Organizational Strategies in the Context Of Legitimacy Loss: Radical versus Gradual Responses to Disclosed Corruption

Strategic Organization, Online First. DOI: 10.1177/1476127016685237

59 Pages Posted: 25 Feb 2014 Last revised: 21 Feb 2017

See all articles by Stefan Schembera

Stefan Schembera

University of Zurich - Department of Business Administration

Andreas Georg Scherer

University of Zurich - IBW Department of Business Administration

Date Written: January 23, 2017

Abstract

How do organizations respond to the loss of legitimacy in the context of disclosed corruption, and what drives the particular responses adopted? In this article, we study the organizational strategies of three multinational companies before, during, and after legitimacy loss due to disclosed organizational corruption. We explore why some multinational companies exceed regulatory expectations and choose radical strategies that substantially influence their environment by defining a new benchmark of anti-corruption practices, while others follow a more gradual approach. We build on the concept of legitimacy in institutional theory and focus on three strategies that organizations tend to adopt to regain legitimacy: isomorphic adaptation, moral reasoning, and strategic manipulation. Based on our empirical study, we suggest that when a transgression is accompanied by a strong legitimacy shock, transgressors are likely to see no alternative but to react both radically and instantly. We identify two distinct extremes of strategic manipulation: decoupling and substantial influence.

Keywords: corporate social responsibility, corruption, institutional environment, legitimacy, organizational response, reintegration, transgression

Suggested Citation

Schembera, Stefan and Scherer, Andreas Georg, Organizational Strategies in the Context Of Legitimacy Loss: Radical versus Gradual Responses to Disclosed Corruption (January 23, 2017). Strategic Organization, Online First. DOI: 10.1177/1476127016685237. Available at SSRN: https://ssrn.com/abstract=2400936 or http://dx.doi.org/10.2139/ssrn.2400936

Stefan Schembera (Contact Author)

University of Zurich - Department of Business Administration ( email )

Universitaetsstrasse 84
Zurich, 8006
Switzerland
+41 (0)44 634 5309 (Phone)
+41 (0)44 634 5301 (Fax)

HOME PAGE: http://www.business.uzh.ch/professorships/as/team/staff/schembera.html

Andreas Georg Scherer

University of Zurich - IBW Department of Business Administration ( email )

Universitätsstrasse 84
Zurich, 8006
Switzerland
+41 44-63 45302 (Phone)
+41 44-63 45301 (Fax)

HOME PAGE: http://www.business.uzh.ch/professorships/as.html

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