Companies in Cleveland focus on housing, those in Columbus orient toward children's' issues, and Minneapolis firms put much of their efforts into the arts.

Why do companies focus their social activity on their headquarters' community, and what are the forces that drive corporate giving on a local level?

This is the focus of a soon-to-be published article by Harvard Business School professor Christopher Marquis and coauthors Gerald Davis and Mary Ann Glynn, who are developing a framework for understanding how social and governmental forces in local communities influence corporate decision making in the social sphere.

As part of their research, they have interviewed more than 50 people in two cities and collected data on some 1,000 communities since the late 1980s. They observe that organizations in different cities seem to have different foci when it comes to their community involvement.

Understanding the forces that drive corporate giving on a local level provides important lessons for executives, policymakers, and the groups who benefit. But such knowledge also suggests more work to be done in order to learn how global business trends, such as industry consolidation and globalization, might influence local philanthropy efforts.

The authors suggest that there are three main factors that influence corporations to follow locally established patterns: what the government encourages; what local peers are doing; and what they believe to be "right." This typology is similar to work on how industry membership influences companies.

For example, regarding governmental factors, the city of Detroit created an Enterprise Zone to attract local inner-city corporate spending. Cleveland firms have a well-established focus on housing, which some researchers credit to the early actions of local political leadership and governmental agencies that encouraged public-private housing partnerships.

Corporations are also embedded in local social systems that include common club memberships and overlapping boards. These connections help inform companies what others in their local area are doing and directly put them in touch with local needs. Prior research on Minneapolis has shown how local clubs and the social networks of business leaders and nonprofits positively influence corporate philanthropy. Interviewees in one of the cities studied described how institutions such as the local community foundation and boards of companies and nonprofits create links between local leaders, and that these links are helpful to get the word out about needs and generate peer pressure for giving.

Different locales do seem to have developed different conceptions of what is appropriate activity in this realm, posit the authors. In Silicon Valley, it is well known that corporate social action is very results-oriented, engendered by the start-up culture of the region. In Atlanta, prior commentators have noted that there is a special "spirit" that enables public-private partnerships to form to attract large-scale events that showcase the city, such as the 1996 Olympics.

The authors also contrast the social activities of major corporations in two Ohio cities—Cleveland and Columbus. In Columbus, there is a preponderance of activities targeted to children's needs. These include programs providing kindergarten tutoring to financial support of Pediatric AIDS, The Children's Defense Fund, and Action for Children. They theorize that the Columbus corporations' interest in benefiting children stems from the influence of Dave Thomas, the founder of Wendy's, a major Columbus firm. Wendy's promotional materials describe how Thomas worked to influence other large corporations to support his causes—which centered on children's issues such as adoption. Other Columbus-headquartered companies as diverse as The Limited, Bob Evans, and Cardinal Healthcare evidence similar attention to children.

Cleveland does not have the same focus on children. But in addition to the city's focus on housing, it appears that a tradition of employee volunteering has developed. For example, Eaton has given an award for employee volunteers since 1933. Nordson, as a supplement to offering paid time off for volunteering, created the "Talent and Time" program, which was designed to match employee interests and talents with community needs. And many other Cleveland-headquartered firms have a similar commitment to employee volunteering.

The authors also quote a study by Doug Guthrie of 2,776 firms' giving behavior across 50 U.S. cities, in which he found that 77 percent of giving across these communities stayed within the headquarters' community and that 80 percent of corporations claim that their largest single donation was within their community.

Given the continuing trends in large-scale mergers and consolidation of U.S. industries, if corporate social action maintains its focus on the headquarters location, this may have a detrimental effect on areas that are losing headquarters. Interviewees described how local banks used to be the largest supporters of social programs in one of the communities studied. But now, after out-of-town banks bought the major local firms, these organizations have drastically reduced their local support because the key decision makers are no longer in touch with the needs of this locality.

The authors hope the study will help companies see the need to geographically diversify social spending. Although many companies claim they support programs in all communities where they have employees, the study interviews and prior studies do not support this claim. For policymakers, at both the national and more local levels, perhaps the major implication is the need to consider how social spending changes as industries consolidate and mergers change the locations of major corporate headquarters.