20721: Spare Me the Sermon, Show Me the Money: Venture Dehybridization in Moral Markets (session 25677)

This study examines venture dehybridization within moral markets by analyzing U.S. cleantech venture capital (VC) investments from 2001 to 2015. While existing literature highlights the creation and early dynamics of moral markets, limited attention has been given to the evolution and scaling of ventures within these markets. Drawing on legitimacy theory and market evolution frameworks, we explore the interplay between venture-level moral and pragmatic legitimacy in shaping investment decisions across the cleantech lifecycle. Using a dataset of 2,885 investment deals from 1,184 ventures, our findings suggest that moral legitimacy significantly influences new venture financing at the early stages of the industry life cycle, whereas pragmatic legitimacy becomes more relevant at the later stages of the industry life cycle. We also find a gradual decoupling—or dehybridization—of venture-level moral and pragmatic legitimacy as the sector matures. These results advance our current understanding of moral market dynamics and offer insights for entrepreneurs, investors, and policymakers in fostering sustainable entrepreneurial ecosystems.

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