The Importance of Community Values in Small Business Strategy Formation: Evidence from Rural Iowa [*]

The aim of this research was to test whether small business owners and managers could be clustered on the basis of their values toward their community and whether cluster designation was significantly related to the kind of business strategies employed. Little is known empirically about aspects of social responsibility relating to small business operators' regard for community and their strategic planning. In this study, community values and management strategies were measured by the self-reports of 1,008 small business operators in 30 rural Iowa communities. Cluster analysis revealed three categories of business operators distinguished by high, medium, and low levels of community values. Operators in the high community values cluster were found to vary significantly with regard to personal and business characteristics from operators in the other two clusters. Clusters with high and medium community values differed from the low community values cluster with regard to eleven business strategies. This analysis indicates that business owner/managers in small towns differ in their reported levels of community values, and that those values are associated with their evaluation of the importance of various strategies for success. The values of top management are an essential element in explaining the behavior and performance of a business (Bamberger 1983). These values affect the management style, the structure, the approach to the market, and the strategies for success employed by the business (Bamberger 1983; Thompson and Strickland 1986; Freeman, Gilbert, Jr., and Hartman 1988; Kotey and Meredith 1997). In fact, Freeman, Gilbert, Jr., and Hartman (1988, p. 833) contend that "strategic management is by nature a process of values clarification. " In this article, one area of management values--the area dealing with the attachment of business owners and managers to their communities and their sense of responsibility toward their community--is elaborated. The purpose of this study was to group small business operators according to their community values and then to compare the resulting groups in terms of their business strategies. Values are a stable core of standards about what is "good," desirable, or preferred. Research has refined the categories of possible management values to the following: acceptance of chance, including risk and innovation; manager/ personnel relationships; juridical thinking (for example, the use of all legal means); working for society's or the firm's interest; and participation in society (Bamberg 1983). The latter two value sets include the issues of interest here--community attachment and social responsibility toward the community. Research on corporate social responsibility is the focus of another body of literature. A brief overview of that literature will help to establish the theoretical link between the values of community attachment, social responsibility, and management strategies. Corporate social responsibility refers to the obligation of businesses to contribute to social betterment above and beyond their role in the market exchange of their goods or services (Frederick 1986, 1994). A central question dealt with by scholars in this domain is: What are the factors that distinguish socially responsible businesses from less responsible ones? Finding answers to this and other questions related to corporate social responsibility has proven to be a challenge. One obstacle has been defining and operationalizing the concept of social responsibility (Arlow and Gannon 1982; Wartick and Cochran 1985; Griffin and Mahon 1997). Equally daunting has been the difficulty of obtaining information about the subject, stemming from the reluctance of businesses to reveal information about either their performance or about their socially (ir)responsible behavior (Arlow and Gannon 1982; Wartick and Cochran 1985; Griffin and Mahon 1997). Small businesses have been especially ignored by corporate social responsibility scholars (Thompson and Smith 1991). …