Organizational Legitimacy

by

David L. Deephouse, Rongrong Zhang

• LAST REVIEWED: 09 March 2020
• LAST MODIFIED: 27 June 2018
• 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 in the context of a social system. Earlier examinations of legitimacy frequently considered a nation-state or an organizational field as the social system of interest; later examinations have considered communities, world society, and the individual as the social system conferring legitimacy. The term “subjects” is used to refer to the many types of social arrangements under the umbrella of the organizational legitimacy; subjects is used instead of objects because “subjects” grants at least some level autonomy to the social arrangement or the actors involved and because legitimacy is fundamentally subjective, not objective. 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 information technology), and even 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. This article focuses on organizational legitimacy rather than legitimacy of individuals within groups and organizations. Most research on organizational legitimacy is presented in journal articles. However, there are many excellent papers in edited books and handbooks. There are no books written yet that focus on organizational legitimacy. This article begins with the emergence of legitimacy into organization theory literature in 1956. It traces the origins of legitimacy to initial statements of the resource dependence and institutional theories in the 1970s. Three sections consider the definition of legitimacy, reviews of the research, and its theoretical relationships with other concepts. Three sections consider different sources of legitimacy; two of these are related to social systems in which organizations are embedded, 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. The importance of legitimacy in entrepreneurship, both organizational and institutional, is the subject of the section on Entrepreneurship. The section on Legitimacy in Related Disciplines provides links to research in related fields that also study (non-organizational) legitimacy.

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 and Parsons 1960 highlight the congruence of organizational values with societal values. Dornbusch 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. Built on that, 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 Pfeffer and Salancik 1978, on resource dependence theory, recognizes the value of legitimacy as a strategic tool to acquire resources through competition.

• Dornbusch, Sanford M., and W. Richard 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 subordinators’ recognition of the existence of the normative order, propriety refers to whether these orders are accepted or approved by these subordinators. See pp. 29–64.

• Dowling, John, and Jeffrey 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. Built 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 subscription.

• Meyer, John W., and Brian 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 subscription.

• Parsons, Talcott. “Suggestions for a Sociological Approach to the Theory of Organizations—I.” Administrative Science Quarterly 1 (1956): 63–85.

  It 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 subscription.

• Parsons, Talcott. Structure and Process in Modern Societies. New York: Free Press, 1960.

  This book contains a collection of ten essays. It provides a theory of formal organization. Central constructs of legitimacy research are provided. For example, it distinguishes “authority” from “legitimation” and “authorization.”

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

  Pfeffer and Salancik provide the foundational text for resource-dependence theory. In this chapter, they argue 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. See 188–224.