External legitimation in international new ventures: Toward typology of captivity

What is it about?

There are situations when a firm has no practicable alternative but to sell their products via a single enterprise, or when there is a limited number of customers in a firm's niche market. This situation is referred to as captivity. This paper explores within the framework of new venture legitimation how and why international new ventures that are captive acquire external legitimacy and strive for survival in the face of critical events.

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Why is it important?

The paper puts forward a typology of captivity that is generated by cross-tabulating two business strategies: route to market (direct or indirect) and market development (vertical or horizontal). Three types of captivity emerged: captive industry supplier, captive dyadic partner, and captive market leader. When the above-identified prerequisites of captivity disappear, companies may become free market leaders.