The dark side of legitimacy: how (not) to manage complex legitimation processes

Thesis

By focusing on the legitimation of firms in terms of their market activities rather than appreciating the many roles firms increasingly play in society, research on strategic legitimation has not fully grasped the complexities of interrelated legitimation processes unfolding in a firm’s market and nonmarket environments. In a world where firms are under growing societal pressures to perform nonmarket activities, like providing public goods and services, it is important to better understand how multiple legitimation processes interact. A comparative longitudinal analysis of three mining firms in Peru shows that when firms perform nonmarket activities to construct legitimacy in terms of controversial market activities––like mining––they simultaneously construct legitimacy in terms of nonmarket activities. As firms become more legitimate in terms of nonmarket activities, stakeholders expect firms to provide more public goods and services to maintain their legitimacy in terms of market and nonmarket activities. Firms thus appear to face a choice; conform to mounting stakeholder demands, or risk losing legitimacy and face societal opposition. This dissertation shows how firms can reconcile this conundrum by employing strategies of firm-state collaboration, whereby firms construct the legitimacy of the state to deflect societal expectations onto the state. In developing an integrated theoretical model of a legitimation trap and legitimation trap escape, this dissertation challenges research on strategic legitimation which has narrowly focused on a firm’s legitimation in terms of market activities and overlooked how firms’ separate but interrelated legitimation in terms of market and nonmarket activities influences performance. The present work also extends nonmarket strategy research, which has argued that providing public goods and services can help firms maximise performance, whereas this dissertation cautions against an unmitigated view of this approach. This research has strategic implications for the roles firms play in society relative to states and in tackling societal grand challenges.

Authors: Rustler, A

• DOI: 10.5287/ora-dmgjokx7r
• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford
• Language: English