Legitimacy Pressures Research Articles

Still dare to be different? Peers' CSR engagement and analysts' response to focal firms' CSR strategies

AbstractThis study investigates how security analysts' response to focal firms' corporate social responsibility (CSR) strategies varies with the level of CSR engagement among peer firms, about which contradictory arguments can be drawn from the perspectives of legitimacy and competitive dynamics. Legitimacy theory underscores the importance of conformity to peers' behaviors, while the competitive dynamics perspective suggests that firms should differentiate from their peers. The optimal distinctiveness theory suggests an orchestration between CSR conformity and CSR differentiation, combining the arguments of legitimacy and competitive dynamics. Based upon a sample of Chinese listed companies from 2009 to 2018, this study uses a second‐hand panel dataset and employs three‐way interactions and the generalized method of moments (GMM) system. The empirical results show that as CSR engagement among peer firms increases, heavier legitimacy pressure is imposed on focal firms, and their CSR scope conformity attracts more analyst coverage, and this effect is more prominent for firms in institutionally developed regions. On the other hand, the competitive advantage gained from CSR emphasis differentiation is weakened by rivals' engagement in CSR, and the influence of CSR emphasis differentiation on analyst recommendation is weakened by peers' CSR engagement, and in highly competitive industries, this effect of peers' CSR engagement is stronger. We propose that peers' CSR engagement has different impacts on the importance of CSR conformity and differentiation. Finally, both the theoretical and practical implications are discussed.

Seeking common ground: CSR conformity and stock liquidity

This paper investigates the impact of CSR conformity on stock liquidity from a legitimacy perspective. Based on the sample of Chinese listed firms from 2009 to 2021, the results reveal that CSR conformity mitigates legitimacy pressures, thereby significantly improving stock liquidity. Notably, this effect is primarily driven by the increased involvement in stakeholder-related CSR activities rather than third-party CSR activities. In addition, this liquidity-boosting effect is more pronounced in firms with more analyst attention and with higher institutional investor shareholding.

Reinvigorating radioactive wastewater to the ocean: Investigate the effect of board diversity on environmental corporate social responsibility in the context of Japan

The discharge of radioactive wastewater into the eastern ocean from the Fukushima Daiichi nuclear plant, a decision that comes from the Japanese government and TEPCO (Tokyo Electric Power Company), has subjected Japanese firms to reputational damage risks and increasing environmental legitimacy pressure from multiple stakeholders in environmental corporate social performance (ECSR) than ever. In the present research endeavor, we draw upon the existing body of scholarly literature pertaining to gender-diverse board and business ethics as a critical element of steering ocean and coastal environmental management. This undertaking aims to provide original insights into the factors influencing board gender diversity (BGD) and its subsequent impact on ECSR within the specific context of Japan. Grounded in the theoretical framework of legitimacy theory, we put forth a conceptual model designed to elucidate the relationship between BGD and ECSR. Additionally, this study delves into the moderating influence of financial constraints between BGD and ECSR. To empirically examine our conceptual framework, we collected data from two primary sources: Toyo Keizai Inc. and Nikkei Inc. The findings of our investigation reveal a statistically significant positive relationship between BGD and ECSR performance. Furthermore, our results indicate that financial constraints serve to intensify the association between BGD and engagement in ECSR initiatives. Finally, we corroborate the robustness of our findings through various extensions of our analytical models.

Environmental Justice and Corporate Green Innovation: The Role of Legitimacy Pressures

This study examines the impact of environmental judicial reinforcement on green technology innovation, constructing a progressive difference-in-differences model using firm- and city-level panel data from 2006 to 2019 and taking the successive establishment of environmental courts by the Intermediate People’s Court in Chinese prefectural-level cities as a quasi-natural experiment. We find that establishing environmental courts in China promotes green technology innovation. This finding still holds after a series of robustness tests such as selected fixed-effects Poisson model regression. The mechanism analysis suggests that environmental courts primarily promote increased green innovation output by heavily polluting firms by exerting more substantial pressure regarding environmental legitimacy. The heterogeneity analysis reveals that the positive impact of the establishment of environmental courts on green technology innovation is more pronounced in water pollution-intensive industries and areas with high public participation and media attention. Our findings provide new insights into how environmental justice affects firms’ green innovation and validate the Porter hypothesis. Also, they serves as a reference for constructing environmental courts in China and other policy jurisdictions that may be interested.

Stay Vigilant in Peace Time? Antitakeover Provisions and Corporate Social Responsibility

We examine how antitakeover provisions (ATPs) impact corporate social responsibility (CSR) disclosure for Chinese listed firms. The empirical results show that the level of CSR disclosure is positively related to the level of ATPs, and this relationship is primarily observed in State-Owned Enterprises (SOEs). Further evidence indicates that this association is most prevalent in observations with lower efficiency or higher legitimacy pressures. Our paper provides new evidence on the mixed motivations for CSR disclosure in Chinese firms and offers insights into the moderating effects of ATPs in the context of weak corporate governance.

Substantive or symbolic ? The strategic choice of sustainable environmental strategy for enterprises induced by the new environmental protection law

AbstractThe new “Environmental Protection Law” (abbreviated as NEPL) holds milestone significance for the construction of China's ecological legal system. However, evidence regarding the impact of NEPL on sustainable environmental strategy (abbreviated as SES) still lacks empirical analysis. This study aims to examine the mechanisms and boundary conditions through which the NEPL influences SES. Utilizing a difference‐in‐differences approach, an empirical analysis is conducted on the data of listed companies on the Shanghai and Shenzhen A‐shares from 2008 to 2021. The findings are as follows: (1) NEPL has significantly promoted both the substantive environmental strategy (abbreviated as SUB) and symbolic environmental strategy (abbreviated as SYM) of heavily polluting enterprises. Compared with SYM, the impact of NEPL on SUB is more significant. (2) Analyst coverage plays a significantly positive moderating role in the relationship between NEPL and SUB, while managerial myopia plays a significantly positive moderating role in the relationship between NEPL and SYM. (3) Environmental legitimacy pressure exerts a mediating effect on the relationship between NEPL and SES. The research findings enrich existing theories related to strategic choice and environmental policy under government intervention and provide policy recommendations for enterprises to achieve sustainable development in the context of NEPL.

Media Pressure and Carbon Disclosure of Indonesian Greenest Firms

Even with the advantages, carbon taxes are still one of the least effective instruments for climate policy. The purpose of this study is to examine the connection between non-mandatory carbon disclosures specifically in developing countries. This research sample is a green ranking company, and 108 data observations were carried out on 36 selected companies in the year between the Covid-19 out-break 2019-2021. Multiple linear regression testing is carried out to test the alleged hypothesis, by first testing the assumptions. The statistical results support the hypothesis that only legitimacy pressure (media exposure) increases corporate motivation to disclose carbon emissions. This study is novel because, while earlier research has mostly focused on the external factors that drive voluntary disclosure, our findings provide new perspectives and imply that media pressures offer a supplemental explanation for the variation in corporate carbon disclosure propensity that has been largely ignored in the body of existing literature. This suggests for the need to call for holistic mandatory disclosure requirements that encourage companies to participate in climate policy.

Sustainable Media and Green Innovation: The Impact of Sustainable Atmosphere and Environmental Regulation on Manufacturing Enterprises

This study proposes a research framework for media attention towards green innovation of manufacturing enterprises based on the theory of stakeholders and legitimacy. We examine the potential effect of media attention on the manufacturing industry and make a multidimensional heterogeneity analysis with a sample of Chinese manufacturing enterprises during 2011–2019. Our results show an inverted U-shaped relationship between various attentions of media and green innovation. We find that the early attention of the media can expand the green innovation ability of manufacturing enterprises. However, the excessive attention of the media later may decrease the green behavior of enterprises. The legitimacy pressure of media attention on enterprises helps enterprises carry out green innovation and reduce false green innovation activities. In addition, the sustainable construction, environmental regulations, and sustainable social atmosphere focused on by the media will have a positive effect on the green innovation of enterprises. We suggest that recognizing the importance and potential power of sustainable media, environmental regulations, and sustainable atmosphere in green technology is a key component of the ecological inclusive path to promote the achievement of sustainable development goals.

Optimal distinctiveness of short-term rental property design

The short-term rental market remains highly competitive, requiring that hosts should identify effective strategies to position their products for desirable performance. This study investigates the optimal balance beyond dyadic choice between differentiating from or conforming to competitors, in the dimensions of properties’ functional and aesthetic design. We hypothesize U-shaped distinctiveness-performance relationships considering high legitimacy pressure and low strategy effectiveness in the short-term rental context. Moreover, the moderating effects of factors including online review volume and listing age are examined. Analyzing a sample of 99,757 Airbnb listings in Texas, the findings reveal different patterns of product positioning between functionality and aesthetics. The moderate degree of distinctiveness in functionalities leads to the worst performance while in aesthetics generating the best outcome. This study contributes to the hospitality literature by introducing and testing optimal distinctiveness within the short-term rental market. The findings also provide positioning guidance for short-term rental listings under different conditions.

Not gone away: how domestic terrorism impacts multinationals in foreign markets

PurposeThe paper aims to understand how state and non-state domestic terrorism impacts MNEs in foreign markets. Despite the burgeoning literature on terrorism within international business (IB), most research has focused on international terrorism, or terrorism generally. Consequently, there has been limited research examining how domestic or local based terrorism impacts foreign firms.Design/methodology/approachThis is a conceptual paper.FindingsDomestic terrorism is the most common form of terrorism in the world today and involves the state and non-state actors. Non-state domestic terrorism can be low intensity or high intensity. High intensity non-state-domestic terrorism typically involves regular and protracted political violence, along with inter-communal violence. This can expose MNEs to considerable operational, governance and legitimacy pressures.Originality/valueThe paper contributes to the gap in IB terrorism research with regards domestic or local based terrorism. Drawing on IB theory and critical terrorism research, the paper addresses the nature and impact of domestic terrorism within IB. The authors’ paper shows the operational, governance and legitimacy pressures of both state and non-state domestic terrorism for MNEs in host markets. While most IB scholars consider the threat of non-state terrorism for international firms, this study shows how domestic state terrorism benefits and constrains foreign firms.

Environmental protection taxes and green productivity: Evidence from listed companies in China

Enforcing an environmental protection tax is a pivotal institutional measure for addressing environmental and climate change challenges and marking a substantial advancement in ecological development. This study aims to explore the influence of environmental protection taxes on the "green" productivity of the manufacturing industry through an analysis of Chinese listed companies. Initially, the Dynamic Slacks-Based Measure (DSBM) method is employed to estimate the "green" production efficiency levels of 175 listed companies in China from 2016 to 2020. Subsequently, by aligning pollution tax standards issued by local governments and relevant environmental protection departments with microlevel data from the CSMAR database, wind database, listed company annual reports, and social responsibility reports, the sample was refined to 833 data points. Using the implementation of the environmental protection tax policy in 2018 as a natural experiment, a Difference-in-Differences (DID) model is applied for empirical testing. The empirical results reveal a counterintuitive negative correlation between the environmental protection tax and the "green" productivity of companies, contradicting the predictions of the Porter hypothesis. This suggests that stringent environmental regulations hinder the development of green technologies. The adverse impact of environmental protection taxes on "green" productivity is attributed to heightened environmental legitimacy pressures and increasing environmental uncertainty risks companies face. Further exploratory analysis indicated that the digital economy and green finance have a positive moderating effect, significantly mitigating the negative impact of environmental protection taxes on companies' overall "green" productivity. Consequently, dynamically optimizing environmental tax policies is imperative to alleviate companies' environmental legitimacy pressures and uncertainty risks. Additionally, capitalizing on the opportunities the digital economy presents and leveraging green finance policies have emerged as effective strategies for realizing the Porter effect of environmental protection taxes.

DYNAMICS AND CONSTRAINTS OF THE START-UP LEGITIMATION PROCESS: THE ROLE OF ORGANIZATIONAL IDENTIFICATION

From inception, start-ups are torn between two opposing legitimacy pressures: the need to differentiate from competitors and the need to conform to stakeholders’ expectations. In this study, we adopt an organizational identification perspective, coupled with a legitimacy-seeking lens, to explore the start-up legitimation progress for entrepreneurs who identify with their ventures either intrinsically or instrumentally. Applying a longitudinal multi-case study design and using rich interview data, we track the decisions and actions of ten Russian high-tech start-ups over a twenty-month period. Our findings reveal that start-up legitimation is a dynamic process guided by the organizational identification of the founders and bounded by identity tensions. The study extends the literature on new venture legitimation and its constraints. Theoretical and practitioner implications are discussed.

Can China’s leading officials’ accountability audit of natural resources policy promote corporate emissions reduction?

The Chinese government proposed the policy of the leading officials’ accountability audit of natural resources (AANR) in 2013 and launched pilot audits in some regions in 2014. In order to explore whether AANR reduces corporate environmental pollution, this paper validates the impact of AANR on corporate emission reduction using a multi-period difference-in-difference (DID) method based on a sample of Chinese A-share heavy-polluting corporations from 2010 to 2017. The results indicated that AANR can significantly reduce corporate pollutant emissions, with legitimacy pressures and resource dependence playing a mediating role. Further research found that the AANR promoted emission reduction more strongly for large-sized corporations and political connection corporations, and more significantly for corporations with higher internal and external governance levels. Policy effects were more significant in regions with favorable economic growth and legalization. The above findings verify the effect of government audits on micro corporation pollution management, enrich the theoretical system of AANR research, and provide meaningful empirical evidence for AANR's further improvement.

Analyst coverage and manufacturing enterprise green transition: An empirical study based on Chinese enterprises.

This study used the entropy weight method to develop an index of green transition and empirically examined the influence of analyst coverage on green transitions by manufacturing enterprises in China. We examined A-share listed manufacturing firms from 2010-2020, using patent data, media reports from Chinese Research Data Services, and other data from the Cathay Capital Database. After excluding cases with missing data, our final sample comprised 16,576 observations. The following conclusions were drawn. First, analyst coverage significantly contributed to green transition. Second, the analysis of the impact mechanism showed that improving information transparency, weakening principal-agent conflict, and increasing environmental legitimacy pressure are the paths through which analyst coverage affects manufacturing's corporate green transition. Third, the effect of analyst coverage was stronger for large-scale and state-owned manufacturing companies.

Transparência e seus drivers. Um estudo baseado na experiência colombiana (2012-2016)

Abstract The research aim is to analyze the drivers of transparency levels in Colombian municipalities from the perspective of citizens (agency theory) and local governments (legitimacy theory). We used the Panel Corrected Standard Errors (PCSE) and a system Generalized Method of Moments (GMM) estimator in a dataset of 1,101 Colombian municipalities for five years (2012-2016). Our results show that fiscal autonomy, education, gross domestic product per capita, population size, and political participation are positively associated with public information disclosure in Colombia. Through this research, we contribute to the transparency literature in subnational governments in developing countries by examining determinants related to “citizens’ monitoring abilities” and “pressures for legitimacy” in Colombia.

Information or pressure? The effect of director experience on CEO CSR compensation adoption and design

AbstractWe investigate the impact of director experience in integrating social responsibility criteria into CEO compensation (corporate social responsibility [CSR] contracting) in other firms on the adoption and design of CSR contracting within focal firms and address the question of whether such experience brings information or pressure to focal firms. Using hand‐collected data of a sample from the Standard and Poor's (S&P) 500 index, we find that director experience is positively associated with the likelihood of CSR contracting adoption. This effect is particularly pronounced in challenging situations where firms require more information for the adoption, such as when they have diverse stakeholders with varying CSR interests and operate in unpredictable market environments. Additionally, director experience has a positive effect on the use of quantitative CSR targets in initial contract design, especially in these challenging scenarios. Interestingly, the positive effect of director experience on CSR contracting adoption does not vary with firms’ peer legitimacy pressure. Our findings suggest that director CSR contracting experience provides valuable information that fosters learning rather than imposing institutional pressure that leads to isomorphism when firms make CSR contracting decisions. By disentangling the intertwined role of director experience, our research offers insights into how it influences the adoption and design of innovative management control practices within firms.

The dynamics of new sharing economy ventures strategies and ecosystem legitimacy: the case of Airbnb

While new ventures strive to align with prevailing demand and expectations to gain and maintain legitimacy and successfully overcome the liability of newness, sharing economy ventures face additional legitimacy pressure before and after they achieve scale. Based on an inductive single case study approach, using the example of Airbnb Inc., this study investigates how digital platform‐based ventures navigate the tension between remaining legitimate yet distinctive throughout the organizational lifecycle. Adopting a processual perspective, our findings reveal the strategies used by Airbnb to navigate the temporal dynamics of entering established industries. With a particular focus on the digital platform's efforts to achieve and maintain cognitive and sociopolitical legitimacy, this study aims to enhance knowledge regarding the formation and adjustment of organizational strategy and identity over time. Our proposed model of digital platform development reveals three distinct stages of strategy shifts, including demonstrating a sense of novelty, establishing dominant positioning in a broader market, and competitive differentiation to create value for customers. Furthermore, we show the primary triggers for change and the organizational identity change process in different stages of the organizational lifecycle.

Inter-state war, institutions and multinationals: insights from the Russian-Ukraine war

PurposeWars, and violent conflicts generally, can generate significant institutional dynamics and new legitimacy pressures for multinational enterprises (MNEs). The purpose of this paper is to understand the nature or source of institutional pressures facing MNEs in war and to examine how MNEs respond and navigate these institutional pressures.Design/methodology/approachThis is a conceptual paper.FindingsThrough the theoretical lens of institutional theory and drawing on insights from the devastating Russian–Ukrainian war in Europe, the study provides a framework that explains the nature of institutional pressures impacting MNEs in a major war conflict and how MNEs respond to these pressures. Central to the framework is the impact of formal and informal institutions on MNEs during war. As a result of regulatory and social pressures, MNEs have to make important strategic decisions either to protect their legitimacy or to defend their economic objectives against institutional demands.Originality/valueAs the paper situates the pressures of war for MNEs in a formal and informal institutional context, this offers a new approach to understanding the costs and pressures of war on MNEs.

Sustainable mining: Examining the direct and configuration path of legitimacy pressure, dual embeddedness resource dependency and green mining towards resource management

The mining industries' contribution to economies has been limited to the boomtown's impact of short-term initiatives. However, the bane of mining on resource management has been a recurring theme. This study recognizes the need to investigate the interrelationship among legitimate pressure, resource dependence, and green practices in the quest for sustainable resource management. The study categorized legitimate pressure into three distinct groups (coercive, normative, and mimetic pressure) and resource dependence into intra and inter-organizational resource dependence to assess the interrelationship among these constructs. We use both the structural model and the fuzzy set qualitative comparative analysis (fsQCA) approach and 320 respondents from the Ghanaian mining industry.According to our findings, normative pressure does not influence the implementation of green mining policies without the two groups of resource dependencies acting as mediators.The findings from the fSQCA have shown that the combination of coercive pressure, normative pressure, inter-organizational resource dependencies, and intra-organizational resource dependencies is the best path toward sustainable resource management. The study contributes to the global efforts toward sustainable resource management. Policy and managerial implications are discussed.

Environmental Information Disclosure, Legitimacy Pressure, and Green Total Factor Productivity

Environmental Information Disclosure, Legitimacy Pressure, and Green Total Factor Productivity