In search of legitimacy: a semiotic analysis of business model disclosure practices

Purpose: This paper aims to investigate how firms disclose the presentation and content of business model (BM) information in corporate reports to manage their legitimacy in response to European Directive 2014/95. Design/methodology/approach: Legitimacy theory is used to identify disclosure strategies pursued by firms in reaction to the new regulation. To understand how firms adopt these strategic responses, semiotic analysis is applied to a sample of European companies’ reports through Crowther’s (2012) framework, which is based on a mechanism of binary oppositions. Findings: Half of the sample strategically choose to comply with the European Union (EU) Directive regarding BM information through the use of non-accounting language, figures, and diagrams. Other firms did not disclose any substantive information but managed the impression of compliance with the regulation, while the remainder of the sample dismissed the regulation altogether. Research limitations/implications: This study demonstrates how organisations use the disclosure of BM information in their corporate reports to control their legitimacy. The results support the idea that firms can acquire legitimacy by complying with the law or giving the impression of compliance with the regulation. This study provides evidence on the first-time adoption of the EU Directive, and therefore, future research can enlarge the sample and conduct the analysis over a broader time frame. Practical implications: A more precise indication of the EU Directive regarding “where” firms should report BM information, “how” the description of a BM should refer to the environmental, social, governance (ESG) factors, and a set of performance measures to track the evolution of a company’s BM overtime is needed. Originality/value: While there has been a notable amount of research that has applied content analysis methodologies to investigate the thematic and syntactic aspects of BM disclosure in corporate reports, only a few studies have investigated BM disclosures in relation to the EU Directive. Furthermore, the application of semiotic analysis extends beyond traditional content analysis methodologies because it considers the structure of the story at many levels, thus developing a more complete textual picture of how BMs are described, allowing an analysis of the reasons behind the disclosure strategies pursued by firms.