Moral capital and organizational legitimacy: Evidence from the private sector in China

Social legitimacy reflects a generalized perception that the actions of the organization are desirable, proper, or appropriate. Due to the importance of moral capital and moral legitimacy, organizations are using charitable giving in a more strategic manner, as those donations are helpful to enhance firm image and further improve firm performance. The social judgment of organizations is pervasive since they are embedded in normative systems and surrounded by implicit rules of what is perceived as appropriate behavior in society. The chapter explores evidence to support the argument that moral capital has a positive effect on organizational legitimacy as measured by private enterprises’ access to bank loans for either working capital or business development capital. Political capital is found to be an important strategy to enhance the legitimacy of private enterprises. China’s entry into the World Trade Organization in 2001 triggered dramatic reshaping of the banking sector.