Is Institutional Legitimacy Related to Business Sustainability? Analysis of Cashew Nut Farmers’ Perspectives Mediated by Societal Stakeholders’ Action in Tanzania

Abstract

This paper analysed the effect of institutional legitimacy on cashew nut farming
business sustainability in Tanzania through societal stakeholders’ action.
Specifically, the paper examined the effect of institutional legitimacy on business
sustainability, societal stakeholder’s action on business sustainability and
mediating effect of societal stakeholders’ action on the relationship between
institutional legitimacy and business sustainability. Explanatory research design
was used, and simple random sampling was applied to select 380 cashew nut
farmers. A structured questionnaire was used to collect data which later were
analysed using structural equation modelling. Results indicated that institutional
legitimacy had a positive and significant effect on business sustainability.
Societal stakeholders’ action was also found to have positive and significant
effect on business sustainability. Further, results showed a partial mediation
effect of societal stakeholders’ action on the relationship between institutional
legitimacy and business sustainability. The study concluded that institutional
legitimacy and societal stakeholders’ actions are predictors of business
sustainability, and societal stakeholders’ action partially mediates the
relationship between institutional legitimacy and business sustainability. Thus,
the study recommends that, for cashew nut farming business in Tanzania to be
sustainable, it is important for institutions like Cashew Nut Board of Tanzania
(CBT) and others to be legitimate to both farmers and societal stakeholders.
Further it is recommended to scholars to undertake research on understanding
mediation effect of the stakeholder theory on institutional theory exposed by
results of this study.