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.