Using an institutional lens, we trace physician-venture relationships post sunshine regulation – when a previously highly-valued involvement of physicians as outside experts in medical device firms is delegitimized by regulatory institutions. Exploiting a quasi-natural experiment provided by the staggered enactment of state-level “sunshine laws” that promoted transparency regarding potentially-conflicted relations between physicians and firms in particular U.S. states, we observe changes in (1) physician involvement, and (2) innovation in ventures. Consistent with perceived incompatibility with physician’s professional logic, we observe decreases in R&D involvement by junior and academic physicians (but not by senior or clinical ones), and in patent and product applications filed by non-physician (but not physician) founded firms. Our findings indicate that the new value of transparency promoted by regulatory institutions is perceived differently across the profession and has an unintended effect on young firms’ R&D and innovation. This study contributes to research in the intersection of institutional theory and contemporary research on entrepreneurship, and on how professionals perceive and creatively respond to institutional delegitimation pressures. In so doing, we unpack bases for resistance to delegitimation among professional actors–contributing to novel insights about the microfoundations underlying delegitimation.
