Why Earning Local Trust is the Key to Multinational Success in Emerging Markets

Why It Matters

Multinational companies face far more than just cultural or legal barriers when entering emerging economies — they often struggle with something less visible but equally crucial: being seen as a legitimate part of the local business landscape.

 

Key Takeaways

• Multinationals (MNEs) must earn legitimacy to thrive in unfamiliar markets.
• Legitimacy can be viewed as alignment, active influence, or stakeholder judgement.
• A better grasp of legitimacy helps firms and researchers shape effective international strategies.

 

What Does It Mean to Be 'Legitimate'?

When a company sets up shop in a new country, particularly in an emerging market, local acceptance can make or break its success. This goes beyond ticking regulatory boxes. The real challenge lies in whether locals perceive the company’s presence and actions as appropriate, trustworthy, and aligned with local values and expectations.

This idea is known as organisational legitimacy. When companies lack legitimacy, they may struggle to attract customers, retain staff, secure licences, or navigate government relations. In some cases, failure to earn legitimacy can even lead to political pushback or forced exits. For all the strategic planning that goes into market entry, overlooking legitimacy can be a costly oversight.

Three Ways to Look at Legitimacy

In their paper, the authors propose three useful ways to understand legitimacy — each offering different insights into how companies can manage it.

The contingency view treats legitimacy as something a company earns by fitting into the local environment. Think of it as learning the rules and playing by them. While this works for local firms, it’s harder for foreign companies to fully align with local norms, especially when they carry expectations from their home countries.

The agency view sees legitimacy as a process that companies can influence. In this view, companies are not just passive players but active agents who can shape perceptions through strategic actions — such as partnering with trusted local entities or engaging in visible community programmes. Yet, acting as a change agent in unfamiliar terrain can be risky and complex.

The judgement view puts the spotlight on stakeholders — customers, regulators, employees — and how they perceive the company. Here, legitimacy isn’t something a company owns or manages alone; it lives in the minds of others. For MNEs, this means they must contend with deep-seated biases, including stereotypes tied to their country of origin.

Bringing the Views Together

So far, most research and practice focus on the first view: achieving a good fit with the host environment. But the authors argue that this is only part of the picture. To truly understand — and improve — how companies can earn and maintain legitimacy, it’s time to combine all three perspectives.

Doing this will help managers see not just how to adapt, but when and how to proactively shape the narrative or address misperceptions. However, this also presents research challenges, such as tracking legitimacy over time and finding ways to measure it meaningfully in different markets. Tackling these hurdles could open up valuable new directions for international business research and practice.

Business Implications

For managers of multinational subsidiaries, especially in emerging markets, this research offers a practical lens for thinking about local challenges. It encourages them to go beyond compliance and think about deeper integration, strategic signalling, and stakeholder perceptions.

In short, legitimacy is not a given — it’s earned. And companies that take a broader, more thoughtful approach to earning trust are likely to find longer-term success abroad.

 

Authors & Sources

Authors: Klaus E Meyer (Western University) and Caleb H. Tse (Nanyang Technological University)

Article Link: International Business Review

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