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Community cohesion a big plus for local business, study finds

June 24, 2016

For more information, contact: Ben Haimowitz, (718) 398-7642, press@aom.org

How local support helped small bars prevail vs a national mandate

Amid the gloom that has pervaded Europe and North America in the post-recession years, some new research finds a reason for cheer in an obscure development – the fight that small bars in the Netherlands waged successfully against a national anti-smoking statute. Frans Hals, the 17th-century Dutch artist renowned for his portrayals of tavern conviviality, would be proud.

When the Dutch government implemented a ban eight years ago on smoking in bars, it was merely a small part of a massive anti-tobacco movement across the developed world that has mostly proved irresistible. That the statute aroused fierce opposition among the country's small bar owners is not surprising. Considerably less expected is that staunch local support in many communities enabled the owners to prevail against the national law, in what a new scholarly paper calls "a David-versus-Goliath scenario."

At a time when rampant globalization marches arm in arm with increasing state power, the paper in the Academy of Management Journal investigates the struggle of small bar owners against "institutional pressure emanating from a powerful actor," and finds that "the social cohesion of a community...offers[s] relatively powerless actors strong arms with which to oppose a regulatory force...Our example is especially noteworthy, given that the organizations in question are not giant businesses with very deep pockets and throngs of lobbyists but small bars, owner-run establishments [that] were able to challenge the regulations and prevailed."

In sum, "when an organization, however small, serves an important social function in its community and joins forces with other similar organizations in its immediate environment, it can exert power and influence above and beyond its net economic contribution and/or value, even in the face of strong institutional pressures."

The study, by Tal Simons of Tilburg University and Patrick Vermeulen and Joris Knoben of Radboud University, probes a phenomenon that has emerged with some prominence in advanced economies in recent years – the dynamism of local businesses. A few months ago, for example, a much-discussed cover story in the US magazine The Atlantic concluded from extended travels across the country that “many people are discouraged by what they hear and read about America, but the closer they are to the action at home, the better they like what they see.” In the words of one observer cited in the story, “In scores of ways, Americans are figuring out how to take advantage of the opportunities of this era, often through bypassing or ignoring the dismal national conversation."

In an example of how local dynamism has played out in a major industry, even in the face of contrary national trends, an earlier study in the Academy of Management Journal found evidence of considerable local resistance to the nationalization of finance, with banking professionals and consumers working together to create a financial infrastructure outside the grip of national institutions. "Drive around any major US city," observes Cornell University's Christopher Marquis, a study co-author, "and alongside Bank of America and Citigroup branches sit banks that reflect the specific locale or culture, such as Hyde Park Bank in Chicago or East Boston Savings Bank. There has been groundswell for community-based finance, even within a regulatory system that substantially favors larger banks."

What factors foster local business dynamism? In the case of small bars in Holland, those “embedded in communities that exhibit greater residential stability and kinship, together constituting a higher level of community cohesion, resisted institutional pressure from the state more than their counterparts located in less cohesive communities."

Comments Prof. Simons: "As experience with globalization accumulates and disillusionment with it increases, the expectation that local communities will lose their potency is proving unfounded. Our study can be appreciated alongside other examples of local dynamism as an indication of the power of communities to get things done. Evidence of supporting the bar owners in their struggle included contributing funds for legal action and alerting the bar owner when inspectors were approaching. Even some non-smokers opposed the implementation of the bans, viewing them as potentially undermining the social conviviality that local bars provide. Cohesive communities were able to rally and support their local bar in the face of a seemingly invincible opponent – the state."

The professor adds: "Inconsequential though this success may seem in the grand scheme of things, my co-authors and I see it in a larger context – as part of a renewed resort to local resources and talents and to a revived sense of communities as social arenas where significant social dynamics occur."

Following Holland’s enactment of the ban on smoking in bars in 2008, opposition to the law was pursued by an organization called "Save the Small Bars" (SSB). As a result, in 2009 a Dutch appeals court ruled that establishments operated solely by owners should be exempt from the mandate on the grounds that the ban was based on the right of employees to work in a smoke-free environment. When this decision was overruled by the country's Supreme Court, the battle shifted to the political arena, and, with the election of a new government in 2010, the ministry of health announced that it would no longer enforce (with fines as high as 2,400 euros) the law for small bars without staff. A subsequent study found that in 80% of such establishments customers were smoking again.

What accounts for this unlikely victory? The heart of the resistance, as indicated by local membership in SSB, came from municipalities with stable residential patterns and high levels of what the study's authors call kinship, as measured by responses to nine items on a national survey. Citizens responded on a scale of 1 to 7 to such statements as "I feel an attachment to this neighborhood"; "I have a lot of contact with the people who live next door"; "I feel responsible in part for the neighborhood being a pleasant place to live"; and "people are nice to each other in this neighborhood."

The researchers found that an increase of community stability of 1% was associated with a boost in resistance to the smoking ban of nearly 0.5%. Even more impressive, an increase in kinship of 1% was associated with a 1.9% resistance boost. Interestingly, too, average household income in a community was negatively related to resistance to the extent it was statistically significant at all.

As the professors reiterate in conclusion, "Communities' distinctive local endowments, as expressed in their social cohesion, matter and influence organizations' actions above and beyond a multitude of other factors...It is advisable for managers to be familiar with the characteristics of the communities in which they operate..[C]ohesion in particular may have a substantial impact on organizations' activities and fates.”

The paper, “There’s No Beer without a Smoke: Community Cohesion and Neighboring Communities’ Effects on Organizational Resistance to Antismoking Regulations in the Dutch Hospitality Industry," was in the April/May issue of the Academy of Management Journal. This peer-reviewed publication is published every other month by the Academy, which, with almost 20,000 members in 128 countries, is the largest organization in the world devoted to management research and teaching. Its other publications are Academy of Management Review, Academy of Management Perspectives, Academy of Management Learning and Education, Academy of Management Annals, and Academy of Management Discoveries.

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