The liability of disruption

Research Summary We study the internationalization‐related legitimacy challenges of firms with disruptive business models by using a case comparison of leading sharing economy companies Airbnb and Uber. We show that they are insulated from many traditional legitimacy challenges to multinationals entering host markets, but exposed to others that have not been noted previously. Specifically, we identify a novel market‐entry legitimacy challenge, “liability of disruption,” which manifests as regulatory, incumbent business, and societal pushback against firms with disruptive business models. After presenting our cross‐case analysis, we theorize about the nature and impacts of these three distinct but interconnected forms of host country institutional pushback on firms’ ability to achieve and maintain legitimacy, and how they are driven by national governance characteristics.Managerial Summary Sharing economy companies Airbnb and Uber have engaged in rapid processes of global growth, but their practices and right to operate have been challenged by a variety of host country stakeholders. This study shows that their international expansion efforts have been affected by emergent regulatory scrutiny, incumbent businesses’ opposition, and other societal concerns about their impacts on employees, customers, competitors, and the communities where they operate. We label these challenges as the “liability of disruption” and illustrate their importance for understanding the internationalization‐related complexities faced by sharing economy firms and, more generally, internationalizing ventures with disruptive business models that aim to restructure entire industry sectors.