Can companies buy legitimacy?

Abstract

Organizational legitimacy is greatly influenced by firm corporate social responsibility records. An organization with a poor corporate social responsibility record can either try to improve its practices or attempt to manipulate institutional norms and belief systems in order to convince society that its practices are acceptable. We argue that firms’ corporate political strategies – attempts by firms to influence public policy outcomes in a favorable way – can be very effective in shaping legitimacy norms and offsetting negative public image. We draw on institutional theory and propose that firms with negative corporate social responsibility records consider investing in political strategies necessary in order to construct new legitimate standards in line with their strategies. We test our hypotheses on 348 manufacturing firms and find that firms with poor corporate social responsibility records engage more in political strategies. These findings also show that organizational visibility and organizational slack moderate the relationship between corporate social responsibility and political strategy.