The best examples of company towns have had high ideals; but many have been regarded as controlling or exploitative. Others developed more or less in unplanned fashion, such as Summit Hill, Pennsylvania, one of the oldest, which began as a LC&N Co. mining camp and mine site nine miles (14.5 km) from the nearest outside road.
Traditional settings for company towns were where extractive industries — coal, metal mines, lumber — had established a monopoly franchise. Dam sites and war-industry camps founded other company towns. Since company stores often had a monopoly in company towns, it was possible to pay in scrip through a truck system. In the Soviet Union there were several cities of nuclear scientists (atomics) known as atomgrad; particularly in Ukraine those were Pripyat, Varash, Yuzhnoukrainsk among others.
Typically, a company town is isolated from neighbors and centered on a large production factory, such as a lumber or steel mill or an automobile plant; and the citizens of the town either work in the factory, work in one of the smaller businesses, or is a family member of someone who does. The company may also donate a church building to a local congregation, operate parks, host cultural events such as concerts, and so on. If the owning company cuts back or goes out of business, the economic effect on the company town is devastating, as people move to jobs elsewhere.
Company towns often become regular public cities and towns as they grow and attract other settlement, business enterprises, and pool transportation and services infrastructure. Other times, a town may not officially be a company town, but it may be a town where the majority of citizens are employed by a single company, thus creating a similar situation to a company town (especially in regard to the town's economy). Further, such dependencies extend to neighborhoods and regions of larger cities. In each case, if the primary company falls on lean times, fails outright or the industry fades in importance (as with steam locomotive support rail yards and anthracite mining industries which depended on steam locomotives spurring demands) the communities contract and lose property value and then population as people move to find work elsewhere, and the youth of the community bears the children of their generation in another demographic region.
Paternalism, a subtle form of social engineering, refers to the control of workers by their employers who sought to force middle-class ideals upon their working-class employees. Paternalism was considered by many nineteenth-century businessmen as a moral responsibility, or often a religious obligation, which would advance society whilst furthering their own business interests. Accordingly, the company town offered a unique opportunity to achieve such ends.