Organizational Legitimacy: Six
						Key Questions

Deephouse, David L.; Bundy, Jonathan; Tost, Leigh Plunkett; Suchman, Mark C.

doi:10.4135/9781446280669.n2

Cited by 391 publications

(477 citation statements)

References 135 publications

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“…Yet, these earlier explorations were limited by the challenge that scholars face when establishing institutional claims because they lacked the evidence that performance outcomes provide. This difficulty has hindered institutional theorists from more rigorously developing their concepts (Deephouse et al, ). Thus, we directly contribute to calls in prior work to test the organizational effects of complex institutional environments and conflicting institutional pressures (Greenwood et al, ; Hiatt, Carlos, & Sine, ; Pache & Santos, ).…”

Section: Discussionmentioning

confidence: 99%

“…We thus directly contribute to calls in prior work to test the effects of complex institutional environments and conflicting institutional pressures (Greenwood et al, ; Pache & Santos, ). The idea that technical rationality conflicts with institutional norms to manifest new behaviors that are not always aligned with economic interests is a continuing theme of strategy and institutional research, yet many studies lack evidence on organizational outcomes (Deephouse, Bundy, Tost, & Suchman, ; Oliver, ). We contribute by examining how new firm outcomes changed, as a result of the introduction of an institutional intermediary to contribute a deeper understanding of the mechanisms through which changes in the institutional environment affect new firm growth.…”

Section: Introductionmentioning

confidence: 99%

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The dark side of institutional intermediaries: Junior stock exchanges and entrepreneurship

Eberhart

Eesley

2018

Strategic Management Journal

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Research Summary: Our study shows how institutional intermediaries established to foster the creation of new firms might hinder new firm growth instead. We show that intermediaries can reduce new firm growth rates due to institutional conflict. To analyze this idea, we examine the setting of junior stock exchanges, which are commonly formed to facilitate entrepreneurial growth. The introduction of these exchanges focused investment into new technology firms, reduced investment in other sectors, and led to diminishing new firm growth. Our findings demonstrate how institutional conflict causes unintended effects and reveals the complexity of influencing entrepreneurship with institutional intermediaries. Managerial Summary: Investors and entrepreneurs face uncertainty when deciding what firms to start and fund. We show that an intermediation effort to make entry easier for entrepreneurs increases the uncertainty that entrepreneurs and investors face. For investors, the enthusiasm for technology firms engendered by the new exchange can motivate investment in marginal firms to maintain as desired deal flow. However, lower firm growth and less liquidity in the future is likely. For entrepreneurs, our results indicate that it is more challenging to manage technology firm growth as well as there is potential opportunity to investigate other industries. Finally, for policymakers and supporters of the new exchanges, our results imply that investment flows are altered as intended, but unless listing standards remain high, the virtuous cycle of † The authors dedicate this work to the memory of Dr. William Miller-a mentor and friend to both of us whom we deeply miss. We especially thank Khonika Gope for her excellent research assistance. We also acknowledge the generous help of

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Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The dark side of institutional intermediaries: Junior stock exchanges and entrepreneurship

Eberhart

Eesley

2018

Strategic Management Journal

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“…To ensure legitimacy, firms need to gain acceptability and credibility from these wider stakeholders. Neoinstitutional theorists argue that firms exhibiting culturally approved forms and activities, receiving support from normative authorities, and having approval from legal bodies are more likely to survive due to their social fitness or perceived appropriateness than firms lacking these evaluations (Deephouse, Bundy, Tost, & Suchman, 2017;Meyer & Rowan, 1977). Therefore, conformity is viewed as useful to firms in terms of enhancing their likelihood of survival through a variety of rewards, such as increased prestige, legitimacy, and social support (DiMaggio, 1988;DiMaggio & Powell, 1983;Meyer & Rowan, 1977).…”

Section: Mne Cpa Choices In Host Marketsmentioning

confidence: 99%

“…Prior research claims that firms need to gain acceptability and credibility from these wider stakeholders to obtain their endorsement of legitimacy. Firms exhibiting culturally approved forms and activities, receiving support from normative authorities, and having approval from legal bodies are more likely to survive due to their social fitness or perceived appropriateness than firms lacking these evaluations (Deephouse et al, 2017;Meyer & Rowan, 1977). Moreover, neoinstitutional theorists have demonstrated that legitimacy and social support can exert influence on a firm's viability, independent of its performance, or can even confer performance advantages to firms (Bansal & Roth, 2000;Baum & Oliver, 1991;Deephouse, 1996;Suchman, 1995).…”

Section: Non-engaged Political Tactics and Strategies To Stay In Ormentioning

confidence: 99%

To engage or not to engage with host governments: Corporate political activity and host country political risk

Villa

Rajwani

Lawton

et al. 2018

Global Strategy Journal

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Research summary: We analyze how a host market’s institutional context can influence a multinational enterprise’s (MNE’s) senior management’s choice and deployment of corporate political activity (CPA). First, we argue that a non‐engaged approach to CPA is likely to be chosen when senior management perceives high host country political risk, arising not only from host country political institutions, but also from the distance between home and host government relations. Second, we propose that the deployment of this approach can require active adaptation through four political strategies: low visibility, ensuring a minimal degree of general attention from other actors; rapid compliance, entailing high speed actions to obey the rules; reconfiguration, involving rearranging the MNE’s structure and processes for competitiveness; and anticipation, implying the prediction of public policy and analysis of interest groups to anticipate responses. Managerial summary: Senior managers of multinational enterprises often examine when and how to engage, or not to engage, with host governments. We argue that senior managers are likely to choose to evade engagement with a host government when they perceive high host country political risk, not only through public political risk ratings, but also via their home and host government relations. We show that this choice can require senior managers to lead active adaptation through four strategies: low visibility, enabling the MNE to operate under the radar of host governments; rapid compliance, entailing high speed actions to obey the rules; reconfiguration, involving rearranging the MNE’s structure and processes for competitiveness; and anticipation, implying the prediction of public policy and analysis of interest groups to anticipate responses. A video abstract is available at https://youtu.be/DL1LlQEhGU0.

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“…This line of research has inspired a growing exploration of the regulatory, normative, and cognitive environmental effects on firm formation and trajectories. This approach employs important constructs, such as legitimacy (Deephouse et al 2017), regulatory regimes, constraining norms, institutional logics, and social movements that together illuminate the dynamics of entrepreneurship (David et al 2016, Thornton 1999, Tolbert et al 2011. For instance, scholars explored how organizations gain legitimacy by fitting their behavior and organizational forms into their institutional environment (DiMaggio and Powell 1983, Meyer and Rowan 1977, Stinchcombe and March 1965.…”

Section: Theory Institutions and Entrepreneurshipmentioning

confidence: 99%

Institutions and Entrepreneurial Activity: The Interactive Influence of Misaligned Formal and Informal Institutions

et al. 2018

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Abstract. We contribute to the institutions and entrepreneurship literature by examining the interactive influence of formal and informal institutions on new business creation, survival, and growth. Prior literature demonstrates how formal and informal institutions shape the level of entrepreneurship. This paper extends this to examine the cases when formal and informal institutions conflict with one another to cast an analytic eye on why countries differ in the type of entrepreneurial activity in terms of entry, survival, and growth. We argue that national and regional differences can be better explained by the interactive influence of formal and informal institutions. Moreover, we argue that informal institutions dominate formal institutions due to the former's characteristics of deep embeddedness and resistance to change over time. These ideas are presented and summarized into a typology of institutional effects on entrepreneurship activity depending on the combination of formal and informal institutions. The paper concludes with implications for future theory and research on the joint influence of different institutional effects and particularly on the intersection between institutions and entrepreneurship.

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Organizational Legitimacy: Six Key Questions

Cited by 391 publications

References 135 publications

The dark side of institutional intermediaries: Junior stock exchanges and entrepreneurship

The dark side of institutional intermediaries: Junior stock exchanges and entrepreneurship

To engage or not to engage with host governments: Corporate political activity and host country political risk

Institutions and Entrepreneurial Activity: The Interactive Influence of Misaligned Formal and Informal Institutions

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