Organizational Legitimacy and Survival: Evidence from Employer-Provided Health Insurance
Xuguang Guo

The article examines the relationship between organizational legitimacy and survival by investigating the impact of employer-provided health insurance (EPHI) on business survival. Adopting EHPI in the United States is considered to be legitimacy-driven. Employers have been complaining about the rising cost of health insurance, but they are reluctant to reduce their spending on EPHI. Using Medical Expenditure Panel Survey-Insurance Component (MEPS-IC) and the Longitudinal Business Database (LBD) data from 1997 to 2005, this study’s findings show that companies who offered EPHI were less likely to default. The advantage of business survival did not decline despite the significant increase of EPHI premiums during the study period. The findings provide empirical evidence that expensive legitimacy can be paid off by a better chance of survival.

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