Grades of membership and legitimacy spillovers: Foreign banks in Shanghai, 1847-1935

In this study, we formulated and tested a theory about how heterogeneity among subpopulations affects the degree to which organizations in these subpopulations contribute to and benefit from the overall population's legitimacy. Historical data on banking in Shanghai were used. Firms in subpopulations with a higher "grade of membership" were found to contribute strongly to the legitimacy of the general population; firms in subpopulations with a lower grade of membership benefited most from legitimacy spillovers. The concepts of "fuzzy density," "contrast," and public acceptance were applied to measuring legitimacy.