Organizational Legitimacy

by

David L. Deephouse, Rongrong Zhang

• LAST REVIEWED: 21 June 2023
• LAST MODIFIED: 22 November 2024
• DOI: 10.1093/obo/9780199846740-0145

Introduction

Organizational legitimacy is a central concept within organizational research. Most definitions of organizational legitimacy refer to the appropriateness or alignment of a subject with its social system as evaluated by social actors within it. The term “subjects” is used to refer to the many types of social arrangements whose legitimacy is evaluated; “subjects” is used instead of “objects” because “subjects” grants at least some level of autonomy to the social arrangement or the actors involved and because legitimacy is fundamentally subjective, not objective. Earlier examinations of legitimacy frequently considered a nation-state or other authoritative actors in an organizational field as the evaluator; later examinations have considered communities, world society, and the individual as evaluators. Organizational legitimacy has been studied for many subjects in addition to organizations themselves, including industries (such as electricity generators), populations of organizations (such as newspapers), classes of organizations (such as multinational enterprises), structures (such as the multidivisional form), practices (such as downsizing and specific technologies), and organizational leaders (such as CEOs). Consideration of leaders and authority structures within organizations demarks a boundary between organizational legitimacy and legitimacy in groups, a topic in social psychology that also has a large body of research, as mentioned in Legitimacy in Related Disciplines. This article focuses on organizational legitimacy rather than legitimacy of individuals within groups and organizations. This article begins with the emergence of legitimacy into organization theory literature in 1956 and traces its movement into resource dependence and institutional theories in the 1970s. The next section illustrates its entry into management and organization research. Three sections present a review of legitimacy research, theoretical advancements, and its relationships with other concepts. The next three sections consider different sources of legitimacy; two of these are related to field-level evaluators, and the third considers individuals as the micro-foundation of legitimacy in a social system. The section on managing legitimacy includes four subsections. Three are on gaining, maintaining, and losing legitimacy; the fourth focuses on the analysis of texts of those championing the legitimacy of a subject and of others responding with differing levels of support. Two sections about the importance of legitimacy in entrepreneurship and multinational enterprises follow. The final section presents brief introductions to research in related fields that also study legitimacy, both organizational and other types.

Origins

Interest in organizational legitimacy emerged from political science and law, which considered such important matters as the legitimacy of heirs, especially for monarchial succession; arrangements of political power; and the rule of law in society. Early work on organizational legitimacy emerged primarily in sociology. We mark the origin by the publication of the first issue of Administrative Science Quarterly, arguably the first journal in organization theory. Parsons 1956 highlights the congruence of organizational goals and values with societal goals and values. Dornbush and Scott 1975 distinguishes propriety or authority from validity of authority; this provides a basis for discussion of the legitimacy judgments at the individual level four decades later. Dowling and Pfeffer 1975 treats legitimacy as a dynamic constraint for organizations and discusses the processes of legitimation. Meyer and Rowan 1977 proposes how legitimacy can be a resource for organizations to gain more resources. Further, the foundational work of Pfeffer and Salancik 1978 on resource dependence theory recognizes the value of legitimacy as a strategic tool to acquire resources.

• Dornbush, S. M., and W. R. Scott. Evaluation and the Exercise of Authority. San Francisco: Jossey-Bass, 1975.

  This chapter proposes that authority is a form of legitimate power. It defines legitimacy as the social norms guiding behaviors of actors. It also differentiates validity from propriety of authority. While validity concerns the subordinates’ recognition of the existence of the normative order, propriety refers to whether these orders are accepted or approved by these subordinates. See pp. 29–64.

• Dowling, J., and J. Pfeffer. “Organizational Legitimacy: Social Values and Organizational Behavior.” Pacific Sociological Review 18.1 (1975): 122–136.

  DOI: 10.2307/1388226

  This paper provides a conceptualization of organizational legitimacy. Building on Parsons 1956, it emphasizes that organizations try to enhance their legitimacy by aligning their value systems with those of other organizations and the broader social system. Legitimacy serves as a constraint for organizations, but it will change and the organization has to adapt to it. A case of American Institute for Foreign Study illustrates these ideas. Available online by purchase or subscription.

• Meyer, J. W., and B. Rowan. “Institutionalized Organizations: Formal Structure as Myth and Ceremony.” American Journal of Sociology 83.2 (1977): 340–363.

  DOI: 10.1086/226550

  Meyer and Rowan ground their approach in analyzing the source of formal structure. It proposes that an organization’s structure is driven by rationalized institutionalized rules or “institutional myths.” Organizations conforming to institutional myths will gain legitimacy and resources and thus increase their survival capabilities. Available online by purchase or subscription.

• Parsons, T. “Suggestions for a Sociological Approach to the Theory of Organizations-I.” Administrative Science Quarterly 1.1 (1956): 63–85.

  DOI: 10.2307/2390840

  This article provides an approach to analyzing formal organizations. Organizations are regarded as social systems achieving specific goals that serve the functioning of the society. The value system of an organization should align with the general values of its superordinate society, which, in turn, supports and influences organizational activities. Organizations should conform to institutionalized societal norms of “good conduct” to be legitimate. Available online by purchase or subscription.

• Pfeffer, J. S., and G. R. Salancik. “The Created Environment: Controlling Interdependence through Law and Social Sanction.” In The External Control of Organizations: A Resource Dependence Perspective. By J. S. Pfeffer and G. R. Salancik, 188–224. New York: Harper & Row, 1978.

  Pfeffer and Salancik provide the foundational text for resource-dependence theory. This chapter argues that organizations conform to social values and norms to achieve legitimacy, which will influence their competition for resources. Relative to other work, they place more emphasis on how organizations can strategically achieve legitimacy to manage their dependencies on others for resources.