Learning from successful local private firms in China: Establishing legitimacy

Many international firms have found China a difficult market in which to prosper. In spite of this, many local private Chinese enterprises are succeeding. although they face an institutional environment that can be quite hostile. One of the principal reasons many local private firms have been able to succeed in a challenging environment where many multinationals have struggled is that they pursue strategic actions that establish their legitimacy in the society. The result is that the negative impact of meddlesome officials and the lack of well-codified and enforceable laws is reduced. This article identifies nine legitimacy-building strategies that local private firms have employed in China's transition economy. International firms entering these markets would be well served by observing and creatively replicating the local private firms' behaviors that helped to establish legitimacy.