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Investing in L3C Organizations: Indicators of Legitimacy

Author

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  • Gregory G. De Blasio
  • Emma K. Woeste

    (Northern Kentucky University, USA
    Northern Kentucky University, USA)

Abstract

Organizations are cautioned to avoid favoring one stakeholder group over others when establishing policy and engaging in public discourse. Corporations are often crit-icized for privileging investors or shareholders. Non-profits, however, typically main-tain strong connections to community stakeholders and operate with visible educa-tional, heath care, or other institutional affiliation. With the recent and ongoing crea-tion of a new legal entity, the low-profit, limited liability L3C company, organization-stakeholder relations will need to be reconceptualized. The L3C is charged with a pri-mary purpose of practicing charity and social good, and yet is permitted to generate low profit and to court investors. The L3C investors expect a financial return much in the same way an investment in a large for-profit organization would be expected to grow. How, then, does the L3C organization fulfill its obligation to do charitable work and meet the institutional demands of social transformation while pursuing profit and answering to investors? In other words, how does L3C remain legitimate? The L3C places a new form of strain on stakeholder relations. An examination of a social circus organization in its formative stages helps to answer how stakeholder relations are re-considered for the hybrid L3C low-profit entity. The concepts of civic engagement and institutional affiliation were found to be factors in the legitimation process.

Suggested Citation

  • Gregory G. De Blasio & Emma K. Woeste, 2013. "Investing in L3C Organizations: Indicators of Legitimacy," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 2(2), pages 83-86.
  • Handle: RePEc:ods:journl:v:2:y:2013:i:2:p:83-86
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    References listed on IDEAS

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    1. Gregory Blasio, 2007. "Coffee as a Medium for Ethical, Social, and Political Messages: Organizational Legitimacy and Communication," Journal of Business Ethics, Springer, vol. 72(1), pages 47-59, April.
    2. E. DuPuis & Sean Gillon, 2009. "Alternative modes of governance: organic as civic engagement," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 26(1), pages 43-56, March.
    3. Guido Palazzo & Andreas Scherer, 2006. "Corporate Legitimacy as Deliberation: A Communicative Framework," Journal of Business Ethics, Springer, vol. 66(1), pages 71-88, June.
    Full references (including those not matched with items on IDEAS)

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    Keywords

    legitimacy; L3C; social circus; stakeholder theory; community; institutionalization;

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