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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. Sethis 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 todays 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 Administrations 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 CSRs 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).
Bessers (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 owners level of
education (Fairlie and Robb 2005). A recent national study by the Small Business
Administrations 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 Bessers 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) usingdatafromthe2000NationalFamilyBusinessSurvey
(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 Items
Commitment to the Community
=.75
The people of this community really care about
the fate of this business.

% Variance
Explained

Factor
Loading
.59

3.58
3.16

If given a chance you would brag about this


community as a good place to locate a business.

.61

3.56

How satisfied are you with the amount of


support your business gets from your
community?

.69

3.66

The business does not have much to gain by


remaining in the community. (R)

.78

3.45

As a business owner or manager you are willing


expend resources to help this town.

.67

3.71

If you feel like talking, you usually can find


someone in the community to talk with.

.75

3.95

.45

2.79
2.92

How often in the past 3 years has your business


provided financial or technical assistance in
community development and planning?

.62

2.23

How often in the past 3 years has your business


provided donations to local schools or youth
programs?

.75

3.22

.80

3.49
3.68

.72

3.29

Community Support
=.62
Your business keeps in close contact with local
economic development organizations.

Sense of Community
=.74
Community leaders need to consider family
needs more carefully when they undertake
community planning projects.
This used to be a better community in which to
live. (R)

24.72

Mean
Score

10.31

8.20

Std.
Dev.

Variance

3.88

15.00

2.95

8.68

1.30

1.69

Total Variance Explained


43.23
n= 221
responses 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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