Companies that do more for the community acquire a special standing—they become ‘institutions’—and their products become infused with a special significance, according to a recent study from Davide Ravasi, UCL School of Management.

The research team, which included Innan Sasaki, Lancaster University, and Evelyn Micelotta, University of New Mexico, Albuquerque, studied the Japanese city of Kyoto, where century-old companies still prosper because of their special relationship with the local community—they are known as shinise, and operate in a broad range of industries, from sake brewing to timber constructions, clothing, or confectionery.

The local community recognises that these firms play an important role in protecting it from cultural erosion and the westernisation of Japanese society, and, because of this reason, it mobilises to buffer them from market pressures.

“Our research found that, in Kyoto, shinise enjoy a special standing because they are not just seen as producers of exquisite goods, but also as essential to keep the local culture alive. These firms are considered the embodiment of values, such as thrift, sobriety, perseverance, craftsmanship, and respect for tradition, that make Kyoto different from the rest of Japan. That is why the local government acknowledges and supports them, and their products receive preferential treatment in shops,”says Professor Ravasi.

The study used data from 74 in-depth, semi-structured interviews with 56 different informants from local shinise—including owners, managers and employees—and 36 interviews with 33 representatives from the local community.

In the Western world, it is not uncommon to praise market forces for weeding out companies that have become, perhaps temporarily, unprofitable or are unable to withstand the pressure of larger, more efficient competitors.

This research, however, suggests that efficiency and profitability are not the only criteria we should use to evaluate the contribution of business to society, and points to the possibility that valued and established businesses may become a veritable part of our cultural heritage, and the potential long-term damage to society of losing them to the forces of the market.

This research is due to be published in Organisation Studies.