Changing Criteria for Internal Legitimacy and the Internationalization Process

We study the dynamics of internal legitimacy within a multinational corporation (MNC). Particularly, how changing criteria for internal legitimacy affect the internationalization process of a state-owned multinational company (SOMNC). As both shift in criteria for internal legitimacy and internationalization are time- consuming processes, we explore this with a historically embedded case study that spans over ten years. Based on extensive archival material we conduct an in-depth study of Telecom Finland undergoing both privatization and internationalization during the period of interest. We show that Telecom Finland’s criteria for internal legitimacy for its international ventures gradually changed from emphasizing national to multinational legitimacy. This shift had implications on both geographical market and partner preferences. Additionally, we uncover path dependent implications, as ventures established under national legitimacy continues to impact internationalization strategy under multinational legitimacy. Our study contributes to the discussion on legitimacy in MNC by looking at the dynamics of internal legitimacy from the parent’s perspective. We also extend the SOMNC literature by showing how rationales to internationalize can change as state influence decreases and how it impacts the internationalization process. Finally, we answer multiple calls in international business research to uncover complex, path dependent, and contextually embedded relationships using historical methods.