State of Research: Previous Findings on Corporate Diplomacy, the Media, and Organizational Legitimacy

Zusammenfassung

Now that this thesis has introduced the theoretical framework and discussed the related main concepts of corporate diplomacy, public relations, legitimacy and the role of the media, and institutional linkages, the fourth chapter reviews previous research on these constructs. The chapter firstly presents previous findings on corporate diplomacy and secondly on public relations as a legitimation strategy. Subsequently, previous research on the media’s role in gaining legitimacy and institutional linkages in the organizational legitimation process are reviewed.

Now that this thesis has introduced the theoretical framework and discussed the related main concepts of corporate diplomacy, public relations, legitimacy and the role of the media, and institutional linkages, the fourth chapter reviews previous research on these constructs. The chapter firstly presents previous findings on corporate diplomacy and secondly on public relations as a legitimation strategy. Subsequently, previous research on the media’s role in gaining legitimacy and institutional linkages in the organizational legitimation process will be reviewed. Lastly, the chapter discusses factors affecting organizational legitimacy building to derive the hypothesized model, summarizing the assumptions on direct and indirect corporate diplomacy effects on organizational legitimacy.

4.1 State of the Research on Corporate Diplomacy

Previous corporate diplomacy research has predominantly encompassed conceptual papers (e.g., Ingenhoff & Marschlich, 2019; Macnamara, 2012; Mogensen, 2019; Ordeix-Rigo & Duarte, 2009; Westermann-Behaylo et al., 2015). Some empirical exceptions have explored corporate diplomacy as the involvement of MNCs in public diplomacy and its contribution to nation branding and the enhancement of the corporation’s home country image (Fitzpatrick et al., 2020; White & Fitzpatrick, 2018; White & Kolesnicov, 2015; White et al., 2011). White and Fitzpatrick (2018) and Fitzpatrick et al. (2020) have examined corporations’ perceptions in the U.S. and Europe concerning their involvement in government-led public diplomacy efforts and the perceived relevance of the home country’s image for corporate diplomacy. Building on survey data (N = 30), White and Kolesnicov (2015) have concluded that MNCs do not intentionally engage in activities that advance public diplomacy outcomes, such as the image of their country of origin. However, the authors have discovered that although corporations are aware of the advantages of engagement with the host country’s government, they do not proactively seek to collaborate with governmental actors in the host country’s environment (White & Fitzpatrick, 2018). Fitzpatrick et al.’s (2020) study has confirmed these findings regarding MNCs’ perceived role in engagement in public diplomacy and nation branding. Their interview study with MNCs’ communication executives has found that MNCs particularly seek to achieve economic interests in the host country (Fitzpatrick et al., 2020).

White and Kolesnicov (2015) have explored the corporate diplomacy efforts of Romanian corporations on a national level and the role of companies in creating national identity in Romania. By conducting a qualitative case study, including an analysis of electronic corporate documents, the authors have concluded that corporate diplomacy contributes to a country’s identity, which may positively affect the country’s image in the international arena (White & Kolesnicov, 2015). Fitzpatrick and colleagues’ studies offer interesting insights into corporate diplomacy, particularly regarding their methodology in the interview studies (Fitzpatrick et al., 2020; White & Fitzpatrick, 2018). However, the conceptualization of corporate diplomacy as part of public diplomacy is not congruent with how this research conceives corporate diplomacy (see section 3.3).

Furthermore, corporate diplomacy has been studied as CSR efforts of MNCs in foreign countries and the self-attributed accountability of private companies for global issues (Weber & Larsson-Olaison, 2017) and as the link between CSR, public diplomacy, and nation branding (White et al., 2011). Weber and Larsson-Olaison (2017) have analyzed how German and Swedish MNCs demonstrate their engagement in the refugee crisis. By content-analyzing annual reports (N = 157), the authors have found that German corporations communicate more extensively about their participation in the emerging societal crisis than Swedish companies. They have concluded that German MNCs generally seem to demonstrate their obligation to deal with global societal issues more extensively (Weber & Larsson-Olaison, 2017). This finding points to the role of corporations as societal players in the global arena, referred to as corporate diplomacy. Even though their conceptualization has similarities to my understanding of corporate diplomacy, Weber and Larsson-Olaison (2017) have rarely pointed to the interaction between MNCs and their societal environment, which is the focus of this thesis.

Like Weber and Larsson-Olaison (2017), White et al. (2011) have analyzed corporate diplomacy in the realm of CSR in the case of U.S. corporations operating in Romania. By qualitatively content-analyzing news releases (N = 90), they have found that the CSR efforts of foreign MNCs, as part of corporate diplomacy, can contribute to creating a national culture in transitional countries. Accordingly, such corporate engagement in societal issues is comparable to governmental activities, contributes to the host country’s culture, and can enhance the home country’s image of foreign MNCs (White et al., 2011). Lastly, Mogensen (2017) has examined corporate diplomacy in a case study on a Chinese hydropower project in Myanmar, seeking to find out how corporate communication may play a significant role in solving conflicting interests between a country, social movements, and MNCs. The study has emphasized that foreign MNCs need to directly engage with the host country’s communities to effectively contribute to societal issues and solve conflicts in the host country (Mogensen, 2017).

The literature review on prior empirical research shows that, firstly, corporate diplomacy has been mostly researched as involvement in (government-led) public diplomacy. Secondly, quantitative analyses are significantly lacking. Thirdly, the link between corporate diplomacy and organizational legitimacy has been analyzed only marginally (Mogensen, 2017). Fourthly, studies on corporate diplomacy in the media and the direct effects of corporate diplomacy have not been conducted so far, to the best of my knowledge. Finally, corporate diplomacy has been rarely studied in the context of Western European MNCs, particularly regarding those operating in the Middle East region. Table 4.1 provides an overview of previous empirical research on corporate diplomacy.

Table 4.1 State of the research on corporate diplomacy

4.2 State of the Research on Public Relations as a Legitimation Strategy

Although the idea of building organizational legitimacy through public relations is not new, only a few scholars have explicitly outlined legitimacy as a key concept in public relations research (Merkelsen, 2013; Metzler, 2001; Sandhu, 2012; Wæraas, 2007, 2018; Yoon, 2005). Consequently, empirical public relations research on legitimacy is rare. Prior studies have analyzed the legitimacy efforts of private companies through the lens of CSR (e.g., Bachmann & Ingenhoff, 2016, 2017; Berg & Feldner, 2017) and in the context of crisis communication (e.g., Massey, 2001; Yim & Park, 2019). Moreover, studies have examined legitimacy in the context of not-for-profit organizations (NPOs) in the case of charitable organizations’ legitimacy (Wiggil, 2014) and concerning advocacy organizations and issue legitimacy (Mundy, 2013). Lastly, potential legitimacy conflicts of private companies have been studied in the issues of cultural diversity (Holmström et al., 2009), climate change (Livesey, 2002), and food safety (Merkelsen, 2013). In the following, relevant studies are briefly reviewed regarding the measurement of legitimacy and the key findings related to legitimacy.

Legitimacy and CSR Communication

In the context of a commodity trading corporation and a media company, Bachmann and Ingenhoff (2016, 2017) have developed and tested a CSR dilemma model that brings together the direct and indirect effects of CSR communication and organizational legitimacy. By conducting experimental surveys, Bachmann and Ingenhoff’s studies (2016, 2017) have indicated that the extent of CSR communication has significant direct and indirect effects on corporate legitimacy. In the case of the fictitious commodity company, corporate credibility was found to be a significant mediator, positively affecting corporate legitimacy (Bachmann & Ingenhoff, 2016). In the study, corporate legitimacy was measured as a latent construct, comprising items that analyze the congruence between the company’s activities and socially accepted norms and values, the company’s perception as legitimate, and the impression that the company complies with social standards (Bachmann & Ingenhoff, 2016). In a later study, Bachmann and Ingenhoff (2017) have measured the organizational legitimacy of a media company as the perception of the organization’s contribution to the public and its right to operate. Likewise, Lock and Schulz-Knappe (2019) have explored the effects of credible CSR on organizational legitimacy in the case of a fashion company by conducting an experimental survey. Organizational legitimacy was analyzed on two levels. First, cognitive legitimacy was measured as agreement with the company’s decision. Second, pragmatic legitimacy was studied as purchase intention. The study’s findings have implied that credible CSR communication results in higher purchase intention and decision agreement, which the authors interpreted as a positive effect on pragmatic and cognitive legitimacy (Lock & Schulz-Knappe, 2019). While Bachmann and Ingenhoff’s studies (2016, 2017) provide an interesting approach to measuring corporate legitimacy, the operationalization of organizational legitimacy by Lock and Schulz-Knappe (2019) significantly differs from the conceptualization of organizational legitimacy in this thesis as the perceived congruence between organizational behavior and societal expectations.

In contrast to the quantitative approaches of the previously presented studies, Berg and Feldner (2017) have applied a qualitative case study that critically assessed whether and how Coca-Cola uses public relations to manage organizational legitimacy on a moral level. In particular, the authors have reviewed Coca Cola blog posts to explore how its corporate communication on a political CSR topic follows ethical standards to manage public criticism of the company. Berg and Feldner (2017) have concluded that the public relations strategies were unsuccessful in gaining organizational legitimacy because the company failed to demonstrate that it meets societal expectations. Similarly, discussing organizational legitimacy as an alignment of societal expectations and corporate behavior, Dudenhausen et al. (2020) have investigated how corporate self-image and the public corporate image differ concerning perceived corporate responsibility. Building on a public survey and a content analysis of press releases and annual reports of clothing and banking companies, the authors have found a significant difference between a company’s self-image and its public image regarding company responsibility (Dudenhausen et al., 2020). Although the authors have neither explicitly measured organizational legitimacy nor further discussed their findings in the light of legitimacy, they have concluded that “legitimacy might be at risk when communication departments ignore the expectations of the public and thus cause the corporate self-image and the public image to diverge” (Dudenhausen et al., 2020, p. 29). Building on that, a more in-depth discussion on organizational legitimacy regarding societal expectations is necessary and undertaken by this research.

Legitimacy and Organizational Communication in Times of Crises

Organizational legitimacy was analyzed in the context of corporate crises. According to Massey (2001, p. 153), “[w]hen faced with a crisis, organizations are compelled to communicate strategically with stakeholders to manage legitimacy.” To test the effects of crisis communication strategies, Massey (2001) has conducted an experimental survey and found that organizations with consistent crisis responses increase organizational legitimacy. The experiment has analyzed the legitimacy perceptions of an airline, measuring the latent construct through the organization’s perceived credibility, safety, and right to operate (Massey, 2001). In contrast, Long (2016) has taken a qualitative approach to study the crisis communication strategies of the Red Cross Society of China. By reviewing the social networking sites, press releases, and media coverage of the Chinese Red Cross Society during a national scandal, the author has concluded that the organization failed to secure its legitimacy during the crisis due to a lack of transparency and failure to address societal expectations (Long, 2016).

Similar to Long (2016), other scholars have applied qualitative approaches to studying crisis communication strategies and their challenges in securing organizational legitimacy in the case of a previous scandal of Korean Air (Yim & Park, 2019) and of the U.S. Federal Emergency Management Agency during a national catastrophe (Veil & Anthony, 2017). Both studies have indicated that the most critical challenge of crisis communication regarding securing legitimacy is the potential increase of risk perception from the stakeholders’ perspectives (Veil & Anthony, 2017; Yim & Park, 2019). Moreover, the scholars have concluded that crisis communication might vary in its effects on moral, cognitive, and pragmatic legitimacy (Yim & Park, 2019).

However, case studies, such as the previously presented ones, are limited in generalizability and applicability to other studies. Nevertheless, particularly legitimacy research in crises underscores the relevance of studying public relations strategies in gaining legitimacy across stakeholders and levels (moral, pragmatic, and cognitive legitimacy). This thesis specifically seeks to learn more about the role of relationship building in gaining different legitimacy types, accounting for varying stakeholders and expectations.

4.3 State of the Research on the Role of Media in Gaining Organizational Legitimacy

The media are regarded as one of the most critical institutions in an organizational environment. Therefore, the media are essential for organizational legitimacy building (Baum & Oliver, 1991; Bitekine & Haack, 2015; Merkelsen, 2013). This argument is mainly reasoned by the assumption that the media not only reflects (Dowling & Pfeffer, 1975; Hybels et al., 1994) but influences public opinion (see agenda-setting theory, McCombs & Shaw, 1972). This phenomenon also applies to corporate-related news in the media and the public audience’s perception of a company (Carroll & McCombs, 2003). The particular importance of media representations for affecting organizational legitimacy perceptions among a wider audience lies in the perceived role of the media as “the share of voice that determines the evaluator’s perception of validity” (Bitekine & Haack, 2015, p. 8). For organizational legitimation, the media are relevant since it forms societal expectations of the community and organizations, thereby influencing public relations and corporate communications (Carroll & McCombs, 2003; Deephouse, 2000). By increasing the public visibility of organizations and evaluating organizational decisions and behavior, media coverage significantly affects organizational legitimacy perceptions (see section 2.2.3).

Due to its pivotal role in the legitimation process, scholars have increasingly analyzed the link between media and organizational legitimacy and how organizational legitimacy is enhanced through positive media portrayals (Deephouse, 1996; Humphreys, 2010; Marberg et al., 2016; Pollock & Rindova, 2003). Three overall approaches to studying organizational legitimacy through media coverage can be found in prior research. First, scholars have analyzed organizational legitimacy in the media as a public endorsement and the visibility of an organization (e.g., Deephouse, 1996; Kennedy, 2008; Pollock & Rindova, 2003). These studies have not examined organizational legitimacy on a specific level. Second, previous studies have investigated organizational legitimacy in the media on a cognitive level (e.g., Navis & Glynn, 2013; Schultz, Marin et al., 2013). These studies have mostly built on the assumption that media portrayals increase the recognition and publicity of organizations, which contributes to the comprehensiveness and taken-for-grantedness of organizations, referred to as cognitive legitimacy (Suchman, 1995). Third, a few studies have analyzed media evaluations of organizational decisions and behavior, measuring organizational legitimacy on a socio-political level (e.g., de Souza, 2010; Humphreys & LaTour, 2013). Previous findings within the three domains of analyzing legitimacy and media are presented and discussed in the following.

Legitimacy as Media Recognition

Most of the previous studies that have explored legitimacy in the media conceived media recognition or attention as “the amount of prominence or coverage that an actor, event, or issue receives” (Andrews & Caren, 2010, p. 843) to operationalize legitimacy (e.g., Baum & Powell, 1995; Deephouse, 1996; Pollock & Rindova, 2003). Deephouse (1996) is one of the first scholars who has analyzed organizational legitimacy in the media, which he defined as the public endorsement arising from media representations. In the case of commercial banking companies, his results indicate that, besides regulators, the media are a critical source of legitimacy even if the organizational age, size, and economic performance are included in the analysis (Deephouse, 1996). Pollock and Rindova (2003) have investigated the effects of media coverage on legitimacy in the case of initial public offerings. The authors have found that increased media-provided information positively affects stock turnover (Pollock & Rindova, 2003). Lastly, measuring legitimacy as the number of press articles on corporations, Deeds et al. (2004) and Kennedy (2008) have concluded that organizational legitimacy through media coverage positively influences the flow of economic resources in emerging industries. As these studies show, measuring organizational legitimacy as media recognition has only minor informative value for how media portrayals can contribute to organizational legitimacy since it does not consider what the media articles are about or whether they are positive or negative (except for Pollock & Rindova, 2003).

Media Coverage and its Link to Cognitive Legitimacy

Few studies have investigated legitimacy in the media on a cognitive level. Navis and Glynn (2010) and Schultz, Marin et al. (2013) have explored the media’s role as part of the legitimation process of new market categories. Analyzing linguistic patterns in news media coverage, Navis and Glynn (2010) have suggested that media coverage creates a cognitive construal of new market categories, mitigating incoherence, unfamiliarity, and unpredictability. These results imply that media attention, when not negatively connoted, can contribute to the organization’s perceived familiarity and stability and, in turn, to cognitive legitimacy. Schultz, Marin et al. (2013) have studied the emergence of the broadband market and revealed that positive media coverage of this market and related news helped build awareness about broadband technology among the industry, regulators, and customers. However, “[n]egative evaluation of the industry also strongly affected the emergence of the new category, but in this case, it played a de-legitimating role, reducing the rate of entry” (Schultz, Marin et al., 2013, p. 50). This finding emphasizes that cognitive legitimacy might be affected by the general occurrence of news coverage about an organization or industry and the valence of the news.

Furthermore, one study has explicitly analyzed cognitive legitimacy and its link to media presentations in the case of NGOs (Marberg et al., 2016). The scholars have examined how NGOs have been portrayed in the media for over 25 years and found that media coverage helped NGOs gain cognitive legitimacy by categorizing and labeling the organizational types of NGOs over time. Accordingly, media coverage presented NGOs mostly related to their good efforts and role as independent experts, thereby contributing to the understanding of NGOs’ unique purpose and  role in society. This process led to the proliferation and cognitive recognition of NGOs and, in this regard, to the cognitive legitimacy of an entire organizational type (Marberg et al., 2016).

Media Coverage and its Link to Socio-Political Legitimacy

Previous research has explored the role of media coverage in socio-political legitimacy, particularly moral legitimacy. In his study on the social acceptance of gambling among consumers, Humphreys (2010) has examined the role of media portrayals in constructing and changing the meaning of gambling, affecting cognitive and moral legitimacy perceptions regarding the issue. The author has conducted a discourse analysis with news articles on gambling between 1980 and 2007. Humphreys (2010) has concluded that media coverage shapes the legitimacy perceptions of gambling institutions in three ways—selection, validation, and realization. By selecting certain information, quotations, and examples and presenting them as congruent or incongruent with societal and cultural values, i.e., validation, the study has shown that media granted gambling and gambling institutions moral legitimacy. Humphreys has conceived media realization as the choice of media outlets to cover the topic of gambling, allowing for determining the awareness of gambling practices. According to Humphreys’s (2010) results, the media discourse has led to higher visibility of gambling and, in turn, granted cognitive legitimacy. Likewise, Humphreys and LaTour (2013) have explored the link between media frames and legitimacy judgments on online gambling compared to those of more established industries, including casino and lottery gambling. Building on a content analysis of media frames in combination with an event analysis, the authors have found that media frames “play a critical role in establishing legitimacy at the sociocultural level and that framing potentially bridges cognitive and normative [moral] legitimacy” (Humphreys & LaTour, 2013, p. 773). Similar to the previously mentioned scholars, de Souza (2010) has explored organizational legitimacy on the moral level. The study has analyzed which media frames occurred in the portrayals of NGOs and showed that NGOs are framed in four ways, favorably depicting NGOs and highlighting NGOs’ role as courageous visionaries that help develop a country (de Souza, 2010). Building on that, de Souza (2010) has concluded that media frames on NGOs significantly contribute to their legitimacy on a moral level.

Overall, Humphreys’s (2010; Humphreys & LaTour, 2013) and de Souza’s (2010) research offers interesting insights into the measurement of organizational legitimacy beyond media recognition and endorsement of an organization and its activities. Notably, their methodological approaches seem relevant for this thesis since cognitive and moral legitimacy were studied through analyzing media frames (Humphrey & LaTour, 2013). This approach allows for combining media recognition of corporate activities such as corporate diplomacy and media evaluation concerning these actions.

In the realm of public relations, research exploring media-based legitimacy has been scarce so far. One exception is the study by Merkelsen (2013), in which the author has explored the role of the institutional environment, including the media, in forming legitimacy perceptions of food safety. In addition to other methods, Merkelsen (2013) has deployed a qualitative content analysis of news media coverage to examine how food safety was presented in the media. The author has concluded that food companies are put under pressure by media evaluations, possibly threatening the legitimacy of food safety and the reputation of food companies. Although Merkelsen (2013) has not explicitly measured legitimacy on a particular level, he has linked organizational behavior to the regulative and moral restrictions emerging from the organizational environment and putting pressure on these organizations. The value of Merkelsen’s study mainly lies in embedding legitimacy in public relations and a neo-institutional approach. Although his field study approach significantly differs from the current research’s approach, Merkelsen’s study points to the role of the media in determining institutional logic that affects organizational behavior, the legitimacy of issues relevant to an organization, and organizational reputation. However, the studies of Humphreys (2010; Humphreys & LaTour, 2013) and Merkelsen (2013) have focused on the legitimation of an issue rather than an organization, the latter of which is the focus of this thesis.

Synopsis of Previous Research on Organizational Legitimacy and the Media

In summary, the literature review implies that media portrayals may affect legitimacy perceptions of organizations in two ways—first, by frequently covering and selecting information and activities related to a specific organization and by quoting organizational representatives, the media increases an organization’s prominence, comprehensibility, and familiarity, which contributes to organizational legitimacy on a cognitive level (Humphreys, 2010; Islam & Deegan, 2010; Lamertz & Baum, 1998; Marberg et al., 2016). Second, media coverage adds to organizational legitimacy on a socio-political level (moral, pragmatic, and regulative legitimacy) by evaluating organizational decisions and behavior, which makes some aspects more salient than others and determines how the organizational environment comes to know about its activities, such as corporate diplomacy. Notably, the concept of frames as “selective views on issues—views that construct reality in a certain way, leading to different evaluations and recommendations” (Matthes, 2012, p. 249) plays a critical role in forming organizational legitimacy judgments in the media (de Souza, 2010; Humphreys & LaTour, 2013; Marberg et al., 2016). However, the literature review on legitimacy and media also demonstrates that previous research has mostly applied a management and organizational studies perspective, focusing on the media’s role in organizational survival. A few studies went beyond that premise; however, they were not applied to the case of private companies.

4.4 State of the Research on the Role of Institutional Relations in Gaining Organizational Legitimacy

Previous research has explored the role of institutional relations in legitimacy building from different angles, including an institutional perspective that defines institutional linkage as “a direct and regularized relationship between an organization and an institution in the organization’s environment” (Baum & Oliver, 1991, p. 187). An institution has been regarded as a constituent of the organizational field with a high degree of community-wide impact, uncontested social acceptance, or legislative authority, affecting organizational decisions and behavior (Baum & Oliver, 1991; Zucker, 1987, 1988). In addition to the conceptualization as institutional linkages, other scholars have investigated institutional relations as group affiliations (Ma & Lu, 2017), as legitimacy spillovers (Kostova & Zaheer, 1999), or as organizational community (Ruef, 2000). In the following, studies from these perspectives and their main findings concerning legitimacy are presented and briefly discussed.

Institutional Relations as Institutional Linkages

In the first realm, previous research has examined how institutional linkages affect organizational existence and economic success (Baum & Mezias, 1993; Baum & Oliver, 1991; Singh et al., 1986). Baum and Mezias (1993) and Baum and Oliver (1991) have measured institutional linkages as ties between an organization and governments and between an organization and community representatives. First, in the context of day childcare organizations in Canada, the studies have shown that both linkages to a governmental institution and a community institution have a significant positive effect on organizational growth and survival (Baum & Mezias, 1993; Baum & Oliver, 1991). Second, Baum and Mezias’s (1993) study has indicated that governmental linkages have a stronger effect on organizational growth than community linkages. Building on these results, the authors have concluded that linkages to established actors in an organization’s environment significantly contribute to organizational legitimacy on an economic level (Baum & Mezias, 1993). According to Baum and Oliver (1991), an organization’s institutional linkages to an established or socially accepted organization such as the government increase the perception of congruence between organizational behavior and societal norms and values. In this regard, the external evaluation of institutional linkages facilitates the assessment of the organization since the established institution is well-known and can be regarded as legitimized: “Relationships will be viewed more favorably to the extent that they are perceived to be consistent with the normative expectations imposed on these relationships” (Baum & Oliver, 1991, p. 214).

Institutional Relations as Group Affiliations

In the second perspective, Ma and Lu (2017) have conceptualized institutional relations as group affiliations, conceiving the construct as the “embeddedness or interconnectedness of business groups with leading formal and informal institutions [that] should confer resources and legitimacy to business groups and their affiliates in the institutional context” (p. 678). In their study, Ma and Lu (2017) have explored group affiliations in annual reports and Chinese companies’ websites. By analyzing the relationship between group affiliations’ effects on a company’s market value of equity and organizational traits such as firm age and size, the study has indicated that group affiliations significantly moderate the effect of organizational traits on firm value (Ma & Lu, 2017). Ma and Lu (2017) have not directly measured organizational legitimacy but related the firm value to organizational legitimacy as a strategic resource.

Institutional Relations as Legitimacy Transfer between an Overall Population and its Subpopulations

In the third view of institutional relations, Kuilman and Li (2009) have analyzed how an organizational subpopulation’s legitimacy benefits from the legitimacy of the overall population. They have conceived the legitimacy of an overall population as “the extent to which the population is socially recognized, and its existence is taken for granted” (p. 229). A subpopulation represents an organization that is a member of the overall population (Kuilman & Li, 2009). The authors have analyzed secondary data on media reports in the context of banking companies in China to test the effect of the legitimacy transfer of the overall population on its subpopulations. The study has found that subpopulations that were less fitting to the overall population could benefit the most from legitimacy spillovers, while they could rarely contribute to the overall population’s legitimacy (Kuilman & Li, 2009). This result implies that the more similarly a subpopulation displays itself to its overall population, for instance, an MNC’s subsidiary and its headquarters, the less it can benefit from a legitimacy spillover.

In contrast to this finding, Li et al. (2007) have found that similarities between organizations, such as the industry sector and the country of origin, contribute to organizational legitimacy. Li et al. (2007) have revealed that foreign MNCs could profit from other MNCs’ legitimacy as long as they demonstrate similar behavior. The authors have explored whether foreign MNCs’ subsidiaries entering the Chinese market are perceived as more legitimate (measured as public acceptance in the media) when they show entry modes similar to those of previously established foreign MNCs (Li et al., 2007). The more an organization acts like another organization already established, the more likely legitimacy spillovers are (DiMaggio & Powell, 1983; see also Kostova & Zaheer, 1999).

Institutional Relations as an Organizational Community with the Same Identities

Lastly, institutional relations were researched as an organizational community, defined as “a bounded set of forms with related identities” (Ruef, 2000, p. 658). In the context of the U.S. healthcare industry, Ruef (2000) has analyzed how new organizations are affected by their positioning of organizational identity concerning existing identities in the community. When organizations demonstrate similar identities, the author has found that they increase the probability of legitimation (Ruef, 2000). In line with that, McKendrick et al. (2003) have revealed that the fit between the individual identity of an organization and its collective, established identity significantly contributes to organizational legitimacy on a cognitive level.

However, the presented studies on institutional relations have operationalized legitimacy mostly as organizational survival or growth and have not explored a specific level of organizational legitimacy or the role of societal values in organizational legitimacy. Furthermore, prior research on institutional linkages and legitimacy can mostly be found in organizational studies and sociology and have, to the best of my knowledge, not been linked to public relations or communications research so far.

4.5 State of the Research on Institutional Linkages and Intervening Variables in the Legitimation Process

This chapter is partly derived from an article published in Public Relations Review by Marschlich, S., & Ingenhoff, D. (2022). Public-Private Partnerships: How Institutional Linkages Help to Build Organizational Legitimacy in an International Environment. Public Relations Review, 48(1), 102124, available online: https://doi.org/10.1016/j.pubrev.2021.102124.

The previous subchapters have shown that media coverage plays a critical role in shaping legitimacy judgments concerning an MNC and its activities. Moreover, it has been demonstrated how institutional linkages affect organizational legitimacy. Building on prior research (Baum & Mezias, 1993; Baum & Oliver, 1991), it can be assumed that corporate diplomacy news linking the MNC with an already-established actor in the host country’s environment (in terms of institutional linkages) positively affects organizational legitimacy perceptions compared with such news that does not display institutional linkages. This research examines the role of institutional linkages between a foreign MNC and the local government in the UAE. Consequently, the following hypothesis can be stated:

H1: :

Corporate diplomacy with institutional linkages to the host country's government leads to a higher perception of organizational legitimacy (on the moral, pragmatic, and regulative levels).

However, the previous literature has pointed to several intervening variables that may affect the relation between institutional linkages and organizational legitimacy. First, the effect of institutional linkages depends on the perceived legitimacy of the institution that an organization links itself to (Baum & Mezias, 1993; Baum & Oliver, 1991). Applied to this thesis, the effect of the institutional linkages between the foreign MNC and the local government is assumed to depend on the perceived legitimacy of the UAE Government. The more the government is perceived as legitimate, the higher the MNC’s perceived legitimacy is (see Baum & Oliver, 1991). Moreover, it can be expected that the corporate diplomacy initiative expresses desirable outcomes contributing to the host country’s society due to the orientation of corporate diplomacy initiatives toward the local community. When the corporate diplomacy initiative involves the government, the government may be perceived as acting in a (more) desirable manner (see Suchman, 1995), and the government’s legitimacy spills over to the perceived legitimacy of the MNC, as proposed by previous research (Baum & Oliver, 1991; Kostova & Zaheer, 1999). These arguments lead to the second and third hypotheses:

H2: :

Corporate diplomacy with institutional linkages to the host country's government positively affects the perceived legitimacy of the government.

H3: :

The perceived legitimacy of the government positively influences organizational legitimacy.

Moreover, it is assumed that due to the significant power and impact of the UAE Government on local society, the institutional linkage between a foreign MNC and the local government positively affects the perception of the corporate diplomacy issue. As Kostova and Zaheer (1999) have pointed out, information on foreign MNCs in any host country is scarce, leading to the liability of the foreignness of MNCs. The institutional linkage with the government, which can be regarded as a cognitive relationship between the MNC and the government, emerges (“bounded rationality,” Kostova & Zaheer, 1999) and enhances the evaluation of the MNC and that of the issues the company engages in (Kostova & Zaheer, 1999). Following this, it can be presumed that the perception of the issue promoted through the joint corporate diplomacy initiative between the company and the government can be positively affected by the government’s involvement. At the same time, as previous studies have indicated, issue legitimacy affects whether the organization is perceived as appropriate and proper and, in this sense, is regarded as legitimate (Chung et al., 2016; Coombs, 1992). Coombs’s study (1992) has shown that issues considered difficult or inappropriate harm the legitimacy of the company that promoted this issue. Similarly, Chung et al. (2016) have found that issue legitimacy, conceived as the adequateness of an issue or an organizational action, positively influences the social environment’s acceptance of the organization related to the issue. Social acceptance and the perception of appropriateness constitute organizational legitimacy (Bitekine, 2011; Suchman, 1995). Hence, the following hypotheses are stated:

H4: :

Corporate diplomacy with institutional linkages to the host country’s government positively affects issue legitimacy.

H5: :

Issue legitimacy positively affects organizational legitimacy.

In addition, recent research has shown that people in the UAE highly trust the local government (Edelman Trust Barometer, 2020), which might be related to its achievements in recent years regarding education, public health, and other public goods (Khaleej Times, 2016). The Edelman Trust Barometer (2020) has shown that the trust in UAE media outlets is significantly lower than the people’s trust in the government. In addition, the rated competence of the UAE media is significantly lower than the rated expertise of the UAE Government (Edelman Trust Barometer, 2020). Following Newell and Goldsmith (2001), trustworthiness and expertise are the two dimensions making up credibility. Therefore, it can be assumed that individuals perceive UAE news outlets as more credible when the government is involved since the UAE Government is more trusted and perceived as more competent compared to local media outlets. Finally, previous scholarship has suggested that organizational legitimacy is influenced by the perceived credibility of the source in which organizational action is displayed and evaluated (Bachmann & Ingenhoff, 2016; Lock & Schulz-Knappe, 2019). In this thesis, the source of corporate diplomacy content is the news media. The media’s influence on individuals’ perceptions and judgments depends on the extent to which individuals believe what they read in the media, conceived as media credibility (Finch et al., 2015). Finch et al. (2015) have analyzed the effects of environmental values and source credibility on legitimacy in the oil industry. They have found that media credibility significantly affects the evaluation of industry legitimacy. Furthermore, Bachmann and Ingenhoff (2016) have explored the impact of CSR disclosure on organizational legitimacy and revealed that content credibility significantly affects this relation. In particular, the study has indicated a positive effect of content credibility on organizational legitimacy (Bachmann & Ingenhoff, 2016). Following these arguments, the subsequent hypotheses are posed:

H6: :

Corporate diplomacy with institutional linkages to the host country's government affects media credibility.

H7: :

Media credibility positively influences organizational legitimacy.

A summary of the hypotheses can be found in Figure 4.1.

Figure 4.1

Model of the effects of corporate diplomacy on organizational legitimacy