Abstract
In this study we analyze the overlapping perspectives of legitimacy theory, institutional theory, resource dependence theory, and stakeholder theory. Our purpose is to explore how these theories can inform and be built upon by one another. Through our analysis we provide a broader theoretical understanding of these theories that may support and promote social and environmental accounting research. This article starts with a detailed analysis of legitimacy theory by bringing some recent critical discussions on legitimacy and corporations in the management literature into accounting research. The notion forwarded by legitimacy theory then serves as an overarching concept to examine the relationship between and among theories. We conclude that two theoretical considerations are important for future social and environmental accounting research. First, it must be acknowledged that some business entities initiate social activities based on direct interactions with stakeholders, whereas others may also undertake similar activities to manage their societal level of legitimacy. Second, from analyzing the perspectives of legitimacy theory, institutional theory, resource dependence theory, and stakeholder theory, it is possible to reach compatible interpretations of business social phenomena, and the selection and application of these theories should depend upon the focus of study.
References
Ashford, B. E. and D. W. Gibbs: 1990, ‘The Double-edge of Organizational Legitimation’, Organization Science 1(2), 177-194.
Bansal, P. and I. Clelland: 2004, ‘Talking Trash: Legitimacy, Impression Management, and Unsystematic Risk in the Context of the Natural Environment’. Academy of Management Journal 47(1), 93-103.
Barnett, M.: 2007, ‘Stakeholder Influence Capacity and the Variability of Financial Returns to Corporate Social Responsibility’, Academy of Management Review 32(3), 794-816.
Berger, P. L., and T. Luckmann: 1967, The Social Construction of Reality, (Doubleday, NY).
Branco, M. C. and L. L. Rodrigues: 2008, ‘Factors Influencing Social Responsibility Disclosure by Portuguese Companies’, Journal of Business Ethics 83(4), 685-701.
Chen, J. C., D. M. Patten, and R. W. Roberts: 2008, ‘Corporate Charitable Contributions: A Corporate Social Performance or Legitimacy Strategy?’. Journal of Business Ethics 82(1), 131-144.
Cho, C. H., and D. M. Patten: 2007, ‘The Role of Environmental Disclosures as tools of Legitimacy: A Research Note’, Accounting, Organizations, and Society, 32(7-8), 639-647.
Clarkson, M. B. E.: 1995, ‘A Stakeholder Framework for Analyzing and Evaluation of Corporate Social Performance’, Academy of Management Review 20(1), 92-117.
Deegan, C.: 2000, Financial Accounting Theory, (McGraw Hill, Sydney).
Deegan, C.: 2002, The Legitimizing Effect of Social and Environmental Disclosures—A Theoretical Foundation. Accounting, Auditing & Accountability Journal 15(3), 282-311.
Deegan, C. and M. Rankin: 1996, ‘Do Australian Companies Report Environmental News Objectively?-An Analysis of Environmental Disclosures by Firms Prosecuted Successfully the Environmental Protection Authority’, Accounting, Auditing & Accountability Journal 9(2), 50-67.
DiMaggio, P. J. and W. W. Powell: 1983, ‘The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields’, American Sociological Review 48(2), 147-160.
DiMaggio, P. J. and W. W. Powell: 1991. ‘Introduction’, in W. W. Powell and P. J. DiMaggio, (eds.), The New Institutionalism in Organizational Analysis, (University of Chicago Press, Chicago), pp. 1-38.
Dowling, J. and J. Pfeffer: 1975, ‘Organizational Legitimacy: Social Values and Organizational Behavior’, Pacific Sociological Review 18, 122-136.
Epstein, E. M. and D. Votaw: 1978, Rationality, Legitimacy, Responsibility: Search for New Directions in Business and Society, (Goodyear, Santa Monica, CA).
Fiedler, T. and C. Deegan: 2002, ‘Environmental Collaborations Within the Building and Construction Industry: A Consideration of the Motivations to Collaborate’, Paper Presented at the Critical Perspectives on Accounting Conference, 23 July 2003, New York, NY.
Finkelstein, S.: 1997, ‘Interindustry Merger Patterns and Resource Dependence: A Replication and Extension of Pfeffer (1972)’, Strategic Management Journal 18, 393-416.
Freeman, R. E.: 1984, Strategic Management: A Stakeholder Approach, (Pitman, Boston, MA).
Friedman, A. L. and S. Miles: 2002, ‘Developing Stakeholder Theory’, Journal of Management Studies 39 (1), 1-21.
Giddens, A.: 1984, The Constitution of Society: Outline of the Theory of Structuration, (Polity Press, Cambridge).
Gray, R., R. Kouhy, and S. Lavers: 1995, ‘Corporate Social and Environmental Reporting: A Review of the Literature and a Longitudinal Study of UK Disclosure’, Accounting, Auditing & Accountability Journal 8(2), 47-77.
Gray, R., D. Owen, and C. Adams: 1996, Accounting and Accountability: Changes and Challenges in Corporate and Social Reporting, (Prentice Hall, London).
Gulati, R. and M. Gargiulo: 1999, ‘Where do Interorganizational Networks Come from?’, American Journal of Sociology, 104, 1439-1493.
Higginson, N., C. Simmons, and H. Warsame: 2006, ‘Environmental Disclosure and Legitimation in the Annual Report - Evidence from the Joint Solutions Project’, Journal of Applied Research 8(2), 3-23.
Hybels, R. C.: 1995, ‘On Legitimacy, Legitimation, and Organizations: A Critical Review and Integrative Theoretical Model’, Best Papers Proceedings, Academy of Management National Meeting, Vancouver, BC.
Katz, D. and R. L. Kahn: 1966, The Social Psychology of Organizations, (John Wiley & Son, New York, NY).
Kuhn, T. S.: 1970, The Structure of Scientific Revolutions, (University of Chicago Press, Chicago).
Levy, D. L., H. S. Brown, and M. de Jong: 2010, ‘The Contested Politics of Corporate Governance: The Case of the Global Reporting Initiative’, Business and Society 49(1), 88-115.
Lindblom, C. K.: 1994, ‘The Implications of Organizational Legitimacy for Corporate Social Performance and Disclosure’, Paper Presented at the Critical Perspectives on Accounting Conference, New York.
Magness, V: 2006 ‘Strategic Posture, Financial Performance and Environmental Disclosure: An Empirical Test of Legitimacy Theory. Accounting Auditing & Accountability Journal 19(4), 540-563.
Maurer, J. G.: 1971, Readings in Organization Theory: Open System Approach, (Random House, New York).
Meyer, J. W. and B. Rowan, 1977, ‘Institutional Organizations: Formal Structure as Myth and Ceremony’, American Journal of Sociology 83(2), 340-363.
Meyer, J. W. and B. Rowan, 1991, ‘Institutionalized Organizations: Formal Structures as Myth and Ceremony’, in W. W. Powell and P. J. DiMaggio (eds.), The New Institutionalism in Organizational Analysis, (University of Chicago Press, Chicago), pp. 41-62.
Meyer, J. W., and W. R. Scott, 1983, (eds.), Organizational environments: Ritual and rationality, CA: Sage, Beverly Hills.
Milne, M. and D. M. Patten, 2002, ‘Securing Organizational legitimacy: An Experiment Decision Case Examining the Impact of Environmental Disclosure’, Accounting, Auditing & Accountability Journal 15(3), 372-405.
Mitchell, R. K., B. R. Agle, and D. J. Wood: 1997, ‘Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts’, Academy of Management Review 229(4), 853-886.
Mobus, J.L.: 2005, ‘Mandatory Environmental Disclosures in a Legitimacy Theory Context’, Accounting, Auditing & Accountability Journal 18(4), 492-517.
Neu, D., H. Warsame, and K. Pedwell: 1998, ‘Managing Public Impressions: Environmental Disclosures in Annual Reports’, Accounting, Organizations and Society 23(3), 265-82.
O’Donovan, G.: 1999, ‘Managing Legitimacy through Increased Corporate Environmental Reporting: An Exploratory Study’, Interdisciplinary Environmental Review 1(1), 63-99.
O’Donovan, G.: 2002, ‘Environmental Disclosures in the Annual Report: Extending the Applicability and Predictive Power of Legitimacy Theory’, Accounting, Auditing & Accountability Journal 15(3), 344-371.
Oliver, C.: 1991, ‘Strategic Responses to Institutional Processes’, Academy of Management Review 16(1), 145-179.
Orlitzky, M.: 2008, ‘Corporate Social Performance and Financial Performance: A Research Synthesis’. In: Crane, A., A. McWilliams, D. Matten, J. Moon, D. Siegel, (Eds). The Oxford Handbook of Corporate Social Responsibility. 112-134. New York: Oxford University Press.
Parsons, T. and N. J. Smelser: 1956, Economy and Society: A Study in the Integration of Economic and Social Theory, (Routledge & Kegan Paul, Ltd, London).
Patten, D.M.: 1991, “Exposure, Legitimacy, and Social Disclosure”, Journal of Accounting and Public Policy 10(4), 297-308.
Patten, D. M.: 1992, ‘Intra-industry Environmental Disclosures in Response to the Alaskan Oil Spill: A Note on Legitimacy Theory’, Accounting, Organizations and Society 17(5), 471-475.
Patten, D. M.: 1995, ‘Variability in Social Disclosure: A Legitimacy-based Analysis’, Advances in Public Interest Accounting 6, 273-285.
Patten, D. M.: 2005, ‘The Accuracy of Financial Report Projections of Future Environmental Capital Expenditures: A Research Note’, Accounting, Organizations and Society 30(5), 457-468.
Peng, M. W.: 2004, ‘Outside Directors and Firm Performance during Institutional Transitions’, Strategic Management Journal 25(5), 453-471.
Pfeffer, J.: 1972a, ‘Size and Composition of Corporate Boards of Directors: The Organization and its Environment’, Administrative Science Quarterly 17, 218-228.
Pfeffer, J.: 1972b, ‘Merger as a Response to Organizational Interdependence’, Administrative Science Quarterly 17, 382-394.
Pfeffer, J.: 1973, ‘Size, Composition, and Function of Hospital Boards of Directors: A Study of Organizational-environment Linkage’, Administrative Science Quarterly 18, 349-364.
Pfeffer, J. and H. Leblebici: 1973, ‘Executive Recruitment and the Development of Interfirm Organizations’, Administrative Science Quarterly 18, 449-461.
Pfeffer, J. and P. Nowak: 1976, ‘Joint Ventures and Interorganizational Interdependence’, Administrative Science Quarterly 21, 398-418.
Pfeffer, J. and G. R. Salancik: 1978, The External Control of Organizations: A Resource Dependence Perspective, (Harper and Row, New York).
Pfeffer, J. and G. R. Salancik: 2003, The External Control of Organizations: A Resource Dependence Perspective, (Stanford University Press, CA).
Roberts, R. W.: 1992, ‘Determinants of Corporate Social Responsibility Disclosure: An Application of Stakeholder Theory’, Accounting, Organizations and Society 17(6), 595-612.
Roberts, R. W. and L. Mahoney: 2004, ‘Stakeholder Conceptions of the Corporation: Their Meaning and Influence in Accounting Research’, Business Ethics Quarterly 14(3), 399-431.
Salancik, G. R.: 1979, ‘Interorganizational Dependence and Responsiveness to Affirmative Action: The Case of Women and Defense Contractors’, Academy of Management Journal 22, 375-394.
Scott, W. R.: 1977, ‘Effectiveness of Organizational Effectiveness Studies’, in P. S. Goodman and J. M. Pennings (eds.), New Perspectives on Organizational Effectiveness, (Jossey-Bass, San Francisco), pp.63-95.
Scott, W. R.: 1987, ‘The Adolescence of Institutional Theory’, Administrative Science Quarterly 32(4), 493-511.
Scott, W. R.: 1992, Organizations: Rational, Natural and Open Systems, (Prentice Hall, Englewood Cliffs, NJ).
Suchman, M. C.: 1995, ‘Managing Legitimacy: Strategic and Institutional Approaches’, Academy of Management Review 20(3), 571-610.
Terreberry, S.: 1968, ‘The Evolution of Organizational Environments’, Administrative Science Quarterly 12, 590-613.
Thompson, J.: 1967, Organizations in Action, (McGraw-Hill, New York).
Ullmann, A. E.: 1985, ‘Data in search of a theory: a critical examination of the relationships among social performance, social disclosure and economic performance of US firms’. Academy of Management Review 10(3), 540-57.
Walden, W. D. and B. N. Schwartz: 1997, ‘Environmental Disclosures and Public Policy Pressure’, Journal of Accounting and Public Policy 16,125-154.
Zucker, L. G.: 1987, ‘Institutional theories of organizations’. Annual Review of Sociology 13, 443-464.
Acknowledgments
The authors would like to thank Jason Chen, Charles Cho, Peggy Dwyer, Tom Keon, Kiana Lin, Den Patten, and the participants of the 5th Conference on Social and Environmental Accounting Research, the 2006 European Accounting Association Meeting, and research workshops at the University of Central Florida for their constructive comments.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Chen, J.C., Roberts, R.W. Toward a More Coherent Understanding of the Organization–Society Relationship: A Theoretical Consideration for Social and Environmental Accounting Research. J Bus Ethics 97, 651–665 (2010). https://doi.org/10.1007/s10551-010-0531-0
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10551-010-0531-0