Corporate Political Activities and Firm Legitimacy in Institutionally Challenging Context

This thesis integrates resource dependency and institutional theories in exploring the impact of varying corporate political activities (CPA) on firm legitimacy, in a weak institutional context. Drawing on an extensive and rigorous systematic literature review, utilizing a comprehensive set of survey data from 260 firms operating in Nigeria, and employing analytical quantitative techniques, this thesis integrates three interrelated empirical studies exploring the CPA-legitimacy relationship. The first empirical study investigates the current state of knowledge on the Corporate Political Ties (CPT) literature. Ninety-one studies from leading journals were reviewed and synthesised into an integrating framework linking CPT with its antecedents, strategies, and consequences. Altogether, the findings reveal that that current CPT research could be categorised along these dimensions. The review additionally identified commonly reviewed themes in the literature, uncovers unexpected omissions, and highlights research gaps, if pursued, could enrich the literature. For academics, the systematic review offers a reliable and current knowledge base, and represents a reference point for practitioners, to further develop the field and accumulate knowledge. The second empirical study investigates the impact of varying corporate political activities (financial incentive strategy, constituency building strategy, and managerial political ties) on firm legitimacy. It additionally investigates the role of the mediating mechanism; manipulation, linking various corporate political activities (CPA) to firm legitimacy, in weak institutional context. Altogether the findings reveal that the implementation of CPA aids in obtaining legitimacy in weak institutional contexts. Second, our findings additionally reveal that firms employ CPA in strategically manipulating their institutional context, so as to shape institutional perceptions and norms to justify their legitimacy. In sum, the findings attest to the conjectured efficacy of manipulation in legitimacy building. Therefore, extending Banerjee and Venaik’s (2017) study into weak institutional contexts. It further aids in unravelling the underlying mechanism around CPA-legitimacy relationship, a nascent aspect, for better political and theoretical strategizing. The third empirical study helps to unpack the ‘‘black box’’ regarding the process by which firms build legitimacy from “regulatory ties” in a weak institutional context. Prior, in the CPA literature, “regulatory ties” have often been theorised with “political ties” under the umbrella of “political actors”. This has not allowed for the unpacking and explicating of the role and value of regulatory ties on firm performance outcomes more generally, and in legitimacy building, more specifically. This study helps to explicate the role of regulatory ties in legitimacy building. It additionally explores the role of “conformance” in meditating the regulatory tie-legitimacy relationship. Further exploring the moderating effects of regulatory autonomy and information strategy. The findings reveal that regulatory ties enhance firm legitimacy. It further reveals that firms will adopt regulatory ties in communicating “conformance” and adherence to regulatory demands in order to obtain legitimacy. We also find that information strategy is effective in helping firms nurture regulatory ties and achieving conformance with its institutional context. Additionally, regulatory autonomy is of no consequence to firms building legitimacy with regulators in weak institutional context. This thesis helps to explore the CPA-legitimacy relationship. It contributes to CPA literature, legitimacy literature, Institutional and resource dependency theories. It confirms and upholds the salient role of corporate political activities for legitimacy building in weak institutional context. It further addresses the salient, but often ignored “how” question, in an often-ignored institutional context, in the CPA research. On the resource dependency fronts, this thesis enriches the resource dependence theory by treating managerial CPA as instruments for managing institutional dependency and pressures. It additionally contributes to institutional theory by deepening insight into how institutional strategies can impact legitimacy outcomes.