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Legitimacy Theory

Chapter · January 2013

DOI: 10.1007/978-3-642-28036-8_471

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Adriana Burlea-Schiopoiu Ion Popa

University of Craiova Titu Maiorescu University
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HOW TO CITE
BURLEA ŞCHIOPOIU A., POPA I., 2013, Legitimacy Theory, in Encyclopedia of Corporate Social
Responsibility, Editors Samuel O. Idowu, Nicholas Capaldi, Liangrong Zu, Ananda das Gupta, Springer-
Verlag Berlin Heidelberg, pp.1579-1584,
http://www.springerreference.com/docs/html/chapterdbid/333348.html

LEGITIMACY THEORY

Adriana SCHIOPOIU BURLEA

Ion POPA

Synonyms
Corporate Governance, Institutional Theory, Legal Theory, Sustainable Development, Trust, Voluntary
Social and Environmental Disclosures

Definition
Suchman (1995, p. 574) considers that “Legitimacy is a generalized perception or assumption that the actions
of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values,
beliefs, and definitions”.
In our conception, the legitimacy theory is a mechanism that supports organisations in implementing and
developing voluntary social and environmental disclosures in order to fulfil their social contract that enables
the recognition of their objectives and the survival in a jumpy and turbulent environment.
The social perceptions of the organisation's activities are reported to the expectation of the society. In the
situation when the organisation's activities do not respect the moral values, the organisation is severely
sanctioned by the society; these sanctions may even lead to the failure of the organisation. The organisation
has to justify its existence through legitimate economical and social actions that do not jeopardize the
existence of the society in which it carries on, nor the environment.

Introduction
The new economic, social and environmental challenges dictate to the organisations and to the governments,
to respect the rules, values and norms, and to voluntarily disclose social and environmental information in
order to probe their compliance. Therefore, legitimacy theory plays the role of a justifiable factor for the
disclosure of the environmental information.
The global financial crisis and the instability of the financial markets put pressure on the organisations to re-
evaluate their values system and to emphasise the importance of legitimacy. The correlation of the tangible
financial resources with the intangible legitimacy resources is important for shaping a new organisational
vision. Many scholars have criticized the enhancement of the legitimacy theory (Mobus, 2005; Owen, 2008).
Legitimacy theory was sometimes seen only as a ‘plausible explanation of managerial motivations’ without any
real effort to determine how a disclosure “...may or may not promote transparency and accountability towards
non-capital provider stakeholder groups” (Owen, 2008, p. 248) and not like an instrument to be used for
making viable predictions (Mobus, 2005). Thus, the organisations must voluntarily disclose social and
environmental information in order to legitimate their legitimacy. The disclosure of information must be
accompanied by concrete actions realised in compliance with social and environmental norms and values.
The abstract nature of the legitimacy makes it very difficult to discover the mechanism by which the
organisations are motivated to voluntarily disclose social and environmental information. The organisation
often associates the symbolic representation of its image with its culture and considers that in order to attain
the legitimacy it is necessary only to improve its culture and to promote it in the external environment.
The legitimacy theory has a very rich disciplinary background based on management theory, institutional
theory, and stakeholder's theory. Strategically speaking, the sustainability of legitimacy theory is based on the
management heritage that connects the traditional norms and values with modern ethics. Therefore, this
chapter lays out the different answers to the following questions:
 When should an organisation be considered legitimate?
 When an organisation is considered legitimate? Who affect its legitimacy?
 Is legitimacy an objective or an end for the organisation?
Paradoxically, the crucial role of legitimacy of organisations, institutions and society survival is motivated,
unfortunately, by negative social and environmental phenomena generated by the lack of legitimacy. The
legitimate literature suggests that the survival of an organisation depends on its legitimation processes and on
how the continuous pressures and challenges are managed. The purpose of the legitimation processes is to
obtain and maintain the stakeholders’ approval.

Key Issues

Why is it important for an organisation to act in consent with the legitimacy theory?
Why does an organisation need social approval in order to develop its legitimate activities?
The legitimacy types
The instability of the legitimacy
The relationship between legitimacy theory and stakeholder theory

Future Directions
The strategic actions will be strictly bounded by the institutional environment and by accountability
requirements. Therefore, it is important to note that the long-term impact of legitimacy on the economic and
financial performance of the organisation will generate many internal conflicts of multi-dimensional construct
of legitimacy, which will influence the transition from legitimacy to illegitimacy and from illegitimacy to
legitimacy. Thus, the role of independent media, in driving the legitimacy of the organisations, will be very
important only if accompanied by the other stakeholders, community and government regulators.
The other studies will concern the role of the stakeholders in the manipulation of the community's perception
of the organisational legitimacy. The stakeholders should act to prevent the loss of legitimacy and not destroy
the image of an organisation. The role of stakeholders becomes a vital one in the prevention and reduction of
illegitimate risks, and the organisations will have the opportunity of a precise action at every level of
legitimacy based on the evolution and changes of the values and expectations of the society as a whole. In
this context, the trust becomes an element in shaping organisational legitimacy, and it reflects the
organisational behaviour.
Legitimation strategy is a very important mechanism that influences the perception of the organisation by its
stakeholders. Thus, the factors that help or impede the organisation in attaining, maintaining and defending
its legitimacy should be explored through empirical investigations.
References
1. Aldrich, H. E. & Fiol, C. M. (1994). Fools rush in? The institutional context of industry creation.
Academy of Management Review, 19, pp. 645–670.
2. Ashforth, B. E. & Gibbs, B. W. (1990). The double-edge of organizational legitimation’. Organization
Science, 1, pp. 177–194.
3. Dowling, J. & Pfeffer, J. (1975). Organizational legitimacy: social values and organizational behavior.
Pacific Sociological Review, 18, pp. 122–136.
4. Gunningham, N. Kagan, R. & Thornton, D. (2004). Social Licence and Environmental Protection:
Why Businesses Go Beyond Compliance. Law and Social Inquiry 29, pp. 307–341.
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theoretical model. Academy of Management Journal, Best conference proceedings, pp. 241-245.
6. Mobus, J.L. (2005), Mandatory environmental disclosures in a legitimacy theory context, Accounting,
Auditing, and Accountability Journal, Vol 18 No 4, pp. 492-517.
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Future Prospects for Social and Environmental Accounting Research, Accounting, Auditing and
Accountability Journal, Vol. 21, No. 2, pp. 240-267.
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Rothman‘s 1956-1999 annual reports, Accounting, Auditing, and Accountability Journal, vol. 23, no. 1, pp. 55-
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