Legitimacy theory
Legitimacy theory is a business concept that examines how organizations, institutions, and their behaviors are perceived within society. Central to this theory is the idea of a social contract, where the public expects organizations to engage in proper and desirable actions, which in turn fosters trust and support. Legitimacy can be understood at two levels: institutional and organizational. Institutional legitimacy pertains to society's views of major social institutions, such as governments and religions, which can take generations to be solidified. On the other hand, organizational legitimacy, often referred to as strategic legitimacy, focuses on how businesses can develop and maintain their reputation in the marketplace.
Achieving organizational legitimacy involves demonstrating the ability to provide goods and services that are valuable to society while aligning with social norms. Businesses invest considerable resources in establishing and maintaining their legitimacy, as sustaining high performance and adapting to changing social expectations is crucial. Additionally, businesses must be prepared to defend their legitimacy against unexpected challenges, such as crises or scandals, which can threaten their established status. Overall, legitimacy is recognized as an essential asset for organizations, enabling them to expand influence, increase profits, and engage effectively with their communities.
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Legitimacy theory
Legitimacy theory is a business concept relating to the behaviors and perceptions of businesses, other organizations, and larger social institutions within a society. This theory involves the idea of a social contract linking people with organizations and institutions. People expect these large groups to adhere to legitimacy, or a behavioral style distinguished by proper and desirable actions. In return, the people trust and support these large groups, allowing them to continue to exist or even to prosper. Definitions and criteria of legitimacy may vary depending on the values and beliefs of different kinds of people.
Overview
Legitimacy theory is challenging to define partly because it consists of two distinct levels. These levels are termed "institutional" and "organizational." Both levels involve the interaction between society and public groups and concepts, but they differ in their scales, workings, and perspectives.
Institutional legitimacy theory deals with how society views its largest social institutions. Some examples of these institutions include religions, governments, and economic systems. These major institutions are generally only embraced when they come to feel both natural and useful to society. Studies of institutional legitimacy are hampered by the extremely long periods often involved. For example, it may take hundreds of years for a religion to become truly engrained and accepted in a culture.
Most work with legitimacy theory occurs on the smaller, organizational level. Business analysts often call this level "strategic legitimacy" because it can be assessed, studied, and altered through various strategies for the benefit of a business. Although this legitimacy has many facets, generally the best route to success is to find a balance between social norms and the activities of the organization.
Businesses often devote large amounts of time, money, and energy to gaining organizational legitimacy. First, they must establish themselves as capable businesses, able to effectively produce goods and services valuable to a society. Once primary business legitimacy is established, business leaders must maintain it. Maintaining legitimacy is an ongoing challenge for all businesses in which they must keep their high standards of performance and try to foresee and avoid any threats to their legitimacy. This is especially challenging because sometimes social norms or expectations change, and the business must change quickly to maintain its balance.
Successful businesses then move into later stages of legitimacy. One is extending the reputation of legitimacy into other markets or across new kinds of offerings. For example, even the most trusted shoe manufacturer is going to have to prove its legitimacy if it intends to shift into electronics. Businesses must also prepare to defend their hard-earned legitimacy. Unforeseen events, from personal scandals to deadly disasters, may threaten to ruin the legitimacy of an organization. Forward-thinking leaders must remain prepared to protect their legitimacy against any sudden obstacles.
Legitimacy is vitally important to businesses and other organizations and institutions. These groups require legitimacy to operate in a society. Many business leaders view legitimacy as an asset to be gained, maintained, and leveraged through careful strategy. Legitimacy can allow a group to expand its influence, build more profits, gain new supporters, and reach many other important goals.
Bibliography
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Burke, Peter J., editor. Contemporary Social Psychological Theories. Stanford UP, 2006.
Coicaud, Jean-Marc. Legitimacy and Politics: A Contribution to the Study of Political Right and Political Responsibility. Cambridge UP, 2002.
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Hoque, Zahirul, editor. Methodological Issues in Accounting Research: Theories, Methods, and Issues. Spiramus, 2006.
Hurrelmann, Achim, et al., editors. Legitimacy in an Age of Global Politics. Palgrave MacMillan, 2007.
Tilling, Matthew V. "Refinements to Legitimacy Theory in Social and Environmental Accounting." Flinders University, www.flinders.edu.au/sabs/business-files/research/papers/2004/04-6.pdf. Accessed 1 Dec. 2017.