Abstract
In this chapter, we discuss the legitimacy theory and the legitimacy gap. Organizations seek to be perceived by stakeholders as legitimate. Because legitimacy is a moving target, organizations have to be pragmatic. The legitimacy gap will be formed due to the concept of time, which informs the movement of expectations. As time progresses, the environment in which organizations operate will shift, which would create a shift in expectations. This change brings a shift to legitimacy, and this shift creates a “legitimacy gap”. On the basis of this, Lindblom (1994) defines the legitimacy gap as “the difference between the expectations of the relevant stakeholders relating to how an organization should act, and how the organization does act”. Essentially, two main sources of the legitimacy gap were outlined, namely, the changes in societal expectation and information asymmetry. We outlined the role of AI in moderating the legitimacy gap, specifically if the concept of information asymmetry is deemed the main driver of the gap. In the context of harvested and stored large data sets, we suggest that intelligent agents linked (connected) to the relevant data repositories would be updated on an ongoing basis as the new data is being captured or it becomes available through unstructured sources. This data would previously have been difficult to collate. We point out that social media and other sources would make it possible to harvest this data. We think that once harvested, AI-powered models will analyse it, which will assist organizations in predicting expectations. In cases where society is too weak, perhaps authorities could deploy the same technology on behalf of societies that are unable to, in order to reduce the information gap between the organization and the society.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Abreu R (2015) From legitimacy to accounting and auditing for citizenship. Procedia Econ Finance 23:665–670
Archel P, Husillos J, Larrinaga C, Spence C (2009) Social disclosure, legitimacy theory and the role of the state. Account Audit Account J 22(8):1284–1307
Branco MC, Rodrigues LL (2006) Communication of corporate social responsibility by Portuguese banks: a legitimacy theory perspective. Corp Commun Int J 11(3):232–248
Burlea ŞA, Popa I (2013) Legitimacy theory. In: Idowu SO, Capaldi N, Zu L, das Gupta A (eds) Encyclopedia of corporate social responsibility. Springer, Berlin, Heidelberg, pp 1579–1584
Cormier D, Gordon I (2001) An examination of social and environmental reporting strategies. Account Audit Account J 14(5):587–616
Das RC (2016) Handbook of research on global indicators of economic and political convergence. Katwa College, India
Deegan C (2002) The legitimizing effect of social and environmental disclosures—a theoretical foundation. Account Audit Account J 15(3):282–311
Dowling J, Pfeffer J (1975) Organizational legitimacy: social values and organizational behaviour. Pac Sociol Rev 18:122–136
Fiedler T, Deegan C (2002) Environmental collaborations within the building and construction industry: a consideration of the motivations to collaborate. In: Proceedings of the critical perspectives on accounting conference, New York. http://aux.zicklin.baruch.cuny.edu/critical/html2/8036deegan.html
Guthrie J, Cuganeson S, Ward L (2006) Legitimacy theory: a story of reporting social and environmental matters within the Australian food and beverage industry. The University of Sydney, 5th Asian Pacific Interdisciplinary Research in Accounting (APIRA) Conference, 8–10 July 2007, Auckland, New Zealand. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1360518. Accessed 13 Aug 2018
Harari YN (2018) 21 Lessons for the 21st century. Jonathan Cape, London
Hassaan, M. (2016). Handbook of research on global indicators of economic and political convergence. Katwa College, India. https://books.google.co.zw/books?hl=en&lr=&id=NLnLDAAAQBAJ&oi=fnd&pg=PR1&dq=Hassaan,+M.+(2016).+Handbook+of+Research+on+Global+Indicators+of+Economic+and+Political+Convergence.+Katwa+College,+&ots=HJjm8sGQoz&sig=DAf7W8bcBo_aOotE4i6PkLw0YQw&redir_esc=y#v=onepage&q&f=false. Accessed 24 Dec 2019
Islam MA (2017) CSR reporting and legitimacy theory: some thoughts on future research agenda. In: Aluchna M, Idowu SO (eds) The dynamics of corporate social responsibility: a critical approach to theory and practice, pp 323–339. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2947527
Lindblom C (1994) The implications of organizational legitimacy for corporate social performance and disclosure. Critical Perspectives on Accounting Conference, New York, NY
Mohammed SD (2018) Mandatory social and environmental disclosure: a performance evaluation of listed Nigerian oil and gas companies pre- and post-mandatory disclosure requirements. J Finance Account 6(2):56–68
Mousa GA, Hassan NT (2015) Legitimacy theory and environmental practices: short notes. Int J Bus Stat Anal 2(1):41–53
Nasi T, Nasi S, Phillips N, Zyglidopoulos S (1997) The evolution of corporate social responsiveness: an exploratory study of finnish and Canadian forestry companies. Bus Soc 38(3):296–321
O’Donovan G (2000) Legitimacy theory as an explanation for corporate environmental disclosures. Thesis, Victoria University of Technology, Melbourne, Australia
O’Donovan G (2002) Environmental disclosures in the annual report: extending the applicability and predictive power of legitimacy theory. Account Audit Account J 15(3):344–71
Porter ME, Kramer MR (2011) How to reinvent capitalism and unleash a wave of innovation and growth. The big idea, creating shared value. http://www.coherence360.com/praxis/wp-content/uploads/2015/08/Michael_Porter_Creating_Shared_Value.pdf. Accessed 23 Dec 2019
Seckin-Celik T (2017) Sustainability reporting and sustainability in the Turkish business context: in ethics. https://www.igi-global.com/chapter/sustainability-reporting-and-sustainability-in-the-turkish-business-context/173942. Accessed 23 Dec 2019
Shocker AD, Sethi SP (1973) An approach to developing societal preferences in developing corporate action strategies. Calif Manag Rev 14(4):97–105
Suchman MC (1995) Managing legitimacy: strategic and institutional approaches. Acad Manag Rev 20(3):571–610
The Institute of Chartered Accountants of England and Wales (2018) Artificial intelligence and the future of accountancy. ICAEW Thought Leadership, IT Faculty, UK
Zyznarska-Dworczak B (2017) Legitimacy theory in management accounting research. Problemy ZarzÈdzania 16(1):195–203
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2020 Springer Nature Switzerland AG
About this chapter
Cite this chapter
Moloi, T., Marwala, T. (2020). The Legitimacy Theory and the Legitimacy Gap. In: Artificial Intelligence in Economics and Finance Theories . Advanced Information and Knowledge Processing. Springer, Cham. https://doi.org/10.1007/978-3-030-42962-1_12
Download citation
DOI: https://doi.org/10.1007/978-3-030-42962-1_12
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-42961-4
Online ISBN: 978-3-030-42962-1
eBook Packages: Computer ScienceComputer Science (R0)