Organizational Legitimacy. A Challenge for Armenia’s businesses

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This topic is often looked upon by the Armenian entrepreneurs as irrelevant and not worthy of consideration when making a business decisions. This is because all Armenian entrepreneurs are aware and have accepted the fact that when doing business in Armenia illegitimate actions, weak systems, corrupt personnel and even false impressions are a very much a part of reality. Thus, to identify organization as being legitimate or not is considered to be a waste of time. Nevertheless, organizational legitimacy has the ability to identify risk and opportunities when venturing into new business or developing existing business. It is often seen that corruption, irregular reporting, system manipulation, lack of transparency are all barriers for the average Armenian entrepreneur to earn a steady income. However, as much as these factors should not exist in any business environment, it is not surprising that they exist in transitioning economies such as Armenia (or other similar economies such as China, Vietnam, Cambodia, Georgia, Belarus, Poland, Ukraine and Laos). These barriers should be considered as risks and businesses will do well to identify these risks and manage their operations accordingly.

In an economy where there is so much environmental risk, the possibility of running out of funds or losing money through investment into a small or medium sized firm is high. However, based on natural fundamental financial principles the possibility to earn money through business growth is also high. This means that Armenian businesses can lose a lot and earn a lot in a short period of time. That is why organizations in Armenia have a short lifespan; they begin by making substantial money in a short period of time, but fail to be sustainable over the long term. Organizations would be wise to implement systems that will classify and categorically identify if peer organizations are legitimate or not. For example, when organizations report their annual financial position, does the paperwork they provide reflect their activities throughout the year correctly. Through this, organizations can evaluate one another and better understand which organization carries the least or the most amount of risk, therefore which organization is legitimate and illegitimate. In essence this evaluation process also has the potential to set industry standards in business operations and conduct.

Business is difficult to conduct in Armenia that is for certain. However, entrepreneurs should be well advised to be innovative, with strong social and inter-organizational ties, well equipped with resources and to always have a contingency strategy in place. Business success and failure mainly depends on the strengths and abilities of its governing body and employees (human resources).  In short, do not enter into a business where you have limited knowledge. In transitioning economies, if you understand a business process, it does not mean you can conduct business in that industry. Business success in Armenia can only take place through experience and invaluable business contacts and connections.  

Aram Barlezizian, Marketing Advisor

University of Western Sydney