How Do Organisations Gain Legitimacy? Legitimacy as Social Process


Term Paper (Advanced seminar), 2019

13 Pages, Grade: 1,3


Excerpt

Table of contents

1. Introduction

2. What is legitimacy?

3. Who establishes legitimacy?

4. Legitimacy and resources

5. Legitimacy as a constraint

6. Conclusion

References

1. Introduction

Many social and political scientists agree that organizational legitimacy is a central concept in organizational theory - legitimacy was a topic of social theorists such as Dowling and Pfeffer (1975), Deephouse (2018), Parsons (1960), Suchman (1995) and others. According to Ruef and Scott (1998) was Max Weber among the first social theorists to stress the importance of legitimacy. In his theory on the types of social action, he gave particular attention to those forms of action that were guided by a belief in the existence of a legitimate order: a set of “determinable maxims”, a model regarded by the actor as in some way obligatory or exemplary for the actor himself. In his work, Weber applied the concept to the legitimation of power structures, both corporate and governmental. Boyd (2000) discusses Stillman (1974) who acknowledged that there is no consensus definition of legitimacy but generalized that a government is legitimate if the results of governmental output are compatible with the value pattern of the society. He argues that legitimacy is (usually) a part of an institution that acts in accordance with public values. In my paper, I come from this idea that there is not one definition of legitimacy and try to summarize the arguments on what legitimacy is. Boyd (2000) suggests that legitimacy is dependent on social structure, systems and norms and that legitimation is a social process, however it is not clear how large a part of the social system must confer its approval for an organisation; these statements I also analyse. Another thesis underlying my paper is from Deephouse (1996) who argues that organizational legitimacy is defined as a status conferred by social actors. He states that legitimacy depends on the perspective of a particular social actor, whose values and expectations for action should be congruent with the aspiring legitimate organization. Moreover, the social actors approve legitimacy for an organisation, where only certain actors have the authority to confer legitimacy, however they need to be identified first. In my seminar paper I also discuss Hybels (1995) who theorizes that legitimation comes from the actors through conferral of resources and communication of positive reputation, however I point out the resource-based view from Tilling (2010) where he suggests that legitimacy is an operational resource too.

During my research, I discussed several authors who research the aspects of legitimacy important for my paper. Suchman (1995) and Hamidu (2015) who analyses the concept of legitimacy, Dowling and Pfeffer (1975) who address the importance of resources and the idea of legitimacy as a constraint, Hybels (1995) whose work opposes the argument about resources of the two authors, and other authors who contribute to my topic. Only after discussing all the authors in my paper, I could answer my research question “How do organisations gain legitimacy?”.

In my paper I argue that there is a plethora of theories analysing the gaining of legitimacy, however the process of gaining legitimacy and its establishment depends on diverse factors. To support the argument, I have researched and compared various theories and thus discussed different aspects on how legitimacy is gained. The paper is organised as follows: firstly, I will sum up the theories on what legitimacy means and how is it approached by different authors. Secondly, I discuss the questions of actors and who establishes legitimacy, then I focus on the theories about what role do resources play in establishing legitimacy and lastly, I analyse the approach of legitimacy as a constraint.

2. What is legitimacy?

Firstly, it is important to clarify, what legitimacy is; it is also to mention that there is not one common conception of legitimacy. Some authors approach the definition of legitimacy by highlighting the importance of norms, values and beliefs.

Suchman for instance, considers legitimacy to be “a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (Suchman, 1995, p. 574). Likewise, Dowling and Pfeffer focused on legitimacy also as a part of the value system. They argued that legitimacy is “a condition or status which exists when an entity’s value system is congruent with the value system of the larger social system of which the entity is a part. When a disparity, actual or potential exists between the two value systems, there is a threat to the entity’s legitimacy” (Dowling et al. 1975, p. 122). In their work from 1975, Dowling and Pfeffer argue that organisations seek to establish congruence between the social values associated with or implied by their activities and the norms of acceptable behaviour in the larger social system where they operate. In so far as these two value systems are congruent, it can be perceived as organisational legitimacy.

On the other hand, Hamidu et al. (2015) considered legitimacy to be “a relationship between the activities of an organisation and the perception of its stakeholders on the activities it undertakes” (Hamidu et al., p. 7). The authors consider the actors (stakeholders or society) to be the defining factor in establishing legitimacy. The authors add that an organisation in order to survive needs to fulfil what the society expects from it; this way, the organisation is considered legitimated (having the right of survival) to be in the same environment with the society it serves. They also state that legitimacy theory expresses how an organisation reacts to the pressures and expectations of its stakeholders to survive (Hamidu et al., 2015).

Moreover, in their paper from 1975 Dowling and Pfeffer touch upon the economic aspect of legitimacy which is linked to the problem of legality and illegality. They theorize that legitimacy is not to be gained only by competition for economic resources and therefore, legitimacy is not defined by what actions are legal or illegal. The authors explain that legitimacy is not conferred by the existence of resource or informational exchange between organizations. While it is likely that illegitimacy will lead to economic sanctions, economic exchange is not identical with legitimacy (Dowling et al., 1975).

According to Deephouse (2018) there are several categories of legitimate organisations: there are “accepted” organisations, legitimation of which is not questioned or challenged, “proper” organisations which are evaluated, and aspire to be accepted and achieve the goal, “debated” organisations are questioned by the stakeholders and their actions are challenged and, lastly, “illegitimate” organisations which are unable to function.

The understanding of legitimacy is closely linked to the process of legitimation, which is also important to define in my paper. Again, Dowling and Pfeffer (1975) suggest that legitimation is the process “whereby an organisation justifies to a peer or superordinate system its right to exist (to continue to import, transform, export energy, material or information) - the legitimation is accomplished partially through the organisation’s espousing legitimate goals and partially through its own value system (Dowling and Pfeffer, 1975, p. 122). Some theorists (such as Tillig, 2004) suggest that legitimation is an underlying process to organisational legitimacy, by which an organisation seeks approval (or avoidance of sanction) from various groups in society.

In this chapter, we have learnt that there are several definitions of legitimacy, however the most important element to establishing it are the norms and values of the society, however an organisation has to take into consideration its environment that influences its process of gaining legitimacy. Legitimacy is not equal to legality and is not conferred by economic exchange. The process of gaining legitimacy is called legitimation. Further, I will discuss other factors contributing to the establishment of legitimacy.

3. Who establishes legitimacy?

An organisation cannot gain legitimacy without any actors involved. Hybels (1995) highlights that for building a well-grounded theory of the legitimation of organizations, it is necessary to identify the critical actors, both internal and external, whose actions are necessary to the fulfilment of an organization’s functions. He argues that there are several actors who contribute to the establishment of legitimacy. It is the state, the public, the financial community and the media (Hybels, 1995).

Firstly, he argues, that the state not only controls critical resources directly through the distribution of contracts and grants, but also indirectly influence the transfer of resources through regulation and legislation. Secondly, the public as a consumer group and “public interest groups” affect legislation and regulation directly through lobbying and indirectly through influence on voters. Such groups also have considerable impact on demand for the products of industry through influence on the choices of consumers. The public in general, whether organized or not, plays a vital role in the legitimation process of an organization through the control of critical resources. Thirdly, the financial community, or as Hybels calls it “the investment community” as a whole plays a vital role in legitimating both new and established organizational forms by determining the present values of firms based on rationalized evaluations intended to predict future returns on investment. And, lastly, the media where the representatives work in an institutional framework that covers all other institutions, much as the government and the financial community do. They play a critical role in the legitimation of business and other types of organizations, not only by reporting illegitimate activities, but by defining and evaluating grounds for the actions of entrepreneurs, managers, regulators, and investors. The media have little direct control over the transfer of resources to organizations but have considerable influence on the allocation decisions of others (Hybels, 1995, p. 244).

The article from Boyd (2000) complements Hybels by suggesting that legitimacy cannot be established in isolation; the organisation’s efforts must adapt and respond to the concerns of its publics (here the consumers). He then suggests that legitimacy decisions are based on messages in the public. Organizations can only survive if they maintain a coalition of supportive stakeholders necessary for operation, and that means that the members of that coalition have legitimacy-determining power. That the public is a crucial actor Boyd supports with the following statement: “An institution is considered legitimate if the public perceives it to be responsible and useful” (Boyd, 2000, p. 343).

Likewise, Tallberg (2019) focuses on the audiences (the public) evaluating the political legitimacy. He argues that the sociological understanding of political legitimacy as beliefs within a given constituency or other relevant audience that a political institution’s exercise of authority is appropriate. Legitimacy from this perspective lies with the beliefs and perceptions of audiences, not the normative state of an institution, although the latter may influence whether audiences regard an institution’s exercise of authority as more or less appropriate. Legitimacy beliefs are the outcome of a process in which individuals interact with justifications and challenges of political institutions. Where actors deliberately seek to make a political institution more legitimate, by boosting beliefs that its rule is exercised appropriately, it can be referred to legitimation (Tallberg, 2019).

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Details

Title
How Do Organisations Gain Legitimacy? Legitimacy as Social Process
College
Free University of Berlin
Course
Institutional Theory
Grade
1,3
Author
Year
2019
Pages
13
Catalog Number
V941760
ISBN (eBook)
9783346324399
ISBN (Book)
9783346324405
Language
English
Tags
Institutional Theory, Legitimacy, Organisations
Quote paper
Anna Steinbachova (Author), 2019, How Do Organisations Gain Legitimacy? Legitimacy as Social Process, Munich, GRIN Verlag, https://www.grin.com/document/941760

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