Session 150

Legitimacy, Liabilities and Institutions

Track A

Date: Tuesday, October 9, 2012


Time: 17:30 – 18:45


Room: Meeting Hall IV (b)

Session Chair:

  • William Newburry, Florida International University

Title: A Little Birdie Told Me: Twitter and Organizational Legitimacy in Initial Public Offerings


  • Cameron Verhaal, Georgia State University
  • Chong Oh, University of Utah
  • Leif Lundmark, University of Nebraska-Omaha

Abstract: Drawing on the organizational legitimacy literature, we propose and test a set of preliminary and high level hypotheses that suggest that social media, specifically Twitter, serves as a mechanism for conferring legitimacy in the market for initial public offerings (IPOs). We find broad support for our claims that simply having a Twitter account, and the extent to which a firm utilizes Twitter, will impact IPO performance. The extant literature has identified traditional media outlets as a valuable source of organizational legitimacy, however, social media and micro-blogging remain outside of our current classification of the phenomenon. Our findings, though preliminary, have significant implications for the theoretical underpinnings of legitimacy and organization theory, as well as practical implications for strategic use of an emergent technology.

Title: Do Local Firms Incur a Liability of Localness? The Case of Emerging Country Firms\' Outward FDI in Developed Countries


  • Fuming Jiang, Curtin University
  • Htwe Htwe Thein, Curtin University

Abstract: Prior studies revealed that local indigenous firms in emerging developing countries suffer from a liability of localness resulting from the inward foreign direct investment, especially by developed country multinationals, and this liability and its effects on local firm performance may continue to present as long as the foreign firms exhibit a significant competitive advantage over local firms. This study joins academic debates on this frontier, yet, under-researched issue confronting international business researchers and practitioners and makes a counter-argument that the localness of developed country firms may not be a liability in the context of emerging country firms’ investment in developed countries.

Title: Too Much Love? Institutional Support and the Odious Specter of Strategic Incoherence


  • Richard Hunt, Virginia Polytechnic Institute

Abstract: In times of transition, governmental institutions often play a lead role in facilitating the sociopolitical and cognitive legitimacy of emerging industries through regulatory policies that encourage firm formation and rapid market growth. Reasonable though this may at first seem to be, excessive munificence may invite unintended consequences. Using a dataset of six million transaction-level decisions involving all 612 companies and 56,465 permitted projects from a complete industry history, I find that firms will substitute the legitimizing effects of institutional support for strategic coherence. While institutional support does in fact generate a legitimacy dividend, the ill-effects of excessive munificence are evidenced by indiscriminate, contagion-style market entry by unfit firms that perform poorly, fail quickly, and leave a long trail of regulatory violations in their collective wake.

Title: Trading Partner Selection in Online Marketplaces: Does it Matter Where You Are and What You Are?


  • Gianvito Lanzolla, City University London
  • Vanina Torlo, University of Greenwich

Abstract: In this paper we seek to shed more light on the antecedents of seller selection in online marketplaces. We argue that when looking for trading partners buyers are more likely to select sellers that are characterized by strong institutional signals that help reducing the uncertainty around them. We identify two such institutional signals – i.e. seller’s location and seller’s legal status - and we hypothesize that the higher the ranking of the seller’s institutional signal, the higher the likelihood to be selected as a trading partner. Model estimations show support for our hypotheses.

All Sessions in Track A...

Mon: 08:00 – 09:15
Session 147: Emerging Market Firms and Complex Institutional Environments
Mon: 09:30 – 10:45
Session 220: Political Strategies in Transition Contexts
Mon: 13:30 – 14:45
Session 221: National Institutions and Firm Behavior
Mon: 16:30 – 17:45
Session 154: Embeddedness, Networks and Non-Market Strategies
Tue: 08:00 – 09:15
Session 153: Cognition, Bounded Rationality and Strategy
Tue: 11:00 – 12:15
Session 151: Coevolution of Institutions and Firm Strategy
Session 152: Institutional Change and Innovation
Tue: 14:15 – 15:30
Session 155: Institutional Transitions and Internationalization Strategies
Tue: 15:45 – 17:00
Session 219: Strategic Responses to Institutional Change
Tue: 17:30 – 18:45
Session 150: Legitimacy, Liabilities and Institutions

Strategic Management Society