How Do Individuals Judge Organizational Legitimacy? Effects of Attributed Motives and Credibility on Organizational Legitimacy

Abstract

This experimental study examines individuals’ legitimacy judgments. We develop a model that demonstrates the role of attributed motives and corporate credibility for the evaluation of organizational legitimacy and test this model with an experimental vignette study. Our results show that when a corporate activity creates benefits for the firm—in addition to social benefits—individuals attribute more extrinsic motives. Extrinsic motives are ascribed when a corporation is perceived as being driven by external rewards as opposed to an altruistic commitment to a social cause. Extrinsic motives negatively affect corporate credibility and organizational legitimacy judgments. This article contributes to a better understanding of the complex process of organizational legitimacy judgment by shedding light on the individual’s perspective and expounding the relationship between attributed motives, corporate credibility, and organizational legitimacy.

Keywords

attributed motives credibility experiment individual level legitimacy

Twenty years after the seminal article by Elsbach (1994), the interest in individual legitimacy judgments among scholars has reignited. Although in recent years theoretical models have substantially enhanced our understanding of individual legitimacy judgments (Bitektine & Haack, 2015; Tost, 2011), we still lack studies that explore this issue empirically.

Previously, empirical research has dedicated much attention to collective legitimacy judgments, for instance, by assessing the public opinion through media coverage (Joutsenvirta, 2013). Although both individual and collective judgments of legitimacy are about the appropriateness of an organization in respect to norms and values (Deephouse, Bundy, Tost, & Suchman, 2017), they differ at least in one important aspect. While individuals are often aware of and even influenced by collective legitimacy, they still have distinct beliefs about an organization that affect their evaluation of organizational legitimacy. These beliefs can only be investigated on an individual level.

This article seeks to investigate the legitimacy judgment process of individuals. We address individual legitimacy judgments by defining it as an attitude (Finch, Deephouse, & Varella, 2015). By definition, an attitude is the sum of beliefs about an object, person, or organization (Ajzen & Fishbein, 1980). This perspective on legitimacy is appropriate as it takes into account the beliefs on which individuals base their legitimacy judgment. For instance, Finch et al. (2015) show that industry credibility is an important belief positively related to industry legitimacy. Credibility, in turn, is affected by the motives that people perceive to drive organizational actions (Alcañiz, Cáceres, & Pérez, 2010), from here on called attributed motives. This is because people often care more about why certain activities have been conducted than about the outcomes these activities deliver (Gilbert & Malone, 1995). To sum up, we conceptualize individual legitimacy judgments of organizations as attitudes that are affected by two beliefs: corporate credibility and attributed motives.

We conducted an experimental vignette study to test our research model. In a between-subject design, participants were asked to assess different legitimation efforts—more specifically, communication regarding the benefits of investments in environmental innovations. Our results show that corporate activities providing social as well as company benefits augment the attribution of extrinsic motives such as profit interest, which, in turn, adversely affect credibility and legitimacy judgments.

This article has two major contributions to the growing body of literature on organizational legitimacy. First, defining legitimacy judgments as attitudes opens up an avenue to bridge insights from social psychology on attitude formation with legitimacy research. While it was known before that collective and individual judgment is not necessarily congruent, we demonstrate how two individual beliefs—attributed motives and credibility—lead to a change in legitimacy judgment. Second, we examine the individual perspective empirically. Our research answers the call for causal–effect designs in business and society research (Oll, Hahn, Reimsbach, & Kotzian, 2018) and more importantly, the call for experimental research on legitimacy judgments (Bitektine & Haack, 2015; Deephouse et al., 2017; Tost, 2011).

Theoretical Background

Legitimacy is a central construct of institutional theory. It deals with evaluations of the actions of an entity as appropriate “to a social system in terms of rules, values, norms, and definitions” (Deephouse et al., 2017, p. 32). Although scholars stress that these evaluations are generalized and, thus, a collective phenomenon, organizational legitimacy is also an evaluation made by individual actors (Bitektine & Haack, 2015). However, research has only begun to theorize and empirically investigate organizational legitimacy as an individual phenomenon.

Two empirical studies on individual legitimacy judgments offer important insights for our study. First, Elsbach (1994) used a within-subject experimental design to test the effectiveness of different legitimating strategies of the cattle industry, which was exposed to public criticism due to food safety and environmental concerns. She showed that a combination of acknowledgment of responsibility with reference to widely institutionalized characteristics were most effective in defending legitimacy. Elsbach concluded that evaluators expect the organization to communicate about its conformity with normative practices. From this study, we mainly conclude that based on the reasons organizations give for their actions, evaluators form beliefs about attributes of the organization and, thus, judge organizational legitimacy. Second, Finch and colleagues (2015) examined the legitimacy—as an attitude—of the oil sands industry in Canada, which is considered to lack legitimacy due to its negative impact on the environment. In their survey, they show that participants who favor environmental values judge the legitimacy of the oil sands industry negatively, whereas those who favor financial values judge the industry’s legitimacy positively. In addition, credibility of the industry was positively correlated with its legitimacy. This study has two important takeaways for our article: First, it provides evidence that considering legitimacy as an attitude is a fruitful avenue for this research stream. Second, credibility is an important factor that influences legitimacy judgments.

Organizational Legitimacy as an Attitude

In this study, we follow Finch and colleagues (2015) and consider an individual’s legitimacy judgment as an attitude. An attitude is defined as an “evaluation of an object, concept or behavior along a dimension of favor or disfavor, good or bad, like or dislike” (Fishbein & Ajzen, 2010, p. 78). This means that legitimacy judgments lead to social evaluations regarding the appropriateness of organizations (Deephouse et al., 2017). The favorability depends on the evaluation against a benchmark. With respect to organizational legitimacy, this benchmark is the norms and values that the organization is expected to fulfill. Because “legitimacy resides in the eye of the beholder” (Ashforth & Gibbs, 1990, p. 177), each individual may apply a different set of norms and values to evaluate legitimacy. If the individual’s expectations are met, the organization is judged as legitimate, which corresponds to a favorable attitude toward the organization.

The expectations on the organization and their perceived fulfillment depend on individuals’ beliefs. A belief is formed when individuals associate the organization with a particular characteristic or attribute (Fishbein & Ajzen, 2010). These associations are regarded as true despite inconclusive evidence (Colman, 2015). Fishbein and Ajzen (2010) conceptualize attitudes as a sum of beliefs. Hence, a change in beliefs always implies a change in attitude. With respect to legitimacy, if an individual believes an organization has valuable characteristics, his or her attitude toward that organization will be more favorable.

Credibility and Attributed Motives as Beliefs

There is strong evidence in the literature highlighting the crucial role of credibility on attitude formation (Chaiken & Maheswaran, 1994; Lafferty & Goldsmith, 1999). Simultaneously, legitimacy research has often taken for granted a strong relation between credibility and legitimacy (Derry & Waikar, 2007; Meyer & Rowan, 1977; Suchman, 1995; van Rijnsoever, Welle, & Bakker, 2014).

Credibility is a belief because it refers to positive attributes of the company, which lead its audience to accept its corporate messages (Ohanian, 1990). Although credibility has been conceptualized as a two-dimensional construct (Hovland, Janis, & Kelley, 1953), empirical research has predominantly concentrated on one dimension: trustworthiness. Trustworthiness reflects a company’s willingness to genuinely disclose what it knows (Hovland et al., 1953; Newell & Goldsmith, 2001; Pornpitakpan, 2004). Expertise, the second dimension, refers to a company’s relevant knowledge of an issue, which enables it to disclose correct statements (Hovland et al., 1953). In line with previous research, we will focus on trustworthiness as the dominant aspect of credibility.

Credibility itself is influenced by what individuals believe to drive organizational actions—so-called attributed motives (Alcañiz et al., 2010). Such assessments are difficult if not impossible to verify by individuals. Thus, considering attributed motives as beliefs is appropriate. One can differentiate between extrinsic and intrinsic motives (Calder & Staw, 1975). Extrinsic motives prevail when a corporation is perceived as being driven by external rewards such as financial incentives as opposed to an altruistic commitment to a social cause. Additionally, Ellen, Webb, and Mohr (2006) differentiate between strategic, stakeholder, egoistic, and value motives. Strategic motives correspond to the profit interests of firms and encompass, for example, maintaining and attracting customers. Stakeholder motives translate to external pressure from stakeholders—that is, introducing activities only for the sake of silencing criticism from external audiences such as customers or regulators. Egoistic motives are defined as taking advantage of a social cause, misusing it as window dressing or to gain a tax write-off. Value motives are attributed when moral obligations or long-term interests in the community are believed to guide actions and decisions. The former three (strategic, stakeholder, egoistic) can be subsumed as extrinsic motives, while the latter (value) is congruent with intrinsic motives.

In what follows, we will describe the hypothesized relationships between attributed motives, credibility, and legitimacy in more detail. The theoretical model on which our study is based is shown in Figure 1.

Figure 1.

Proposed conceptual model.

Hypotheses Development

One strategy for a company to gain legitimacy is to adapt its goals, methods, and outputs to conform to societal norms and values (Dowling & Pfeffer, 1975). For example, if a company wants to demonstrate compliance with the social norm of environmental protection by adapting its production processes, these changes need to provide some form of environmental benefit, such as a significant reduction of CO₂ emissions. Thus the provided benefit—reduction in CO₂—directly corresponds to addressing the norm of environmental protection.

While corporate activities can provide various benefits that are able to address different sets of norms, research has shown that individuals are also concerned about the driving motives behind corporate actions (Ellen et al., 2006; Gilbert & Malone, 1995). Kelley’s (1971) discounting principle can explain how individuals attribute motives to corporate activities. It states that the role of one particular motive for driving an action is discounted as soon as other potential motives are evident. The more motives are able to explain a particular activity, the less explanatory power is attributed to each of them. Kelley (1972) further argues that when intrinsic and extrinsic motives are salient, extrinsic motives are more likely to be attributed.

By applying the discounting principle, we infer that corporate activities that provide only benefits for society are likely to foster the attribution of intrinsic motives (value motives). However, if the activity provides benefits for the society and financial advantages for the company, extrinsic motives (strategic, stakeholder, egoistic motives) are more likely to be attributed. Thus, we propose the following:

Hypothesis 1 (H1): Corporate activities that provide social benefits and company benefits increase the attribution of extrinsic motives compared with cases in which only social benefits are provided.

Extrinsic motives such as egoistic and stakeholder-driven motives have been found to trigger consumer skepticism, which is defined as the tendency to disbelieve, while intrinsic motives inhibit skepticism (Skarmeas & Leonidou, 2013). Moreover, a number of researchers suggest that altruistic motives have a positive effect on credibility (Bigné-Alcañiz, Currás-Pérez, & Sánchez-García, 2009; Rifon, Choi, Trimble, & Li, 2004) particularly on the trustworthiness dimension (Alcañiz et al., 2010). Alcañiz et al. (2010) argue that consumers who are skeptical about companies’ social initiatives use trustworthiness as a cue to judge the honesty of the initiative.

Due to the attribution of extrinsic motives, a company might be perceived as biased. Thus, the company’s readiness to make correct statements is questioned, and it appears less trustworthy (Garcia de los Salmones, Dominguez, & Herrero, 2013; Moore, Mowen, & Reardon, 1994). Thus, we propose the following:

Hypothesis 2 (H2): The attribution of extrinsic motives negatively affects perceived corporate credibility.

Any legitimation attempt conducted by a company requires communication. If a company adapts its structure, processes, and goals to attain legitimacy, these changes need to be communicated to change stakeholders’ perception of organizational legitimacy (Hrasky, 2011). As credibility is a pivotal determinant of the effectiveness of corporate communication (Lafferty & Goldsmith, 1999; Pornpitakpan, 2004), it follows that credibility needs to be carefully considered when discussing the legitimation process. This is in line with Finch and colleagues (2015), who argue that individuals scrutinize not only whether the content provided with a message favors or defies organizational legitimacy but also the credibility of the source. Thus, more credible legitimation attempts should result in more favorable legitimacy judgments.

This relationship can be partly explained by Heider’s (1958) balance theory. Because social benefits are not necessarily associated with a profit-driven company, a company that is judged as honest and sincere makes it easier to integrate “unexpected” prosocial behavior into a more favorable legitimacy judgment. A study by Alcañiz and colleagues (2010) found evidence for this effect of credibility on the perception of corporate social responsibility (CSR). In line with previous research, we propose the following:

Hypothesis 3 (H3): The greater the perceived corporate credibility of an organization, the greater the individual’s legitimacy judgment of the organization will be.

Combining the propositions stated above (H1-H3), we conclude that the relationship between the benefits provided by a corporate activity and the subsequent legitimacy judgment depends on the attribution of extrinsic motives and the assessment of credibility. If corporate activities provide additional company benefits, more extrinsic motives will be attributed; these, in turn, influence credibility and finally legitimacy. Thus, we assume that there is no direct effect between the benefits caused by an innovation and the legitimacy judgment, but rather that an indirect effect exists. In other words, individuals do not make rash judgments when confronted with statements that claim legitimacy, but instead go through a multistep cognitive process involving the attribution of motives and evaluation of credibility. This claim is backed with research on attitudes that suggest belief formation as an important cognitive process for evaluative judgments of attitudes (Fishbein & Ajzen, 2010; Wyer & Albarracín, 2005). Additionally, this research shows that message qualities (e.g., credibility of the message) are important for attitude construction (Kruglanski & Stroebe, 2005; Lafferty & Goldsmith, 1999). Therefore, we propose the following:

Hypothesis 4 (H4): The effect of benefits on an individual’s legitimacy judgment is mediated by the attribution of extrinsic motives and perceived corporate credibility.

Method

We conducted a randomized online experiment to examine the factors that influence legitimacy judgments. Vignettes were chosen because they combine the benefits of a laboratory experiment—high internal validity—with those of a field experiment—high external validity (Aguinis & Bradley, 2014; Oll et al., 2018).

Sample

The legitimacy of controversial industries is challenged by the general public, and a sample that represents broad parts of the population is therefore most appropriate for investigating the legitimacy judgment process. Our sample was recruited with the support of an online panel provider, and participants were invited to participate in the study via email. A total of 276 people started to answer the questionnaire; 15 were automatically excluded through questionnaire programming because they either did not read the material carefully (only clicked through) or repeatedly skipped answering questions; and 43 participants could not proceed with the questionnaire after the demographic questions because the respective quotas for age, gender, or education were already met. Only 15 participants abandoned the questionnaire, resulting in a very low dropout rate of 6.9%. A total of 203 participants completed the questionnaire. Out of those, four were excluded due to unintelligible answers. Thus, our final sample contained 199 participants. Participants who completed the questionnaire were incentivized with a fixed monetary amount through the panel provider.

Gender was equally distributed within our sample (49.7% female). The average age of the participants was 42.97 years. A total of 65 participants (32.6%) reported having a university entrance qualification or held a university degree. All participants live in Germany. According to the German Federal Statistical Office (2015), our sample can be considered a good proxy for the German population.¹

Experiment

We examined legitimacy judgments depending on varying benefits induced by an innovation. In our between-subject design, we manipulated the stated benefits of an innovation implemented by the company. One half of the sample received material that refers to the provision of social benefits, whereas the other half received material indicating that the innovation provides social benefits as well as company benefits.

As context for our study, we chose a company with a controversial business model. Such companies are characterized by “social taboos, moral debates, and political pressures [and] inherently entail persistent or emerging environmental, social, or ethical issues” (Lindgreen, Maon, Reast, & Yani-De-Soriano, 2012, p. 393). Thus, they lack legitimacy (Reast, Maon, Lindgreen, & Vanhamme, 2013) and the assumed legitimizing effect of innovations will be stronger and more illustrative compared to noncontroversial industries.

The coal power industry is particularly suited for the current study. Coal-fired power plants are controversial because the depletion and burning of coal causes environmental damages and, thus, poses a threat to organizational legitimacy (Hrasky, 2011). CO₂ emissions and their adverse effects on the environment are often publically debated and, thus, well known to most people. Furthermore, in Germany, where our sample was recruited, the coal industry still plays a major role in terms of energy supply (BDEW, 2015) and the provision of jobs. For these reasons, we expect that participants can easily relate to the proposed hypothetical case.

To avoid the influence of prior familiarity with the company, we used a fictitious company (“ZERTO AG”). ZERTO AG was introduced on a website excerpt titled “About Us” as a power supplier mainly generating energy with coal power plants. Using a website excerpt is well suited because information regarding organizational activities can usually be found on corporate websites (Park, Lee, & Hong, 2016). Additional information such as founding year, number of coal power plants, and number of employees was presented in the first excerpt. A “Research & Development” (R&D) website excerpt followed, which provided participants with information about ZERTO’s innovation efforts and the resulting benefits. This second excerpt was used for manipulating the benefits.

The social benefits used in the experimental material emphasize CO₂ reduction. Company benefits were manipulated by adding a paragraph that highlighted the reduced costs and increased profitability of the power plants. The experimental material can be found in Appendices A and B.

The experimental material and the subsequent questionnaire needed to be watched and completed online. After reading a short introduction and answering a few basic sociodemographic questions, the company description was presented to the participants. Subsequently, participants were randomly assigned to one of the experimental treatments and forwarded to the R&D websites. Questions regarding attributed motives, corporate credibility, and organizational legitimacy followed in this order. Finally, participants were asked to respond to the control variable. On average, participants spent 6 min 32 s answering the questionnaire.

Measures

Organizational legitimacy

Several legitimacy measures assess industry legitimacy (Chung, Berger, & DeCoster, 2016; Elsbach, 1994; Finch et al., 2015).² To the best of our knowledge, only two studies have proposed an organizational legitimacy scale (Bachmann & Ingenhoff, 2017; Massey, 2001). However, Massey (2001) included items measuring credibility in his legitimacy scale. Thus, to measure organizational legitimacy as distinct from credibility, we adapted the legitimacy scale from Bachmann and Ingenhoff (2017) and added one item from Massey (2001), which we directly identified as a legitimacy question. In addition, one item was added, which was phrased as follows: “ZERTO Corporation complies with the norms and values of German society” (see Table B1 in Appendix B). We made this modification because no other legitimacy scale included an item that directly addressed norms and values. Nevertheless, this is a vital issue because compliance with society’s norms and values is central to organizational legitimacy (Suchman, 1995). The developed scale consisted of five items and was carefully pretested (see the Pretest section below).

Credibility

We apply the well-established scales developed by Newell and Goldsmith (2001) that differentiate between trustworthiness and expertise. Most of the studies we build our hypotheses on used credibility as a one-dimensional construct, and the items included in their credibility measures are clearly limited to the trustworthiness dimension. To ensure comparability with previous studies, we operationalize credibility with the trustworthiness scale (four items).

Attributed motives

Similar to Ellen and colleagues (2006) and Forehand and Grier (2003), we use open-ended questions to discover which motives might be evoked by different benefits. The question was phrased as follows: “What do you think are ZERTO’s reasons for innovating their coal-based power plants?” The open-ended questions were coded by two independent raters with the categorical scheme derived by Ellen and colleagues (2006). Intercoder agreement was .96. Disagreements were resolved by discussion. The coding scheme consisted of four codes (anchor examples from the material are in parentheses): strategic (“cost efficiency”), stakeholder (“public pressure”), egoistic (“subvention,” “greenwashing”), and value (“contribution to climate protection”) motives. Only the last, value motives, were regarded as intrinsic motives; strategic, stakeholder, and egoistic motives were subsumed under extrinsic motives. After coding the material, the codes were transformed into a variable that summarized the number of attributed extrinsic motives. This variable was labeled “number of attributed extrinsic motives.”

Control variables

Disposition to trust is an important precursor to building a trusting relationship with an organization (McKnight, Cummings, & Chervany, 1998) and affect the attribution of motives (Marín, Cuestas, & Román, 2016). Hence, we include a measure for trust disposition (KUSIV3, three items; Beierlein, Kemper, Kovaleva, & Rammstedt, 2012) to control for its possible influence on credibility and legitimacy judgments.

Researchers are aware that numerical and verbal framing can cause different reactions depending on the respective context and the message recipients. In a meta-analytical study, Allen and Preiss (1997) found statistical evidence generally to be more persuasive than narrative evidence. However, other authors highlighted that some people favor numerical information, whereas others find verbal information more persuasive (Bansal & Kistruck, 2006; Viswanathan & Childers, 1996). In the reporting context, both types of framing are common: In annual reports, numerical framing often prevails, whereas environmental disclosures are often verbally framed (Jones & Shoemaker, 1994). To ensure the generalizability of our experimental results, half of our participants received information about a corporate innovation framed in numerical terms whereas the other half received information in a verbal framing. Because we know that message framing can have diverse effects on the recipients, we control for this factor in the succeeding analyses.

Reliability and validity checks

We run several analyses to determine the reliability and validity of our measures (Churchill, 1979). The individual item reliability is assessed by the factor loadings of the measurement model (see Table B1 in Appendix B). All factor loadings are above the recommended value of 0.7 (Hair, Babin, Anderson, & Black, 2014). Scholars suggest that Cronbach’s alpha should be above .7 (Nunnally, 1978), which is the case for all our constructs (see Table 1).

Table 1.

Means, Standard Deviations, and Correlations for All Dependent, Independent, and Control Variables in Analyses.

	Group 1: Social benefits	Group 2: Social and company benefits	1	2	3	4	5	6	7	8	9	10	11	12	13
	M (SD)	M (SD)	1	2	3	4	5	6	7	8	9	10	11	12	13
1. Age	44.05 (13.25)	41.97 (13.69)	—
2. Gender	1.51 (.50)	1.50 (.50)	.07	—
3. Education	2.00 (.83)	2.01 (.79)	−.36**	−.12	—
4. Benefits	0	1	−.09	−.02	.01	—
5. Framing	.52 (.50)	.50 (.50)	.07	.13	−.01	−.03	—
6. Trust disposition	3.87 (.89)	3.60 (.79)	.14*	.02	.14	−.15*	.06	.77
7. Legitimacy	4.48 (.86)	4.54 (1.00)	.12	−.10	−.13	.06	−.13	.13	.93
8. Credibility (trustworthiness)	4.46 (1.15)	4.44 (1.16)	.02	−.05	.02	−.003	−.10	.19**	.65**	.87
9. No. of attributed extrinsic motives	.74 (.79)	.97 (.63)	−.34**	.18*	.26**	.18*	−.02	−.01	−.27**	−.18*	—
10. Strategic motives	.22 (.41)	.65 (.48)	−.06	.08	.09	.44**	.10	−.06	−.12	−.08	.62**	—
11. Egoistic motives	.20 (.41)	.07 (.26)	−.20**	.09	.15*	−.20**	−.04	−.02	−.34**	−.23**	.40**	−.11	—
12. Stakeholder motives	.32 (.47)	.25 (.44)	−.31**	.11	.22**	−.08	−.14	.07	−.03	−.01	.59**	−.05	.02	—
13. Value motives	.60 (.49)	.53 (.50)	.24**	−.11	−.09	−.07	.01	.05	.36**	.28**	−.62**	−.32**	−.33**	−.37**	—

Note. Bold faced values indicate cronbach’s alpha for each scale.

p < .05. **p < .01.

Two analyses were run to assure that our constructs show sufficient discriminant validity. First, items’ cross-loadings reveal that all items load higher on their respective constructs than all other indicators (Chin, 1998; see Table B2 in Appendix B for the cross-loadings). Second, a confirmatory factor analysis indicates (see Table B3 in Appendix B) that Model 4—the model with the four hypothesized constructs—fits best (χ² = 112.18, df = 60, p = .00, comparative fit index [CFI] = .958, Tucker–Lewis index [TLI] = .945, root mean square error of approximation [RMSEA] = .077). Additional analyses reveal that the four-factor model fitted the data significantly better than any of the other models, providing evidence of the discriminant validity of the four-factor model. In summary, the results show the validity and reliability of the measurement model for the constructs.

Common-method variance

Common-method variance is a threat to self-reported data stemming from the same questionnaire and single respondents (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003). Controlling for the effects of an unmeasured latent methods factor (Podsakoff et al., 2003), we estimated post hoc whether the measures were influenced by common-method variance and followed the procedure recommended by prior studies (Cote & Buckley, 1987; Cui, Vertinsky, Robinson, & Branzei, 2018; Zhou, Brown, Dev, & Agarwal, 2007). Using a nested models procedure, three models (method, trait, and trait-and-method) were estimated with confirmatory factor analysis. As the number of attributed extrinsic motives variable was coded from open-ended questions rather than using a response scale, the following models do not include this variable.

Model 5 is a method-only model in which all measures are loaded on one construct (χ² = 409.22, df = 54, p = .00, CFI = .714, TLI = .650, RMSEA = .211).

Model 6 is a trait-only model in which each measure is loaded on its respective construct (χ² = 95.00, df = 51, p = .00, CFI = .965, TLI = .954, RMSEA = .076); Model 6 consists of legitimacy (five items), credibility (four items), and trust disposition (three items) (see Table B1 in Appendix B for the constructs and items).

Model 7 is a trait-and-method model in which a common factor linking to all the measures is added into Model 6 (χ² = 95.00, df = 50, p = .00, CFI = .964, TLI = .952, RMSEA = .078).

The results demonstrate that Models 6 and 7 fit much better to the data than Model 5. Additionally, the difference in model fit (ΔCFI) between Models 6 and 7 is less than 0.010 which indicates a nonsignificant difference in model fit (Cheung & Rensvold, 2002). The latter indicates that the variance in the data can be explained by the traits rather than by a common-method variance. Therefore, we conclude that the model is not driven by a common-method variance.

Pretests

The experimental material and scales used (credibility and organizational legitimacy) were carefully pretested. The first round of pretests was conducted with 73 students at a German business school. These tests were used to check whether the material used (fictitious corporate websites) was perceived as realistic piece of corporate communication. Responses to open questions revealed that the participants accepted the experimental material.

A second pretest was conducted as a trial of our benefit manipulation. Furthermore, we tested open-ended questions for attributed motives against scale-based measures. By doing so, we also intended to get first insights into whether the motives attributed by the participants would differ between the benefit treatments. Heterogeneous attributed motives in the different conditions indicated that the manipulation was successful. This pretest was conducted with 60 participants who were recruited by an online panel provider. This was done to ensure that participants from the pretest and the main sample had similar sociodemographic characteristics.

Data Analyses

Before testing the hypotheses, the different treatments were checked for randomization imbalances (analyses of variance [ANOVAs] and nonparametric tests) regarding the disposition to trust, age, gender, and formal education. Results show no significant differences between the various conditions.

To test our theoretical model, a mediation analysis according to Hayes (2013; 10,000 bootstrap samples, 95% confidence interval [CI]) was conducted. Several authors have endorsed bootstrapping procedures for mediation analysis and have emphasized that the independent variable (in our case, benefit) does not require a direct effect on the dependent variable (legitimacy) as a prerequisite for a mediation analysis (Shrout & Bolger, 2002; Wood, Goodman, Beckmann, & Cook, 2008; Zhao, Lynch, & Chen, 2010). The presence of an indirect effect is sufficient for a mediation effect. The independent variable “benefits” was dummy coded: The solely social benefit condition was used as referent (coded 0 for the dummy variable), the social and company benefit condition coded 1. The dummy variable “benefits” was used for all subsequent analyses. Number of attributed extrinsic motives and credibility were modeled as mediators. In addition, age, gender, education, trust disposition, and message framing were included as control variables. For message framing, the verbal framing condition was used as referent (coded 0 for the dummy variable), the numerical framing condition was coded 1.

To gain further insights into how the single motives (strategic, stakeholder, egoistic, value) affect credibility and legitimacy judgments, we ran additional mediation analyses. Benefits were the independent variable, attributed motives were used as mediators, and credibility or legitimacy was used as a dependent variable. Each attributed motive was coded as a binary variable; a value of 1 indicates that a particular motive (e.g., strategic) was attributed, whereas 0 shows that this motive was not attributed. All four attributed motive variables were included as mediators in the mediation analysis. The analysis was conducted with MPLUS (Muthén & Muthén, 2015; 10,000 bootstrap samples, 95% CI).

Results

Descriptive Statistics

Correlations for all variables included in our study are depicted in Table 1. Mean and standard deviations are shown for both treatment groups.

The correlations show that additional company benefits are positively correlated with the number of attributed extrinsic motives, which are in turn negatively correlated with credibility. Credibility, however, is positively correlated with legitimacy. Thus, the descriptive statistics are basically in line with our hypothesis. Message framing, which was included as a control variable, does not correlate with any other variable.

Hypotheses Testing

Results of our mediation analysis show that the provided benefits of an innovation indirectly influence the legitimacy judgment of participants through its effect on attributed motives and the perceived credibility of the organization. As can be seen in Figure 2 and Table 2, participants who received the information that the company’s innovation provides social and company benefits attributed more extrinsic motives to the company’s actions. Those participants who believed the company to be driven by extrinsic motives had less confidence in the credibility of the company. A lower perceived credibility led participants to judge the organization as less legitimate. This supports our hypotheses for the direct effects (H1, H2, and H3) and our mediation hypothesis (H4) (unstandardized indirect effect = −.03, SE = .02, 90% CI [−.09, −.01]).³ The direct effect from benefits to legitimacy was not significant (c’ = .11, SE = .10, p > .05). This further strengthens our belief that individuals go through a multistep cognitive process instead of making quick automatic decisions with regard to legitimacy.

Figure 2.

Unstandardized regression coefficients for the relationship between innovation benefits and legitimacy judgment as mediated by the number of attributed extrinsic motives and credibility.

Table 2.

Mediation Analysis With Number of Attributed Extrinsic Motives and Credibility as Mediators Between Benefits and Legitimacy.

Direct effects	M₁ (attributed motives)					M₂ (credibility)				Y (legitimacy)
Antecedent		Coefficient		SE	p		Coefficient	SE	p		Coefficient	SE	p
X: Benefits	a₁	.22		.10	.02	a₂	.14	.16	.40	c’	.11	.10	.26
M₁: No. of attributed extrinsic motives		—		—	—	d₂	−.31	.12	.01	b₁	−.17	.08	.03
M₂: Credibility (trustworthiness dimension)		—		—	—		—	—	—	b₂	.49	.05	<.01
C₁: Gender		.32		.10	<.01		−.06	.17	.72		−.04	.10	.71
C₂: Age		−.01		<.01	<.01		−.01	.01	.29		<.01	<.01	.42
C₃: Education		.19		.07	<.01		−.01	.11	.95		−.04	.07	.60
C₄: Message framing		−.05		.10	.60		−.23	.16	.15		−.15	.10	.15
C₅: Trust disposition		<.01		.06	.95		.27	.10	.01		<.01	.06	.95
		R² = .21F(6, 181) = 7.84, p < .01					R² = .09F(7, 180) = 2.43, p = .02				R² = .46F(8, 179) = 19.25, p < .01
Indirect effects			Unstandardized indirect effect				SE	LL CI		UL CI
Benefits ⇒ No. of attributed extrinsic motives ⇒ legitimacy			−.04*				.02	−.11		−.01
Benefits ⇒ No. of attributed extrinsic motives ⇒ credibility ⇒ legitimacy			−.03*				.02	−.09		−.01
Benefits ⇒ credibility ⇒ legitimacy			.07				.08	−.09		.22

Note. Hayes did not interpret p values for significance of indirect effects, but rather emphasized checking confidence intervals (confidence intervals that do not include zero are indicators of indirect effects). Still, we label indirect effects with * for purpose of better illustration. *CI = 95%. LL = lower limit; CI = confidence interval; UL = upper limit.

In addition to the proposed direct and indirect relationships, we found that the number of attributed extrinsic motives had a direct negative effect on legitimacy judgments, as well as an indirect effect on legitimacy. This means that participants who believe that mostly extrinsic motives are behind a company’s actions are less prone to judge the organization’s legitimacy positively. The attribution of extrinsic motives was thereby influenced by what the company communicates as the benefits of their innovation.

Additional Post Hoc Analysis for Attributed Motives

Table 3 shows the percentage of respondents selecting a motive in each of the two experimental conditions. In both groups, the attribution of value motives is equally distributed. However, a considerable proportion of participants in the social benefit condition inferred that egoistic motives were driving the organization’s introduction of an environmental innovation. A closer look at each participant revealed that those who attributed egoistic motives did not likewise attribute value motives. In the other condition (social and company benefits), participants most likely inferred value as well as strategic motives. In other words, while strategic and value motives can complement each other, value and egoistic motives seem to be incompatible.

Table 3.

Percentage of Respondents Selecting a Motive in Each Group.

Attributed motives	Group 1Social benefits	Group 2Social and company benefits
Strategic motives	21%	63%
Stakeholder motives	31%	24%
Egoistic motives	20%	7%
Value motives	58%	52%

Note. Columns do not sum to 100% because respondents can choose more than one motive. Motives were categorized by two independent coders.

Post hoc mediation analysis differentiating between the four attributed motives shows that the solely social benefit presentation tends to trigger the attribution of egoistic motives whereas the social and company benefits presentation provokes the attribution of strategic motives. Still, both extrinsic motives had adverse effects on an individual’s legitimacy judgment. Additionally, the attribution of egoistic motives led to a negative credibility judgment. In contrast, participants who believed intrinsic (i.e., value motives) to drive the company’s activities perceived the company as more credible and favored it with positive legitimacy judgment. Per se, the attribution of value motives is not hindered by presenting additional company benefits. Direct effects are shown in Figure 3.

Figure 3.

Unstandardized regression coefficients for the relationship between benefits and legitimacy judgment as mediated by attributed motives.

Only the attribution of egoistic motives indirectly influences credibility and legitimacy, respectively. A negative mediating effect of strategic motives on legitimacy can only be shown with a weakened confidence interval (unstandardized indirect effect = −.24, SE = .12, 90% CI [−.44, −.04]). Indirect effects are presented in Table 4.

Table 4.

Indirect Effects of Attributed Motives Between Benefits and Credibility.

Indirect effects	Unstandardized indirect effect	SE	LL CI	UL CI
Attributed motives as mediator between benefits and credibility
Benefits ⇒ strategic motives ⇒ credibility	−.15	.13	−.41	.10
Benefits ⇒ stakeholder motives ⇒ credibility	−.004	.03	−.06	.06
Benefits ⇒ egoistic motives ⇒ credibility	.28*	.14	.01	.56
Benefits ⇒ value motives ⇒ credibility	−.08	.08	−.24	.08
Attributed motives as mediator between benefits and legitimacy
Benefits ⇒ strategic motives ⇒ legitimacy	−.24	.12	−.47	.001
Benefits ⇒ stakeholder motives ⇒ legitimacy	.01	.03	−.05	.07
Benefits ⇒ egoistic motives ⇒ legitimacy	.31*	.13	.05	.56
Benefits ⇒ value motives ⇒ legitimacy	−.09	.09	−.26	.09

Note. Mediation analysis conducted with MPLUS (Muthén & Muthén, 2015; 10,000 bootstrap samples, 95% confidence interval). Following Hayes, we do not interpret p values for significance of indirect effects, but rather check confidence intervals (confidence intervals that do not include zero are indicators of indirect effects). Still, we label indirect effects with * for purpose of better illustration. *CI = 95%. LL = lower limit; CI = confidence interval; UL = upper limit.

Discussion

First and foremost, our results highlight the importance of understanding the legitimacy judgment process on an individual level. Overall, we show that participants who judge the legitimacy of an organization will be affected by their beliefs about the credibility and the attributed motives of this organization. Participants who judged an organization presenting social and company benefits for their innovation evaluated them as less legitimate compared with organizations presenting solely social benefits for the innovation. Prima facie, this could be counterintuitive to many CSR conceptualizations (Carroll, 1999; Donaldson & Dunfee, 1999; Schwartz & Carroll, 2007) because economic responsibilities are seen as fundamental to businesses, and additional company benefits should result in higher legitimacy.

Our study provides a plausible explanation for this phenomenon. Even though financial gains are integral to business, they trigger cognitive processes with adverse effects on legitimacy. They augment the attribution of extrinsic motives, which in turn, negatively affects credibility. Both attributed motives and credibility are beliefs that influence legitimacy judgments. Not surprisingly, legitimacy is negatively affected.

Our results are in agreement with those of Finch and colleagues (2015), who found a positive correlation between industry credibility and industrial legitimacy. Our study empirically strengthens the link between both concepts because we apply their framework to organizational legitimacy. In prior research, this link is often limited to theoretical considerations (Meyer & Rowan, 1977) or both constructs are lumped together because credibility is seen as an integral part of legitimacy (Massey, 2001).

While the importance of attributed motives is widely acknowledged by CSR scholars (Alcañiz et al., 2010; Ellen et al., 2006), research lacks studies that apply attributed motives to legitimacy judgments. Of particular interest are strategic motives. While previous studies have found evidence that they have positive effects on company evaluations in CSR settings (Ellen et al., 2006; Groza, Pronschinske, & Walker, 2011), our results indicate the contrary: Although strategic motives do not influence credibility judgments, they have a negative effect on legitimacy. This finding is important for two reasons. First, the different effects on credibility and legitimacy reveal that credibility and legitimacy should be treated and measured as different concepts. Second, the negative effect of strategic-driven motives on legitimacy suggests that legitimacy judgments have distinct properties that differentiate them from other kinds of company evaluations of previous studies (Ellen et al., 2006; Groza et al., 2011). Thus, insights regarding different kinds of company evaluations need to be carefully assessed before transferring them from one concept to another.

A closer look at the trigger for the attribution of extrinsic motives reveals differences between strategic and egoistic motives. Not surprisingly, evaluators attribute strategic motives when the company presents its innovation in light of the benefits for society and itself. In contrast, when the company only emphasizes the social benefits of its innovation, evaluators infer egoistic motives rather than value motives. It seems that when only social benefits are presented by the company, a significant portion of the audience is skeptical toward the organization and suspects the organization of greenwashing (Laufer, 2003). This finding lends support to research that indicates negative consequences if stakeholders attribute egoistic motives to an organization (Ellen et al., 2006). Ellen and colleagues (2006) found that a high fit between a company’s mission statement and their CSR activities prevents the attribution of egoistic motives. We extend their findings by adding that egoistic attributions arise in cases where a company solely emphasizes the social benefits of their activities instead of openly disclosing any benefits for itself.

While the trigger for the motives is distinct, their effect on legitimacy is similar because both strategic and egoistic motives affect legitimacy negatively. This poses a dilemma for corporations. Strategic motives are attributed when a company reports the social and corporate benefits of an environmental innovation, and egoistic motives are attributed when solely social benefits are emphasized. So far, it is not clear how the different attributed motives interact and in which situations they become salient. Nevertheless, previous research supports that companies should openly communicate both social and company benefits (Ellen et al., 2006). This is especially pronounced when public opinion and discourse are negative (Rim & Song, 2016). Otherwise, as shown in our study, corporations face the risk that a skeptical audience might punish them with negative evaluations. Future research should link recent developments in attitude research with legitimacy research and study how legitimacy judgment as attitude formation is influenced by salience of beliefs (Fishbein & Ajzen, 2010; Kruglanski & Stroebe, 2005).

Although to the best of our knowledge no other study that deals with organizational legitimacy has assessed attributed motives as well as credibility, we find cues for the relevance of the former factor in Elsbach’s (1994) study. She manipulated organizational justifications and measured how this affected individuals’ legitimacy judgment. While the referral to social norms was favored by the participants, signaling compliance with industrial norms such as efficiency was punished with a lower legitimacy judgment. Nevertheless, Elsbach did not inquire about attributed motives. However, one can imagine that different justifications cause the attribution of different motives.

Conclusion

The current study contributes to the recent discussions about individual legitimacy judgments. We conceptualize legitimacy as an attitude and thereby focus on the influence of psychological factors on legitimacy judgments. We show that two kinds of beliefs are crucial influencing factors in this regard: attributed motives and corporate credibility. The former in particular has been neglected in legitimacy research so far.

We address this issue by adding attributed motives to the value-attitude framework of Finch and colleagues (2015). This sheds light on the link between the legitimation strategy applied by the company and the individual’s perception of corporate credibility because attributed motives mediate between both. Furthermore, attributed motives also directly affect legitimacy judgments. Thus, the importance of attributed motives within the legitimacy judgment process cannot be stressed too much. For example, they help to better understand Elsbach’s (1994) valuable efforts on the effectiveness of different legitimation strategies because references to different norms are likely to be associated with different motives.

Much scholarly attention has focused on legitimation strategies employed by organizations (Deephouse et al., 2017; DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Vaara & Tienari, 2008) while neglecting the evaluator and his or her judgment of such efforts. Recent advances, therefore, conceptualized the cognitions of individuals forming a judgment about an organization’s legitimacy (Bitektine & Haack, 2015; Tost, 2011). While previous models acknowledge that legitimacy judgments depend on the beliefs of individuals and their perceptions of the organization (Bitektine & Haack, 2015; Hoefer & Green, 2016), they fall short on defining what those beliefs are (Hoefer & Green, 2016) and explaining how these perceptions are processed (Bitektine & Haack, 2015). We make an essential contribution to both research streams by proposing a process individuals go through to judge such legitimation strategies.

Hoefer and Green (2016) identified different forms of arguments (logos, pathos, ethos), which have distinct effects on the formation of legitimacy judgment. We see the application of Hoefer and Green’s (2016) detailed account of possible arguments to our legitimacy process model as a fruitful avenue for further exploration of the link between rhetoric and legitimacy judgments. One interesting area of exploration would be how an organization’s changes in rhetoric (pathos, ethos) trigger different attributed motives (e.g., strategic or egoistic) and how this affects legitimacy judgments.

Furthermore, we are confident that our legitimacy process model can add to Bitektine and Haack’s (2015) explication of the link between micro- and macro-level processes because our model emphasizes factors that prevail on the individual level and that cannot be inferred on the collective level. In this respect, a better understanding of individual judgments likewise enhances our insights on collective judgment formation. However, more research is required to better understand connecting factors between these models and our results. One example could be the kind of validity cues, such as journalist or expert judgments, that prevail in specific situations. If newspapers that are known for a certain political orientation or specific lobby groups applaud particular corporate activities, some individuals might question corporate motives instead of taking such external assurance as a legitimacy-enhancing cue.

In line with previous research, our results confirm the positive relationship between credibility and legitimacy judgments. However, we did not test this relationship in a stepwise causal–effect design because we only manipulated benefits and not credibility. Previous studies, however, accumulated distinct evidence that the formation of a belief about the credibility of a source precedes the attitude formation (Lafferty & Goldsmith, 1999; Pornpitakpan, 2004). In the future, experimental studies should be conducted that directly manipulate credibility and measure its effect on organizational legitimacy (Mathieu, DeShon, & Bergh, 2008). To get generalizable results, our study focuses on the general public. However, the obtained results need to be replicated with specific stakeholder groups such as customers, employees, or investors. The latter could be of particular interest because they (Wall Street) might react more positively to company benefits than members of the general public (Main Street; Lamin & Zaheer, 2012).

Footnotes

Appendix A

Appendix B

Acknowledgements

We would like to thank the editor, Carolyn Egri, and two anonymous reviewers for providing valuable insights, constructive comments, and excellent guidance throughout the reviewing process.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Notes

Author Biographies

Johannes Jahn is a research assistant and PhD student at the Chair of Business Ethics and Management Control at ESCP Europe Business School, Berlin. He holds an MSc in business administration from European University Viadrina Frankfurt (Oder). His research interests focus on business ethics, corporate social responsibility (CSR), and organizational legitimacy.

Melanie Eichhorn is a research assistant and PhD student at the Chair of Business Ethics and Management Control at ESCP Europe Business School, Berlin. She holds a graduate degree in psychology from Vienna University. Her research interests include CSR, social accounts, and organizational legitimacy.

Rolf Brühl (Technical University, Berlin) is a full professor of Business Ethics and Management Control at ESCP Europe Business School, Berlin. His research interests focus on CSR, social accounts, legitimacy, and international management control systems. His articles have appeared in such journals as European Journal of Innovation Management, European Management Journal, International Journal of Business Communication, Journal of Business Economics, and Journal of Business Ethics.

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