Managing Legitimacy in Business‐Driven Social Change: The Role of Relational Work

• Published date: 01 June 2020
• Date: 01 June 2020
• DOI: http://doi.org/10.1111/joms.12544
• Author: Verena Girschik

© 2020 Society for the Advancement of Management Studies and John Wiley & Sons, Ltd.

Managing Legitimacy in Business-Driven Social

Change: The Role of Relational Work

Verena Girschik

Copenhagen Business School

ABSTRACT This paper examines how companies manage their legitimacy in driving social

change, drawing attention to how companies proactively negotiate their involvement with

nonmarket actors. Building on the legitimacy-as-process perspective, I argue that companies

construct the legitimacy of their involvement by engaging in relational work, that is, by invest-

ing efforts in shaping their relations with others and thereby redefining roles and responsibilities.

To explore the role of relational work in business-driven social change, I present an inductive,

interpretive study of a pharmaceutical company’s efforts to build a market for its products by

improving diabetes care in Indonesia. Grounded in the empirical study, I develop a process

model to explain how legitimacy is redefined from the bottom-up, that is, how a company’s

involvement is re-negotiated in situ and crafted to attain the social approval of a wider audience.

Advancing the micro-foundations of nonmarket strategy, the model offers new insights into how

companies can organize with nonmarket actors and how they can effectively publicize their

involvement as socially responsible. I also discuss the model’s implications for a more critical

research agenda on the political responsibilities of companies in social change.

Keywords: business in society, legitimacy, nonmarket strategy, relational strategies, social

change

INTRODUCTION

Companies are increasingly addressing social problems such as environmental degrada-

tion, poverty, and public health crises, especially in developing countries and emerging

markets where resources are scarce. In doing so, they are filling gaps in local governance

and providing public goods, thereby catalysing social change and saving lives (Matten

and Crane, 2005; Scherer and Palazzo, 2011; Scherer et al., 2016). For example, most

pharmaceutical companies now invest in public health and improving access to care for

Journal of Man agement Studi es 57:4 June 2020

doi:10. 1111/j om s.1 25 44

Address for reprints: Verena Girschik, Department of Management, Society and Communication, Copenhagen

Business School, Dalgas Have 15, 2000 Frederiksberg, Denmark (vg.msc@cbs.dk).

776 V. Girschik

© 2020 Society for the Advancement of Management Studies and John Wiley & Sons, Ltd.

people in need (Access to Medicine Foundation, 2014). Such involvement is rarely mo-

tivated by managerial philanthropy or societal expectations alone; rather, companies fill

governance gaps and shape their nonmarket environments with a view to attaining com-

petitive advantage (Baron, 1995, 2016; Doh et al., 2012; Marquis and Raynard, 2015;

Oliver and Holzinger, 2008; Yin and Jamali, 2016). Companies drive social change in

order to realise market opportunities, thereby ideally creating value for both business and

society (Husted et al., 2012; Porter and Kramer, 2011).

Companies’ political activities aimed at driving social change are often met with sus-

picion, in many cases being considered controversial or even outright illegitimate (Bhanji

and Oxley, 2013; Palazzo and Scherer, 2006). With regard to public goods, the legitimacy

of companies’ activities is beset by moral concerns as to whether they are ‘the right

thing to do’ (Palazzo and Scherer, 2006; Suchman, 1995). The intrinsic problem with

business-driven social change is that whenever business and societal objectives collide the

risk arises that business interests will dominate the trajectory of change (Banerjee, 2008;

Barley, 2007; Crane et al., 2014). Even when companies espouse a commitment to soci-

etal objectives they are still perceived as making public welfare choices from a business

mindset and as prioritising strategic considerations over the needs of local communities

(Valente and Crane, 2010). For these and other reasons, companies lack legitimacy as

political actors and hence as agents of social change (Bhanji and Oxley, 2013; Lawrence,

1999).

The nonmarket strategy literature has highlighted how companies manage their legit-

imacy by engaging in public discourse around social problems and by deliberating their

involvement with regulators and with the public (Joutsenvirta and Vaara, 2015; Patriotta

et al., 2011; Reinecke and Ansari, 2016; Scherer and Palazzo, 2011). When their involve-

ment is construed as socially responsible, they may legitimately participate in political

activities and drive social change (Palazzo and Scherer, 2006; Scherer et al., 2013, 2016).

This perspective is too narrow, however, in that it does not account for companies’ stra-

tegic efforts and their idiosyncratic involvement in local contexts (Frynas and Stephens,

2015; Mäkinen and Kourula, 2012; Whelan, 2012). Indeed, it is widely known that com-

panies pursue their self-interests by driving or influencing change through their relations

with social or political actors (Doh et al., 2012; Hillman and Hitt, 1999; Marquis and

Raynard, 2015; Mellahi et al., 2016; Oliver and Holzinger, 2008). Since the literature

has mainly focused on how companies gain legitimacy in public discourse, we know little

about how they negotiate their involvement with those they aim to co-opt, consociate or

collaborate with.

In this paper I aim to provide new insights into how companies manage their legitimacy

as they cultivate relations with nonmarket actors. In doing so I argue that companies can

redefine legitimacy from the bottom up as they engage in relational work - defined as

the activities and practices through which actors purposely craft, maintain and shape

their relations and thereby renegotiate roles and responsibilities. To explore the role of

relational work in business-driven social change I present an inductive, interpretive study

of a pharmaceutical company’s efforts aimed at building a market for its products by

improving diabetes care in Indonesia. Because the company’s interest in social change

was seen as being business-driven, nonmarket actors sought to protect their own legiti-

macy by avoiding relations with the company. In detailing the company’s sensitive and