Our study examines how entrepreneurs in India, Kenya, and Mexico navigate the challenge of seeking funding from Western impact investors while maintaining legitimacy within their local communities.

Prior research has focused largely on investors’ perspectives, assuming entrepreneurs solely aim to meet investor expectations. In contrast, our study focuses on entrepreneurs as they balance competing institutional logics: community-oriented norms emphasizing relationships, trust, and local impact, and investor-oriented norms emphasizing financial projections, metrics, and scalability.

Based on interviews with 30 entrepreneurs actively pursuing impact investment, we find that legitimacy tensions are often 1) perceived, and 2) evolve over time as founders interact with investors.

Notably, some founders choose to withdraw from funding opportunities when they perceive misalignment with their community commitments, reframing “opting out” as a strategic choice rather than a failure.

Overall, our study challenges assumptions that investors hold primary power in funding relationships and demonstrates that entrepreneurs embedded in pluralistic institutional environments may prioritize community legitimacy over financial capital.

Our work calls for a broader understanding of legitimacy that accounts for cultural and contextual differences, arguing that impact investing can only fulfill its promise if investors recognize and adapt to these complex realities.

Link to the full article online:

https://onlinelibrary.wiley.com/doi/10.1111/joms.13233