Circulated legitimacy : the microfoundations of scaling nonprofits

Abstract

As the world engages with challenges such as poverty and inadequate education, nonprofits are increasingly expected to play a role in creating positive impact at scale. Consequently, more practitioners and scholars are examining the scaling of nonprofits, specifically how nonprofits improve the quality or scope of their operations or mobilise other actors to effect collective change and better address such challenges. Most research on scaling has focussed primarily on the organisational level, typically identifying organisational pathways, strategies, capabilities, and influencing factors. However, limited research has investigated the microfoundations of scaling, namely how it is influenced by individuals’ perceptions, actions, and interactions. This research gap represents a lack of understanding of how scaling objectives are negotiated, decided, and challenged, as well as how scaling outcomes are realised, hampered, and evaluated through the interplay of individual stakeholders. Drawing on the legitimacy judgment theory (individuals’ judgments of the appropriateness of an organization within a social context), this thesis explores the microfoundations of scaling by examining the key research question: How do individual legitimacy judgements influence the organisational objectives and outcomes of scaling nonprofits? This thesis adopted the extended case method to study the scaling of two educational nonprofits in China. I spent an eight-month period of participant observation for the two nonprofits, conducted six interviews at one case nonprofit and 46 interviews at the other case nonprofit, and collected secondary data such as documents, websites, and publications. For the data analysis, I generated memos by analysing the data, iteratively comparing memos with the literature and the follow-up data collection. Based on the empirical findings, the theory of circulated legitimacy was proposed to explain the microfoundations of scaling: successfully scaling a nonprofit comes from increasing positive legitimacy judgements and resource contributions on various scaling-related activities, while resource contributions are led by positive legitimacy judgements. With respect to the interactions of core members of a nonprofit and various individual stakeholders, the theory identifies and highlights the interplay of three concepts: scaling-related activities, legitimacy judgements, and resource contributions. Individual stakeholders have different perspectives and criteria when making legitimacy judgements and deciding whether to contribute resources. Finally, the successes of scaling-related activities ground the successful scaling of a nonprofit. This thesis makes several important contributions. First, it generates the theory of circulated legitimacy that illuminates the microfoundations of scaling nonprofits, extending the legitimacy judgement theory by proposing that individuals make dynamic legitimacy judgements based on scaling-related activities instead of on the organisation as a whole. Second, it reveals how resource contributions are transformed by certain legitimacy judgements, supporting an individual-level bridge for the organisation-level legitimacy-resources-growth framework and the relationship between strategic legitimacy and institutional legitimacy. Third, it stresses the heterogeneous perspectives of individuals concerning scaling-related activities, incorporating stakeholder theory to better understand the dynamics of legitimacy judgements. Practically, the theory of circulated legitimacy can support operational decision-making, stakeholder management, and resource mobilisation for nonprofit practitioners, facilitating the development of consensus on scaling objectives and the achievement of desired scaling outcomes.