Legitimacy Theory

Question 1

Deephouse & Suchman (2008)

Answer 1

This paper discusses past theoretical and empirical research on legitimacy. Then the relationship between legitimacy and two other types of social evaluation (status and reputation) will be considered. Finally, recommendations for advancing legitimacy research will be discussed.

Question 2

Legitimacy protects the organization from

Answer 2

external pressures

Question 3

Legitimacy positive definition

Answer 3

Meyer and Scott – “a complete legitimate organization would be one about which no question
could be raises”

Question 4

Legitimacy negative definition

Answer 4

Pfeffer and Salancik – “legitimacy is known more readily when it is absent than when it is
present”

Question 5

two legitimacies

Answer 5

cognitive legitimacy and sociopolitical legitimacy.

Question 6

Cognitive legitimacy

Answer 6

spread of knowledge about a new venture.

Question 7

sociopolitical legitimacy

Answer 7

process by which key stakeholders accept a venture as appropriate and right, given existing norms and laws.

Question 8

Sociopolitical divided into three dimensions:

Answer 8

regulative, normative, and cognitive.
These three were later combined in a new category called cultural legitimacy.

Question 9

Different types of legitimacy

Answer 9

• Pragmatic: the rational effectiveness of organizations
• Normative: moral, legally mandated
• Regulatory legitimacy: meet regulations (e.g. industry standards)
• Normative, professional: meet professional’s regulations
• Cognitive legitimacy: meet shared meanings/language

Question 10

difference between pragmatic and normative legitimacy

Answer 10

normative legitimacy does not reside in judgments about whether a given activity benefits the evaluator, but rather on judgments about whether the activity is the right thing to do.

Question 11

two major sources of legitimacy

Answer 11

society-at-large and the media.

Question 12

three issues regarding the sources of legitimacy:

Answer 12

1. Recognition that many common sources of legitimacy are themselves organizations
2. Are there legitimate sources of legitimacy? For example: criminal organizations can be
   institutionalized without being legitimate
3. Nature of assessments sources make to determine legitimacy

Question 13

Precursors

Answer 13

Technical conformity and efficiency. Conformity and efficiency increased banks’ legitimacy in the eyes of regulators. Only conformity was found to have a positive effect on legitimacy in the eyes of the media.

Question 14

Deephouse (1999)

Answer 14

The performance consequences of firm-level strategic similarity. Firms should be as different as legitimately possible when balancing between competition and legitimation

Question 15

Differentiation proposition:

Answer 15

less strategic similarity (more different) increases performance

Question 16

Two factors to increase failure rates is strategic similarity:

Answer 16

• Competitive intensity
  The nearness of firm A to firm B, C, etc.
• Niche overlap density
  The number of firms competing for the same resources

Question 17

conformity proposition

Answer 17

greater strategic similarity increases performance. The reasoning behind this is that the firm using this strategy does not have to deal with legitimacy challenges

Question 18

When is an organization’s strategy legitimate?

Answer 18

• When it is acceptable to its organizational field
• When it is aligned with the cognitive consensus (also: industry recipe/standard)
• When members of the organizational field endorse it

Question 19

High level of strategic similarity

Answer 19

Firm competes with many other firms in a similar way for similar resources
Expected to have relatively low performance because the costs of strong competition outweigh the benefits from being legitimate

Question 20

Low level of strategic similarity

Answer 20

Firm faces few competitors for its targeted resources and thus can price more monopolistically Expected to have low performance because the costs of legitimacy challenges outweigh the benefits of reduced competition

Question 21

Moderate level of strategic similarity

Answer 21

Firm faces reduced competition for resources, so performance is higher than firms of the highly similar type
Expected to have high performance because they benefit from reduced competition while maintaining legitimacy (balance between differentiation and conformity)

Question 22

Strategic balance proposition:

Answer 22

moderate amounts of strategic similarity increase performance
* Firms face conflicting pressures; however, they have to be cautious to: don’t be too different, but
also not too similar. Being moderate of both perfectly balances the strategy.