CSR and SME performance

1. Introduction

As the environmental degradation is progressively starting to influence the quality of our lives,
our nature and our future, there is a rapidly increasing need to combat this issue. A major factor
is the behavior of large corporations and enterprises who are the main contributors to the rising
emission of greenhouse gases and other harmful materials. Therefore, there is an important quest
and task, to change the actions of these corporations to be in line with the theories of corporate
social responsibility (CSR). One solution is to find a link of positive influence between CSR
activities, implementations in corporations and the financial or non-financial performance of those
corporations, which my research focuses on.

2. Literature review

In the recent years, research in this field has immensely increased, for that reason there is a
plethora of studies conducted in a great variety of ways with different contextual and
methodological factors. While searching in databases with my key words, more than 1,000 results
were shown. Therefore, it is very important to synthesize the extant literature. So far, empirical
findings on the association demonstrate positive, negative, mixed or non-significant relationships
(Choongo, 2017; Rettab et al., 2009). To comprehend the literature, I chose the meta-analytic
research of Oduro et al. conducted in 2021 as my most important resource, who examined 57
peer-review articles filtered from 797 articles through a comprehensive filtering process focusing
only on small and medium enterprises (SMEs).

As I said before, there is a great variety of moderating factors which can influence a firm’s
performance after adopting CSR measures, but in this meta-analysis the authors counted in and
considered most of them, resulting in very reliable outcomes of this quantitative research. Some
moderating factors include for instance the type of organization, region or country, financial and
non-financial performance of the organizations and methodological factors like the sampling
technique, sampling size, longitudinal or cross-sectional studies. CSR initiatives are pronounced
when there exist institutional mechanisms for communication between different stakeholders, and the
governmental institutions are pro-CSR and effective (Campbell, 2007). Concerning the sector of the
organization, Kim et al. (2019) observed that CSR associations differ between consumer goods
industry, durable goods industry and stigmatised industry (e.g. mining) regarding customer
attitudes and purchase intent.

Another important aspect of this topic is the conceptual model of corporate social responsibility.
The authors of the meta-analysis used the triple-bottom line framework from Elkington, 1994,
dividing it to people (social-oriented CSR), planet (environment-oriented) and profit
(economic-oriented) to conceptualize the CSR dimensions per the extant literature. As a result,
they integrated this approach into the analysis, comparing how the different CSR dimensions
contrastingly influence the performance.

Oduro et al. in their quantitative meta-analysis found that all dimensions of CSR activities have a
significant positive impact on overall performance, however the effect of social-oriented CSR is
the strongest followed by environment and lastly economic-oriented activities. Consequently, they
discovered that each dimension has significantly stronger impact on non-financial performance than
on financial performance. Or in other words, CSR activities influenced more positively customer
satisfaction, firm’s reputation and employee performance than financial indicators like return on
assets, return on investment and profitability. Concerning the type of organizations, the
researchers found service firms to be more positively affected by CSR than manufacturing firms and
they hypothesized that “firstly, it could be due to CSR skepticism and cynicism attached to
manufacturing firms, secondly, because service firms rely on person-to-person interaction for
success and thirdly, because manufacturing firms have to invest much in eco-innovation and
cost-saving technologies to maximize their positive impact and minimize their negative impact on
the society” (Oduro et al., 2021). Lastly, they confirmed the hypothesis that the region of the
corporations significantly impacts the CSR relationship, particularly it’s stronger in North
America, Australasia, and Africa than in Europe.

Although this meta-analysis is very complex and carefully conducted and provides us with a reliable
source, I would examine the primary studies, especially those which found negative or no
significant effect of CSR on performance to find the details and exact reasons for those outcomes.
Also, I miss, from my point of view a very important moderating factor, that which particular CSR
actions or measures were implemented in the corporations which the authors merely mention. CSR
actions can considerably differ, just to mention some, they can be plans or statements(marketing),
firm policies, level of greenhouse gas emissions, supply chain policies, management systems,
certifications and reporting. Because of my limited time capacity, I could not conduct further
research of the literature which would fill these information gaps which would give me deeper
insight on the topic. Another limitation of mine is the proper knowledge of statistical methods and
computations through which I could evaluate the studies better and test them independently.

3. Conclusion

My research question, whether CSR activities can positively impact financial or non-financial
performance of SMEs, was contentedly answered through the literature review. However, I would
conduct further research as mentioned to erase any doubts about partial moderating factors because
just CSR in itself contains a broad spectrum of constructs. Companies adopting social,
environmental and economic responsibility measures certainly benefit, either financially but more
non-financially, which can give them important comparative advantages for functioning. These
measures not only help companies, but more importantly, they positively affect their stakeholders,
the society, the environment and our future.

4. Resources:

Campbell, J.L. (2007), “Why would corporations behave in socially responsible ways? An
institutional theory of corporate social responsibility”, Academy of Management Review, Vol. 32 No.
3, pp. 946-967.

Choongo, P. (2017), “A longitudinal study of the impact of corporate social responsibility on firm
performance in SMEs in Zambia”, Sustainability, Vol. 9 No. 8, pp. 1300.

Elkington, J. (1994), “Towards the sustainable corporation: win-win-win business strategies for
sustainable development”, California Management Review, Vol. 36 No. 2, pp. 90-100.

Kim, Y., Park, H. and Kim, J.K. (2019), “Corporate association strategies and consumer responses:
the relative effectiveness of CA versus CSR communication strategy by industry type”, Journal of
Marketing Communications, Vol. 25 No. 2, pp. 204-227.

ODURO, Stephen, Kot David ADHAL NGUAR, Alessandro DE NISCO, Rami Hashem E. ALHARTHI, Guglielmo
MACCARIO a Lara BRUNO. Corporate social responsibility and SME performance: a meta-analysis.
Marketing Intelligence [online]. 2022, 40(2), 184-204, ISSN 02634503. Dostupné z:
doi:10.1108/MIP-05-2021-0145

Rettab, B., Brik, A.B. and Mellahi, K. (2009), “A study of management perceptions of the impact of
corporate social responsibility on organisational performance in emerging economies: the case of
Dubai”, Journal of Business Ethics, Vol. 89 No. 3, pp. 371-390.