Levels of legitimacy development in internationalization: Multinational enterprise and civil society interplay in institutional void

Abstract

Research Summary Typically, studies on subsidiary legitimation take the perspectives of compliance and isomorphism to examine multinational enterprises (MNEs') legitimacy; our study considers both isomorphism and institutional innovation perspectives to examine how subsidiaries, in collaboration with civil society actors, co‐develop various levels (degrees) of legitimacy in an institutional void. The study finds four overlapping levels of legitimacy—“acceptance,” “image,” “endorsement,” and “synergy” (a combination of acceptance and efficiency)—that subsidiaries co‐develop throughout the internationalization process. We bring new insight into legitimation: that an isomorphism perspective of legitimacy alone cannot explain the complexity of subsidiary legitimation in an institutional void because subsidiaries not only earn acceptance by compliance, but also create/co‐create image, endorsement, and synergy as outputs of institutional innovation. We contribute to the global strategic management in emerging economies. Managerial Summary We investigate how MNE‐civil society interplay co‐develops different levels of legitimacy in an institutional void, as opposed to only the “acceptance” level. The study combines both rule‐accepting and rule‐changing perspectives, revealing that MNEs' strategic endeavors yield overlapping, yet increasing, levels of legitimacy—“acceptance,” “image,” “endorsement,” and “synergy”—in internationalization. These levels are not necessarily derived from a firm's strategic initiatives using an isomorphism perspective; instead, the firm appears as an institutional entrepreneur and co‐develops new institutions, which creates synergy (legitimacy + efficiency) for the firm's operation. Although it is difficult to separate the increasing levels of legitimacy, managers can use the insights to design specific strategies for each level of legitimacy and develop partnerships with local actors in legitimation in an institutional void.

A processual view of organizational stigmatization in foreign market entry: The failure of Guggenheim Helsinki

“…In this regard, we complement but also challenge Edman's (2016) conceptual work in uncovering the difficulties of managing foreignness as an organizational identity. Overall, previous studies on subsidiary legitimation paint a rather positive picture of increasing local acceptance over time, as subsidiaries succeed in balancing local versus global institutional demands (Pant & Ramachandran, 2017), or even in shaping host country institutions (Rana & Sørensen, 2020;Régner & Edman, 2013). In contrast, we put forward a more nuanced -and perhaps more realistic -view of local legitimacy building.…”

Supplier Internationalization Through Upgrading in Global Supply Chain: Evidence from the Garments Industry of Bangladesh

“…In reality, options were limited in selecting additional OBM suppliers as only a few Bangladeshi garment suppliers upgrade and internationalize their own brands. These three large suppliers were selected based on the six priori case selection criteria: (i) companies have diverse backgrounds, (ii) they upgraded as own brand manufacturers, (iii) launched their own brand in the national market, (iv) internationalized through their own brands, (v) internationalized in different time points, and (vi) they have differentiated organizational and managerial strengths (see, Hoque 2021Rana & Sørensen, 2020. Therefore, it would be a perfect blend to investigate their pathways and to understand the enablers and motivators that contributed to their internationalization process.…”

The collaborative and contested interplay between business and civil society in circular economy transitions

“…Here, business is viewed as strategic partner to influence social change (Fabig & Boele, 1999; Selsky & Parker, 2005). For example, Rana and Sørensen (2021) show how multinational enterprises work with CSOs to develop different levels of legitimacy. While difficulties and barriers exist in this collaborative approach, these can be overcome through dialogue and collaboration (Burchell & Cook, 2006, 2013).…”

“…Here, companies are seen as enemies, and CSOs believe that firms are more likely to go beyond profit maximization, engage in sustainability and mitigate social problems when they feel institutional pressures at the community level (Arenas et al, 2013; Marquis et al, 2007) such as through consumer boycotts and media campaigns. This means that cross‐sectoral collaborations are hotly contested political processes (Rana & Sørensen, 2021), involving stakeholders that do not necessarily see eye to eye. This is, in part, because of the different ideologies and worldviews amongst different cultures and communities (Djelic & Etchanchu, 2017; Ehrnström‐Fuentes, 2019; Haase & Raufflet, 2017).…”