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The Relevance of Stakeholder Theory and Social Capital Theory in the Context of CSR in SMEs: An Australian Perspective

Abstract

The concept of business responsibility, usually termed as corporate social responsibility (CSR), originated in the early 1930s after the Wall Street crash of 1929 exposed corporate irresponsibility in large organisations. The understanding of CSR has evolved since then and its scope has now broadened from mere compliance to corporate laws to active alignment of internal business goals with externally set societal aspirations. Unfortunately, the significance of this multidimensional concept within the small and medium enterprise (SME) sector has continued to be overshadowed by its application in large and multinational organisations. More importantly, this has led to the practice of judging SMEs, which are experiencing increasing pressure to engage in social activities, as if they are no different from their larger counterparts. This study therefore investigates CSR from the perspective of SMEs in Australia without any theoretical presumptions and then comments on the relevance and applicability of the two theories that have been commonly used to investigate business responsibility, namely, stakeholder theory (ST) and social capital theory (SCT). The research findings indicate that CSR within the SME sector is more aligned to the fundamentals of SCT, mainly owing to the unique resource and survival challenges that they face, and which are, arguably, not so pronounced in large organisations.

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Abbreviations

ABS:

Australian Bureau of Statistics

CSR:

Corporate social responsibility

OECD:

Organisation for Economic Co-operation and Development

SCT:

Social capital theory

SME:

Small and medium enterprise

SRI:

Stanford Research Institute

ST:

Stakeholder theory

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Correspondence to Suman Sen.

Appendices

Appendix 1: Interview Questions

  1. (i)

    What do you understand by the term ‘CSR”?

  2. (ii)

    Do you think there is any social responsibility of your business?

  3. (iii)

    Do you find economic objectives of the business are in contradiction to moral obligations? If so, how do you manage them?

  4. (iv)

    What is your organisation doing in the area of CSR?

  5. (v)

    How would you like to prioritise the following CSR activities?

    1. (a)

      Donation for better cancer treatment

    2. (b)

      Additional medical benefit for employees

    3. (c)

      Sponsor a local football team

    4. (d)

      Funding a community group that opposes smoking

    5. (e)

      Financial support for employees to enhance professional skills

    6. (f)

      Control energy usage to reduce operational costs

  6. (vi)

    Is there any predetermined budget for CSR? If so, what factors affect them?

  7. (vii)

    Could you please inform how CSR decisions are taken in your business?

  8. (viii)

    To what extent do your stakeholders influence such decisions?

  9. (ix)

    Why is your company participating in CSR activities?

  10. (x)

    Are there any future plans about CSR? If so, what are they?

  11. (xi)

    Are you, or is your company, a member of any trade union or industry association? If so, what was the motivation for such involvement?

Appendix 2: Profile of the Participating SMEs

  Name (pseudo) of the SME Industry/business type Number of employees
1 Company A Language school 40
2 Company B Aviation 66
3 Company C Horse Race and Retail Sales 30+ casuals
4 Company D Accounting Firm 30–35
5 Company E Urban Vegetation Management 70
6 Company F Website Designing 15
7 Company G Coffee Shop- Retail Franchise 16 (Head Office only)
8 Company H Construction 38–40
9 Company I Fruit and Vegetable Retail 27
10 Company J Accounts and Business Strategy 19
11 Company K Accounting Firm 5
12 Company L Marketing Communication 3

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Sen, S., Cowley, J. The Relevance of Stakeholder Theory and Social Capital Theory in the Context of CSR in SMEs: An Australian Perspective. J Bus Ethics 118, 413–427 (2013). https://doi.org/10.1007/s10551-012-1598-6

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Keywords

  • Corporate social responsibility
  • Small and medium enterprises
  • Social capital theory
  • Stakeholder theory