LGST 216: Emerging Economies – reading number 5

[Different schools of thought use different words in trying to describe the notion of appro-
priateness. The most common word other than appropriateness is “legitimacy.” Using the
word “legitimacy” is easier because the process through which an institution becomes per-
ceived as “legitimate” can be called “legitimation.” Nonetheless, the word “appropriate-
ness,” which is attributed largely to schools of thought within the discipline of sociology,
seems to be used more often than others, and will be used in this course. Appropriateness is
an important concept; as new institutions were introduced into transition economies, schol-
ars notice that the quality of those institutions had little bearing on whether people used
them. People tended to only use new institutions if they considered those institutions to be
appropriate (hence, “considerations of appropriateness.”) Whether an institution is consid-
ered appropriate almost never has anything to do with efficiency or effectiveness, and is
instead usually related to history, culture, and social norms and beliefs. These things are
not, of course, static and are constantly changing, sometimes in response to new ideas in-
troduced by strangers as the ability to form relationships with strangers changes.]

Annual Review of Psychology 57, 375-400 (2006)

Psychological Perspectives on Legitimacy and Legitimation

Tom R. Tyler *
[excerpted; edited; references omitted]

legitimacy—the belief that authorities, institutions, and social arrangements are appropriate,
proper, and just. This quality is important because when it exists in the thinking of people within
groups, organizations, or societies, it leads them to feel personally obligated to defer to those au-
thorities, institutions, and social arrangements. Legitimation refers to the characteristic of being
legitimized by being placed within a framework through which something is viewed as right and
proper. So, for example, a set of beliefs can explain or make sense of a social system in ways that
provide a rationale for the appropriateness or reasonableness of differences in authority, power,
status, or wealth. This has the consequence of encouraging people to accept those differences.
Irrespective of whether the focus is on an individual authority or an institution, legitimacy is a
property that, when it is possessed, leads people to defer voluntarily to decisions, rules, and so-
cial arrangements. . . .
The many recent changes in the government within various societies around the world,
including South Africa and the former Soviet republics, have provided additional field settings
within which the underlying assumptions of legitimacy theory have been tested. These changes
in government have also rekindled interest in understanding how to create and maintain institu-
tional legitimacy, since issues of social disintegration and internal conflict become salient when
governments collapse and new forms of social order must be created. This reemphasis on under-
standing how to legitimate new governments is consistent with the earlier “major preoccupation

*
Professor of Psychology, New York University
of political scientists and sociologists [with legitimacy] in the post-colonial, nation-building era
after the Second World War.” That preoccupation with establishing legitimacy was fueled by the
fear that, without legitimate authorities and institutions, societies would descend into anarchy
and chaos.

International Journal of Emerging Markets 11(1), 12-17 (2016)

Institutions and Emerging Markets:

Effects and Implications for Multinational Corporations
Daniel Rottig
[excerpted; edited; some references omitted]

Since the creation of the term "emerging markets" by the Dutch-born US investment banker An-
toine van Agtmael in 1981, the world has experienced a tremendous proliferation in the im-
portance of these markets, which have gained significant economic and political influence. . .
Since then, institutional theory has become a “popular and powerful” 1 conceptual lens through
which researcher have examined the structures, actions, [and] transformations . . . Emerging
markets are characterized by a number of unique institutional features that generally do not exist
in developed markets. These include institutional voids, relative importance of informal com-
pared to formal institutions, institutional pressures by local governments, as well as institutional
change and transitions. . . In order to fill the void of institutions, in general, and the lack of mar-
ket intermediaries, in particular, informal institutions have developed in emerging markets and
become crucial for economic activity compared to formal institutions that drive economic activi-
ty in developed markets. Such informal institutions comprise local providers of specific interme-
diary services that are only open to selective rather than all market participants, and thus do not
constitute a substitute to formal institutions that are taken for granted in developed countries. . .
Given the prevalence and higher relative importance of informal social compared to formal legal
and economic institutions, governments in emerging markets typically have a much stronger so-
cial orientation and exercise greater influence and control over companies than governments in
developed countries. MNCs operating in emerging markets therefore are confronted with legiti-
macy pressures for social performance and an active involvement in their local communities.

[The transition economies of Central and Eastern Europe have been the focus of a great
deal of research, in part because they have been the locus of a great deal of trade and in-
vestment with and from Western Europe and North America, and in part because several
countries within the region have been admitted to the European Union and thus subjected
to its requirements for institutional change.]

1
Dacin, M.T., Goodstein, J. & Scott, W.R. ( 2002 ), Institutional theory and institutional change: introduction to the
special research forum. Academy of Management Journal 45(1), 45-56, p. 45.
Journal of International Management 14(1), 1-11 (2008)

International Business and Institutional Development in

Central and Eastern Europe
Modestas Gelbuda, a Klaus E. Meyer b & Andrew Delios c
[excerpted;edited; refernces omitted]

Sociological perspectives to institutional theory have been applied to numerous strategic issues
in a [business] firm. These applications have been made with the goal, implicit or explicit, of
overcoming limitations inherent to the rational choice models that [once dominated] economic
perspectives on decision-making in organizations. Unlike the [old] perspective, [newer] theories
conceptualizes institutions as the rules and norms that define legitimate behavior. In a sociology-
based institutional theory perspective, organizations conform to the prevailing belief systems of
the society to obtain legitimacy. With gains in legitimacy comes enhanced access to resources
and stronger social–psychological support from the external environment. Notably, this legitima-
cy and support can emerge even if the actions and decisions that foster legitimacy are at odds
with efficiency requirements of the firm. . . . Institutional theorists embrace the point that coer-
cive isomorphism, or the rules developed and supported by law and the government, are im-
portant to defining cost-efficient and legitimate behavior for a firm, and thereby serve as an iso-
morphic force. . . The difference in the strength in institutions is important for a number of rea-
sons. Strong institutions provide legitimacy and social–psychological support, as well as material
benefits, such as reductions in transaction and production costs, that are conducive to the effi-
cient operations of a firm. Even if weak institutions do not provide such explicit support for
business transactions, weak institutions still can provide legitimacy and social–psychological
support, provided that firms conform to local rules and norms. The risk in such conformance in a
weak institutional environment is that the laws and rules in institutionally weak countries can be
incompatible with the efficiency requirements of a firm, such as the protection of property rights
and freedom from government corruption.

[We will talk about democracy and democratization in another class. In the meantime . . .]

1 African and Asian Studies 23-61 (2002)

Anchoring Democracy in Indigenous African Institutions

Daniel Ayana *
[excerpted; edited; some references omitted]

Due to the basic premise that politics has winners and losers, and because of the elites critical
role during the transitions to democracy, the literature on democracy focuses on the elites, elec-

a
The Baltic Institute for Leadership Development (BILD), Vilnius, Lithuania.
b
School of Management, University of Bath, Bath BA2 7AY, United Kingdom.
c
NUS Business School, National University of Singapore, and Business Link, Singapore, Republic of Singapore.
*
Professor of African History, Youngstown State University.
tions or regime change. The common African is mentioned only as an afterthought directly or
indirectly as a “non-governmental actor” in the context of the consolidation of democracy, with
its pessimistic overtones, to transform the “big-man democracy” or neo-patrimonialism that is
expected to survive under the guise of democracy. . . a historical perspective that attempts to link
democratic transition and consolidation with African institutions is an important area of study. It
identifies the indigenous “institutional locales” and "movement cultures" as valid and enduring
building blocks for democracy and empowering the ordinary Africans. Legitimizing these indig-
enous institutions is crucial to provide a moral connectedness between African states and their
respective populations. . .
[Having pointed out that democracy as an institution (or set of institutions) is not viable
in changing polities in Africa unless it is perceived as appropriate, Ayana goes on to propose
(based on his reading of the literature on the process of democratization) that the most effective
way of legitimizing democracy is to use local building blocks that are already perceived as legit-
imate, and to leverage the perceived appropriateness of those institutions. The institution that he
finds particularly suited to this process is religion.]
We re-conceptualize indigenous African religions, with which the grassroots institutions
are associated, directly or indirectly, as “civic religions,” because of their public content. Our
primary goal in recasting indigenous African religions as “civic religions” is to shed light on
their participatory aspects . . . One of the hallmarks of civic religions was its inclusiveness of so-
cial categories. Scholars had documented the prominence that Zulu women and girls had in ritu-
als and leadership. John Mbiti provides us with the significant status generally accorded to wom-
en in indigenous African religion. S.F. Nadel’s Nupe Religion indicates laymen leading in part of
the rituals performed at different times of the year. For other rituals, the office of the “priest” was
entrusted to the younger brother of the chief. The religion had a built-in “complementary ar-
rangement at once uniting and separating” temporal and religious power. 1 The Lugbara recog-
nized age seniority as the qualification to lead in ritual performance, and for the juniors to suc-
ceed the seniors to the office. Among some African communities, the kings were believed to per-
form priestly functions, and according to E. Evans-Pritchard these “priest-kings” are unifying
figures that “reign but do not rule.” 2. . If Nuer religion may be held as typical of indigenous Af-
rican religions, then a detailed reading of the documented Nuer religion shows that most indige-
nous African religions fit the parameters of civic religion, illumining the degree of popular par-
ticipation, institutionalized clerical control, and resort to procedures. Analysis of peacetime Nuer
religious functions depicts the role of secular rituals, the centrality of laymen in performing ritu-
als and their institutional safeguard against the priesthood. A master of ceremonies performs the
communal sacrifices of the Nuer. His title indicates the group’s shared performance and partici-
pation in the ceremony. The master of ceremonies acts not as an individual, but as a representa-
tive of the group. There could be other masters of ceremonies within the group, psychologically
making the incumbent feel not indispensable. When other Nuer groups come together for such
ceremonies, there are other candidates for the master of ceremony. What the master of ceremony
receives for officiating amounts to no more than a recompense for his services. The role of the
master of ceremonies is social, devoid of a particular power. . . the priestly offices in African in-
digenous religions were not offices of power as in some other societies. Evans-Pritchard’s de-
scription can be taken as typical of the transposed values of most African societies during secular

1
Siegfried Frederick Nadel. 1954. Nupe Religion Philadelphia: Taylor & Francis Group. Pp. 35-37, 51-72.
2
E.E. Evans-Pritchard. 1966. The Divine Kingship of the Shilluk of the Nilotic Sudan. The Frazer Lecture. Social
Anthropology and Other Essays. New York: Free Press. Pp. 200-201.
ceremonies. He says, “The role of the priesthood can be regarded either as a political institution
functioning within a set of religious ideas and values or as a religious institution functioning
within a set of political ideas and values.” 3

3
Id. p. 299-300.