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Capabilities, Proactive CSR and Financial Performance in SMEs: Empirical Evidence from an Australian Manufacturing Industry Sector

Journal of Business Ethics volume 109, pages 483–500 (2012)Cite this article

Abstract

Proactive corporate social responsibility (CSR) involves business strategies and practices adopted voluntarily by firms that go beyond regulatory requirements in order to manage their social responsibilities, and thereby contribute broadly and positively to society. Proactive CSR has been less researched in small and medium enterprises (SMEs) compared to large firms; and, whether SMEs are ideally placed to gain competitive advantage through such activity therefore remains a point of debate. This study examines empirically the association between three specified capabilities (shared vision, stakeholder management and strategic proactivity), proactive CSR and financial performance in SMEs. Using quantitative data collected from a sample of 171 SMEs in the machinery and equipment sector of the Australian manufacturing industry, we find that all specified capabilities are positively associated with adoption of proactive CSR by SMEs, and that proactive CSR is, in turn, associated with an improvement in firm financial performance. Evidence of a fully mediating role for proactive CSR on the association between capabilities and financial performance presented in this study aligns with RBV theory that suggests adoption of value-creating strategies that make the most effective use of a firm’s capabilities is essential to financial success. The study contributes to the CSR literature by demonstrating a case for SMEs being able to maximise financial returns whilst proactively making progress towards CSR.

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Authors and Affiliations

  1. Australian Innovation Research Centre, University of Tasmania, Private Bag 108, Hobart, TAS, 7001, Australia

    Nuttaneeya Ann Torugsa

  2. Griffith Business School, Griffith University, Gold Coast, QLD, 4222, Australia

    Wayne O’Donohue

  3. School of Management, University of Tasmania, Private Bag 16, Hobart, TAS, 7000, Australia

    Rob Hecker

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  1. Nuttaneeya Ann Torugsa
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  2. Wayne O’Donohue
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  3. Rob Hecker
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Correspondence to Nuttaneeya Ann Torugsa.

Appendix

Appendix

See Tables 2, 3, 4, 5 and 6.

Table 2 Proactive CSR. Please indicate the extent to which your firm voluntarily engages in each responsible business strategy that goes beyond regulatory requirements, as compared to ‘similar firms’ in your industry sector (1 = ‘not addressed issues at all’ to 5 = ‘we are the leaders on this issue’)
Full size table
Table 3 Shared vision capability. Please tick the appropriate box below for the following statements as each relates to your firm (1 = ‘strongly disagree’ to 6 = ‘strongly agree’)
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Table 4 Stakeholder management capability. Please tick the appropriate box below to indicate the level of “attention” your firm gives to each type of stakeholder in organisational decision-making. Then, please tick the appropriate box below to indicate the ‘importance’ of each type of stakeholder in helping your firm to understand issues it is facing. (1 = ‘very low’ to 5 = ‘very high’)
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Table 5 Strategic proactivity capability. Please tick the appropriate box below for the following statements as each relates to your firm (1 = ‘strongly disagree’ to 6 = ‘strongly agree’)
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Table 6 Financial performance. Please tick the appropriate box below to indicate your firm’s financial performance in the past 6 months compared to ‘similar firms’ in your industry sector (1 = ‘much worse’ to 5 = ‘much better’)
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Torugsa, N.A., O’Donohue, W. & Hecker, R. Capabilities, Proactive CSR and Financial Performance in SMEs: Empirical Evidence from an Australian Manufacturing Industry Sector. J Bus Ethics 109, 483–500 (2012). https://doi.org/10.1007/s10551-011-1141-1

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  • DOI: https://doi.org/10.1007/s10551-011-1141-1

Keywords

  • Proactive corporate social responsibility (CSR)
  • Capabilities
  • Financial performance
  • Resource-based view (RBV)
  • Small and medium enterprises (SMEs)