Gaining legitimacy in their host country environment is a key priority for multinational corporations’ public relations efforts since it secures their local social license to operate. By applying neo-institutional public relations to corporate diplomacy, this paper argued that institutional linkages between corporations and local government could enhance the building of legitimacy. The study sought to determine whether institutional relations affect the perception of organizational legitimacy, focusing on the United Arab Emirates. In non-democratic countries, public relations tends to be perceived as less sophisticated, and legitimacy becomes even more critical for foreign corporations. Therefore, a one-factorial (corporate diplomacy with/ without governmental involvement) between-subjects experimental design study surveying a representative sample of residents in the United Arab Emirates (N = 199) was conducted. The results imply that corporate diplomacy with governmental linkages leads to a higher perception of moral, pragmatic, and regulative organizational legitimacy, partially mediated by media credibility, governmental legitimacy, and issue legitimacy.
Gaining organizational legitimacy is a significant challenge for public relations (PR) efforts of multinational corporations (MNCs) in their host country environment (Fredriksson & Pallas, 2014; Ordeix-Rigo & Duarte, 2009). One valid approach, building on public relations (PR) to proactively respond to this challenge and to gain organizational legitimacy, is corporate diplomacy (CD) (Mogensen, 2017), which is generally conceived as corporate engagement in societal, environmental, and political issues in a company’s host countries (Ingenhoff & Marschlich, 2019). Organizational legitimacy is an evaluative judgment of a group concerning the appropriateness, properness, and desirability of organizational behavior (Suchman, 1995) and determines a corporation’s social acceptance and its social license to operate (Ordeix-Rigo & Duarte, 2009; Rindova et al., 2006). Due to the so-called “liability of foreignness,” foreign MNCs are observed more critically by their host country environment, which may result in delays of legitimacy perceptions (Kostova & Zaheer, 1999). Therefore, engagement in legitimacy-seeking activities such as CD becomes particularly crucial for MNCs (Kostova & Zaheer, 1999; Palazzo & Scherer, 2006).
For foreign MNCs, it is critical to gain and secure organizational legitimacy in the global arena and, in this regard, also in the host country. Corporate diplomacy is a valid approach to meet societa expectations and values within the host society and to gain legitimacy. This study emphasizes, in particular, the importance of collaborations with established host country institutions, in our case, the local government. As Kochhar (2018) has already stated, “[c]orporate diplomacy emphasizes how the legitimacy of an organization depends on its ability to meet the expectations of an increasingly numerous and diverse array of constituents in the given nonmarket business environment” (p. 350). The current study supports this statement by exploring how corporate diplomacy affects the perception of organizational legitimacy on a moral, pragmatic, and regulative level. Applying neo-institutionalism and PR approaches, this study shows that CD needs to build on PR to cultivate institutional relationships to achieve the perception of congruence between CD activities and the expectations and values on an individual, governmental, and social level in the host country. The role of PR then lies in firstly, the cultivation of relationships with established actors in the host country and, secondly, the demonstration of CD as a contribution to personal interests and values, to the government’s expectations, and the whole community in the host country. By analyzing CD through the lens of PR, this study provided substantial insights into how MNCs can actively seek to gain legitimacy through the demonstration of institutional linkages, which has not been explored before.