The impact of globalization on legitimacy signals : The case of organizations in transition environments

Purpose – The aim of this paper is two‐fold: to examine the challenges that organizations that have originated in transition environments face when moving from one layer of the environment (local/national) to another one (international/global) and to enrich the understanding of the legitimacy concept by looking at two types of legitimacy (functional and relational) relevant to the organizations in transition environments trying to access the global marketplace. Design/methodology/approach – Drawing on the legitimacy needs of organizations evolving in transition environments and trying to access a different environmental layer, we developed a signalling theory of legitimacy. Findings – When trying to move from one layer of the environment to another one, organizations will use different types of legitimacy signals in order to address the liabilities they face. Research limitations/implications – The research examines organizations facing both drastic environmental changes and evolving in a global industry. Future research can separately study the impact of each factor; and also investigate additional types of liabilities. Practical implications – The study can help organizations from transition and emerging economies identify and employ signals that can enhance their organizational legitimacy, which may affect their performance. Additionally, public policy implications are developed in order to stimulate local businesses. Originality/value – The multidimensionality of a signalling theory of legitimacy – functional and relational – increases our understanding of organizations facing liabilities, such as firms evolving in transition environments and trying to access the global marketplace.