Pacific Sociological Association

Organizational Legitimacy: Social Values and Organizational Behavior

Author(s): John Dowling and Jeffrey Pfeffer
Reviewed work(s):
Source: The Pacific Sociological Review, Vol. 18, No. 1 (Jan., 1975), pp. 122-136
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 ORGANIZATIONALLEGITIMACY:
SocialValuesandOrganizational
Behavior

JOHNDOWLING
StanfordUniversity

JEFFREY PFEFFER
of California,
University Berkeley

Organizationsseek to establishcongruence
betweenthe
social values associated with or impliedby theiractivitiesand
the normsof acceptablebehaviorin the largersocial systemof
whichthey are a part. Insofaras these two value systemsare
congruentwe can speak of organizationallegitimacy.Whenan
actual or potential disparityexists between the two value
systems,therewill exist a threatto organizationallegitimacy.
These threatstake the formof legal,economic,and othersocial
sanctions.In thispaper,it is arguedthat an empiricalfocuson
organizational effortsto becomelegitimatecan aid in explaining
and analyzingmanyorganizational behaviorstakenwithrespect
to the environment, and further, can generatehypothesesand a
conceptualperspectivethat can directadditionalattentionto
the issueof organizational legitimacy.
This paper providesa conceptualframework fortheanalysis
of organizationallegitimacyand the process of legitimation
throughwhich organizationsact to increase their perceived
legitimacy.It presents a number of examples includinga
discussionof the AmericanInstitutefor ForeignStudy as a
demonstrationof these ideas in action. Both the particular
circumstanceswhich can lead to problemsof organizational
legitimacyand some of the actions that can be taken to
legitimatean organizationare illustrated.
PACIFIC SOCIOLOGICAL REVIEW, Vol. 18 No. 1, January 1975
(@1975 Pacific Sociological Assn.

[122]

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/ORGANIZATIONALLEGITIMACY[123]

ORGANIZATIONALLEGITIMACY

Parsonsviewedlegitimacyas the "appraisalof actionin terms

of sharedor commonvalues in the contextof the involvement
of the action in the social system" (1960: 175). Although
organizationallegitimacyhas been conceptuallydefinedin the
sociologicalliterature, it has receivedlittleempiricalattention.
As Terreberryhas noted, "An input called 'legitimacy'is
popular in sociologicalcirclesbut highlyresistantto empirical
specification"(1968: 608). Parsonswrotethat since organiza-
tions exist in a superordinate social systemand utilizeresources
which mightbe otherwiseallocated, the utilizationof these
resourcesmust be accepted as legitimateby the largersocial
system.Thus, organizationsare legitimateto the extent that
theiractivitiesare congruentwiththegoals of the superordinate
system.
Parsonsalso noted thatorganizations willtake stepsto ensure
their legitimacy."Legitimation is the process wherebyan
organizationjustifiesto a peer or superordinate systemitsright
to exist, that is to continueto import,transform, and export
energy,material,or information" (Maurer,1971: 361). Thomp-
son (1967), followingParsons, has noted that legitimation
occurs at the institutionallevel of formalorganizations,and
that one of the principalfunctionsof personson the institu-
tional level is to legitimatethe organizationin the social system
of whichit is an element.
If legitimacyis important,indeedessentialforthe survivalof
organizations,how can legitimacybe assessed? Terreberry
(1968) providesone suggestion."The view taken here is that
legitimacyis mediatedby theexchangeof otherresources.Thus
the willingnessof firmA to contributeto X, and of agencyB to
referpersonnelto X, and firmC to buy X's producttestifiesto
the legitimacyof X" (1968: 608). Terreberry, therefore, would
have us assess legitimacyby the existence of resource or
informationaltransactionsbetween organizations.While it is
likely that illegitimacywill lead to economic sanctions,eco-
nomic exchange is not identical with legitimacy.There are

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[124] PACIFICSOCIOLOGICALREVIEW/ JANUARY1975

illegitimateorganizationsthat engagein successfulinterorgani-

zational transactionsand there are legitimateorganizations
which are not able to obtain adequate resources through
voluntarytransactionmechanisms.We suggestthat a legitimate
purposewill not necessarilyensureresourceallocation,norwill
resourceallocation necessarilyensure legitimacy.The relative
inadequacy of medical facilitiesin poor and ruralareas in the
United States is an exampleof the first.The organizedheroin
distribution is an exampleof the second.
If legitimacyis not to be assessedsolelyby a competitionfor
economic resources,legitimacyis also not definedsolely by
what is legal or illegal.Thoughin a democraticpolitylaws are
likely to be correlatedwith societal normsand values, their
correlationsare less than perfect.There are at least three
reasons why this is so. First,we have the dynamicnatureof
normswhich change over time whereaslegal change,whichis
much more formal, is delayed and must await a specific
statutoryor common law enactment.Second, normsmay be
and are contradictory, whereasthereis a greaterpresumption of
consistencyin the legalcode. Third,thereis the questionof the
formalnature of law; societies may be preparedto tolerate
certainbehaviorinformally but not to givethemlegalsanction
-gambling prostitutionmay be in this category.Under more
authoritarianforms of government,there may be even less
correlationbetweenlegalityand legitimacy.
We have describedthe existenceof threepartiallyinterde-
pendent sets of organizationalbehaviors:those that are eco-
nomically viable, those that are legal, and those that are
legitimate.Organizationswill attemptto engage in activities
whichare in the set intersectedby all three,and will perform
behaviorsthattheyperceivewilllead to accomplishing this.
Legitimacy can be assessed by an examination of the values
and normsprevalentin a society.These valuesbecomeapparent
throughsystematicsurveyssuch as those exemplifiedby the
studiesof values undertakenby Rokeach (1968; Rokeach and
Parker, 1970). Values and norms are also reflectedin the

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/ORGANIZATIONALLEGITIMACY[125]

writingand communicationof a society at a point in time.

Norms and values are visible in the communicationsof a
culture.

DETERMINANTSOF ORGANIZATIONALLEGITIMACY

Organizationallegitimacyis the outcome of, on the one

hand, the processof legitimation enactedby thefocalorganiza-
tion,and on the other,the actionsaffecting relevantnormsand
values taken by other groupsand organizations.Social norms
and values are not immutable.Changingsocial normsand values
constituteone motivationfor organizationalchange and one
sourceof pressurefororganizationallegitimation.
Clark (1956), in a study of adult education in California,
providesan example of the change in values occurringas a
consequence of an organizationaladaptation to the environ-
ment. In the processof transforming initialvalues to adjust to
problems, organizationalchangemayshapethevalue of the
the
largersociety(Clark,1956: 327).
A second source of change in social normsand values may
derivefromthe competitionbetweenthefocalorganizationand
otherorganizations.Since organizationalsurvivalis enhancedby
legitimacy,legitimacycan be viewedas a resourcewhicha given
focal organizationattemptsto obtain and which,occasionally,
competingorganizationsmay attemptto deny. Organizations
may competewithrespectto whatactivitiestheywillperform,
and what activities other organizationswill perform.The
differentiation of functionsamong organizationsis open to
contest.Levineand White(1961) noted thatexchangesamong
healthorganizationswerefacilitatedwhenthereexisteddomain
consensus,or when the organizationsmutuallyrecognizedand
accepted each other'ssphereof activity.Thompson(1967) also
noted that conflictover organizationaldomains was a com-
ponent of interorganizational competition,and Downs (1967)
has commented that organizations frequentlyattempt to
increasetheirdomain of activityto ensuretheirsurvivalshould
circumstances in theirpreviousenvironment change,

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[126] PACIFICSOCIOLOGICALREVIEW/ JANUARY1975

Competitionover organizationaldomains can be resolved

throughmarketmechanisms, in whichconsumerschoose which
organization organizationaltype they believe are serving
or
thembetter,or throughrecourseto social normsand valuesthat
defineand delimitlegitimatespheresof organizational activity.
Currently, there are questions concerning the legitimacyof
government intervention the healthsystem, the intrusion
in and
of private competitorsin the package and postal handling
business.Conflictexistsover whetherit is legitimateforschool
systemsto contractthe educationaltask or some portionof it
to privatebusinessfirms.
Organizationallegitimacyis determinedby the method of
operation and output as well as by the goals or domain of
activity of the organization.Perrow (1970) has noted the
importanceof the legitimacyof an organization'smethod of
operation. He relates the anecdote of a pharmaceuticalfirm
which experimentedwith pigeons as a means of pickingout
defectivepills fromthe productionline.Whilethepigeonswere
easilytrained,inexpensive,and moreaccuratethantheirhuman
counterparts,there was little expected legitimacyfor the
method,and thusit was neverimplemented.
The thirdfocus of challengesto legitimacyis the organiza-
tion's output.This is exemplifiedby RalphNader'scriticismof
automobilesafety,and the legitimacyof cigarettes as a product
because of theassociatedhealthhazards.
Legitimacy is a constraint,therefore,on organizational
behavior,but it is a dynamic constraintwhich changes as
organizationsadapt, and as the social values which define
legitimacychangeand are changed.

ORGANIZATIONALBEHAVIORAND THE
PROCESS OF LEGITIMATION

Perrow (1970: ch. 4) has pointed out that legitimacyis

problematicfororganizations,and it is likelythatorganizations
take actionsto ensuretheircontinuedlegitimacy.An organiza-

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 DowlingandPfeffer
/ORGANIZATIONALLEGITIMACY[127]

tion can do three things to become legitimate.First, the

organization can adapt its output, goals, and methods of
operation to conformto prevailingdefinitionsof legitimacy.
Second, the organizationcan attempt,throughcommunication,
to alterthe definitionof social legitimacyso thatit conformsto
the organization'spresentpractices,output,and values.Finally,
the organizationcan attempt,againthroughcommunication, to
become identifiedwith symbols,values, or institutionswhich
have a strongbase of social legitimacy.Since the changingof
social norms is a difficultprocess, it is likely that most
organizationswill eitheradapt to the constraintsimposed by
the requirementto be legitimateor will attemptto identify
their presentoutput, values, and methodof operationswith
institutions,values,or outputswhichare strongly believedto be
legitimate.Legitimation,therefore, involves a change in the
organization'smission or the use of symbolsto identifythe
organizationwithlegitimatesocial institutions or practices.
Parsons(1956) has commentedthat one importantfunction
of organizationalstatementsof goals or objectives is the
legitimationof the organization.Indeed, Parsonssuggeststhat
goals operate much more as rationalizationsfor the organiza-
tion's existence ratherthan as guidelinesfor internalorgani-
zationalfunctioning.
Zald and Denton (1963) providean exampleof the changeof
objectivesto maintainorganizationalsurvivaland legitimacyin
the face of changingsocial valuesand customs.In theirstudyof
the historyof the YMCA, Zald and Denton note thatwhilethis
organizationwas originallyevangelicaland religiousin nature,
with the secularizationof Americansociety,the YMCA also
secularized, emphasizingmore the physical recreation and
educationalaspectsof its operations.Selznick's(1949) studyof
the TennesseeValley Authorityalso illustrates thealterationof
organizationalobjectivesand methodsto conformto require-
ments for social legitimacyin order to obtain local social
support.
Changingsocial valueswhichappearinimicalto theparticular
organizationor industryare frequentlythe focus of institu-

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[128] PACIFICSOCIOLOGICALREVIEW/JANUARY1975

tional advertising.The railroads have advertisedto increase

public acceptance for two governmental measureswhichhave
immensely benefited what are essentiallyprivatecompanies-
governmentassumptionof the passengerrailroadservice,and
governmentsupportwhich is anticipatedfor maintainingthe
track.
Changingsocial valueshave confronted modernbusinesswith
a crisis of legitimacy.Mason noted that "it cannot be too
stronglyemphasized that the growthof nineteenthcentury
capitalismdepended largely on the general acceptance of a
reasoned justificationof the systemon moral as well as on
political and economic grounds"(1958: 6). Cheit (1964) has
argued that the social environmentof businesshas changed,
with an emphasistowardan increasingassignmentof responsi-
bility to the corporationfor the use of its influence.And,
businesshas respondedto theseproblemsof legitimacy. Whyte
(1952) has reviewedthe campaign in the early 1950s to sell the
freeenterprisesystem,whichat one timeexpendedmore than
$100 milliona year. Manypersonshave viewedthe new trend
toward corporateresponsibility and to corporateconcernwith
noneconomicendeavorssuch as urbanrenewal,supportforthe
performing arts,and supportforassistingthe disadvantagedas
methodsfor businessto ensureits continuedlegitimacy(e.g.,
Votaw and Sethi,1969; Schlusberg,1969).

THE CASE OF THE AMERICANINSTITUTE

FOR FOREIGNSTUDY

As a case exampleof organizationalactionstakento ensure

legitimacy,we consider the AmericanInstitutefor Foreign
Study. The American Institute for Foreign Study was a
nonprofiteducational organizationthat organized and con-
ducted highschool and summerstudytoursabroad.Moneywas
made by an affiliated,for-profit organization(International
Study Services,which subsequentlychangedits name to New
England Travel) which operated as a travel agency under

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/ORGANIZATIONALLEGITIMACY[129]

exclusivecontractwithAIFS. Indeed, the establishment of the

dual organization, one part of which was nonprofitand
educational,was one importantpartof the legitimation process.
High school study abroad programsdid face a particularly
acute problemof legitimation.Roberts(1969), in theSaturday
Review, published an article which included criticismof the
commercialforeignsummerstudy programs,questioningtheir
value to the student,and callinginto questionthe legitimacyof
runningeducationalprogramsforprofit.Robertswrote,"Many
people felt that education and commercialismare mutually
exclusive" (1969: 61). Further,in A Guide to StudyAbroad
(Garratyand Adams, 1962), a majorreferencebook on foreign
study,highschool summerstudyabroad is criticized.
To establish its legitimacy,the American Institute for
Foreign Study undertooka wide range of activities,many of
whichwere possibleonly because of the nonprofit, educational
status of the organization.The establishment,then, of this
organizationitselfwiththe affiliated,for-profittravelagencyis
a major step in the legitimation process.One activityinvolved
the co-optationof major political leaders. AIFS establisheda
scholarshipprogramto providesummerstudyabroad forneedy
students. This programwas administeredby major political
figures,which,in 1969, included SenatorJacob Javits,Mayor
John Lindsay, Congressman Lowell Weicker, and Senator
EdwardKennedy(AIFS, 1969: 32).
In addition to associatingits programswith majorpolitical
figures, AIFS engaged in co-optation of the educational
establishment. Clearlyfora programpackagedas education,the
support of teachersand schooladministrators was critical.AIFS
used two strategiesto obtainthe supportof educators.One was
to give teachersand administrators, free,the opportunityto
travel throughEurope for either recruitingstudentsor for
helpingto administer the program.The secondactiontakenwas
the establishmentof boards of advisers,composed of both
European and Americanmembers.The Americanboard was
dividedinto two parts,the highschool divisionand the college
division.In 1969, there were 22 membersof the highschool

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[130] PACIFICSOCIOLOGICALREVIEW/JANUARY1975

advisory board from the United States. Of these, ten were

principalsand eight were either superintendents or deputy
superintendents of school districts.
In additionto legitimating the organization,AIFS soughtto
legitimatethe method of operations.One tactic used forthis
was the use of European campusesforthe summerprograms.
Theoretically,of course,the educationalprogramscould be run
anywhere,but by using the European campusesof prominent
universities, the universitiesthemselvesreceivedfundsduringa
timewhentheirfacilitieswereunderutilized and AIFS received
the prestigeof havingtheseschoolslistedin its brochure.
AIFS also took actions to attemptto identifyits output,
students who had studied during the summer abroad, as
legitimate.This was accomplishedby listingall those univer-
sities who had given college credit to eitherthe studentsor
teacherswho had participatedin the summerprogram.Whilea
disclaimerwas printedindicatingthat since thesecreditswere
the resultof placementexaminations,there was no necessary
causal connectionwiththe studyabroad,thedisclaimerwas not
prominentlyplaced. AIFS (1969: 9) lists 144 schools where
AIFS students received credit, including Stanford, Vassar,
Brown,and Northwestern.
The case of the AmericanInstituteforForeignStudy,then,
exemplifiesthe problemsand tacticsof organizationallegitima-
tion. Faced witha problemof legitimacybecauseof critiquesof
methodsof operation,AIFS engagedin a varietyof legitimating
behaviorsincludingthe co-optationof both prominenteduca-
tional and political leaders,the use of legitimateorganizations
as sites for its operation,and the identificationof its output
with other legitimateorganizations,namelyprominentAmeri-
can universities.

LEGITIMACY AND ORGANIZATIONAL ANALYSIS

Because organizationsseek legitimacy,the analysisof organi-

zational legitimation
enables us to summarizeand comprehend

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/ORGANIZATIONALLEGITIMACY[131]

a varietyof organizationalbehaviors.In Table 1, legitimating

behaviorsdiscussedin our example of the AmericanInstitute
forForeignStudy,as wellas thoseenumeratedin otherresearch
are displayed.
The concept of legitimacyis importantin analyzingthe
relationshipsbetween organizationsand their environments.
Legitimacyprovidesa linkagebetween the organizationaland
societal level of analysis. Legitimacyand social norms and
values constrainthe actions takenby individualorganizations.
At the same time, actions taken by organizationsfor the
purposeof legitimationcan actuallyalterthe valuesand norms
(e.g., Clark, 1956). Further,because legitimacyis importantto
organizations,constraintsimposed by social normsand values
and reactionsto such constraintsprovidea focus foranalyzing
organizationalbehaviorstakenwithrespectto theenvironment.
We can illustratethe use of this conceptual focus for
analyzingorganizationalbehaviorby presenting severalhypoth-
eses thatfollowfromtheprecedingdiscussion.Such hypotheses
illustratethe potentialforadditionalempiricalresearchon the
issueof organizationallegitimacyand actionsof legitimation.
One approach to the analysisof legitimacyis to focus on
legitimacyas a constrainton organizationalbehavior. The
hypothesisis that since legitimacyis a constrainton behavior,
organizationsin whichvalues,output,or methodsof operation
are currently at variancewithsocial normsand valueswilltend
to alter these values, outputs, or methods of operationsto
conform to social values. Paralleling the examination of
individual conformityto social expectations, we examine
organizationalconformity to social expectations.Such organiza-
tional adaptations are illustratedby the changingfocus of
advertisingfor new automobiles, as well as with increasing
corporateactivity(at least in the press) in the areas of equal
employmentand economic development.As Mason (1958)
noted, manybusinessinstitutions are beingcriticized.Business
response representsthe attempt to identifythe values of
economic organizationsas beingcongruentwiththe prevailing
valuesof the totalsociety.

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W
h)
TABLE 1
EXAMPLES OF ORGANIZATIONAL LEGITIMATIO

OrganizationalResponse
Focus of Adaptationof Attemptto Change
Response Organization Values of Society

Goals YMCA secularizesemphasis Industrycampaignto promote

(Zald and Denton, 1963) freeenterprisesystem(Whyte,
1952)
AmericanInstitutefor
ForeignStudy is established
educational
as nonprofit,
organization

Method Pharmaceuticalfirmdoes Competitionoverappropriate

of not use pigeons(Perrow, organizationaldomain (Thompson,
Operation 1970) 1967), such as withcontract
education,privatepostal
systems,and public health
insurance
Output YMCA providesrecreation Conflictsoverproductor
and education (Zald and servicelegitimacy,as in the
Denton, 1963) case of cigarettes,the SST
airplane,and the automobile

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/ORGANIZATIONALLEGITIMACY[1331

While legitimacyis a constrainton all organizations,it is

likelythat it affectssome organizationsmore thanothers.This
is because (1) some organizationsare considerablymorevisible,
and (2) some organizationsdepend relativelymore heavilyon
social and political support.We would thereforehypothesize
thatorganizationsthatare larger,and organizationsthatreceive
more political and social benefitswould tend to engagemore
heavilyin legitimating behavior.
One legitimating behavioris contributionto charity,which
has alreadybeen examinedfroman economicperspective(e.g.,
Nelson, 1970; Johnson, 1966). There are, we argue, three
perspectivesfor analyzingvariationsin corporategenerosity,
eitheracross firmsor industriesor over time. The firstis the
relativeeconomic benefitsand costs of charity,especiallyas
these are affected by the tax laws. This effect has been
examinedand found.The secondperspectiveproceedsfromthe
argumentthat charityon the part of corporationsis truly
altruisticbehavior. Thus, variationsin generosityare to be
explained by the personalitiesand values of the administrators
of the variousorganizations.The thirdperspective,following
from our discussion of legitimacy,is that organizational
contributions are a formof legitimatingbehavior,and wouldbe
expected to varyover contextsor over timeto the extentthat
legitimacyis moreor less problematicand important.
Another form of legitimatingbehavior is co-optation,in
which various political leadersor other personsof legitimate
status are broughtonto the organization'sgoverningboard
(Selznick, 1949). As in the case of charitablecontributions,
the
use of co-optationwould be expected to vary over time and
over contexts as the issue of legitimacyis more or less
important.Pfeffer (1972) foundthatregulatedcompanieshave
a higherproportionof outside directorsthan do nonregulated
companies. This findingis consistentwith the argumentthat
because regulatedorganizationsare more heavilydependenton
acceptance by the environmentfortheireconomic well-being,
they engagemore in activitiesto link the organizationwithits
environment.In that same study, Pfefferfound that large

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[134] PACIFIC SOCILOGICAL REVIEW / JANUARY 1975

companies,which are more visible,also have a higherpropor-

tionof outsidedirectorson the board(1972: 224).
Lentz and Tschirgi(1963) haveexaminedtheethicalcontent
of corporateannual reports,usingcontentanalysistechniques.
In a sample of 219 companies,the existence of an ethical
statementwas definedas includingany favorablerecognitionof
a corporategoal beyond the narrowpursuitof profit(1963:
387).. In Table 2 of the Lentz and Tschirgistudy(1963: 390),
the percentageof firmswithethicalstatementsin theirreports
for several differentsize classes is displayed.The percentage
increasesdirectlyfrom13% of those firmswithassetslessthan
$100 millionto 52% of those firmswithassetsover $1 billion.
These data are consistentwithour hypothesisthatsize increases
the problemof organizationallegitimacy and henceelicitsmore
statedconcernwithsociallyrelevantgoals.
In Table 4 (Lentz and Tschirgi, 1963: 390), the three
industrieswiththe largestpercentageof firmsevidencingethical
statementsin theirannual reportsare insurance,utilities,and
financeand investment, all businesseswitha largecomponent
of governmentinterventionand public visibility.In Table 5
(1963: 391), Lentz and Tschirgiindicatethat controllingfor
the size class of the firm,firmswith morepublic contactare
more likelyto have ethical statementsin theirannual reports
than those withlittleor no significant contactwiththe public.
In addition to examining legitimatingactivities such as
contributionsand the compositionof organizationalboards,
measuresof the congruencebetweenorganizationaland societal
values can be computed. As mentionedpreviously,Rokeach
(1968) has measuredsocial values. Similarquestions,asked of
organizationalparticipants,can be used to determine the
congruencebetween organizationaland societal values. The
hypothesisis thatorganizations adapt to social requirementsfor
legitimacy, and therefore, over time,therewillbe an increasing
convergence in values. Of course, as in anyequilibriumanalysis,
the problemis complicatedby the fact thateven as organiza-
tionsadapt,social definitions of legitimacychange.
Both throughthe case illustrationof the AmericanInstitute
for Foreign Study, and by consideringvarious legitimating

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 Dowling and Pfeffer/ ORGANIZATIONAL LEGITIMACY [135]

activities,we have seen that legitimacycan providea useful

empiricalfocus forexamininingorganizationalbehaviorstaken
withrespectto theirenvironments. By focusingon theproblem
of legitimacyand the activitiesof organizationallegitimation,
constraintson organizationalbehavior and organizationalre-
sponsesto thisone classof constraintcan be examined.

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