Legitimacy Tradeoffs: Use of Low-Code/No-Code Tools and Digital Start-ups’ Funding

In this study, we adopt legitimacy theory to explore how the use of low-code/no-code (LCNC) tools influences nascent digital start-ups’ odds of funding. Start-ups need to establish legitimacy to acquire funding from investors. While increased use of LCNC tools enables start-ups to develop more reliable digital technologies, they might be questioned on their technological capabilities (i.e., technical personnel and technical knowledge), thus presenting a legitimacy tradeoff. Using data from Crunchbase and LinkedIn for our study, we first categorize LCNC tools into operational and development types based on whether they could substitute core technological capabilities and then investigate how their differential use is associated with start-ups’ odds of funding. We further examine the moderation role of start-ups’ business novelty, another source of legitimacy, on the relation between the use of operational-type and development-type LCNC tools and start-ups’ odds of funding. Our study contributes to the discourse on legitimacy in digital entrepreneurship.