ABSTRACT
Legitimacy is the degree to which an entity, or its actions, are generally perceived or assumed to be “desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and defi nitions” (Suchman 1995, 574). Legitimacy in the eyes of citizens is important for governments to achieve, as it reduces the likelihood of protest (Booth and Seligson 2005). Additionally, legitimacy may be sought by fi rms, particularly multinational corporations (MNCs), as well as by non-governmental organizations (NGOs). For all these entities, legitimacy is a resource that may lead to perceptions of the institution as having greater value, signifi cance, dependability, and trustworthiness (Suchman 1995), hence encouraging public support in both cognitive and material terms (Palazzo and Scherer 2006). Conversely, a lack of legitimacy may increase the organization’s vulnerability to accusations that can result in a loss of infl uence. For corporations, this can also lead to negative fi nancial impacts (Meyer and Rowan 1977), as protestors destroy equipment, take the company to court, or organize boycotts, or as host country governments, viewing such social unease as evidence that an MNC does not have a ‘social license to operate’, increase regulations or barriers to entry (Oetzel and Doh 2009). Meanwhile, reputational concerns – in which legitimacy plays a necessary, albeit not always suffi cient, role (Doh et al. 2010) – have prompted investors to screen potential funding recipients and have inspired powerful funding agencies such as the World Bank to impose directives upon clients (Szablowski 2002). Such fi nancial repercussions are the key driver of corporations’ attempts to achieve legitimacy, rather than any moral sense of “intrinsic social responsibility” (Scherer and Palazzo 2007, 1100).
