As entrepreneurial firms expand into global markets, their success hinges not only on sound strategy or financial performance, but on a more elusive asset: legitimacy. A review in the International Journal of Entrepreneurship and Small Business has looked at a decade of academic research and reveals how boards of directors play a pivotal role in helping firms gain the acceptance and trust they need to operate and succeed in foreign environments.
Legitimacy, in this context, refers to the perception among local stakeholders, such as regulators, customers, business partners, and society in general, that any foreign firm is competent and fit to operate in the host nation. The concept goes beyond legal compliance or profitability. Without legitimacy, companies entering a host market will encounter the problem of what is referred to as the “liability of foreignness”, a cluster of disadvantages noted by academics that arise from being perceived as outsiders. These include cultural missteps, limited networks, and suspicion from the local actors.
The review explores a little-studied dimension of internationalisation – the role of the Board in building legitimacy. The work draws on research from management studies, sociology, and political science. It then offers a cohesive framework that explains how Boards can help firms navigate and adapt to new institutional environments internationally.
Boards of directors are often comprised of seasoned professionals with governance duties and are traditionally viewed as vehicles for strategic oversight. But this review highlights a broader, dual function. Internally, boards influence legitimacy through their composition, ethical leadership, and adherence to good governance. Externally, they serve as conduits for reputational capital and local engagement, building connections with the political and economic hierarchy and aligning the company with the local societal norms.
Godley, A., Bolade-Ogunfodun, Y., Lodorfos, G., Nasr, R., Konstantopoulou, A., Soga, L.R. and Amankwah-Amoah, J. (2025) ‘The role of governing boards in building legitimacy for new entrepreneurial ventures in host markets: a systematic literature review’, Int. J. Entrepreneurship and Small Business, Vol. 55, No. 7, pp.1–36.