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Organizational Identity and Legitimacy under Major Environmental Changes: Tales of Two UK Building Societies


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We studied how organizational identity (OI) and organizational legitimacy (OL) interplayed within two British building societies during drastic environmental changes over two decades. Four salient phases of environmental changes were identified in the British building society sector over the last two decades (introduction of new regulatory framework, recession, demutualization threats and post-demutualization era). Comparative analysis of the two firms' responses to the environmental changes found that, employing distinct specific strategies, both firms accorded tremendous attention and efforts to OI narration and re-narration in order to regain OL. Four properties were identified regarding the interplay between OI narrative and OL: level, locus, mechanism and approach. Our study contributes to the literature by (a) empirically demonstrating the role of the OI/OL interplay in understanding the relationship between organizations and external changes; (b) empirically demonstrating the valence of a narrative approach to OI as a useful perspective to study organizational change and OL; and (c) identifying the role of narrative in leading and directing such changes.