Building the legitimacy of business networks through certification: The development of differentiated relationships

In this paper we analyze how legitimacy allows us to develop differentiated relationships in business networks. Our central argument is that the building of legitimacy in business networks through certification needs the development of what we call differentiated relationships, based on the use of governance mechanisms. Mainly theoretical, our communication develops the argument through a critical review of literature. We use the organizational legitimacy (Elsbach, 1994) and institutional theories (DiMaggio and Powell, 1983) approach to explain how business networks can adopt and manage legitimacy. We exploit also the economic theory (Brousseau and Raynaud, 2006) and social theory of agency (Westphal and Zajac, 1998) to explain the adoption of specific governance mechanisms (Provan and Kenis, 2007) that legitimate business networks. We apply our question to a specific third party certification market: the fair trade market. We show that to build legitimacy in business networks it is necessary to use and manage governance mechanisms in the best way. These actions lead to establish differentiated relationships in business networks between all of the partners involving third party certifiers.