Organizational legitimacy as a core concept for theorizing on business in emerging economies

Foreign multinational enterprises (MNEs) operating in emerging economies (EEs) face major challenges in attaining organizational legitimacy with local stakeholders, a precondition to successful operations in the country. This perspective explores the contingencies and perceptions that cause these legitimacy challenges and the actions MNEs employ to address these challenges, as identified in recent literature. We observe that legitimacy in EEs has many facets. Yet, it is often analyzed in a selective way – focusing on specific events or activities without considering the complexity of the phenomenon of how legitimacy is created, maintained and lost. We argue that organizational legitimacy is a very useful construct for international management research on EEs, and that the concept lends itself to more rigorous theoretical advancement than category-based concepts such as liability of foreignness. However, the IB literature has only partially embraced recent theoretical advances on the concept of legitimacy. We distinguish contingency, agency and judgement views of legitimacy to explore how applications of the concept may enhance our understanding of MNEs operating in EEs. This leads us to develop a future research agenda. • Organizational legitimacy is a key concept to explain MNE strategies and practices in emerging economies. • Legitimacy supports more rigorous theorizing than category-based concepts such as liability of foreignness. • We distinguish contingency, agency and judgement views of legitimacy to develop an integrative theoretical framework. • Future research ought to pinpoint origins of legitimacy challenges and analyze longitudinal processes of managing legitimacy. • A particular challenge is explaining the formation of perceptions of legitimacy by individuals, and their aggregation.