Keywords Illegal mining; Governance risk; Organizational legitimacy; Gold supply chains; Hybrid governance; Informal economies; Regulatory capture; Territorial control; Financial traceability; ESG risk; Extractive governance; Mineral supply security. 1. INTRODUCTION The global energy transition, digitalization processes, and infrastructure expansion are accelerating demand for gold and other strategic minerals. In this context, governments and industry face a shared challenge: delivering minerals faster, smarter and more responsibly, while maintaining social trust and institutional integrity. However, in several resource-rich countries, illegal mining has evolved beyond an environmental or criminal issue into a structurally embedded governance competitor. Peru, one of the world’s leading gold producers, offers a critical case study. Over the past two decades, illegal mining has consolidated territorial presence, mobilized large financial flows, and constructed broad social support networks. Rather than operating solely outside formal institutions, illegal mining increasingly interacts with, pressures, and in some cases reshapes regulatory and political structures. This evolution suggests that illegal mining must be analyzed not merely as lawbreaking behavior, but as an actor engaged in legitimacy construction. Organizational legitimacy theory provides a useful analytical lens. Legitimacy can be defined as a generalized perception that the actions of an entity are desirable, proper, or appropriate within a socially constructed system of norms and values (Suchman, 1995). Importantly, legitimacy does not depend exclusively on legal compliance. It can be constructed through pragmatic benefits, moral justification, or cognitive normalization. In contexts where state presence is weak and informal economies dominate, the construction of pragmatic legitimacy through employment generation and economic dependence can be particularly powerful. Dowling and Pfeffer (1975) argue that organizations may realign their narratives and activities to fit dominant social values in order to reduce opposition and secure survival. Illegal mining in Peru demonstrates this dynamic through symbolic framing strategies such as the narrative of “ancestral mining,” which reframes illegality as cultural tradition and economic necessity. Through such discursive adaptation, illegal actors reduce social resistance and expand political leverage. Moreover, institutional theory suggests that organizations under pressure tend to emulate accepted structures and practices to maintain legitimacy (DiMaggio & Powell, 1983). Even illegal actors may replicate formal organizational forms, participate in institutional arenas, and adopt quasi-legal mechanisms to secure recognition. Ashforth and Gibbs (1990) further highlight how organizations strategically manage impressions and symbolic compliance to 27
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