NC 1030: Concept Paper



NC 1030: Concept Paper

Community Social Responsibility

Prepared by: Linda S. Niehm

(Much of this information is adapted from a paper by Niehm, L.S., Swinney, J., & Miller, N.J. titled “Community Social Responsibility and its Consequences for

Family Business Performance”.)

In the rapidly changing marketplace, businesses of all sizes are under pressure to demonstrate ethical behavior (Cowi and Heathcott 2003; Houck and Williams 1996). Doing what is right and good in business broadly defines the concept of social responsibility. While all firms are increasingly expected to demonstrate accountability for their business behavior, little is known about the social responsibility of small family firms in rural areas. Family businesses comprise the primary resident and economic base in most rural communities. The locale in which they operate is the same place that they call home. Because of family involvement in the business and ties to the community, family-centered businesses may hold a unique perspective of socially responsible business behavior (CSR).

The family firm literature does not address the complexities of managing and sustaining family businesses in rural communities faced with economic and demographic change. Socially responsible business decisions connect the firm to the community. In small rural communities, community social responsibility (CSR) may look different than in larger, growing communities. Harris, Martinez and Ward (1994) suggest that the family influences every step of the business management process. This process includes the delineation of values, goals, and objectives that guide the firm. Few studies have differentiated these underlying managerial components from those of larger firms. Tagiuri and Davis (1992) revealed six overarching goals for family firms, including: employee satisfaction and productivity; owner financial security and benefits; development of new quality products; personal growth, social advancement, and autonomy; good corporate citizenship; and job security. Post (1993) found community orientation made it more likely for family firms to demonstrate environmentally kind practices and policies. While the literature generally acknowledges that family firms focus on attaining financial as well as non-financial goals, it is unclear as to the impact of socially responsible business behaviors on performance outcomes.

Business and Community Social Responsibility

Many researchers have addressed social responsibility in corporate business settings. Frederick (1978) posited that social responsibility embodies the notion of large organizations being obligated to work for social betterment and the common good in all phases of operation. Carroll (1999, 1979) provided four dimensions of societal expectations for socially responsible business behavior- economic, legal, ethical, and discretionary- and proposed a three-step corporate performance model based on socially responsible organizational response. Sethi (1979) reinforced this approach in his evaluation of business response patterns to social issues. He maintained that firm behavior was first guided by social obligations imposed by the marketplace and legal constraints. Firm behavior must also be viewed in terms of its congruence with prevailing social norms, values, and expectations. Sethi’s model was elaborated by Wartick and Cochran (1985) and Wood (1991) as a series of social responsibility principles, processes of corporate responsiveness, and policies or outcomes for social issues management.

In spite of abundant literature regarding large corporations, little is known about the importance of community level social responsibility (CSR) and its relationship to small family firms (Curran, Rutherfoord and Blackburn 2000; Thompson and Smith 1991). Existing studies are primarily descriptive, addressing topics such as: academic experts’ views of how successful family firms use social responsibility (Gallo 2004), acceptable ethical practices for small firms (Longenecker, McKinney, and Moore 1989), perceived CSR priorities and level of performance (Chrisman and Archer 1984; Chrisman and Fry 1982), differences between large and small firm CSR (Brown and King 1982), CSR in minority-owned small businesses (Gomolka 1978), and profiling the charitable contributions of small firms (Thompson, Smith, and Hood 1993). Aronson (1991) and Casson (1991) suggest a more community-focused approach to small business, conceptualizing self-employment as a distinct type of labor market behavior. More recently, researchers have assumed a community-grounded approach, profiling the characteristics and CSR perceptions of small business owners’ CSR in regional settings (Dawson, Breen and Satyen 2002; Besser and Miller 2001; Miller and Besser 2000; Besser 1999, 1998; Kilkenny, Nalbarte and Besser 1999).

As a result of enormous change in the agricultural economy, understanding community marketplaces in today’s rural America is critical. Emergence of global agriculture supply systems and introduction of new technologies have impacted the majority of small and rural communities. It is therefore important to view rural regions of the U.S. as having strong potential for new economic growth. A recent SRI study suggests rural areas have several strengths including a low cost of doing business, high quality of life, ongoing improvement of education, growing levels of entrepreneurship and small business development (Capitalizing on Rural America 2005). The U.S. Small Business Administration’s Office of Advocacy recognizes that thriving small businesses are the nucleus of sustainable rural communities (Advancing Rural America 2001). With these potential economic-based challenges or opportunities existing in many small and rural communities, research connecting perceptions of community social responsibility with how families conduct business is timely. For example, it is unknown what qualities or values associated with small town living attract and retain families and contribute to business performance. Discovering CSR’s existence and impact could arm community development practitioners, policymakers, and residents with strong arguments for attracting new and returnee businesses. For existing or developing businesses, understanding the potential of CSR on business performance could impact strategy formation.

It may be assumed that as community members, local business operators will express socially responsible values through their business. However, little is known about family businesses and their socially motivated actions in small and rural communities. Granovetter (1985) and Uzzi (1996) suggest that four factors ultimately motivate participation in collective action: interest, perceived costs, social ties, and visibility of the action. It is therefore plausible that family business operators’ engagement in socially responsible behavior may be based on perceived community norms for CSR. Several studies regarding small business ethics and social responsibility suggest that family business CSR may be a multi-dimensional construct. Longenecker, McKinney and Moore (1989) found small firms to hold a more demanding position than larger organizations in regard to ethical business issues. Chrisman and Archer (1984) ranked product quality, customer relations, and adequate profit as important to the social responsibility of small business. In more recent work, community social responsibility was found to be comprised of related but varied social factors for small rural businesses, including community support, leadership, commitment, attachment and other community relational aspects (Besser and Miller 2001; Miller and Besser 2000; Besser 1999, 1998; Kilkenny, Nalbarte and Besser 1999).

Various studies have found positive relationships between age and ethical behavior in small business (Barnett and Karson 1987; Posner and Schmidt 1984; Serwinek 1992; Smith and Oakley 1994). Work by Dawson, Breen and Satyen (2002) similarly revealed significant variation in business attitudes for Australian micro business operators based on age and education. Younger business operators viewed ethical rules of operation as more important to their business than did those over 50 years of age and those with a professional degree saw business decisions as closely linked to personal moral decisions.

Miller and Besser (2000) profiled small rural business operators in Iowa by five community value clusters: social responsibility, community support, leadership in the community, community attachment, and collective action. Significant differences were found among cluster profiles for age, gender, marital status, level of education, years lived in town, and age of the business. Besser and Miller (2001) reported similar findings where small business owners were grouped based on variation in community social responsibility. Cluster analysis revealed significant differences among business operator groups for community social responsibility (CSR) factors of support, collective action, commitment, and attachment. Differences were attributed to age, marital status, educational level, years lived in town, age of business, ownership status, and firm size (number of employees).

Besser’s (1999) study of small town business operators found that older businesses and those with more employees were more likely to be committed, provide leadership, and support to the community. Further, education was positively related to commitment, leadership, and support and older operators provided more community leadership and support than younger operators. Owners were also more likely to demonstrate community commitment than managers and those operating older businesses were more likely to hold leadership roles and demonstrate community support. In another study of small town business operators, Besser (1998) found operator education, business age, and collective action to be significant predictors of community leadership. Research conducted by the Center for Economic Studies in the Bureau of Census suggests small business outcomes are positively associated with the owner’s level of education (Fairlie and Robb 2005). A recent national study by the Small Business Administration’s Office of Advocacy (2006) also found that education level was a significant and positive explanatory variable in evaluating the growth of rural small businesses.

While a void exists in the literature concerning the consequences of CSR for family firms, several studies suggest that social responsibility may positively influence subjective or perceived performance and success. Miller and Besser’s work (2000) identified small business operators by community value clusters, finding significant differences among groups regarding perceived firm success. Firms with a higher sense of community social values were more likely to report perceived business success than firms with low values. An analysis of small business operators in 10 Iowa cities (Besser and Miller 2001) revealed significant differences in perceptions of operators’ business success when grouped by CSR level. Operators with higher CSR were significantly more likely to view community support as an important business performance strategy than those with lower CSR. Similarly, Besser (1999) found perceived business success to be associated with business operators’ support and commitment in a study of 30 Iowa communities.

Theoretical Background

One approach to understanding community social responsibility from the perspective of family business operators is the enlightened self-interest model (Aram 1989; Arlow and Gannon 1982; Mescon and Tilson 1987). This approach suggests that socially responsible actions by a community-based firm will be reciprocated over time by support from loyal customers, employees, suppliers, and other stakeholders (Galaskiewicz 1985; Keim 1978). Reciprocal economic exchange is influenced by prevailing social norms, values, and expectations of community groups (Portes and Sessenbrenner 1993; Uzzi 1996). Gouldner (1960) defines reciprocity as the give and take of goodness among group members and a sense of obligation to repay kindness. Socially responsible behavior and expectations for doing what is right for the collective good, may be considered prevailing social norms for doing business in small rural communities. Likewise, family business operators may view social responsibility as a form of reciprocation or giving back to the community.

Complementary to the enlightened self-interest perspective is the concept of social capital. Social capital is reflected in the intangible value created by relational ties between family businesses and the community. It manifests itself at the community level through the development of trust, commitment, reciprocity, and a sense of shared vision (Coleman 1990; Tsai and Goshal 1998). Through collective behavior, residents and business operators help communities generate social capital (Coleman 1988, 1990). Putnam (1993, 2000) suggests that community social capital is enhanced with increasing commitment, attachment, and involvement by community residents. Most family businesses live, work, and operate within the same community. This may in turn cause them to have greater attachment and stronger sentiment toward their communities and a greater likelihood to work for the common good. Socially responsible business behaviors, such as outward signs of support, involvement, and leadership in the community, may further encourage reciprocal behavior from consumers and residents, enrich social capital, and have potential consequences for business performance and sustainability.

Primary research related to CSR for family firms was conducted by Niehm, Swinney, and Miller (2007) using data from the 2000 National Family Business Survey (NFBS). The researchers explored the antecedents and consequences of community social responsibility (CSR) in the context of family firms operating in small or rural US communities. The dimensions of CSR were assessed to determine the consequences of socially responsible business behavior on family business performance. Researchers profiled family business operators’ (n=221) to determine if their CSR orientation contributed to family business performance. Enlightened self interest (Aram 1989) and social capital (Coleman 1988) perspectives provided a framework for elaborating the role of CSR in sustaining family businesses in changing small and rural communities. Results indicated that three dimensions, commitment to the community, community support, and sense of community, accounted for 43 percent of the variation in family business operators’ CSR (see Table 1). Size of the business was significantly related to family firms’ ability to give and receive community support. Further, commitment to the community was found to significantly explain perceived family business performance while community support explained financial performance. The researchers concluded that socially responsible business behaviors can be an important component of performance and sustainability for family owned businesses in small and rural communities.

Table 1

Factor Items, Means and Loadings from Principal Component Analysis of

CSR Dimensions for Family Owned Businesses

|Factor Itemsª |% Variance |Factor Loading |Mean Score |Std. Dev. |Variance |

| |Explained | | | | |

| | | | | | |

|Commitment to the Community α=.75 |24.72 | | 3.58 |3.88 |15.00 |

| The people of this community really care about | |.59 | 3.16 | | |

|the fate of this business. | | | | | |

| If given a chance you would brag about this | |.61 | 3.56 | | |

|community as a good place to locate a business. | | | | | |

| How satisfied are you with the amount of | |.69 | 3.66 | | |

|support your business gets from your | | | | | |

|community? | | | | | |

| The business does not have much to gain by | |.78 | 3.45 | | |

|remaining in the community. (R) | | | | | |

| As a business owner or manager you are willing | |.67 | 3.71 | | |

|expend resources to help this town. | | | | | |

| If you feel like talking, you usually can find | |.75 | 3.95 | | |

|someone in the community to talk with. | | | | | |

| | | | | | |

|Community Support α=.62 |10.31 | | 2.79 |2.95 |8.68 |

| Your business keeps in close contact with local | |.45 | 2.92 | | |

|economic development organizations. | | | | | |

| How often in the past 3 years has your business | |.62 | 2.23 | | |

|provided financial or technical assistance in | | | | | |

|community development and planning? | | | | | |

| How often in the past 3 years has your business | |.75 | 3.22 | | |

|provided donations to local schools or youth | | | | | |

|programs? | | | | | |

| | | | | | |

|Sense of Community α=.74 |8.20 | | 3.49 |1.30 |1.69 |

| Community leaders need to consider family | |.80 | 3.68 | | |

|needs more carefully when they undertake | | | | | |

|community planning projects. | | | | | |

| This used to be a better community in which to | |.72 | 3.29 | | |

|live. (R) | | | | | |

| | | | | | |

| Total Variance Explained | 43.23 | | | | |

n= 221

ªresponses were given as follows: 1 = Strongly Disagree to 5 = Strongly Agree

R= item reverse coded

Notes: Mean Score reflects average of summed items for each factor.

Items reflect 17 measures of Community Social Responsibility from the 2000 National Family

Business Survey

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