A qualitative case study of MNE legitimacy

Purpose – An international joint venture (IJV) helps multinational enterprises (MNEs) overcome the “liability of foreignness.” However, in the presence of institutional voids, MNE’s overreliance on the local partner can result in the MNE unwittingly becoming involved in a corporate scandal. The purpose of this paper is to discuss the causes, impacts and outcomes on the MNE’s legitimacy following a corporate scandal. Design/methodology/approach – Using secondary data, this paper presents a qualitative case study of the Fonterra-Sanlu milk-powder scandal in China. Findings – The paper identifies the institutional voids that contributed to the scandal. It also examines the effects of the scandal on the MNE’s legitimacies and evaluates the appropriateness of its actions in China during the formation, erosion and repair stages of its legitimacy. Research limitations/implications – It contributes to legitimacy literature by discussing the importance of MNE’s active commitment when entering the emerging market. ...