Table Of ContentSOCIAL ORGANIZATION
OF AN
URBAN GRANTS
ECONOMY
A Study of Business Philanthropy and
Nonprofit Organizations
Joseph Galaskiewicz
DEPARTMENT OF SOCIOLOGY
UNIVERSITY OF MINNESOTA
MINNEAPOLIS, MINNESOTA
1985
ACADEMIC PRESS, INC.
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LIBRARY OF CONGRESS CATALOGING IN PUBLICATION DATA
Galaskiewicz, Joseph.
Social organization of an urban grants economy.
Bibliography; p.
Includes indexes.
1. Endowments —Minnesota—Minneapolis Metropolitan
Area—Case studies. 2. Corporations —Minnesota-
Minneapolis Metropolitan Area—Charitable contributions —
Case studies. 3. Charities—Minnesota—Minneapolis
Metropolitan Area —Case studies. 4. Associations,
institutions, etc. —Minnesota—Minneapolis Metropolitan
Area—Case studies. I. Title.
HV99.M55G35 1985 361.7'6 85-6118
ISBN 042-273860-8 (alk. paper)
ISBN 0-12-273861-6 (paperback)
PRINTED IN THE UNITED STATES OF AMERICA
85 86 87 88 987654321
To my funders,
NSF, PONPO, and CURA
of course.
PREFACE
In the best traditions of sociologized inquiry, this research once again
uses the city as a laboratory to study the social organization of modern
life. The study of elites, corporate wealth, and human service organiza-
tions is not new; however, to study these actors as participants in an
urban grants economy is novel. Whether our efforts have been success-
ful is, of course, up to our readers to decide. We hope they look kindly
upon us.
This monograph was written with two audiences in mind. The first is
the academic social scientist who has an interest in the problems of
collective action and resource allocation in an economic order where
neither a market mechanism nor a public authority effects a distribu-
tion of resources. We address the role of exchange and gift-giving in
these arenas of action as well as attempts to economize transaction costs
through the use of agency roles. Because political scientists, economists,
psychologists, anthropologists, and historians, as well as sociologists,
have looked at these topics, we hope that the findings presented here
will contribute to a number of disciplines.
The second audience is the interested citizen who wants to know
more about the third, or nonprofit, sector. The nonprofit organization
and the institution of charity are highly cherished in American culture,
and many hold dear the values which the third sector represents —
idealism, volunteerism, and mutual self-help. We hope the material in
this book can provide some insight into how this sector functions.
We recognize at the start that there are limitations to the case-study
approach. Problems become more acute when one's case may be espe-
cially deviant from the norm. Our case community—Minneapolis-St.
Paul—has a national reputation for having a very generous and active
corporate community, and it would be unwise to infer that processes
xi
XU PREFACE
elsewhere mirror those in the Twin Cities. The Twin Cities were chosen
because it was a case that worked, and, to be honest, because the author
is situated at the University of Minnesota, Twin Cities campus. Still, if
one were to pick a laboratory to study a grants economy, the Twin Cities
would be at the top of most researchers' list. In the tradition of case
studies in sociology, anthropology, and business, it took 6 years to com-
plete the project from beginning to end. We hope that the reader will
agree that what we discovered about this grants economy was well
worth the time and attention that we gave to this case.
Acknowledgments
There are so many people who have helped in this research that it is
very difficult to thank them all. The most important, of course, are the
participants in the study, who gave so freely of their time. Executives,
politicians, journalists, nonprofit staff, and various others in Minneapo-
lis and St. Paul gave the project their full attention and cooperation.
Interview after interview, respondents and informants sat patiently and
answered our questions. The people of the Twin Cities are truly decent
human beings who taught me a great deal.
The original grant that got the project on its way came from the Center
for Urban and Regional Affairs at the University of Minnesota, with the
help of Tom Scott and Tom Anding. This was followed by a grant in 1980
by the National Science Foundation (SES 800-8570) to fund the inter-
view with the nonprofit organizations and the local community elite. In
1981 the Program on Nonprofit Organizations at Yale University pro-
vided funding for the interviews with the corporations and business
leaders. John Simon, Paul DiMaggio, and Scott Boorman were most
helpful in securing these funds. The National Science Foundation aug-
mented its original grant in 1982.1 must also acknowledge the Graduate
School at the University of Minnesota for intermittent funding of re-
search assistants. Its support came at critical times and kept the project
afloat. Finally, throughout the research and the writing of the mono-
graph, the Department of Sociology has been most helpful in providing
facilities and preparing manuscripts. I would like to thank Don McTa-
vish, Dan Cooperman, John Clark, and David Ward, all of whom served
as Chair at one time or another during the period of this research.
Intellectually, there are a number of individuals to whom I am greatly
indebted. My long-standing association with Edward O. Lauman has
been invaluable. Our conversations over the years contributed greatly
xiii
xiv ACKNOWLEDGMENTS
to the endeavor. My interest in collective action stems directly from
seminars I took in graduate school with James S. Coleman and Terry N.
Clark; my concern about the legitimation of social action and social
control comes from the lectures and writings of Morris Janowitz; and my
appreciation of transaction costs analysis came from reading the work of
Oliver Williamson. My association with Ronald Burt and Peter V. Mars-
den has also greatly influenced the way I look at social organization.
Three colleagues at the University of Minnesota have been a great
help to me. Stanley Wasserman, who is now at the University of
Illinois-Champaign, has been a constant source of new ideas on re-
search methodology. Joan Carothers was the first to make me aware of
how prestige processes can be so effective in motivating action. John
Delany introduced me to the economics literature on altruism and don-
ative transfers. The monograph would be considerably less than it is
without our conversations. I would also like to thank Paul DiMaggio,
Clarke Chambers, Andy Van de Ven, Barbara Lukermann, James Lin-
coln, David Knoke, Susan Mondale, Jackie Ries, Judy Martin, Amos
Martin, Bill King, Donald Imsland, and Carol Pine for reading and com-
menting on various chapters.
A number of individuals in the Department of Sociology have assisted
as well, and their help has been invaluable. At various points in time,
Patti Mullaney, Wolfgang Bielefeld, Barbara Rauschenbach, Karl
Krohn, Wayne Kobbervig, Asha Rangan, Laura Hutton, Michael O'Neal,
Mary Jo Reef, Gretchen Lieb-Peterson, Gretchen Matteson, and Donna
Bergstrom have worked as research assistants. Deborah Woodworth has
been very helpful as a project assistant. Jeanne-Marie Rohland, Lisa
Thornquist, Gloria DeWolfe, Deborah Felt, and Joanne Losinski have
typed questionnaires, letters, papers, and the monograph itself in a most
professional way. The book would not have been possible without their
help. There have also been those who provided volunteer help along the
way, such as Sharon Bross and Jan Fiola. I also thank the editors and staff
at Academic Press.
Finally, I would like to thank my wife, Rosemarie, and my father (now
deceased), mother, sisters, and nephews for their patience and under-
standing during some very difficult years for our family. Their tolerance
has allowed me to complete the monograph and for that I am greatly
indebted to them.
INTRODUCTION
I have heard so much about the City of Minneapolis, about its
Chamber of Commerce, about the public spirit of its business com-
munity, about your remarkable Five Percent Club-that I feel a bit
like Dorothy in the Land of Oz. I had to come to the Emerald City
myself to see if it really exists.
The Emerald City
John D. Rockefeller III delivered this little panegyric to a meeting of
the Minneapolis Chamber of Commerce on June 30,1977, and the local
and national press have been repeating it ever since. It was not, how-
ever, an isolated incident or a paternalistic gesture to the locals. Be-
tween 1976 and 1981, articles about the social responsibility of
Minneapolis-St. Paul firms appeared in Fortune ("Minneapolis Fends
Off the Urban Crisis," January, 1976), The Wall Street Journal ("A Mid-
western City Where Fine Arts Flourish," September 15,1977), The Chi-
cago Tribune ("A Club That Means Business," June 26,1979), The Boston
Globe ("Where the Arts Flourish: Minneapolis," May 4,1980), The New
York Times ("Minnesota a Model of Corporate Aid to Cities," July 27,
1981), and even the Harvard Business Review ("In Minnesota, Business
Is Part of the Solution," July-August, 1981). Most recently, "Minneap-
olis, Inc." was cited as the best example of the M-form society in action
by noted business author William Ouchi (1984). In the last decade no
other business community has come close to getting this much attention
nationally, and the attention is all very positive.
The cities of Minneapolis and St. Paul and the state of Minnesota have
shared the spotlight with their companies. In another WaJJ Street Jour-
1
2 INTRODUCTION
ηαΐ article ("A Northern City That Works: How Minneapolis Manages
It," August 5,1980), it was reported that Chicago is no longer the city that
works, and that Minneapolis has taken its place. Among other procla-
mations, the article cites a 1978 report by the Congressional Budget
Office that ranked 39 cities by social need. Only Dallas and Seattle
scored better. In 1980 the Chicago Tribune ('Our Cities: Some Bests
and Worsts," April 4,1980) did an extensive analysis of the quality of life
in 11 American cities. Minneapolis was cited as having the best munic-
ipal government, the best city planning office, the best civic leadership,
the best downtown mall, and the best innovation in urban living (the
downtown skyway system). In 1984 Time magazine printed a feature
article ("Minnesota's Magic Touch," June 11,1984) praising the partner-
ship between government, business, labor, and educational leaders that
has worked to develop new high-technology enterprises in the state of
Minnesota. Whether we can trust the results of these surveys and
reports is a moot point; what is important is that Minneapolis, St. Paul,
Minnesota, and their business communities have received very good
press in the last few years.
A skeptic would want to see some objective, "hard" data before ac-
cepting the Emerald City label that John D. Rockefeller III offered back
in 1977. Nationally, companies gave $2.9 billion in 1981 and $3.1 bil-
lion in 1982 (American Association of Fund-Raising Counsel, 1983:28).
The Minnesota Council on Foundations (1982,1983) estimates that total
corporate giving by Minnesota companies was $62.3 million in 1981 and
$63.4 million in 1982. As a state, Minnesota had only 4.11 million
people in 1981 and 4.13 million in 1982, or 1.8% of the nation's popula-
tion in both years (Statistical Abstract of the United States, 1985:11).
The Council for Financial Aid to Education and the Conference Board
compile annual statistics on corpoate contributions for 21 metropolitan
areas. Based on company giving as a percentage of pretax net income,
Twin Cities companies ranked first in 1977,1979, and 1980. In 1978 and
1981 they ranked second, and in 1982 they ranked fourth [Corporate
Support of Higher Education, 1978, 1979, 1980, 1981, 1982, 1983). The
authors of the 1982 study indicated that statistics for that year were
somewhat misleading because earnings were so low in cities like Balti-
more, Detroit, and Pittsburgh. They suggested that a more reasonable
strategy would be to look at long-term trends. For example, looking at
contributions to higher education as a percentage of pretax earnings,
they noted that only Minneapolis-St. Paul firms were in the top third of
the list for the past 5 years.
A claim that is often heard is that more firms give at the 5% limit in the
Twin cities than in any other area of the country. This claim was given
TWIN CITIES: HISTORY AND CURRENT CHARACTER 3
credibility by a New York Times article in 1978 ("Philanthropy, the
Business of the Not-So-Idle Rich," July 23, 1978), which stated that
"some 33 corporations there [Minneapolis] give five percent of their
income to philanthropy, out of a nationwide total of 37 who reportedly
do so." While it is not clear where the Times got their information on
firms elsewhere, it is true that there has been a "Five Percent Club" in
Minneapolis since 1976. In 1976, 23 firms were in the "club"; in 1982,
62 companies were members. Among the more noteworthy 5%-givers
in 1982 were Dayton-Hudson, Munsingwear, and H. B. Fuller's.
Among 2%-givers were Honeywell, General Mills, Pillsbury, Interna-
tional Multifoods, Peavey, and Bemis. We should note that in 1982,
14.8% of the 534 companies responding to the Conference Board survey
gave 2% or more of their pretax profits to charity, and only 4.3% gave 5%
or more (Troy, 1984:19).
This research then is a case study of a corporate community that
works. However, as a case study limited to one time period, there are
certain limitations that should be acknowledged at the start. First,
without comparable data on other metropolitan areas we can never
identify the variables that explain why giving was so much greater, and
civic culture so much better, in the Twin Cities. That is, one cannot
know why successful communities work so well without knowing
something about cities that do not. Second, the use of cross-sectional
data limits our capacity to identify the true causal order among the
variables we analyze. While we often speculate on causal effects, the
reader must always remember that it is impossible to draw hard and fast
conclusions from cross-sectional data. The period we examined is from
1979 to 1981. Obviously companies' contributions budgets and their
disbursements in these years were the product of decisions and events
that spanned probably a decade. At best we can only hope that our
exploratory study will uncover social processes that, in turn, give future
researchers some insight into the variables that explain fully why com-
pany philanthropic activity was so impressive in the Twin Cities of
Minneapolis-St. Paul in the late 1970s and early 1980s.
Twin Cities: History and Current Character
The Minneapolis and St. Paul business communities grew as their
cities grew. St. Paul incorporated in 1854 and Minneapolis in 1856, but
not much of this part of the country was settled before 1850. According
to Biegen (1975), the area only became attractive with the development
of river transportation that opened up the region and the forest for
