Types of Legitimacy and How Normative and Regulative Legitimacy Is Managed

Regulative Legitimacy

Regulative legitimacy is based on an organization following institutionalized laws and regulations that have been set in place. These are not necessarily based on governmental rules they can also be based on entities such as trade associations. Therefore the institutions that create these rules do not have to have legal power (such as trade associations). However, organizations follow these rules because they are valued by society and society sees organizations that follow the rules as legitimate. The organization decides whether to adhere to the rules by a cost benefit analysis, looking at whether the opportunity lost and the costs imposed by following these rules is overcome by the benefit of being seen as legitimate or if it is lower than a cost of a potential legal fine. By following rules the organization obtains societies approval and support, as it is acting in congruence to societies values. Since laws and regulations are seen as legitimate, following them creates legitimacy for the organization. Rules are followed by most organizations as it lowers uncertainty for them, since they know that other organizations are following them as well and so they know what actions to expect from them. It makes organizations appear rational, since they are following rules that people believe to be rational, since they reflect societies values and views. Therefore they settle for a stable and predictable environment in exchange for the potential to gain a competitive advantage that could come as a result of not following rules. The rules are also followed because of legal and societal repercussions that occur when organizations do not follow them, such as potential boycotts of the organization and fines imposed by g...

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