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The Legitimation of Emerging Industries to Reduce the Investment Risk: the Case of Growing the Esports Pie

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The Legitimation of Emerging Industries to Reduce the Investment Risk: the Case of Growing the Esports Pie The legitimation of emerging industries to reduce the investment risk: The Case of Growing the eSports Pie Author: Gijs Hendriks Student number: 1031372 First examinator: dr. ir. S. Witjes Second examinator: dr. ir. G.W. Ziggers Date: 06/07/2020 Acknowledgements First of all, I want to thank dr. ir. G.W. Ziggers for the time and effort he put in the guidance. The constructive feedback helped me to continually make progress and never slow down. Secondly, I want to thank dr. ir. S. Witjes for providing additional insights and tips. Finally, I want to thank Moritz van der Lugt, Nico Tijsterman, Floris Buurman, Tjerk van der Maten and Rene Reijenburgh for allowing me to interview them. The insights were formidable and really helped me to gather all the information I needed. 2 Abstract The purpose of this research is to analyze legitimacy in emerging industries and the effect on the perceived investment risk. This will extend the knowledge on how to increase legitimacy and how it can improve the investment climate to attract potential investors. The research methodology is a qualitative case study. Data is gathered through literature, interviews and documents. The quality of the analysis is supported with triangulation of data gathering and respondent selection. The scope of the research is legitimacy in emerging industries that are truly innovative. Also, the scope incorporates the sociopolitical and regulatory legitimacy of an industry. The research excludes established industries and emerging industries that use incremental innovations because those industries face less adversity in legitimacy. This makes it difficult to analyze the process of legitimation. The analysis resulted in support for the propositions. This means that sociopolitical legitimacy and regulatory legitimacy negatively affect the perceived investment risk. In other words, the higher the legitimacy, the lower the perceived investment risk. Furthermore, the results show a positive effect of sociopolitical legitimacy on regulatory legitimacy. Emerging industries should increase their legitimacy by creating a sociopolitical environment that complies to the norms and values in the industry but is also appealing to potential investors. This sociopolitical environment should be guarded by regulations and enforcements that match with the norms and values in the market. Cooperation is crucial in increasing regulatory legitimacy. An increasing legitimacy results in a decrease in the perceived investment risk. The research got hindered by the consequences of the Covid-19 virus that made the findings even less generalizable than normal qualitative research methodologies. Comparative case studies can increase the generalizability of the findings. Furthermore, qualitative research methods should be applied to statistically prove or disprove the findings of this research. 3 Content Table Acknowledgements ................................................................................................................................. 2 Abstract ................................................................................................................................................... 3 List of tables and figures ......................................................................................................................... 6 List of abbreviations ............................................................................................................................... 7 Glossary .................................................................................................................................................. 8 1. Introduction ......................................................................................................................................... 9 1.1 Problematics in legitimacy literature ...................................................................................... 10 1.2 Legitimacy in emerging industries that are truly innovative................................................... 12 1.3 Legitimacy as a multidimensional construct ........................................................................... 12 1.4 Thesis outline .......................................................................................................................... 13 2. Theoretical background .................................................................................................................... 14 2.1 Variables ............................................................................................................................... 14 2.1.1 Investment Risk ................................................................................................................... 14 2.1.2 Legitimacy ........................................................................................................................... 15 2.1.3 Regulatory Legitimacy ......................................................................................................... 17 2.1.4 Sociopolitical Legitimacy .................................................................................................... 18 2.1.5 Interrelation between the dimensions of legitimacy ............................................................ 19 2.2 Conceptual model ................................................................................................................. 20 3. Method .............................................................................................................................................. 21 3.1 Research strategy ........................................................................................................................ 21 3.2 Determining the case ................................................................................................................... 21 3.2.1 Contextual environment ....................................................................................................... 24 3.3 Operationalization ....................................................................................................................... 26 3.3.1 The two dimensions of legitimacy ....................................................................................... 26 3.3.2 The framing of franchised leagues ....................................................................................... 27 3.3.3 Measuring perceived investment risk................................................................................... 30 3.4 Data gathering ............................................................................................................................. 30 3.5 Limitations and research ethics ................................................................................................... 32 3.5.1 Limitations of this research .................................................................................................. 32 3.5.2 Research Ethics .................................................................................................................... 33 4. Analysis ............................................................................................................................................ 34 4.1 Analyzing the perceived investment risk .................................................................................... 34 4.2 Indicators of regulatory legitimacy that affect the perceived investment risk ............................ 37 4.2.1 Compliance .......................................................................................................................... 38 4.2.2 Cooperation .......................................................................................................................... 39 4.2.3 Empowerment ...................................................................................................................... 40 4 4.3 Indicators of sociopolitical legitimacy that affect the perceived investment risk ....................... 42 4.3.1 Pragmatic legitimacy............................................................................................................ 42 4.3.2 Moral legitimacy .................................................................................................................. 45 4.3.3 Cognitive legitimacy ............................................................................................................ 47 4.4 Interrelation between regulatory and sociopolitical legitimacy .................................................. 48 5. Conclusion ........................................................................................................................................ 49 5.2 Managerial implications .......................................................................................................... 52 5.2.1 Increasing the sociopolitical legitimacy ............................................................................... 52 5.2.2 Increasing the regulatory legitimacy .................................................................................... 55 6. Discussion ..................................................................................................................................... 57 6.1 Limitations .............................................................................................................................. 57 6.2 Future research possibilities .................................................................................................... 58
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