Institutional Environment Legitimacy, Property Rights, and Institutional Arrangements

We study how changes in the perceived legitimacy of a particular political and economic environment (or institutional environment) affect the property rights of private firms and their relationships with other firms. Management literature has implicitly assumed that economic actors always accept the legitimacy of property rights and the institutional environment that defines and enforces those rights. Taking an interdisciplinary approach that combines the contributions of economic and business history, management studies, and political science, we revise this assumption and maintain the following three points: First, the legitimacy of a particular institutional environment is subject to contestation and, therefore, to change. Second, when the legitimacy of the institutional environment is under threat, the legitimacy of private firms’ property rights will also be threatened. And third, when the legitimacy of the wider institutional environment and property rights regime are threatened and contested, the l...