Judgements of SMEs’ Legitimacy and Its Sources

Abstract

Organizational legitimacy is an important resource, which provides access to other resources. As such, it impacts the survival chances of organizations. In this study, we examine the individual judgments of the owner-managers of small-and-medium size enterprises (SMEs) of the legitimacy of their own enterprise as well as their perception of the legitimacy evaluations of relevant stakeholders. This research is based on interviews with owner-managers of SMEs located in the Lorraine region of France. The results show that when legitimacy is perceived as acquired, their judgments are based on instrumental, relational and moral evaluations, whereas when legitimacy is perceived as being deferred, judgement is based on mainly instrumental evaluations and when they report not being in position to judge their own legitimacy, their judgements are based on moral evaluations. In addition, the legitimacy judgements employed are associated with the different types of legitimacy sought by the SME owner-managers. Moreover, they perceive the validity cues coming from clients and employees as the most important sources of legitimacy. Other stakeholders are accorded secondary importance in granting legitimacy.

Understanding circular economy adoption by SMEs: a case study on organizational legitimacy and Industry 4.0

“…Ivanova Ruffo et al (2020) noted that small companies are not simply "little big firms." Although all organizations suffer from resource-constrained, SMEs have higher chances of failure (Ivanova Ruffo et al, 2020). One reason is their liability of smallness and higher institutional pressures derived from their embeddedness in local networks of actors (Freeman, 1984).…”

“…, 1983). They are indebted to establish the external perception that they are legitimate to access resources and compete with established firms (Ivanova Ruffo et al. , 2020).…”

“…Because SMEs often do not appear as accountable and reliable as large corporations, they face the daunting task of winning acceptance and overcoming the "liability of newness and smallness" (Freeman et al, 1983). They are indebted to establish the external perception that they are legitimate to access resources and compete with established firms (Ivanova Ruffo et al, 2020). Legitimacy is particularly important for SMEs to enable resources acquisition from the government (Guo and Cao, 2014) and financial support from external stakeholders to develop the capability of identifying entry opportunities (Fisher et al, 2017).…”

“…We introduce organizational legitimacy as a functional theoretical perspective to study CE adoptions by SMEs. Ivanova Ruffo et al. (2020) noted that small companies are not simply “little big firms.” Although all organizations suffer from resource-constrained, SMEs have higher chances of failure (Ivanova Ruffo et al.…”

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