Inside-out and outside-in: How entrepreneurial ecosystems can build legitimacy through signaling

The entrepreneurial ecosystem is increasingly drawing the attention of scholars and practitioners, underscoring the importance of collective dynamics between entrepreneurs and entrepreneurial-support intermediaries in fostering entrepreneurial activity. The entrepreneurial journey is characterized by information asymmetry, with entrepreneurial actors sending signals as representations of their underlaying qualities, hoping to acquire necessary resources. Current entrepreneurship research predominantly applies signaling theory to individual and venture-level activities. However, studies that explore signaling within the broader context of entrepreneurial ecosystems are scarce. This paper aims to bridge the entrepreneurial ecosystem-signaling gap by offering insight into how emerging entrepreneurial ecosystems gain legitimacy. We analyze a nascent, privately governed entrepreneurial ecosystem located in Valencia, Spain. Employing a conceptual model based on our findings, we introduce a key boundary condition for the study of signaling in an entrepreneurship context.