The role of cognitive legitimacy in social entrepreneurship: a multilevel analysis

While the role of cognitive legitimacy in new organizational forms' development has been extensively studied, the cognitive legitimacy of social entrepreneurship (SE) has so far received limited attention. Drawing from legitimacy theory and organizational ecology literature, we theorize and explore how SE obtains cognitive legitimacy via its prevalence and the legitimacy spillovers of the two categories it encapsulates: new business and nonprofit organizations. Using data from the Global Entrepreneurship Monitor, we find evidence for the existence of legitimacy spillovers from both new business and nonprofit organizations to SE activity. Second, the perceived density of social enterprises is significantly related to individuals' engagement in SE. Third, we find the effect of legitimacy spillover effects is more significant when individuals perceive a lower density of social enterprises. Our study contributes to the research on SE, organizational ecology, and hybrid organizations by exploring the multiple sources for increasing SE's legitimacy, particularly highlighting the existence of cross-categories legitimacy spillover effect within hybrid organizations. This study delves into how cognitive legitimacy shapes social entrepreneurship (SE). Findings show macro-level legitimacy spillover and perceived SE density predict individual SE entry. This study is vital for effective long-term SE policy planning. This study explores the sources of cognitive legitimacy for social entrepreneurship (SE). Based on legitimacy and organizational ecology literature, we argue that SE may gain cognitive legitimacy through two avenues. First, macro-level legitimacy of both business and nonprofit organizations (elements that SE combines) can prompt individuals to actively assess and pursue SE. Here, legitimacy spillovers occur by emphasizing similarities with these two constituents, thus enhancing the comprehensibility of SE. Second, individuals' perceived SE density enables them to passively recognize SE as a comprehensible option. Our empirical analysis shows both sources of cognitive legitimacy to positively relate to individuals' SE entry, with the legitimacy spillover effect weakening as individuals perceive a higher SE density. Policymakers developing long-term SE policy plans may use this information, e.g. for determining if, when and how updating legal structures could be an effective approach given the local context.