No company can function independently from the community in which it operates. This is especially true for small businesses. What’s more, a mutually supportive company-community relationship is critical to maximizing benefits for both parties. But how do business owners and managers view their role in community support? How does the community support they receive affect their interpretation of their role? Researchers at the University of Helsinki provide advice for getting the most from this relationship. Authors of a 2012 study conducted interviews with 25 small business owners and managers, representing a range of business types.
How “Close” Should Businesses and Communities Be?
Research findings suggested that three types of relationships can exist between businesses and their communities:
- Too close: Businesses are so tightly integrated into the community fabric that owners and managers feel limited by social norms, suffocated or unsupported. This condition often arises when businesses are in small, rural communities and are geographically close to all major stakeholders.
- Too distant: Business owners and managers feel highly detached from the community, often viewing tax payment as their only social obligation. This is problematic for the local community, as detached businesses are less likely to invest in the community and are more likely to relocate.
- Just right: Researchers call this sweet spot “optimal social proximity.” The characteristics of optimal social proximity include:
- Close social relationships between businesses and the community, such that each contributes to the success of the other.
- Businesses that take part in local activities.
- A local community that purchases small businesses’ products and services, and provides supportive pre-conditions for small business success.
To achieve optimal social proximity, business owners must feel supported by their community. This motivates them to invest in community development and well-being. In this way, optimal social proximity maximizes the value that both business and the community reap from their relationship.
How to Create Reciprocity Between Small Businesses and Communities
Business owners and managers: A company’s community engagement activities are driven by enlightened self-interest. Owners and managers should understand that investing in the community can generate greater support that translates to economic benefit. Owners and managers can support their community by:
- Purchasing from local suppliers
- Giving money to local charities
- Taking part in local community development activities
Community stakeholders – Business developers, government and community organizations: It’s imperative that those with a role in business development understand that small business owners and managers will only invest meaningfully in the community if they feel supported in return. Engage directly to understand small business needs and work with these businesses to develop supportive conditions in which to operate.
Small businesses and their local communities both reap the greatest benefit when they have a mutually supportive relationship. When businesses owners and managers feel valued and supported, and have the space to thrive and innovate, they are more likely invest in community building activities. Both parties should make a concerted effort to strengthen their relationship.
Lähdesmäki, M., & Suutari, T. 2011. Keeping at Arm’s Length or Searching for Social Proximity? Corporate Social Responsibility as a Reciprocal Process Between Small Businesses and the Local Community. Journal of Business Ethics. 108: 481-493.