Levels of legitimacy development in internationalization: Multinational enterprise and civil society interplay in institutional void

Research Summary: Typically, studies on subsidiary legitimation take the perspectives of compliance and isomorphism to examine multinational enterprises (MNEs') legitimacy; our study considers both isomorphism and institutional innovation perspectives to examine how subsidiaries, in collaboration with civil society actors, co-develop various levels (degrees) of legitimacy in an institutional void. The study finds four overlapping levels of legitimacy—“acceptance,” “image,” “endorsement,” and “synergy” (a combination of acceptance and efficiency)—that subsidiaries co-develop throughout the internationalization process. We bring new insight into legitimation: that an isomorphism perspective of legitimacy alone cannot explain the complexity of subsidiary legitimation in an institutional void because subsidiaries not only earn acceptance by compliance, but also create/co-create image, endorsement, and synergy as outputs of institutional innovation. We contribute to the global strategic management in emerging economies. Managerial Summary: We investigate how MNE-civil society interplay co-develops different levels of legitimacy in an institutional void, as opposed to only the “acceptance” level. The study combines both rule-accepting and rule-changing perspectives, revealing that MNEs' strategic endeavors yield overlapping, yet increasing, levels of legitimacy—“acceptance,” “image,” “endorsement,” and “synergy”—in internationalization. These levels are not necessarily derived from a firm's strategic initiatives using an isomorphism perspective; instead, the firm appears as an institutional entrepreneur and co-develops new institutions, which creates synergy (legitimacy + efficiency) for the firm's operation. Although it is difficult to separate the increasing levels of legitimacy, managers can use the insights to design specific strategies for each level of legitimacy and develop partnerships with local actors in legitimation in an institutional void.