Foundational Themes

SECTION I

Foundational Themes

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Legitimacy in OrganizationalInstitutionalism

David L. Deephouse and Mark Suchman

INTRODUCTION

Legitimacy is a central concept in organiza-tional institutionalism. The term ‘legiti-macy’ dates back to the dawn of organization theory; however, for most of the past century, research on legitimacyemerged only slowly and was fragmentedacross several distinct social science literatures. Since 1995, however, the body ofrelevant scholarship has grown rapidly and ina variety of directions. Much of this new literature (like much of the literature that preceded it) has been highly theoretical,invoking legitimacy as an explanatory concept rather than examining it as an empir-ical property. Empirical accounts, to date,have focused on exploratory case studies oflegitimacy being gained or lost, while only ahandful of investigations have employedlegitimacy as a variable in hypothesis testing.Perhaps because of this heavy skew towardtheory development versus theory testing, thelegitimacy concept has exhibited substantialplasticity as it has evolved from its earliestinstitutionalist usages (e.g., Meyer & Rowan,1977; Meyer & Scott, 1983). As Wright(1985: 292) has observed, ‘the process of

concept formation is always simultaneouslythe process of concept transformation,’ andlegitimacy has been no exception. Nonetheless,despite its diversity, the literature on legitimacydisplays more than enough coherence and com-monality to merit an integrative review.

This chapter is organized as follows. Ourexploration begins with an overview of pasttheoretical and empirical research on legiti-macy. This discussion includes some basicsuggestions on the dimensions, sources, andsubjects of legitimation, as well as on keylegitimation processes, antecedents and con-sequences.1 Second, we consider the rela-tionship between legitimacy and two othertypes of social evaluation that have recentlygained prominence in organization studies,namely status and reputation. Finally, weconclude with several recommendations foradvancing legitimacy research in the future.

THE EVOLUTION OFORGANIZATIONAL LEGITIMACY

Over the years, the conceptualization andexplication of organizational legitimacy has

1

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displayed substantial elasticity. Taken as awhole, this elasticity has resulted in someproductive conceptual evolution but moreconceptual stretching (Osigweh, 1989). As aresult, the existing literature offers a plethoraof definitions, measures, and theoreticalpropositions, not all of which are fully com-patible with one another. While some mightargue that this intellectual thicket is overduefor a wholesale pruning, here we limit our-selves to the more modest task of mappingthe underlying terrain, seeking to identifyboth the features that have become increas-ingly well established and widely acceptedover time, and the features that have remainedrelatively ambiguous and contested.

The development of legitimacytheory in organizationalinstitutionalism

Most reviewers credit Weber with introducinglegitimacy into sociological theory and thusinto organization studies (Johnson et al., 2006;Ruef & Scott, 1998; Suchman, 1995). Weber’sanalysis of the legitimacy of different author-ity types is well known to many organizationtheorists. More generally, however, his writ-ings also discuss the importance of socialpractice being oriented to ‘maxims’ or rulesand suggest that legitimacy can result fromconformity with both general social normsand formal laws (Weber, 1978). Parsons(1956, 1960) applied Weber’s ideas andviewed legitimacy as congruence of anorganization with social laws, norms andvalues. This formulation was later embracedby many organization theorists, includingDowling and Pfeffer (1975), Pfeffer andSalancik (1978), and Czarniawska-Joerges(1989). Ironically, however, the early institu-tionalist literature was more enthusiastic inembracing Weber’s concept than in adoptinghis conceptualization. Meyer and Scott(1983: 201), for example, commented thatthe many references to Weber as a definingaccount of legitimacy were ‘unfortunate,given Weber’s lack of clarity on the point.’

New institutional theory started develop-ing in 1977 with the articles by Meyer andRowan (1977) and Zucker (1977). AlthoughZucker only mentioned legitimacy once inpassing, Meyer and Rowan made it a centralfocus of their analysis, invoking the term atleast 43 times in some form. Their summarygraphic (1977: 353, figure 2) placed ‘legiti-macy’ and ‘resources’ together in the samebox, and suggested that both of these survival-enhancing outcomes may result notonly from being efficient but also from conforming to institutionalized myths in theorganizational environment. AlthoughMeyer and Rowan (1977) did not offer anexplicit definition of legitimacy, they presaged many of the dimensions explicatedin the mid-1990s by stating that legitimacycan result from suppositions of ‘rationaleffectiveness’ (later termed pragmatic legiti-macy), ‘legal mandates’ (regulatory orsociopolitical legitimacy), and ‘collectivelyvalued purposes, means, goals, etc.’ (norma-tive or moral legitimacy). They also highlighted how legitimacy insulates theorganization from external pressures. ‘Theincorporation of institutionalized elementsprovides an account (Scott & Lyman, 1968) … that protects the organization fromhaving its conduct questioned. The organiza-tion becomes, in a word, legitimate …. Andlegitimacy as accepted subunits of society protects organizations from immediate sanc-tions for variations in technical performance’(Meyer & Rowan, 1977: 349, 351).

In 1983, Meyer and Scott discussed legiti-macy in much more depth, including offeringa more thorough definition:

We take the view that organizational legitimacyrefers to the degree of cultural support for anorganization – the extent to which the array ofestablished cultural accounts provide explanationsfor its existence, functioning, and jurisdiction, andlack or deny alternatives … In such a[n] instance,legitimacy mainly refers to the adequacy of anorganization as theory. A completely legitimateorganization would be one about which no ques-tion could be raised. [Every goal, mean, resource,and control system is necessary, specified, com-plete, and without alternative.] Perfect legitimation

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is perfect theory, complete (i.e., without uncer-tainty) and confronted by no alternatives (p. 201)

One noteworthy feature of this definitionis its emphasis on legitimacy’s ‘cognitive’aspects – explanation, theorization, and theincomprehensibility of alternatives. Thisfocus continues to enjoy substantial currency,especially within neo-institutional sociology(cf. DiMaggio & Powell, 1991).

Some theorizing expanded on Meyer andScott’s (1983) formulation, embracing thebasic proposition that legitimacy can be con-ceptualized as the presence or absence ofquestioning, but suggesting that questioningis as likely to arise when a familiar organiza-tion is unsatisfactory as when a satisfactoryorganization is unfamiliar. Along these lines,Hirsch and Andrews (1984) considered twotypes of questions:

Performance challenges occur when organizationsare perceived by relevant actors as having failed to execute the purpose for which they are char-tered and claim support. The values they serve arenot at issue, but rather their performance in ‘deliv-ering the goods’ and meeting the goals of theirmission are called into serious question … Valuechallenges place the organization’s mission andlegitimacy for existence at issue, regardless of howwell it has fulfilled its agreed-upon goals or function. … [Both] entail fundamental challengesto the legitimacy of an organization’s continued existence. Each places the target in an inherentlymore unstable situation than is addressed in com-parative or longitudinal examinations of adminis-trative efficiency.

Pfeffer and Salancik’s foundational state-ment of resource-dependence theory (1978)adopted a similar ‘negative definition’ oflegitimacy, asserting that ‘Legitimacy isknown more readily when it is absent thanwhen it is present. When activities of anorganization are illegitimate, comments andattacks will occur’ (1978: 194). Knoke (1985:222) restated this in the affirmative, defininglegitimacy (in the context of political associ-ations and interest groups) as ‘the acceptanceby the general public and by relevant eliteorganizations of an association’s right toexist and to pursue its affairs in its chosenmanner.’ The ability to pursue its own affairs

resonates with Child’s (1972) strategicchoice perspective, which holds that legitimate organizations enjoy substantiallatitude to choose their structures, products,markets, factors of production, etc. That is, alegitimate organization has largely unques-tioned freedom to pursue its activities: ‘legitimate status is a sine qua non for easyaccess to resources, unrestricted access tomarkets, and long term survival’ (Brown,1998: 35).

In addition to offering these foundationaldefinitions, early legitimacy research alsobuilt on the work of Pfeffer and Salancik(1978) to examine how organizations gain orlose legitimacy. Galaskiewicz (1985) foundthat organizations often sought to enhancetheir legitimacy by donating to charities,forming director interlocks, and obtainingexternal endorsements. Ashforth and Gibbs(1990) proposed two general approaches,‘substantive’ and ‘symbolic,’ and a total often specific actions, many drawn fromimpression management theory. They alsohighlighted three purposes for legitimationefforts: Gaining, maintaining, or defendinglegitimacy. Both of Ashforth and Gibbs’ con-tributions proved fertile: Elsbach (1994;Elsbach & Sutton, 1992) further integratedimpression management and institutionaltheories in her studies of the Act Up,EarthFirst!, and the California cattle indus-try; and Suchman (1995) further explored thedistinct purposes (or, as he relabeled them,‘challenges’) of gaining, maintaining, andrepairing legitimacy.

The year 1995 could be viewed as a pivotalpoint in the development of legitimacy theory. Scott published his review bookInstitutions and Organizations. He wrote:‘Legitimacy is not a commodity to be possessed or exchanged but a conditionreflecting cultural alignment, normative support, or consonance with relevant rules or laws’ (1995: 45). And Suchman publishedhis comprehensive ‘Managing legitimacy:Strategic and institutional approaches’in the 1995 Academy of Management Review. He observed that legitimacy was

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‘an anchor-point of a vastly expanded theoret-ical apparatus addressing the normative and cognitive forces that constrain, construct, andempower organizational actors,’ but he alsocautioned that the existing literature provided‘surprisingly fragile conceptual moorings.Many researchers employ the term legitimacy,but few define it. Further, most treatmentscover only a limited aspect …’ (1995: 571,italics in the original). To remedy these weaknesses, Suchman offered the followinginclusive, broad-based definition: ‘Legitimacyis a generalized perception or assumptionthat the actions of an entity are desirable,proper, or appropriate within some sociallyconstructed system of norms, values, beliefs,and definitions’ (1995: 574). Within thisscope, he delineated two basic perspectives,an institutional view emphasizing how constitutive societal beliefs become embed-ded in organizations, and a strategic perspec-tive emphasizing how legitimacy can bemanaged to help achieve organizationalgoals.

These two publications raised the visibilityof legitimacy, especially among managementresearchers studying for-profit organizations.Aldrich and Fiol (1994) had already high-lighted the importance of legitimacy to entre-preneurs, and within a few years, Kostovaand Zaheer (1999) reconsidered legitimacyin the context of the multinational enterprise.Meanwhile, at a more theoretical level,Oliver (1997) drew heavily on argumentsabout legitimacy to integrate institutionaltheory with the resource-based view of thefirm, and Deephouse (1999) developedstrategic balance theory to address the tension between differentiating to attain prof-itability and conforming to attain legitimacy.This period also witnessed a sharp upsurge inreferences to legitimacy with the broadermanagement literature. And this heightenedattention led to a number of significantrefinements in the field’s understandings of the dimensions, subjects, and sources of legitimacy, as well as of the processes,antecedents, and consequences of legitimation.

Dimensions of legitimacy

The conceptual dimensions of legitimacyreceived much attention in the mid-1990s.Stryker (1994) distinguished between behav-ioral consent to rules, attitudinal approval ofrules, and cognitive orientation to rules.Aldrich and Fiol (1994: 648) distinguishedbetween cognitive and sociopolitical legiti-macy. ‘Cognitive legitimation refers to thespread of knowledge about a new venture …Sociopolitical legitimation refers to theprocess by which key stakeholders, the general public, key opinion leaders, or government officials accept a venture asappropriate and right, given existing normsand laws.’ Scott (1995), in effect, subdividedAldrich and Fiol’s ‘sociopolitical’ categoryto arrive at three dimensions of legitimacy –regulative, normative, and cognitive – linkedto his three pillars of institutions. Suchman(1995) proposed a broadly similar trichotomy using the labels ‘pragmatic,’‘moral’ and ‘cognitive’ legitimacy; however, he went on to combine this basicframework with two temporal textures(episodic versus continual) and two substan-tive foci (organizational actions versus orga-nizational essences), in order to arrive at a typology containing twelve distinct legit-imacy types: pragmatic legitimacy compris-ing exchange, influence, interest, andcharacter; moral legitimacy comprising consequences, procedures, persons, andstructures; and cognitive legitimacy compris-ing predictability, plausibility, inevitability,and permanence. Together, these efforts toexplicate the various dimensions of legiti-macy allowed more researchers to becomeinvolved in the development of institutionaltheory at both theoretical and empiricallevels.

There has been some effort recently toreconsider these dimensions. Archibald(2004) equated sociopolitical legitimacy withregulative legitimacy and combined norma-tive and cognitive legitimacy in a new cate-gory called cultural legitimacy. Culturallegitimacy accrued over time in professional


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and cultural contexts, whereas sociopoliticallegitimacy was more directly managedwithin political contexts. Bitekhtine (2006)began to disentangle the concepts by drawingon one of the fundamental tools of constructvalidity, the nomological network (Cronbach& Meehl, 1955). Bansal and Clelland (2004) brought forth a contextually focuseddimension called corporate environmentallegitimacy.

In surveying this terrain, we note two per-sistent sources of confusion. The first centerson the term ‘normative legitimacy.’ In gen-eral sociological usage, ‘normative culture’connotes the shared value premises thatstructure collective assessments of the goodand the bad, that which is to be desired andthat which is to be shunned, right and wrong(Suchman, 1997). Norms, in this sense, areeverywhere – within people, groups, organi-zations, and social systems. Congruence withsuch norms lies at the heart of legitimacy asconceptualized by early institutional sociolo-gists (e.g., Weber, 1978; Parsons, 1956, 1960;see also DiMaggio & Powell, 1991); andsuch norms motivate most of the ‘value chal-lenges’ identified by Hirsch and Andrews(1984). In contemporary organizational institutionalism, however, ‘normative legiti-macy’ is often equated with DiMaggio andPowell’s (1983) concept of ‘normative iso-morphism,’ which has come to connote notcongruence with general social values, butrather congruence with the particular ethicsand worldviews of formal professions.2

These competing usages are highly problem-atic. To restrict normative legitimacy to ‘professional endorsement’ marginalizes thesorts of broader societal norms and valuesthat have been seen as important sinceWeber. At the same time, it also marginalizesthe less normative, more instrumental and/orcognitive aspects of professionalization.Meyer and Scott (1983: 202), for example,argue that professional groups, such as‘lawyers, accountants, intellectuals,’ conveylegitimacy by virtue of their ‘collectiveauthority over what is acceptable theory’; but‘acceptable theory’ involves cause and effect

relationships (pragmatic legitimacy), andfundamental meanings (cognitive legiti-macy), as well as norms and values of theprofession and the larger social system(moral legitimacy) (cf., Greenwood, Suddaby,& Hinings, 2002; Suchman, 1995). Perhapsfor this reason, some recent institutionalstudies of professional associations(Greenwood et al., 2002; Jones & Manev,2002) have avoided the term normative legiti-macy, emphasizing instead that professionsoften seek to influence many different dimen-sions of legitimacy at once. We applaud thistrend and propose that future researchers useprofessional legitimacy to refer to legitimacyconferred by professional endorsement (onany grounds), whereas normative legitimacyshould refer to legitimacy conferred by anyaudience (including but not limited to profes-sionals) on primarily normative grounds (cf.,Suchman, 1995, 1997).

A second significant source of confusionin the current literature involves the natureand measurement of the ‘taken-for-granted’component of cognitive legitimacy. As Aldrich and Fiol (1994: 648) note, ‘Thehighest form of cognitive legitimation isachieved when a new product, process, orservice is taken for granted.’ Taken-for-grantedness – an absence of questioning – isnot, however, easy to measure, especiallybecause asking one’s research subjects aboutit is, in itself, a form of questioning. Oneincreasingly popular measurement strategyinvolves counting the number of organiza-tions or the number of media articles, withgreater numbers indicating greater legiti-macy (Archibald, 2004; Carroll & Hannan,1989a; Hybels, Ryan, & Barley, 1994).Although promising in some contexts, thisapproach may be more appropriate foremerging industries, organizations, or prac-tices, than for more established ones. Thereare fewer automobile companies and mediaarticles about automobile quality today thanthere used to be (Abrahamson & Fairchild,1999; Hannan, Dundon, Carroll, & Torres, 1995), but the automobile industryremains deeply taken-for-granted. Perhaps as


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industries become increasingly established, population counts become decoupled fromtaken-for-grantedness, in part because thetaken-for-grantedness of existing firmsreduces the legitimacy of entrepreneurshipmore than it reduces the legitimacy of consolidation. Similarly, with regard tomedia articles, the taken-for-grantedness of awell-established activity may be reflected inthe complete absence of press coverage,because the subject has blended into the cultural landscape and is no longer seen asrequiring social scrutiny or as being ‘newsworthy’ according to prevailing jour-nalistic practices (Itule & Anderson, 1994;Shoemaker, 1996).

Subjects of legitimation

‘Subjects of legitimation’ are those socialentities, structures, actions, and ideas whoseacceptability is being assessed. Alternativeterms include ‘levels’ (Ruef & Scott, 1998),‘focuses’ (Suchman, 1995: 583), or ‘objects’of legitimation (Johnson, 2004). Here, weuse ‘subjects’ for several reasons. First, thisterm is both familiar and encompassing.Second, it reflects the idea that legitimacy is socially constructed and emerges out of the subject’s relation to other rules, laws,norms, values, and cognitive frameworks in a larger social system. Third, it serves as a reminder that legitimacy can be quitesubjective at times, particularly when anorganization is seeking to gain or defendlegitimacy in the face of opposition(Ashforth & Gibbs, 1990; Suchman, 1995).Finally, subjects aren’t necessarily passivebut instead may be active in creating legiti-macy (Ashforth & Gibbs, 1990; Suchman,1995); examples include the European busi-ness schools who created the legitimatingagencies that would then accredit them(Durand & McGuire, 2005), and the Big 5 accounting firms who were actively legiti-mating the multidisciplinary practice at thesame time that they were adapting it for use(Greenwood et al., 2002).

The possible subjects of legitimation arealmost innumerable. Johnson (2004: 10–11)offers a partial list, including: ‘an act, a rule,a procedure, a routine, a distribution, a position, a group or team, a group’s statusstructure, teamwork, a system of positions,an authority structure, an organization, organizational symbols, an organization’sform, practices, services, programs, aregime, a system of power, and a system ofinequality (to name a few).’ Two additionalsubjects of legitimation that have drawnattention in management research recentlyare company founders and top managementteams (Certo, 2003; Cohen & Dean, 2005;Deeds, Mang, & Frandsen, 2004; Higgins &Gulati, 2003, 2006). Indeed, at this point, itappears that almost anything can be a subjectof legitimation. In the future, researchersmay face the challenge of aggregating lower-level subjects of legitimacy in order to assesslegitimacy of a higher-level subject, such asevaluating the legitimacy of a new venture bythe legitimacy of its products, structure, andtop management team. Such an effort mayrun into the problem of aggregation, such asdescribed in stakeholder research (Rowley &Berman, 2000; Wartick, 2002). Alternatively,researchers may decide that only a limitedselection of attributes can be valid subjects oflegitimation – that is, the research communitymight seek to specify legitimate subjects oflegitimation. Given the real-world complexityand plasticity of legitimacy dynamics, how-ever, we do not particularly advocate thislatter, artificially exclusive strategy.

Sources of legitimacy

‘Sources of legitimacy’ are the internal andexternal audiences who observe organiza-tions and make legitimacy assessments (Ruef& Scott, 1998: 880). Meyer and Scott (1983:201–2) focused on those ‘who have thecapacity to mobilize and confront the organ-ization,’ not so much in terms of power but inauthority over cultural theory. They classifiedthese sources into two basic groups. The first


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are those who ‘have standing and license,derived from the organization’s legitimatingaccount of itself’, most commonly the State.The second are those who have collectiveauthority over what is acceptable theory(e.g., lawyers, accountants, intellectuals).These may not be the only relevant sources,however. In Suchman’s definition (1995:574), legitimacy implies congruence with‘some socially constructed system of norms,values, beliefs, and definitions,’ but, as theword ‘some’ suggests, the possible sources ofsuch legitimating accounts are not inherently restricted to any fixed set of gatekeepers. Thus, a central issue for legiti-macy research is identifying who has collec-tive authority over legitimation in any givensetting. The answer depends to a large extenton the focus of the research question. Forinstance, when Suddaby and Greenwood(2005) examined the debate between the USlaw and accounting professions about what aprofessional services firm should be, theissue was fairly specialized and the socialsystem narrowly drawn. In contrast, anexamination of the legitimacy of the globalenergy industry after the Exxon Valdez oilspill would need to encompass popular opinion, state regulators, industry analysts,political activists, and expert ‘epistemic com-munities’ (Adler & Haas, 1992) throughoutthe world system.

Many researchers have finessed these dis-tinctions by treating society-at-large as asource of legitimacy, especially over longperiods of time. This approach is particularlycommon in institutional studies of diffusion(e.g., Strang & Soule, 1998; Tolbert &Zucker, 1983), which build on the linkagebetween cognitive legitimacy and mimeticisomorphism3 to argue that the more numerous the adopters of a practice, themore widespread its acceptance and thegreater its legitimacy. Similarly, ‘densitydependence’ research in organizational ecology has treated the number of organi-zations in a population as a determinant of the organizational form’s legitimacywithin the external social environment.

Empirical support for this relationship hasbeen found in many organizational forms,such as newspapers, automobiles, and Britishmotorcycle manufacturers (Carroll &Hannan, 1989a; Hannan & Carroll, 1992;Hannan et al., 1995; Wezel, 2005). Althoughsome institutionalists (e.g., Zucker, 1989;Baum & Powell, 1995) argued that densityfails to capture the richness of the institu-tional environment, Carroll and Hannan(1989a, b), Hannan and Carroll (1995) andHannan et al. (1995) rebutted that density isa parsimonious indicator of legitimacy thatenjoys predictive validity for a remarkablywide array of organizational populations.Other researchers in both the institutionalistand ecological camps responded by incorpo-rating additional indicators of society-widelegitimacy, most notably time-period vari-ables based on institutional regime changesor stages of the adoption cycle (e.g., Arthur,2003; Ruef & Scott, 1998). For further dis-cussion of these developments, see the companion Chapter 2 by Boxenbaum andJonsson and 24 by Haveman in this volume.

Somewhere between specific legitimacy-granting authorities and society-at-large as asource of legitimacy stand the media. As suggested by Baum and Powell (1995; seealso Dowling & Pfeffer, 1975), the media are one institutionally rich indicator of society-wide legitimacy, and researchershave been working with media data since the1990s. At the population level of analysis,Hybels, Ryan, and Barley (1994) measuredthe legitimacy of the US biotech populationby counting newspaper articles about thepopulation in each year. Concurrently,Deephouse (1996) used media data to measure the public legitimacy of individualorganizations in the financial sector. Mediareports were subsequently used to measurelegitimacy by Lamertz and Baum (1998),Abrahamson and Fairchild (1999), Pollockand Rindova (2003), Bansal and Clelland(2004), and Deeds et al. (2004), etc.However, as Deephouse (1996) pointed out,evidence from journalism and mass commu-nications strongly suggests that media


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reports not only reflect but also influence theopinion of the general public (Fombrun &Shanley, 1990; McCombs & Shaw, 1972;Schramm, 1949). Thus, the media shouldrightfully play a dual role in legitimacyresearch, serving both as an indicator oflegitimation by sociey-at-large and as asource of legitimacy in their own stead.

This duality is particularly noteworthy inthe case of ‘prestige media,’ such as The New York Times or The Wall Street Journal,which have figured prominently in legiti-macy studies. Empirically, prestige mediaprovide appealing indicators of society-widelegitimacy because they are now readilyavailable in electronic form, reducing theoften prohibitive burden of selecting andcoding a media sample (Carroll, 2004;Conway, 2006). Their presence in librariesmakes them amenable to historical research(Mezias & Boyle, 2005). Theoretically, how-ever, prestige media are particularly likely toinfluence that which they are taken as meas-uring, because they are produced by and forsocietal elites, aspirants to elite status, andother participants in the cultural mainstream.Prestige media often set the agenda for lessprestigious media outlets (Boyle, 2001;Gans, 1979), and they are routinely targetedby organizations and institutional entrepre-neurs seeking to build or repair legitimacy.Further, with a few significant exceptions,prestige media tend to be culturally conser-vative, acting as a stabilizing force in society,and perhaps exacerbating the disparitiesbetween legitimate and illegitimate actors(e.g., Gitlin, 1980).

Beyond society-at-large and the media, athird often-mentioned source of legitimacyderives from interorganizational relations: Asubject becomes legitimate when it is con-nected to legitimate others (Galaskiewicz,1985). Pfeffer and Salancik (1978), forexample, explain how the American Institutefor Foreign Study burnished its legitimacy byobtaining endorsements from prominentpolitical figures. And in perhaps the first sta-tistical study of organizational legitimacy,Singh, Tucker, and House (1986) measured

the legitimacy of a voluntary social serviceorganization by whether it was listed in thecommunity directory of MetropolitanToronto, registered as a bona fide charitywith Revenue Canada, and endowed with alarge (and therefore presumably interorgani-zationally embedded) board of directors.Later papers enumerated similar connectionsto government, industry leaders, and otherauthorities in the institutional environment(Baum & Oliver, 1991; Baum & Oliver,1992; D’Aunno, Sutton, & Price, 1991).Thus, charitable donations, interlockingdirectorships, and strategic alliances withprestigious partners have all been identifiedas important sources of legitimacy for thefirms involved (Cohen & Dean, 2005; Deedset al., 2004; Galaskiewicz, 1985; Higgins & Gulati, 2003, 2006; Miles, 1982; Oliver,2001).

Three important interrelated issues emergefrom this review of the sources of legitimacy.The first is a recognition that many commonsources of legitimacy are themselves organi-zations. For instance, regulatory legitimacyresults from rulemaking and enforcementactivities within the agencies of the State.Legitimacy-enhancing interorganizationalrelationships, too, arise from decisions byother organizations to affiliate with the subject entity. And media stories, whetherlegitimating or de-legitimating, do not appearout of a vacuum, but instead are produced by organizations, as Hirsch (1977) remindedus thirty years ago. Thus, the granting oflegitimacy is as amenable to organizationalanalysis as is the pursuit.

We frame the second issue as a question:Are there legitimate sources of legitimacy?This depends in part on the research questionand the social system(s) of interest. Considerwhether organized crime or official corruption is legitimate. Jepperson (1991:149) stated that some elements, such asfraud, bribery, organized crime, and politicalcorruption, can be institutionalized withoutbeing legitimate. Nonetheless, within somesocial systems, be they networks of organized criminals or particular national


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polities, even these ‘social pathologies’ mayin fact be accepted as legitimate – certainly inthe pragmatic sense of being seen as useful and the cognitive sense of being taken-for-granted, and at least occasionally in themoral sense of being ethically permitted, aswell. Thus, an individual might be willing tobribe a police officer in one nation but notanother, and an organization might be willingto bribe a regulator in one nation but notanother. The legitimacy of criminal punishment varies; for instance, many jurisdictions ban capital punishment. Onegroup’s terrorist is often another group’sfreedom fighter. Given this ‘legal pluralism’(Merry, 1988), can researchers meaningfullydistinguish between conventionally legiti-mate sources such as public authorities andformal professions (the two groups listed by Meyer and Scott, 1983) and unconven-tional but often potent competitors such ascriminal underworlds, ethnic enclaves, andrejectionist sects?

The third issue is the nature of the assess-ments that sources make in determiningwhether to grant or withhold legitimacy.Most statistical studies focus on the pres-ence, absence or intensity of support fromany given source. But while it may be fairlyclear that the presence of an endorsement orthe occurrence of an adoption implies support (Galaskiewicz, 1985; Hannan &Carroll, 1992; Tolbert & Zucker, 1983), whatdoes the absence of an endorsement or anadoption indicate? In some cases, such ascharitable registration in an organizationalfield where non-profit status matters and registration is open to all, unregistered organizations would certainly appear to lacklegitimacy (Baum & Oliver, 1991; Baum &Oliver, 1992; Singh et al., 1986). In contrast,the absence of a board interlock with a prestigious firm conveys much less informa-tion about whether the subject organization isacceptable, desirable, or culturally supported, except perhaps from the perspec-tive of the prestigious firm.

Some researchers focus on negativeassessments – questions, challenges, and

rejections – rather than on positive accounts,endorsements and adoptions (Hirsch &Andrews, 1984; Meyer & Scott, 1983). Manycase studies, for example, examine organiza-tions such as Nike and Exxon that have facedlegitimacy challenges. Deephouse (1996)was perhaps the first to apply this approachin statistical research by measuring the extentto which commercial banks were constrainedby regulators and challenged in the media.One of his measures was the presence of aregulatory decision that explicitly limited thestrategic choices of the bank in question. Forthis approach, the absence of legitimacychallenges is an indicator of whether theorganization is ‘accepted’ in the sense ofbeing left to pursue its activities withoutinterference from cultural authorities.However, the presence of questioning maysometimes be as ambiguous as the absence ofendorsement, given that in some domains(academic meetings and presidential pressconferences come to mind) questioning canbe a ritualized display of attentiveness ratherthan a genuine challenge to legitimacy.

We close our discussion of legitimacysources with a statement from the resource-dependence perspective: ‘We suspect thatlegitimacy need not be conferred by a largesegment of society for the organization (orsubject) to prosper.’ (Pfeffer & Salancik,1978: 194). The survival of many structures,organizations and organizational forms without ringing cultural endorsement suggests that there may be some truth to this.But in the absence of broad-based culturalsupport, the characteristics of those particu-lar sources that do grant endorsement maymatter quite a bit.

Legitimation

Generalizing from Maurer (1971), Ashforthand Gibbs (1990), and Walker and Zelditch(1993), (de-)legitimation is the process bywhich the legitimacy of a subject changesover time. Following Van de Ven (1992), weuse the term process narrowly as the order or


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sequence in which things happen. The moregeneral use of the term process includes a setof explanations for explaining a variancetheory and as a category of concepts; theseare discussed elsewhere in this and otherreviews.

Legitimation is closely related to diffusionand institutionalization, and there is sufficient research to specify a generalprocess. For instance, Johnson et al. (2006)integrated research in social psychology andorganizational sociology to develop a four-stage model of legitimation consistingof innovation, local validation, diffusion, andgeneral validation. In general, we expect thedynamics of legitimation to parallel those of institutionalization (Lawrence, Winn, &Jennings, 2001), but exceptions to our expectations may make interesting case studies. Moreover, there is greater need forresearch on the order in which differentsources confer legitimacy and the differentdimensions of legitimacy are conferred. A notable example of this is by Greenwoodet al. (2002). They offered a six-stage modelof institutional change in highly profession-alized fields. They proposed that moral andpragmatic legitimacy was theorized in stagesfour and five and cognitive legitimacyoccurred in stage six.

Antecedents of legitimacy

Meyer and Rowan (1977) suggest that bothtechnical efficiency and conformity to insti-tutional myths can be precursors of legiti-macy.4 Deephouse (1996) was perhaps thefirst to test these relationships directly. Hefound that conformity and efficiencyincreased banks’ legitimacy in the eyes ofregulators, consistent with the regulators’interest in the stability of the banking system;in contrast, he found that only conformityhad a positive effect on legitimacy in the eyesof the media, assumed to be both a leader anda recorder of the public’s norms and values(Dowling & Pfeffer, 1975; Fombrun & Shanley, 1990). Similarly, Westphal et al.

(1997) found that conformity to TotalQuality Management practices enhanced thelikelihood that a hospital would earnendorsement from the Joint Commission onAccreditation of Healthcare Organizations(JCAHO), a major source of legitimacy inthe US healthcare sector. And Glynn andAbzug (2002) found that conformity in orga-nizational names increased their under-standibility to a wide range of business andnon-business audiences. Findings like thesereinforce Suchman’s (1995: 587) prescrip-tion that the best way to gain legitimacy isoften simply to ‘conform to environments.’

Suchman, however, also notes that organizations sometimes gain legitimacy bymanipulating, rather than conforming to,environments. Along these lines, a largenumber of studies have examined how texts,generally construed, can be used to gainlegitimacy for some subjects and challengethe legitimacy of other subjects (Phillips,Lawrence, & Hardy, 2004). In an early studyof organizational impression management,for example, Elsbach (1994) found thataccounts that acknowledge failings or makereference to the institutional environment aresuperior to accounts that deny responsibilityor make reference to the technical environment. More recently, Suddaby andGreenwood (2005) examined the discursivestruggle between proponents and opponentsof multidisciplinary partnerships in profes-sional services, and Vaara, Tienari, andLaurila (2006) identified five ‘discursivelegitimation’ strategies, which they labelednormalization, authorization, rationalization,moralization, and narrativization.

Consequences of legitimacy

The consequences of legitimacy have also received considerable attention. At leastsince Meyer and Rowan (1977: 353), institu-tionalists have argued that legitimacyenhances organizational survival. Supportiveevidence abounds: Legitimacy measured by endorsements and interorganizational


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relationships increased survival rates amongToronto non-profits (Baum & Oliver, 1991,1992; Singh et al., 1986), and both manage-rial and technical legitimacy reduced exitrates for US hospitals (Ruef & Scott, 1998).Organizational ecology, too, has lent supportto this claim, finding that legitimacy (meas-ured by the density of firms in an industry)increases survival rates across a wide rangeof organizational populations (Hannan &Carroll, 1992).

Other, more proximate consequences havebeen examined as well. The strategic view oflegitimacy sees it as something that can bemanipulated to achieve organizational goals(Suchman, 1995), and researchers have longposited that ‘[l]egitimacy affects the compe-tition for resources,’ (Pfeffer & Salancik,1978: 201; see also Parsons, 1960). Morerecently, as an interest in legitimacy hasspread into the strategic management litera-ture, researchers have developed and testedhypotheses predicting how various types oflegitimacy would affect other performancemeasures, such as the value of initial publicofferings (IPOs) (Cohen & Dean, 2005;Deeds et al., 2004; Higgins & Gulati, 2006;Pollock & Rindova, 2003), stock prices(Zuckerman, 2000), stock market risk(Bansal & Clelland, 2004), and stakeholdersupport (Choi & Shepherd, 2005).

Summary

As the preceding discussion demonstrates,research on legitimacy has expanded in manydirections over the past three decades. Initialconcern with the effect of legitimacy on sur-vival has expanded to include effects on othertypes of organizational success. Legitimacyhas been dimensionalized into as many astwelve types, and the recognized sources oflegitimacy have been extended well beyondthe two enumerated by Meyer and Scott(1983) – those with standing and license andthose with authority over what constitutesacceptable theory. These developments havecreated opportunities for a wide variety of

legitimacy studies. Legitimacy continues toappear most frequently in theoretical analy-ses; however, the number of descriptive casestudies has increased substantially, and effortsat confirmatory hypothesis testing (althoughstill relatively rare) seem to be on the rise.

LEGITIMACY AND OTHER SOCIALEVALUATIONS

These developments have brought legitimacyresearch into overlap with a variety of otherways of describing the social evaluation oforganizations. In recent years, the mostprominent of these kindred concepts havebeen ‘status’ (e.g., Podolny, 1993; Phillips &Zuckerman, 2001) and ‘reputation’ (Fombrun& Shanley, 1990; Fombrun, 1996). Althougha full synthesis of these largely independentliteratures would go well beyond the scope ofthe present chapter, one might productivelyponder to what extent and in what ways legit-imacy, status, and reputation are either equiv-alent or distinct. In this section, we brieflycompare and contrast what we see as the keyconnotations of each term.

Definitions and distinctions

The definitions of status and reputation are atleast as diverse, ambiguous, and contested asthe definition of legitimacy. We will exploresome of the sources of this ambiguity andcontestation below, but as provisional work-ing definitions, we offer the following,adapted from the literature:

– Status is ‘a socially constructed, intersubjectivelyagreed-upon and accepted ordering or ranking’of social actors (Washington & Zajac, 2005: 284),based on the esteem or deference that each actorcan claim by virtue of the actor’s membership ina group or groups with distinctive practices,values, traits, capacities or inherent worth (cf.,Benjamin & Podolny, 1999; Weber, 1946).5

– Reputation is a generalized expectation about afirm’s future behavior or performance based on


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collective perceptions (either direct or, moreoften, vicarious) of past behavior or performance(cf., Ferguson, Deephouse, & Ferguson, 2000;Fombrun, 1996; Rindova et al., 2005).6

To illustrate the potential for overlap amonglegitimacy, status, and reputation, considerthe following two examples from recentempirical research: Higgins and Gulati(2003) report that the prior job histories of afirm’s upper echelon employees, such asaffiliations with certain prominent industrieslike pharmaceuticals, increase the likelihoodthat the firm can garner endorsements fromleading investment banks; Deeds et al.(2004) similarly report that US high techfirms with founders or managers from top tenresearch universities and Master of BusinessAdministration (MBA) programs receivehigher IPO valuations. In both studies, theemployee-background variables are charac-terized as measures of legitimacy – a plausi-ble claim, given that past affiliations couldindicate managerial competence and hencepragmatic legitimacy, managerial proprietyand hence moral legitimacy, or managerialconventionality and hence cognitive legiti-macy. But prominence and prestige are alsooften associated with status; and a trackrecord of experience, training and visibilitymight easily foster reputation. Is the choiceamong these labels merely stylistic, or dotheir implications differ?

Certainly, the literatures on legitimacy,status, and reputation have many traits incommon. They all focus on cultural factors inorganizational life. They all suggest thatorganizations can garner resources by conforming to prevailing social norms. Andthey all emphasize that ‘objective’ perform-ance criteria are not always salient or evenevident, and that organizational behavioursmay be social signals as well as technicaloperations. Thus, all three literatures depictsocial perceptions of conformity as beingcentral determinants of organizational success. Moreover, all three recognize thatorganizations can create such ‘social percep-tions of conformity’ in at least three differentways: by embracing and internalizing norms;

by obeying norms instrumentally as long asthe benefits of doing so exceed the costs; andby cynically displaying the outward indiciaof conformity, while making as few substan-tive accommodations as possible. Thus, allthree literatures also, at least implicitly,engage two central questions: (a) how successful can cynical displays of conformitybe, absent internalization?7 and (b) to whatextent does surface conformity lead overtime to internalization, despite initial cynicism? Fundamentally, to what extent canlegitimacy, status, or reputation, be feignedwithout either being internalized by organi-zational participants or being discovered bycurious outsiders, such as competitors, themedia, or the state?

The similarities between these literaturesarise because legitimacy, status, and reputa-tion share many antecedents, consequences,measures, and processes. Indeed, one couldno doubt find instances in the prior literaturewhere different authors use different mixesof the three terms for essentially the sameempirical referents. Given this, any progresstoward precision and parsimony willinevitably come at the cost of contradictingat least some prior usages; we doubt thatanyone could prune this conceptual thicketwhile leaving every branch fully intact.Nonetheless, we believe that researchersthroughout these intertwined literatureswould benefit from clarifying and, wherepossible, disentangling the three focal concepts. Juxtaposing legitimacy, status, andreputation reveals important connotations ofeach that would remain largely invisible ifthe three were considered only in isolation.8

Goring our own oxen first, we can beginby suggesting that legitimacy, in contrast to status and reputation, is fundamen-tally dichotomous. Despite some usages tothe contrary (see below), legitimation islargely a question of ‘satisficing’ to an acceptable level, and the absence of negative ‘problems’ is more important than the presence of positive achievements.Legitimacy is also fundamentally non-rival:it is rarely a zero-sum game within any given


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population; indeed, positive feedback loopsand a ‘logic of confidence’ (Meyer & Rowan, 1977) tend to produce win-win ceremonies of mutual affirmation amonglegitimate actors. Further, legitimacy is fundamentally homogenizing, producingherd-like conformity along whicheverdimensions the prevailing rational mythsestablish as legitimacy-defining. Further,precisely because legitimacy is non-rival and homogenizing, it paints with a broadbrush and tends to attach to all entities thatshare a given form. Although firms, struc-tures and even individuals can achieve legitimacy on their own, the more commonpattern is for each instance to be legitimatedby conformity with a collectively legitimatedtemplate.9 Finally, legitimacy is fundamen-tally political. Because it is linked to authority, legitimacy generally produces ataken-for-granted right to act and commandwithin a particular sphere of activity. Thispolitical aspect is embedded within the etymological roots of legitimacy in the Latinlex or legis, meaning law. It is also consistentwith the central place of the state – as bothlicensor and enforcer – in much legitimacyresearch. Indeed, state certification isarguably the core archetype of legitimation,to which most other legitimation mecha-nisms are linked by either implication oranalogy.

Status reflects the relative position ofsocial groups within a hierarchy of collectivehonour (cf., Weber, 1946). Consequently, incontrast to legitimacy, status is fundamen-tally ordinal and categorical, varying lesswithin groups than across groups. Thisallows empirical distinctions between, for example, the upper-, middle-, and lower-status tiers in an industry (Podolny, 1993;Deephouse & Carter, 2005; Phillips &Zuckerman, 2001). Further, whereas legiti-macy is fundamentally non-rival, status isfundamentally ‘group-rival.’ That is, status ispositive sum within status groups, but negative sum across groups. Groups competefor status through solidarity displays, collective mobility projects, and out-group

ostracism, and individuals move betweengroups primarily through sponsorship, notcompetitive performance. From this, it follows that, whereas legitimacy is fundamentally homogenizing, status is fun-damentally segregating: Lower-status groupstend to imitate higher-status groups as a wayof earning group honour; however, higher-status groups tend to jettison status markersas soon as those markers become contami-nated by imitation. Significantly, becausestatus is group-rival and segregating, it tendsto attach to self-aware cliques or ‘statusgroups,’ rather than to individual socialactors or entire populations. Entry into thesecliques is usually based on a mixture ofascription and achievement (or, one mightsay, legitimacy and reputation), but entry ismore a matter of favor than dessert – objective performance and legitimacy in theeyes of outsiders matter far less than accept-ance by the status group itself. Finally, statusis fundamentally honorific; it reflects culturalcapital and habitus (Bourdieu, 1986), and itelicits deference and tribute: ‘Status gener-ates social esteem and special, unearned (i.e.,non-merit-based) benefits known as privi-leges, which are granted to and enjoyed byhigh-status actors in a social system’(Washington & Zajac, 2005: 284). Statusalso implies an ability to valorize (or contam-inate) by association – as illustrated byadmission into an elite club, or rejection bythe ‘in’ crowd.

More so than either legitimacy or status,reputation involves an explicit extrapolationfrom past to future behavior. Thus, strictlyspeaking, reputations can be as multidimen-sional and idiosyncratic as the behaviors that they summarize.10 Certainly, reputationcan extend beyond product and ser-vice quality (the focus of most economic discussions of reputation), to include being atough competitor, a good place to work, anenvironmentally sensitive manufacturer, etc.(e.g., Shapiro, 1983; Weigelt & Camerer,1988; Benjamin & Podolny, 1999; Carter &Deephouse, 1999; Washington & Zajac, 2005;Rindova, Pollock, & Hayward, 2006).


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Nonetheless, in contrast to both legitimacyand status, reputation is fundamentally a con-tinuous measure, placing each actor on acontinuum from best to worst – or, moreoften, on many such continua. As a rankingof actors, reputation is fundamentally rival:On any given continuum, reputation is con-tingent on relative standing, and hence afirm’s position can usually only increase at the expense of competitors. Reputation is also fundamentally differentiating:Reputation dynamics encourage organiza-tions to distinguish themselves from theirpeers either substantively or by advancingclaims to uniqueness, often despite minimal outward differences. Because reputation is rival and differentiating, it tendsto attach to individual actors, ranking eachfirm even when the distinctions involved aresubstantively trivial.11 Finally, if legitimacyis political and status is honorific, reputationis fundamentally economic: In effect, reputa-tion becomes an input into potentialexchange partners’ expected utility functions.Given that boundedly rational actors cannever know the actual outcomes of transac-tions in advance, would-be exchange partners must turn to reputation in order tomap one another’s past performances ontopresent preferences. This means that favor-able reputation is often a strategic resourcethat firms can exploit for competitive advan-tage (cf., Barney, 1991; Deephouse, 2000;Roberts & Dowling, 2002).

Confusions and conflations

Despite these differences in connotation, theprior literature frequently confuses and conflates legitimacy with both status and rep-utation.12 One common source of difficulty isreflected in the recurrence of phrases like‘more (or less) legitimate’: In the past,researchers have often treated legitimacy as acontinuous variable, obscuring an importantdistinction between legitimacy and bothstatus and reputation. The sources of thisusage are two-fold: First, despite being

fundamentally dichotomous, legitimacy canappear continuous (or at least ordinal) byvirtue of what might be termed ‘pointalism’:Because legitimacy is always assessed bymultiple audiences and with respect to multiple activities, an organization canbecome ‘more legitimate’ by becoming legit-imate to more audiences in more of its activ-ities. Second, legitimacy can vary in itscertainty and security. Thus, a firm canbecome ‘more legitimate’ by becoming moreclearly legitimate, more firmly legitimate, orboth.

Another source of confusion involves theassertion that legitimacy is fundamentally aproperty of forms or populations, rather thanof self-defined groups (a la status) or individ-ual firms (a la reputation). A casual perusalof the empirical literature would turn upmany instances when this assertion seemsnot to hold, and when legitimacy, instead,appears quite similar to group-level status orfirm-level reputation. Upon closer inspec-tion, however, most of these counter-exam-ples prove to be special cases, such as whena form has only one real-world instantiation(e.g., the United Nations) or when a grouperects such high status barriers that itbecomes virtually a population unto itself,incommensurable with other organizations inits domain (e.g., the ‘Big 8, 6, 5, or 4’accounting firms). Moreover, even in thesespecial cases, legitimacy’s underlying conno-tation of being a population-level propertyseeps through: One hallmark of legitimacy isthe (mythological) assumption that legitima-tion arises from alignment with universalprinciples, rather than from the idiosyncratic,culturally-specific maneuverings of a partic-ular firm or group of firms; hence, in claim-ing legitimacy, unique entities tend to presentthemselves as exemplars of an abstract form,even if they are the only exemplar in existence. (An attack on the UN becomes anattack on world government; an appeal forthe international space station becomes atribute to the human spirit of exploration.)

A third cause of confusion is the fact thatobservers (both academics and practitioners)


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often rely on overlapping information inputsto assess legitimacy, reputation, and status.Sometimes these inputs are simply toogeneric and multivocal to be characterized asindicators of one form of social evaluationversus another. This, for example, is clearlytrue of charitable donations and directorshipinterlocks, two of the most common legiti-macy/status/reputation measures in organiza-tion studies (Davis & Greve, 1997; Fombrun,1996; Galaskiewicz, 1985). But even whenwell-established ‘reputational intermedi-aries’ purport to be distilling objective dataabout past performance (as is the case, forexample, in the US News and World Reportrankings of educational programs), confla-tion remains almost inevitable (cf., Sauder & Lancaster, 2006). Evaluators, like all social actors, have cognitive limitations(Simon, 1976), and as a result, unique, infinitely multidimensional reputations getreduced, in practice, to a small number ofsocially constructed ranking criteria. Andsignificantly, both the choice of criteria andthe methods of measurement are heavilyshaped by the same institutional logics andhonor-markers that determine legitimacy andstatus.

A fourth reason for confusion is that legit-imacy, reputation, and status are all related tosuccess. As discussed above, each of thesefavorable social evaluations can enhance per-formance: Legitimacy can be crucial to gar-nering resources from external audiences, tocommanding the loyalty of internal partici-pants, and (in its cognitive forms) to avoidingmisunderstandings and miscues amongexternal and internal constituencies alike.Copious evidence also links status to success.For instance, Benjamin and Podolny (1999)found that the status of a winery led to higherprices, even after controlling for the winery’sproduct quality.

And the impact of reputation on subse-quent outcomes has been well-known, atleast since Merton (1968) famously identifiedthe ‘Matthew Effect’ in the sociology of science.13 In organizational studies, researchon the resource-based view of the firm has

frequently identified a favorable reputationas a resource that can yield significant com-petitive advantages (e.g., Barney, 1991;Deephouse, 2000; Roberts & Dowling,2002).

The situation becomes more complicated,however, when one reverses the causal arrow,to make success an independent rather than adependent variable. Reputation, legitimacyand status can each be bolstered by success-ful performance – but in decidedly differentways. Success enhances reputation directly,by demonstrating an ability to perform.Indeed, the link between past performanceand future potential is arguably reputation’sdefining element. Success enhances legitimacy, too, but mostly indirectly:Success often signals cultural acceptance andan ability to deliver on commitments, both of which affect whether an organization can sustain a self-confirming ‘logic of confidence’ (Meyer & Rowan, 1977). Butsuccess, in itself, is not enough. Legitimacyrarely attaches to organizational forms, suchas criminal gangs or ‘pirate’ radio stations,that ‘succeed’ in culturally inappropriateendeavors or by taking short-cuts around culturally prescribed practices. Finally, while success may enhance status as well, itdoes so only obliquely at best. Success mayprovide currency (literal or figurative) forprocuring the indicia of status-group mem-bership; but status groups tend to be resistantto the success of arrivistes, interposing newbases of distinction (i.e., ‘moving the bar’) in order to maintain group boundaries(Weber, 1946). Given these different mechanisms, the relative impact of successon reputation, legitimacy, and status mayvary. For instance, Deephouse and Carter(2005: 355) showed that financial perform-ance had a stronger effect on reputation thanit did on legitimacy.

Figure 1.1 depicts our nested conceptual-ization of legitimacy, reputation, and status,and their relationships to resource flows.Stakeholders (on the left) exchange resourceswith organizations in a focal industry, population, or sector (on the right); the lines


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represent bi-directional resource flows ofinducements and contributions, such asemployee effort and compensation (Barnard,1938: 94; March & Simon, 1958: 84).14 Forillustrative purposes, we can group stake-holders dichotomously, although stakeholderresearch offers ample evidence of more fine-grained differentiation (Clarkson, 1995;Mitchell, Agle, & Wood, 1997). Consistentwith our discussion above, organizations inthe figure are grouped into two legitimacyclasses (legitimate and illegitimate), andwithin each class organizations are clusteredby status (high, medium, and low). In addi-tion, each organization possesses a uniquereputation, subscripted by the organization’srank within its legitimacy and status cohort.

The essence of the figure is that certainstakeholders will exchange resources onlywith legitimate organizations and will notengage in transactions with others. In other

words, no matter what the components of themarketing mix illegitimate organizationsoffer, a substantial group of stakeholders willnot transact with them. Thus, as manyauthors have suggested in the past, legiti-macy affects market access: ‘An organizationwhich can convince relevant publics that itscompetitors are not legitimate can eliminatesome competition’ (Pfeffer & Salancik,1978: 194; see also Brown, 1994, 1998;Deephouse & Carter, 2005). A few examplesmay be enlightening: One is gambling,divided into state-sanctioned and otherforms. Many customers who would happilybuy a state lottery ticket would never con-sider placing wagers with a bookie, even atsubstantially more favorable odds. Anotherexample is petroleum marketing. Certainstakeholders who are concerned about theenvironment may refuse to patronize Exxonand Shell in reaction to the Exxon Valdez and


Stakeholders Organizations

Legitimateorganizations

Illegitimateorganizations

High status

Middle status

Low status

High status

Middle status

Low status

R1,H,L, R2,H,L...

R1,M,L, R2,M,L...

R1,L,L, R2,L,L...

Resource flows

R1,H,I, R2,H,I...

R1,M,I, R2,M,I...

R1,L,I, R2,L,I...

Ri,S,L denotes reputation of organization i in status group S in legitimacy class L

Figure 1.1 The effects of legitimacy, reputation, and status on resource flows betweenstakeholders and organizations

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Brent Spar incidents, although some of thosesame stakeholders may have forgotten lessde-legitimating accidents caused by otherproducers. A third example comes from theBritish Columbia forestry industry, where theprovince recently decided to grant timberaccess only to contractors who could demon-strate acceptable safety standards, not only intheir own operations but also in the opera-tions of their sub-contractors. In announcingthe new policy, the provincial ForestsMinister nicely captured the importance of legitimacy for market access: ‘no one isgoing to get one of those tenders unless theyhave safety procedures applied through theiroperation … they are a safe company and they meet our standards.’ (Kennedy,2006: S3).

As Figure 1.1 suggests, each legitimacyclass may contain several status groups. Forvisual simplicity, we depict a simple ‘low,’‘medium,’ and ‘high’ division. This tri-chotomy is fairly common in the recentstatus literature, and for some industries,such as automobile manufacturing, thesethree broad status groups may suffice. Inother industries, however, status distinctionsare likely to be much more fine-grained; forinstance, Benjamin and Podolny (1999: 574)identified 41 distinct status groups amongCalifornia wineries. Although not illustratedin the figure, stakeholders may also bedivided into status groups. When this is thecase, and when organizations and stakehold-ers recognize one another’s status hierar-chies, entities in each population may seek toavoid contamination by limiting their contactwith lower status entities in the other. This dynamic tends to reproduce the statushierarchies on both sides of the exchange.

Within any given status group, each organ-ization has a reputation based on manydimensions, such as product quality, work-place practices, community involvement, etc.(Fombrun, 1996). In the case of winemaking,such components might include a reputationfor producing award-winning wine, for beinga good place to work, for having great winerytours, or for donating generously to charities.

(Home winemakers who sell their productoutside of state-licensed facilities mightexemplify an illegitimate group, with limitedmarket access regardless of either reputationor status.) In general, within a legitimacyclass and status group, stakeholders willfavor those organizations with the strongestreputations. The literature suggests at leasttwo noteworthy caveats, however: First,some stakeholders may have idiosyncraticpreferences, leading them to weight certainaspects of reputation differently from thenorm among stakeholders as a whole; thisallows organizations to adopt niche strategiesthat cater to specific subsets of the stake-holder pool. Second, stakeholders will oftengive more credence to (or be more cognizantof) reputational hierarchies within ‘core’versus ‘peripheral’groups; this suggests thatthe impact of reputation may be moderatedby legitimacy and status, such that legiti-mate, high-status actors will enjoy the great-est returns on their past achievements (cf.,Phillips & Zuckerman, 2007; Beck, Horan, &Tolbert, 1978).

As the preceding paragraphs suggest, theinterrelationships among legitimacy, status,and reputation offer numerous researchopportunities. One empirical approach wouldbe to cross-classify legitimacy classes (e.g., Yes/No), status groups (e.g., High/Middle/Low) and reputational ranks (e.g.,High/Low), and then examine the size, char-acteristics, and consequences of each of theresulting 12 categories. Past research hasadopted essentially this approach: Forinstance, studies of top business schools suggest that this sector possesses relativelyclear status groupings (at least at the highend), many rankings systems, and a fewlegitimating agencies (Corley & Gioia, 2000;Durand & McGuire, 2005; Elsbach &Kramer, 1996; Gioia & Thomas, 1996;McKee, Mills, & Weatherbee, 2005; Wedlin,2006). Looking at the California wine indus-try, Benjamin and Podolny (1999) attempt todifferentiate the effect of product quality andstatus affiliations on success. And looking atarchitectural services, Jones and Manev


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(2002) explore how legitimacy and statusaffect reputation.

At a theoretical level, much work remainsto be done on how the processes of legitima-tion, reputation-building, and status-seekingintersect and overlap (Rao, 1994; Vidaver-Cohen, 2006). Figure 1.2 suggests a few ofthe most plausible interconnections: At theircores, legitimacy, status, and reputation stemfrom fundamentally different sources, withlegitimacy reflecting conformity to varioussocial guidelines, while status reflects ascrip-tion and group mobility, and reputationreflects achievement and self-presentation.However, the three also influence oneanother. Legitimacy affects status because acommitment to avoid illegitimate activitiesmay be a criterion for status-group member-ship; and status affects legitimacy becausemembership in a high-status group maycreate presumptions of proprietary that cush-ion the impact of minor rule violations –while at the same time increasing the penaltyfor breaches that are so egregious as tothreaten the honor of the group as a whole.Legitimacy affects reputation because legitimate actors are often both more visibleand more credible in their self-presentations;and reputation affects legitimacy because

reputations are often taken into consideration(at least formalistically) when legitimacysources make endorsement and affiliationdecisions. Finally, as mentioned previously,status affects reputation by increasing thereturns to past achievements; and reputationaffects status both by determining an actor’sstanding within a particular status group andby conditioning the likelihood of sponsoredmobility from one status group to another.

At the risk of oversimplification, much ofthis discussion might be encapsulated in thefollowing equation:

Prestige = Legitimacy + Legitimacy *(Status + Reputation + [Status * Reputation])

‘Prestige,’ here, denotes an organization’scapacity to achieve objectives by virtue ofenjoying a favorable social evaluation.Without legitimacy, prestige will be low,regardless of the organization’s status or rep-utation. However, legitimacy alone is rarelyenough to achieve much beyond the mostmundane tasks. Rather, legitimacy empowersthe organization to enunciate claims based onboth status and reputation – and status and reputation further augment one anotherthrough the visibility, credibility, and mobil-ity effects described above.


Legitimacy

ReputationStatus

Criterion forstatus-groupmembership

Presumption ofpropriety

Visibility andcredibility

Evaluation bylegitimation

sources

Increased returnsto performance

Standing andmobility

Conformity tosocial guidelines

Ascription andgroup mobility

Achievement andself-presentation

Figure 1.2 The interrelation of legitimacy, reputation, and status

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Before closing, we should perhaps notethat legitimacy, status and reputation arehardly the only social evaluations to appearin recent organizational literature. Othersinclude accreditation, certification, credibil-ity, and accountability, as well as the relatedconcepts of the ‘exemplar’ and the‘celebrity.’ To a large extent, these termssimply re-district and re-label the terrain thatwe have explored above. For instance, busi-ness school accreditation associations havebeen described as legitimating agencies(Durand & McGuire, 2005), and accountabil-ity and credibility are linked to trust, a centralcomponent of both legitimacy and reputa-tion. Certification, too, could be incorporatedinto models of either legitimacy, status, orreputation (cf., Schnatterly, Ward, & Lee,2006). Some of the most well-known certifi-cations are those of the InternationalStandards Organization (e.g., ISO 9000 andISO 14000), which – consistent with ourview of legitimacy – are open to any com-pany that meets a set of predetermined crite-ria (Beck & Walgenbach, 2005; Boiral, 2003;cf., Guler, Guillen, & MacPherson, 2002;ISO 9000 News, 1996).15 This type ofdichotomous, non-rival certification can bedistinguished from a ‘certification contest,’defined as ‘a competition in which actors ina given domain are ranked on the basis ofperformance criteria that key stakeholdersaccept as credible and legitimate’ (Rao,1994; Wade, Porac, Pollock, & Graffin,2006: 644). ‘Certification contests legitimateorganizations, generate status orderings, andcreate favorable reputations’ (Rao, 1994: 29;Wade et al., 2006); however, whether theyaccomplish each of these tasks better orworse than other evaluation mechanismslargely remains to be determined.

Finally, exemplars and celebrities aremigrating into organizational studies. Anexemplar is a singular subject that sets thestandard for a certain social act, form, or actor. For instance, Greenwood andEmpson (2003) proposed that profes-sional partnerships may be an exemplarygovernance mechanism; Rindova Petkova,

and Kotha (2007) demonstrated thatAmazon.com became the exemplar of e-commerce in the 1990s; and Bowen (2004)highlighted a US pharmaceutical firm as anexemplar of ethical decision making.Somewhat similarly, celebrities are entities‘that attract a high level of public attentionand generate positive emotional responsesfrom stakeholder audiences’ (Rindova et al.,2006: 51; Hayward, Rindova, & Pollock,2004). Celebrities (and possibly exemplars)benefit disproportionately from their posi-tion, based on the economics of superstars(Rosen, 1981). These benefits could be com-pared to the privileges of high-status actors,discussed above (Washington & Zajac,2005).

INTEGRATIVE DISCUSSION

We conclude by presenting several integra-tive recommendations. The first is to recog-nize that legitimacy and its dimensions areanalytic concepts, not fully separable empir-ical phenomena. The second is to furtherinvestigate the workings of various sourcesof legitimacy and the workings of legitimacyat multiple levels of analysis. The third is toembrace diverse perspectives, improving ourunderstanding of organizational legitimacyby drawing on the work of other disciplinessuch as law, mass communications, andpolitical science.

As a starting point, we urge legitimacyresearchers not to become fixated on defend-ing the purity and independence of the differ-ent dimensions of legitimacy. As suggestedabove, the assertion that a legitimate organi-zation must offer an ‘acceptable theory’ ofitself (Meyer & Scott, 1983: 202) is broadenough to encompass a variety of such legiti-mating accounts – from claims about causeand effect (pragmatic legitimacy), to invoca-tions of collectively valued ends (moral legit-imacy), to constitutive suppositions aboutdefinitions and meanings (cognitive legiti-macy) (Greenwood et al., 2002; Meyer &


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Scott, 1983; Stryker, 1994; Suchman, 1995).Early in the development of organizationalinstitutionalism, Meyer and Scott (1983:214) observed that ‘the literature on legiti-macy tends to distinguish sharply between itscognitive and normative aspects. This mayoveremphasize Western dualism.’ Morerecently, Scott (1995: 143–4) has written that‘distinctions … among [the three pillars ofinstitutions] are analytical in the sense thatconcrete institutional arrangements will befound to combine regulative, normative, andcognitive processes together in varyingamounts.’As applied to legitimacy, any act oflegitimation may operate on a variety ofdimensions. For instance, regulatoryapproval of a new pharmaceutical not onlyconfers regulatory legitimacy but also (a)enhances the ‘cognitive’ comprehensibilityand taken-for-grantedness of the new com-pound, (b) indicates that the entity is consis-tent with the ‘moral’ value of good health,and (c) confirms the entity’s demonstrable‘pragmatic’ benefits. Similarly, Rao (1994)reasoned that certification contests in theearly days of automaking provided both nor-mative justification and cognitive validationfor the young industry – as well as pragmaticpromotion for those fortunate firms thatcould demonstrate superior capabilities.

Instead of further reifying analytic distinc-tions among the various dimensions of legit-imacy, researchers might do well to attendmore closely to the workings of varioussources of legitimacy.16 The sources and sub-jects of legitimacy are embedded in complexnetworks of social influence and communi-cation (Carter & Deephouse, 1999;Granovetter, 1985; Rowley, 1997): Subjectsseek endorsement from various sources andare pleased when they receive it, but certainsources may have a larger impact than others.For instance, regulatory approval of a newpharmaceutical usually means more thanpublication of a non-refereed research studyfunded by the drug’s developer. Meanwhile,subjects may not be the only entities seekingto affect a given source’s deliberations:Social movements often actively advocate

for the legitimation of certain subjects andthe de-legitimation of others (Elsbach &Sutton, 1992; Rao, Morrill, & Zald, 2000;Strang & Soule, 1998). These efforts andcounter-efforts are often adjudicated (albeitnot always fully resolved) by courts andother public authorities as a corollary of thestate’s ostensible monopoly of legitimateforce (Edelman & Suchman, 1997; Suddaby& Greenwood, 2005).

Overall, then, we see a growing role forresearch on institutional politics, whichStryker (2000: 190) defined as the ‘strategicmobilization and counter-mobilization ofdiverse institutional logics.’ Without prejudging the findings of such research, theliterature to date suggests a central positionfor rhetorical, discursive, and technical strug-gles over what is legitimate and who isauthorized to theorize and certify (e.g.,Hensmans, 2003; Lounsbury, 2007; Phillipset al., 2004; Suddaby & Greenwood, 2005;Vaara et al., 2006). Future research mightalso consider the evolution and ecology of entire populations of legitimacy sources.Given that concepts from legitimacy researchhave been used to study the births and deaths of organizations, future researchcould examine the births and deaths of legit-imating agencies or rule systems (Jennings,Schulz, Patient, Gravel, & Yuan, 2005).Along these lines, Durand and McGuire(2005), McKee, Mills, and Weatherbee(2005), and Wedlin (2006) examined the cre-ation and expansion of business schoolaccreditation agencies, and one could imag-ine a similar approach to studying the prolif-eration of business-school reputationrankings. In this way, one might arrive at a‘community ecology’ of legitimacy, in whichthe legitimacy, competition, and populationdensity of subjects and sources – as well asof advocates and activists – might interactand coevolve.

We also believe that future research shouldexamine legitimation at multiple levels –within organizations, among organizations,and within organizational fields – and that theseinvestigations should include the interactions


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among the levels.17 For example, Holm(1995) presented a ‘nested systems’ view, toexamine how various sources contributed to the legitimation and de-legitimation ofmandated sales organization in Norwegianfisheries. More recently, Rubtsova and Dowd(2004) examined cultural capital at themacro-, meso-, and micro-levels, Sine, David,and Mitsuhashi (2007) examined the effectsof firm and sector legitimacy on new ventures, and Crumley, Lounsbury, andGreenwood (2006) examined how socialactors attempted to legitimate and delegiti-mate the role of acupuncture within the insti-tutionalized western healthcare system. Suchcross-level studies are still in their infancy;however, eventually research on how individ-uals within groups within organizations grap-ple with particular subjects of legitimation,such as equal employment opportunity guide-lines (Edelman, 1992), may yield usefulinsights into the legitimation of authority systems in general, a central topic in socialpsychology (Berger, Cohen, & Zelditch,1972; Johnson et al., 2006).

As researchers begin to explore the work-ings of various sources of legitimacy, impor-tant differences in kind are likely to emerge. Tofacilitate productive dialog, we propose thefollowing tentative distinctions: Legitimacyagents are those organizations, such as accred-itors and regulators, specifically established toconfer legitimacy on a certain set of subjects(Durand & McGuire, 2005). Legitimacy medi-ators are other social actors, such as the media,who make or convey implicit or explicit legiti-macy assessments as a side-effect of their rou-tine operations. And legitimacy guidelines areabstract legitimacy-relevant constructs embed-ded in society at large, such as language,values, norms, social rules, etc. We use theterm ‘guidelines’ to highlight the fact that theseconstructs may be in flux, may vary accordingto local conditions, and may not be enforced asstrictly, as consistently, or as formally as mightbe implied by the more commonly used phrase‘social rules.’

In an early review, Galaskiewicz (1985:298) stated ‘this literature [on legitimacy]

lacks an overarching theory of legitimationto guide inquiry.’ Since that time, researchershave made progress in developing not asingle overarching theory, but multiple theo-ries matched to particular dimensions andsources of legitimation. Increasingly thesetheories have drawn on other disciplines, atrend which we believe will and should continue. For instance, Stryker (1994),Suchman and Edelman (1996), Edelman andSuchman (1997) and Edelman, Fuller, &MaraDrita (2001) have extended argumentsfrom the ‘law and society’ tradition toexplore the impact of institutional ambiguityand contestation. Analogously, Carter andDeephouse (1999), Deephouse (1996),Deephouse & Carter (2005), Kennedy(2005), and others have adapted mass com-munication theory to explore the role of themedia and public opinion. In the future, bor-rowings from political science and publicadministration may similarly enrich the legitimacy literature’s depiction of regulatorsand other public sector legitimation sources.Equally important, though, will be exchangeswith other branches of organization theoryitself. After all, many sources of legitimationare organizations in their own right (Hirsch,1977; Scott, 1987), and their actions need tobe understood in organizational terms.

The development of an overarching theoryof legitimation remains unfinished business.More than a decade after Suchman’s 1995review, we still find that ‘most treatmentscover only a limited aspect’ (1995: 571) ofthis complex but crucial subject. A more adequate formulation would contain careful,widely-accepted definitions, would examinemore aspects of the concept, and would incor-porate both strategic and institutional views.One practical challenge on the road to thisdestination arises from the norms of the business school world, in which many legiti-macy researchers now work. Rewards thereincreasingly favor journal publications over longer works, arguably impeding the construction of comprehensive explanationsfor phenomena that are too complex to beexplicated in the space of 30–40 pages.


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Nonetheless, recent years have seen thearrival of several exemplary books, such asScott et al.’s (2000) examination of healthcareorganizations and Wedlin’s (2006) examina-tion of European business schools. And otherresearch programs have yielded impressivelycumulative sequences of journal articles, suchas the work on professional service firms con-ducted by scholars at the University ofAlberta (e.g., Suddaby & Greenwood, 2005;Greenwood et al., 2002; Hinings, Brown, &Greenwood, 1991). These efforts represent a solid start, but whether they will lead to amore comprehensive and holistic understand-ing remains to be seen. Hinings (2006) hasadvocated the pursuit of ambitious, large-scale research programs to reach new heightsin our understanding of complex organiza-tional phenomena. Legitimacy is clearly oneof those complex phenomena, and we agreethat a large-scale research program may be inorder. We note, however, that this programwould require the efforts of many people overmany years. Can such concerted endeavorsbecome legitimate again?

NOTES

1 Given the large volume of relevant research, ourcoverage here is necessarily only partial. Otherinformative reviews of legitimacy scholarship includerecent essays by Stryker (1994, 2000), Suchman(1995), Ruef and Scott (1998), and Johnson, Dowd,and Ridgeway (2006).

2 Arguably, DiMaggio and Powell, themselves,may have intended their arguments about profes-sionals merely to illustrate one way in which anynorms, whether general or specific, might generateisomorphism in an organizational field. Be this as itmay, the linkage between normative isomorphismand professionalization has now become so firmlyrooted in the organizational literature as to be virtu-ally a matter of definition.

3 DiMaggio (1995) has expressed caution aboutthe facile assumption that cognitive legitimacy andmimetic isomorphism necessarily go hand in hand.However, few others in this tradition have taken hisconcerns to heart.

4 One might argue that prevailing definitions ofefficiency are, themselves, institutional myths. Mostinstitutionalist scholarship, however, treats technical

efficiency and institutional conformity as two largelydistinct attributes.

5 Here, we focus on organizational status. Thus,the ‘ranked social actors’ in question are organiza-tions, and the ‘groups’ are, for example, the upper,middle and lower tiers of an industry or the federal,state, and local levels of a government.

6 This definition is consistent with reputation’setymological roots in Latin as re-putare, ‘to thinkback upon.’ In managerial and economic usages,however, this ‘thinking backward’ is often associatedwith ‘acting forward.’ For instance, if a company hasa reputation for product quality, then customers aremore likely to pay extra for its products; if a companyhas a reputation for being a bad place to work, thenrecruits will avoid it and employees will seek new jobselsewhere (Fombrun, 1996; Weigelt & Camerer,1988).

7 For obvious reasons, questions like this link allthree literature to a fourth literature (not reviewedhere) on organization impression management (e.g.Elsbach, 1994; Elsbach & Sutton, 1992).

8 Readers who quail at constraining theirfavorite term should take comfort from our focus onconnotations rather than denotations. We see noneed to narrow the permissible usages of any partic-ular term at this time; however, much can be learnedfrom exploring how legitimacy, status, and reputationmay carry differing overtones even when applied tosimilar phenomena.

9 This is self-fulfilling to some extent: Entitiesthat manage to achieve legitimacy on their ownoften become the templates for legitimate forms. Asthe original instance is imitated, its initially idiosyn-cratic claim to legitimacy becomes reinstitutionalizedat the level of the form as a whole.

10 In this sense, organizational reputation is quiteclose to organizational identity – with the caveat thatreputation emphasizes identity as assessed by trans-action partners, rather than identity as internalizedby representatives of the organization itself.

11 Reputation can also apply to groups of firms(Ferguson, Deephouse, & Ferguson, 2000; Wry,Deephouse, & McNamara, 2006). But the strategicgroups that sometimes appear in reputation researchare not necessarily equivalent to status groups, sincethe former are united by shared performance profiles, while the latter are united by collectivehonor claims.

12 Here, we confine ourselves to addressing over-laps between legitimacy and status and betweenlegitimacy and reputation. Overlaps between statusand reputation, although equally common, are leftfor another day.

13 The label refers to a verse from the biblicalBook of Matthew: ‘For unto every one that hath shallbe given, and he shall have abundance: but from himthat hath not shall be taken away even that which hehath’ (Matthew XXV: 29, King James Version).


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14 Here, the size of the boxes is arbitrary; how-ever, future research might empirically assess the rel-ative magnitudes of various sub-groups.

15 Over 127,000 firms worldwide had met ISO9000 targets by 1996.

16 These two endeavors are not mutually exclu-sive, of course. We mean merely to indicate which ofthe two we would give priority.

17 Stryker (2000: 187, 191) and Scott (1995)have both noted that despite the potential for bothtop-down and bottom-up approaches to institutions,most cross-level work to date has taken a top-downapproach.

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