Leveraging social legitimacy to navigate geopolitical fragmentation and populist polarization

Abstract Although earning political legitimacy helps MNEs manage political risk, association with governments and political elites can become liabilities when regimes, alliances, and public sentiment shift. Reflecting on our study of MNE survival during abrupt regime change, we revisit social legitimacy as a complement to, and sometimes a substitute for, political legitimacy. We distinguish two foundations of social legitimacy: relational legitimacy, built through broad ties across societal constituencies, and material legitimacy, earned by providing products, services, and investments perceived as valuable by non-elite society. Although long recognized as a part of earning and maintaining a license to operate in any country, social legitimacy has become an increasingly important hedge against the ebbs and flows of political power driven by geopolitical fragmentation, populism, and polarization. Indeed, as geopolitics and populism make political affiliations more noticeable and more volatile, we suggest that efforts to earn social legitimacy play an increasingly important role in MNE nonmarket strategy. We identify theoretical and empirical questions concerning the sources, usefulness, and limits of earning social legitimacy; urge researchers and leaders to learn from and connect to non-elite sectors of society; and suggest ways that investment in social legitimacy can help MNEs navigate political turbulence worldwide.