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

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  • Nuttaneeya Torugsa

    ()

  • Wayne O’Donohue
  • Rob Hecker
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    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. Copyright Springer Science+Business Media B.V. 2012

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Business Ethics.

    Volume (Year): 109 (2012)
    Issue (Month): 4 (September)
    Pages: 483-500

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    Handle: RePEc:kap:jbuset:v:109:y:2012:i:4:p:483-500

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    Web page: http://www.springerlink.com/link.asp?id=100281

    Related research

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

    References

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    1. Angeloantonio Russo & Antonio Tencati, 2009. "Formal vs. Informal CSR Strategies: Evidence from Italian Micro, Small, Medium-sized, and Large Firms," Journal of Business Ethics, Springer, vol. 85(2), pages 339-353, April.
    2. Graafland, J.J. & Eijffinger, S.C.W. & Smid, H., 2004. "Benchmarking of corporate social responsibility: Methodological problems and robustness," Open Access publications from Tilburg University urn:nbn:nl:ui:12-139286, Tilburg University.
    3. Ian Worthington & Monder Ram & Trevor Jones, 2006. "Exploring Corporate Social Responsibility in the U.K. Asian Small Business Community," Journal of Business Ethics, Springer, vol. 67(2), pages 201-217, August.
    4. Jan Lepoutre & Aimé Heene, 2006. "Investigating the Impact of Firm Size on Small Business Social Responsibility: A Critical Review," Journal of Business Ethics, Springer, vol. 67(3), pages 257-273, September.
    5. David Murillo & Josep Lozano, 2006. "SMEs and CSR: An Approach to CSR in their Own Words," Journal of Business Ethics, Springer, vol. 67(3), pages 227-240, September.
    6. David Williamson & Gary Lynch-Wood & John Ramsay, 2006. "Drivers of Environmental Behaviour in Manufacturing SMEs and the Implications for CSR," Journal of Business Ethics, Springer, vol. 67(3), pages 317-330, September.
    7. Heledd Jenkins, 2006. "Small Business Champions for Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 67(3), pages 241-256, September.
    8. Mark Groza & Mya Pronschinske & Matthew Walker, 2011. "Perceived Organizational Motives and Consumer Responses to Proactive and Reactive CSR," Journal of Business Ethics, Springer, vol. 102(4), pages 639-652, September.
    9. Bianchi, Raffaella & Noci, Giuliano, 1998. " "Greening" SMEs' Competitiveness," Small Business Economics, Springer, vol. 11(3), pages 269-81, November.
    10. Graafland, J.J. & Ven van de, B. & Stoffele, N., 2003. "Strategies and instruments for organising CSR by small and large businesses in the Netherlands," MPRA Paper 20754, University Library of Munich, Germany.
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