satellite that acts as a chaser spacecraft with docking capacity that permits to anchor non-functional spacecraft and deorbit them. This has allowed Astroscale to start a cooperation with ESA and OneWeb, receiving a $16 million investment to perform a mission in 2024 with the goal of collecting multiple defunct satellites. Furthermore, Astroscale collaborates also with the Japan Aerospace Exploration Agency (JAXA), the UK Space Agency and New Zealand’s Ministry of Business Innovation & Employment. Finally, Astroscale is the most funded Japanese space venture and, globally, the most funded venture in on-orbit services and logistics.

Data Collection

The data collection was performed by relying on data from multiple secondary sources (e.g., academic articles, books, conference presentations, newspapers, reports and the websites of the companies¹). These data were triangulated to gain different perspectives, avoid bias, increase robustness and improve the quality of the analysis (Eisenhardt, 1989; Yin, 2009). Particularly, the process of data collection followed a three-step strategy with specific research objectives.

The first step aimed to collect data and information that allowed us to have a preliminary knowledge of the case, reconstructing the VP and the collaborations established to exploit Astroscale’s business opportunity. The data collection strategy proceeded by gathering descriptive information related to the mechanisms that the venture undertook to gain legitimacy and reduce the liability of newness. The last step of the data collection strategy consisted of tracking and highlighting the peculiar elements concerning Japanese tradition and culture. The aim was to delineate and define the RL related to the context in which Astroscale was embedded. The venture’s website was the main data source for consulting news, press releases and blog articles starting from the inception of the venture. In addition to the official website, the authors consulted the official Astroscale social pages (i.e., Facebook, Twitter, Instagram, LinkedIn and YouTube) and retrieved interviews of the founder Nobu Okada, the president Miki Ito and the COO Chris Blackerby. Those sources offer a comprehensive overview of Astroscale (e.g., the vision and the stakeholders and partners involved in the creation of value). Furthermore, there were used conference papers that investigated the Astroscale case (e.g., Brettle et al., 2019; Weeden et al., 2019), business newspapers (e.g., Financial Times, CNBC, Bloomberg), space newspapers (e.g., SpaceNews, Space.Com) and space agencies’ reports (e.g., ESA, JAXA). Finally, the authors searched for academic articles and books describing the culture, historical business and industrial practices characterising Japan. Through these data, this research framed the RL of Japan at the time when Astroscale was founded.

Data Analysis

The data analysis process followed the insights from Eisenhardt and Graebner (2007) and Yin (2009), which allowed the generalisation of the cases and to picture how RL sustains the risks of lack of legitimacy and liability of newness in radically INVs.

The data analysis strategy consisted of two steps to allow a coherent description of the phenomenon.

First, the case was analysed to understand the mechanism and strategy of the ventures to overcome the lack of legitimacy and liability of newness. A narrative description of the mechanism used by Astroscale to gain legitimacy and reduce liability was used.

Second, this study defined how the ventures dealt with the risks and analysed the elements that resonate with Japanese culture and tradition. In particular, it highlighted the elements that relate to Japanese culture and tradition (i.e., environmental and collectivist culture, manga culture, space tradition and industrial tradition), identifying those elements of the Japanese RL leveraged by Astroscale to gain legitimacy and reduce the liability of newness (Table A1). The retrieved data were independently analysed by each author and then reviewed in meetings to discuss potential misunderstandings and divergent views.

During the two steps, data coding was performed. The themes were identified from the research questions, the theory on legitimacy and liability of newness, and the analysis of the secondary data collected. There were extracted four themes that were used in the analysis of legitimacy: ‘cognitive legitimacy’, ‘sociopolitical legitimacy’, ‘manipulating’ and ‘storytelling’, and three themes for the analysis of the liability of newness: ‘resources’, ‘capabilities’ and ‘network’. Examples of data coding are shown in Tables A2 and A3. The tables contain examples of data used by the authors, and for each of them they reported the elements of the Japanese RL influencing the different themes related to lack of legitimacy and liability of newness.

Findings

Lack of Legitimacy

Astroscale introduced a radically new VP that consists of a series of on-orbit services, such as in situ space situational awareness, satellite life extension and end-of-life management and active debris removal, to preserve satellites’ operations and space sustainability and reduce costs and risks related to space debris. A radically innovative VP can be difficult to understand due to the novelty introduced, since it requires stakeholders to become familiar with a radically new venture (Renko, 2013). This made it difficult for Astroscale to raise and collect investments. In presenting its VP, Astroscale highlights that its mission strongly focuses on the cleanliness and sustainability of the space. These elements of cleanliness and sustainability resonate with important aspects of Japanese culture, which is strongly oriented towards cleanliness and shares the responsibility to stop littering. This has attracted several Japanese entrepreneurs who, moved by ‘deep faith’ in the venture to tackle the problem of space debris, decided to fund the new venture. On the matter, the president of Astroscale, Miki Ito, stated that ‘Japan is more concerned with the issues of debris than other countries are’ (METI, 2015). This collectivist aspect of Japanese culture is further highlighted by the same Okada in an interview years later: ‘Japanese people are loyal to the community where they belong. I mean, that might be in the village, that might be in the school, that might be in the company’ (Romero, 2019). Even the COO, Chris Blackerby, during an interview in 2021 with a journalist asking if Japan is a suitable place to start a venture that aims to the sustainability of space because of its culture, stated,

You are completely right. I mean this idea of responsibility and cleanliness and cleaning up after yourself. You know we’re all taught that as kids, but in Japan, it’s maybe internalized a lot more and it’s a really important issue and I think there’s something to be said for fact that a company like this driving global opinion and direction in this issue is Japan-based and I think Japan should take pride in that. The fact that this is something where Japan is concerned about environmentalism both on the ground and on orbit (Seek Sustainable Japan, 2021)

Moreover, Japan has, in the last 50 years, witnessed a societal change that has made it more environmentally friendly after suffering serious environmental issues.

A further distinctive cultural element of Japan also leveraged by Astroscale is manga, the typical Japanese comic. A painting of a famous cartoonist, Matsumoto Leiji, was hung on the wall of the Tokyo facility of the venture. The picture represents a train travelling from Earth to the Moon through space, pointing at the mission of Astroscale to ensure the safety of the spaceflights. Another manga that helped Astroscale to gain legitimacy is Space Brothers. Also, in this case, a special picture with the characters dressed in Astroscale suits is used to deliver the company’s message. Furthermore, Okada used Space Brothers’ blog to talk about the company and the technologies Astroscale was developing. Besides the cultural elements, Japan has a strong history in civil space operations, especially in the study of solutions for the space debris issue. In fact, in 1997, JAXA attempted for the first time a robotic rendezvous using a chaser and target satellites, and Mitsubishi Heavy Industries, a Japanese company, was selected by NASA and JAXA for the development of a machine or a tool to eliminate space debris. Nobu Okada, while explaining what pushed him to start a space venture, described his meeting with the first Japanese astronaut, Mohri Mamoru, who gave him an inspiring handwritten note: ‘The challenge of space is waiting for you’. This story was presented in Okada’s earlier pitches to attract investors and the attention of institutional actors. Finally, to further increase its legitimacy among the Japanese audience and communicate the importance of the venture’s vision, Astroscale partnered with Otsuka Pharmaceutical, which produces Pocari Sweat, a famous Japanese drink. In 2001, the drink flew to space on board the International Space Station. The two companies worked together on the ‘Lunar Dream Capsule Project’, which consisted of the delivery of a capsule to the surface of the Moon with messages written by kids on their expectations of space.

The Japanese RL has played an important role in the first stages of legitimation, which is considered crucial in the whole legitimation process (Navis & Glynn, 2011). The company, in 2015, won a Japanese award called ‘Minna-no-Yume’ (Everyone’s Dream), which rewards those companies that develop social innovation that further helps to increase its legitimacy to a greater extent. Astroscale was then able to raise a series B investment from Japanese institutions and private entrepreneurs, signing different agreements with other relevant Japanese companies. Meanwhile, Astroscale has started to manipulate the context in which they are embedded by means of Japanese culture. In fact, once a venture increases its legitimacy, it can influence the institutional context (Bergek et al., 2008). The importance of changing some of the established standards and values of the space industry was highlighted in different talks by the founder Okada, Astroscale President Ito, and COO Blackerby. One of the actions taken by Astroscale was to start an academy to diffuse the importance of space conservation for kids. The project, called ‘Space Sweepers Academy’, refers to ‘Planetes’, a manga about a crew of space trash collectors that clean the space to ensure its sustainability. ‘Space sweepers’ is also the name that the company gives to its employees. Okada in an interview revealed that the engineers working for his company are expected to read the manga.

Finally, Astroscale has kickstarted a boom in the Japanese Space Startup Market, increasing the number of space startups from 3 to 20 after its foundation. Furthermore, following the legacy created by Astroscale, another Japanese startup, namely ALE, and two ventures, such as SKY Perfect JSAT and Sumitomo Forestry, are working on the sustainability of space. As a result, this created a new space ecosystem in Japan, changing the structure of space supply chain. In addition, Astroscale won, together with GITAI, a Japanese space startup, a government contract for the development of a robotic arm to be used in space operations. In conclusion, Astroscale’s role in the Japanese Space sector has led the venture to gain sociopolitical legitimacy, thus appearing right and appropriate in the eyes of the whole country.

To address the global market, the venture decided to open offices in the UK’s space hub and the USA. Actually, once the new VP was locally validated in the Japanese context, its novelty may spread to new contexts, bringing other actors to more easily accept it (Drori & Honig, 2013). While opening offices in other countries, Astroscale leveraged the Japanese RL to gain global legitimacy. In an interview, COO Blackerby stated that ‘In NASA, people have come to recognise that this is one of the leading space venture companies in Japan, and even in the world, in terms of understanding the issue and bringing in the right’ (Daimon, 2017). Thanks to Astroscale, Japan extended its environmental culture beyond the Earth, becoming the leading country in the fight for the sustainability of space.

The above discussion highlights the RL-provided elements that familiarised Astroscale’s stakeholders with the novel VP and allowed the firm to start a process of manipulation of the environment. Accordingly, the following proposition is formulated:

Proposition 1. The RL supports radically INVs in gaining legitimacy to increase their likelihood of survival.

Liability of Newness

To overcome the liability of newness, radically INVs need to retrieve the resources they lack and develop the capabilities necessary to compete effectively (Stinchcombe, 1965). From the beginning, Okada was searching for collaboration with Japanese firms and institutions. In an interview, he declared that he always thought that the Innovation Network Corporation of Japan (INCJ) would be a suitable investor for its company. The INCJ is a public–private partnership that involves the Ministry of Economy, Trade, Industry of Japan and some of the major Japanese companies. In March 2016, INCJ funded Astroscale with US$30 million during the series B investment, alongside other Japanese entrepreneurs. The investment made by INCJ in Astroscale has brought not only capital but also capabilities in the development of business models, know-how and technological development. This was only one of the important partnerships that the company created. Related to the importance of the Japanese industries, the President of the venture, Miki Ito, stated that in Japan ‘there are many companies which have superior technologies that are contributing to solving the issue’ and that Astroscale followed a flexible approach to cooperate with the companies owning the necessary technologies (METI, 2015). This kind of approach was helpful in the reduction of the overall liability of newness. In fact, Okada emphasised the importance of collaboration with laboratories, universities and private companies. Among those, there were two mechatronics firms, such as Yuki Precision and OGS, belonging to one of the traditional Japanese industries, that is, the robotics industry. Actually, Japan is recognised as ‘The Robot Kingdom’, due to its historical tradition in automation, in which Japan is deemed as a world leader. These firms contribute to the survival and further development of the new venture by providing the relevant engineering capabilities and the necessary resources for the development of space debris detection satellites. In particular, Yuki Precision, a company with long-standing experience in precision machining, provided its competence in complex and precise machining of materials that are suitable for space. While OSG supported the development of the first satellite manufactured by Astroscale—that is, IDEA OSG-1—by providing the proper tools for the manufacturing of the spacecraft’s components, another important collaboration came from Mitsubishi Heavy Industries, which enhanced Astroscale’s technical aspects of space operations due to Mitsubishi’s knowledge of launch vehicle manufacturing and launch services capabilities. Important contributions came also from the civil space industry, both from firms and institutional actors. On the one hand, a firm such as ANA provided knowledge on operational safety. On the other hand, a collaboration with the University of Tokyo gave Astroscale the possibility to use Hodoyoshi-3, a satellite used in the FIRST Program of Cabinet Office of Japan, as the base for the development of Astroscale technology.

Furthermore, the industrial tradition combined with the university specialisation created the proper environment in which the new ventures could find a skilled workforce. For instance, Ito was one of the engineers working on the Hodoyoshi project and studied at the University of Tokyo. This university is known for its tradition in the space sector. In fact, the first Japanese satellite—Ohsumi—was developed in the Institute of Space and Aeronautical Science, at that time part of the University of Tokyo.

Finally, at the end of 2021, Astroscale received its Series F investments. Until the Series E investment, all the investors providing the necessary financial capital for the development of Astroscale technologies and business models were Japan-based. The shared culture played a paramount role in the decision of Japanese investors to fund Astroscale.

Therefore, recurring to the RL allowed Astroscale to access and source the necessary resources, capabilities and human and financial capital to survive in the aftermath of its creation. Hence, the following proposition is formulated:

Proposition 2. The RL supports radically INVs in reducing liability to increase their likelihood of survival.

Discussion and Conclusion

This work focuses on radically INVs, investigating how they can overcome the so-called ‘death valley’, a period that characterises new ventures in their journey to become viable businesses (Ritter & Pedersen, 2022). In particular, the article discusses how the regional context supports a radically INV while facing the risks that threaten their survival, such as the lack of legitimacy and the liability of newness. What emerged is that the RL, defined by regional business and industrial practices and culture (Aoyama, 2009), has a role in the mitigation of the risks faced by the INVs, and in particular for those INVs that present the highest degrees of novelty. To explore the phenomenon in detail, the authors perform a single case study of a radically INV. They analyse Astroscale, a Japanese venture that pioneered the on-orbit service market by introducing a radically new VP. This research started by analysing how the Japanese RL was leveraged by Astroscale in the mechanisms necessary to gain legitimacy. First, radically INVs can benefit from regional cultural and traditional elements that facilitate the understanding of the VP by stakeholders. In addition, aspects of the regional culture and tradition can be used as symbolic elements that provoke a sense of familiarity among the stakeholders (Bitektine, 2011; Lounsbury & Glynn, 2001). Second, in order to manipulate the environment, a new venture must avoid contrast with the extant practices and values (Suchman, 1995). Therefore, compliance with the RL and its exploitation can become a strategy that radically INVs can pursue to gain legitimacy, subsequently act on the institutions and conversely influence the context. In this way, the radically INV does not contradict the status quo but leverages the local cultural elements and traditions to start shaping the RL, adding new distinctive elements. Third, to extend its legitimacy beyond the local environment, a radically INV can carry the RL in other contexts (Aoyama, 2009), leveraging also the new aspects it added to the RL. In the specific case of Astroscale, Japanese traditional elements such as the culture of cleanliness, the diffusion of manga and the strong industrial tradition in robotics and electronics have allowed the venture to easily communicate its VP. Afterward, it was identified how the RL supports the radically INV in reducing the liability of newness. The shared culture within a region favours information flows (Roundy & Fayard, 2019; Sweeney, 1991), allowing the connection of different actors in it (Laursen et al., 2012). This creates a collaborative climate that allows the radically INVs to access relevant resources. In this way, the RL also facilitates the formation of alliances and networks that may provide further resources that help to cope with the liability of newness. This study showed how Japan represented a proper context for Astroscale to survive since Astroscale could leverage the peculiarities of the Japanese RL to gain legitimacy and reduce the risks due to the liability of newness.

Theoretical Contributions

Extending the knowledge about the elements that may increase the likelihood of survival of radically INVs is paramount for the entrepreneurial literature. First of all, following the lineage of studies that consider the context relevant and important to INVs (Aoyama, 2009; Autio et al., 2014), this study investigated the role of the RL in supporting radically INVs in facing the risks related to the lack of legitimacy and liability of newness. Scholars have investigated how the regional context surrounding the new ventures can influence their creation (Fritsch & Falck, 2007), the identification of new opportunities (Messeni Petruzzelli et al., 2020), the entrepreneurial intentions (Donaldson et al., 2021; Huggins & Thompson, 2016; Wigren-Kristoferson et al., 2022) and the actions to exploit the business idea (Hayton & Cacciotti, 2013). This work contributes by identifying the role of the RL in the business strategy and in the mechanisms deployed by radically INVs to reduce the risks they face. Consequently, this article offers theoretical contributions not only to the entrepreneurship literature but also to the regional studies literature that investigates the role of regional characteristics in sustaining the survival of radically INVs (Aoyama, 2009; Fritsch & Wyrwich, 2018). The research shed light on how the RL may support radically INVs in reducing the negative effects of both the lack of legitimacy and the liability of newness. It highlighted how the culture, historical business and industrial practices of a region can have a crucial role in the economic development of a region, being supporting elements for radically INVs in facing risks during their early infancy.

Second, this work contributes to the entrepreneurship literature by investigating the mechanisms and strategies that firms can adopt to gain legitimacy (Kuratko et al., 2017; Navis & Glynn, 2011; Zimmerman & Zeitz, 2002). In particular, it analyses how the culture and tradition of a region can be used to support manipulation and narrative strategies to gain legitimacy. The literature has suggested the importance of manipulation strategy (Zimmerman & Zeitz, 2002) and when to use it (Kuratko et al., 2017). This work adds elements that explain how this strategy can be performed, making use of elements of RL as a reference to the status quo, thus avoiding contrasts with the context.

Third, the concept of liability for newness was introduced by Stinchcombe in 1965. The importance of this topic is still central to the entrepreneurship literature that is looking for strategies and mechanisms to overcome liability (Soto‐Simeone et al., 2020). This article further increases the understanding of the mechanisms and dynamics, allowing radically INVs to overcome the liability of newness.

Fourth, the role of culture in the literature of entrepreneurship lacks proper attention (Lounsbury & Glynn, 2001). Following the call for further study on culture in entrepreneurship and innovation made by Cornelissen et al. (2017), this study advances the understanding of how culture, in the form of RL, can contribute to the survival of radically INV.

Finally, this work, by focusing on the radically INVs, increases understanding of the dynamics behind the survival of these specific ventures. Entrepreneurship literature has considered INVs as a single typology of firms (Cliff et al., 2006; Koellinger, 2008), without proposing a distinction of the broad group of INVs according to their characteristics. This study focuses on a specific typology of INVs, namely radically INVs, highlighting the specific features and dynamics that characterised them (Samuelsson & Davidsson, 2009).

Practical Contributions

From a practical point of view, the findings can be beneficial to entrepreneurs and policymakers since they show how some of the characteristics of the context may facilitate the survival of radically INVs in a specific region. In particular, entrepreneurs who aim to create a radically INV can scan the environment to identify and leverage elements of culture and tradition that are in line with the opportunity that the radically INV aims to explore, or they can decide to start their venture in a geographical area that presents such elements. As a consequence, the radically INVs not only gain legitimacy, thus increasing their likelihood of success, but also facilitate the understanding by important stakeholders of the value they created. Furthermore, the establishment of a radically INV in a favourable environment can facilitate the identification and gathering of the relevant resources. Once the radically INV gains legitimacy from their proximate stakeholders, they can spread their offering outside the region, carrying the RL and thus gaining legitimacy in different regional contexts. Finally, policymakers may profit from a strong RL since it favours the survival of radically INVs, which lead to economic growth and development. In fact, they can focus their efforts on sustaining the business and industrial tradition and nurturing the RL on which radically INVs can rely to increase their likelihood of survival.

Limitation and Further Development

The study has, of course, some limitations. In particular, the methodology used is a single case study in a specific region. Indeed, an interesting way to further explore the role of RL is to use additional case studies from different regions and sectors in order to investigate the contingency factors that influence the findings of this article. Furthermore, the analysis was based on qualitative data; running an extensive quantitative analysis could help further test and verify the results.

The study opens several avenues for further research exploring the role of the RL in the survival and emergence of radically INVs. For instance, future work can investigate how RL can support the identification of new entrepreneurial opportunities or how the elements of RL imprint the founding teams. Studies could also focus on how INVs, in turn, influence the evolution of the RL and the subsequent generation of entrepreneurs. Furthermore, future studies may investigate if there are differences in how expat-preneurs (i.e., those that temporarily live abroad and initiate a new venture opportunity in the host country [Vance et al., 2016]) or immigrant entrepreneurs (i.e., those that pushed by economic and sociopolitical reasons, move from their home country on a permanent basis and start a new business in the host country [Omorede & Axelsson, 2022]) leverage RL compared with native entrepreneurs. Finally, scholars may investigate how the bundle of resources of a region can influence the location decision of entrepreneurs to start a new venture and, in particular, the role of RL in this decision.

Footnotes

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Funding

The authors received no financial support for the research, authorship and/or publication of this article.

Appendix

Note

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