Community Involvement and the Perception of Success among Small Business Operators in Small Towns (1999)

The purpose of this analysis is to elaborate the relationship between the success of small businesses and their level of social responsibility. It focuses specifically on one dimension of social - commitment to and support for the community. Scholarship about social recognizes several different variants of what is generally thought of as good citizenship (Post 1996; Carroll 1979; Frederick 1986). In this article, corporate social responsibility means the contribution that businesses make to the public good above and beyond the provision of goods and services that they exchange in the market. Public goods are specifically defined as goods that are not diminished by others' enjoyment of them, and once provided, the public good is available to all (Olson 1965; Boulding 1973). Examples include clean air, public radio, and community betterment. Because the term corporate social responsibility reflects the bias toward big that permeates the scholarship on this subject, in this article the term business social responsibility will be used instead in an attempt to broaden consideration to all for-profit organizations. The enlightened self-interest model of social posits that businesses can realize significant benefits through socially responsible behavior; some of these benefits include a well-educated, stable, satisfied work force; a healthy environment; and a thriving community in which to live and do (Sethi 1979; Keim 1978; Fry, Keim, and Meiners 1982). Equally important, according to enlightened self-interest logic, is the possibility that socially responsible behavior will directly enhance a firm's public image and prestige, thereby increasing the probability of customers buying its products, of bank officers giving it attractive rates on loans, of suppliers treating it fairly, and of collaborators seeking it out as partners on lucrative ventures. These consequences can positively impact the success of socially responsible companies (Keim 1978; Fry, Keim, and Meiners 1982). The classic dilemma posed by the provision of public goods, however, is known as the free rider problem. Free riders are the businesses that benefit from the provision of community improvement by others without bearing the cost of providing it. When other businesses bear the costs of providing public goods, non-contributing businesses will have lower costs and are in a better competitive position relative to socially responsible businesses. Capturing the benefits of socially responsible behavior and overcoming the free rider problem require effective mechanisms of monitoring and sanctioning (Olson 1965; Ostrum 1990; Portes and Sensenbrenner 1993). This function could be carried out by a group of prominent civic-minded leaders (Galaskiewicz 1985); or by a network of local suppliers, collaborators, and contractors (Uzzi 1996; Piore and Sabel 1984; Young and Francis 1991); or by the community as a whole. Brown and King (1982) found that a sample of small respondents identified norms and pressures from the community and peers as having more influence on ethics than did moral or religious principles, anticipation of rewards, upholding the law, or fear of punishment. Monitoring and sanctioning should be more effective in small towns where free rider behavior is more difficult to hide. In the Brown and King (1982) study, 39 percent of the respondents indicated that doing in a small town had a large positive effect on small ethics, second only to the respondents who said competition had a large positive effect. Smith and Oakley (1994), in a comparison of owners in metropolitan and non-metropolitan towns, discovered that non-metropolitan owners were less accepting of questionable ethical behavior and had higher expectations for ethical behavior than their metropolitan counterparts. …