Signalling legitimacy for SMEs transition environments - the case of the Bulgarian IT Sector

This research looks at legitimacy challenges of SMEs evolving in transition environments. Facing lower visibility, higher institutional pressures and limited resources, SMEs experience stronger need to demonstrate their legitimacy, their adherence to the requirements of evaluating audiences. Two types of legitimacy are discussed – functional and relational – that better capture the legitimacy needs of SMEs in transitional contexts. Being multi-dimensional constructs, their dimensions are identified, and measurements are proposed and tested using the structural equation modelling technique. The model was tested on data from the Bulgarian IT sector.