How Multinational Banks in India Gain Legitimacy: Organisational Practices and Resources Required for Implementation

Abstract

Liability of foreignness (LOF) refers to the difficulties and additional costs that multinational enterprises face when they operate in a foreign market. Rooted in institutional theory, extant literature has discussed isomorphism, transference, and sociopolitical activism as legitimation strategies to counteract LOF. This view relates to the macro level of firm and society, assumes passivity of subsidiaries, and neglects implementation of these strategies. Consequently, this paper aims at complementing this restrictive view through a qualitative study to explore how French multinational banks respond to LOF challenges in India, an adverse institutional environment typical of emerging markets but also unique due to strong economic nationalism and cultural traditions. As such, the present article contributes to the institutional research stream by (1) presenting an empirical investigation at the micro level of subsidiary organisational practices to operationalise legitimation strategies in managerial terms; (2) revealing rhetoric proactive strategies beyond the passive or reactive paths identified previously; and (3) discussing the internal implications of implementing legitimation strategies directed at external recipients within the intraorganisational network of multinational banks, using the resource-based view.

Managing the MNE subsidiary: Advancing a multi-level and dynamic research agenda

“…As MNE subsidiaries often enjoy high visibility in host societies (especially in emerging economies), such stakeholder pressures may at times be very substantial. Recent qualitative studies highlight practices and tactics MNEs can use to navigate hostile institutional environments such as in Ukraine (Rodgers, Stokes, Tarba, & Khan, 2019) or India (Caussat, Prime, & Wilken, 2019).…”

“…Political ties are commonly operationalized with proxies, such as the number of individuals holding business and political roles (Cui et al, 2018). Moreover, recent qualitative studies point to specific tactics or actions such individuals may use (Caussat et al, 2019;Rodgers et al, 2019), or how they can work with peripheral actors to enhance their influence (Choudhury, Geraghty, & Khanna, 2012). Another recent study shows that individuallevel creativity and work arrangements enhance subsidiary-level environmental collaboration (Bouguerra, Golgeci, Gligor, & Tatoglu, 2019).…”

The organizational legitimacy of Russian firms: Contextual specificity and legitimization strategies

“…Acquiring the legitimacy in the home market is a necessary step that also facilitates access to foreign ones [Prashantham, Kumar, Bhattacharyya, 2019], in which the organizational legitimacy is the driving force for firms' success [Kostova, Zaheer, 1999]. Thus, the organizational legitimacy has the impact on companies' performance in new markets via increased profitability and approval by the civil society and prospective partners [Zimmerman, Zeitz, 2002;Caussat, Prime, Wilken, 2019]. Most papers have introduced sociopolitical activism, transference and isomorphism, which follow from the institutional theory, as three main strategies that help to acquire the organizational legitimacy in a new market [Deephouse, 1996;Caussat, Prime, Wilken, 2019].…”

“…Thus, the organizational legitimacy has the impact on companies' performance in new markets via increased profitability and approval by the civil society and prospective partners [Zimmerman, Zeitz, 2002;Caussat, Prime, Wilken, 2019]. Most papers have introduced sociopolitical activism, transference and isomorphism, which follow from the institutional theory, as three main strategies that help to acquire the organizational legitimacy in a new market [Deephouse, 1996;Caussat, Prime, Wilken, 2019]. They relate to the macrolevel of firms and their institutional environment and ignore the specific practices that companies really use for realization of these strategies [Kostova, Roth, Dacin, 2008;Caussat, Prime, Wilken, 2019].…”

“…Most papers have introduced sociopolitical activism, transference and isomorphism, which follow from the institutional theory, as three main strategies that help to acquire the organizational legitimacy in a new market [Deephouse, 1996;Caussat, Prime, Wilken, 2019]. They relate to the macrolevel of firms and their institutional environment and ignore the specific practices that companies really use for realization of these strategies [Kostova, Roth, Dacin, 2008;Caussat, Prime, Wilken, 2019]. Thus, this view lacks "the microlevel of the firms' strategies" that organizations can apply to gain or maintain their legitimacy [Caussat, Prime, Wilken, 2019, p. 562].…”