A Social Identity Formulation of Organizational Reputation and Legitimacy

Legitimacy and reputation are both perceptions of approval of an organization's actions. Legitimacy is a perception that organizations conform with taken-for-granted standards. Reputation is a perception that organizations are positively distinctive within their peer group. While the need for inclusion and distinction may seem somewhat contradictory on its face, we maintain that both functional demands are grounded in an organization's adopted social identities, or social identity referents, characterized herein as social category memberships. Social identities constitute an organization's reference group and provide stakeholders with standards by which assessments of the organization are made. Organizations are seen as having legitimacy when they comply with the minimum standards of a particular social identity prototype, a prototypical X-type organization. Organizations have good reputations when they are viewed favorably relative to the ideal standard for a particular social identity, an ideal, or esteemed, X-type organization. Conventional thinking holds that legitimacy is a requirement of all organizations, whereas reputation is a desirable, but not essential property. This paper argues that, from the perspective of identity theory, reputation and legitimacy are complementary, reciprocal concepts, linked to the dual identification requirements: who is this actor similar to and how is this actor different from all similar others. The implications of this fresh perspective for organizational reputation scholarship are discussed.