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How does CSR enhance the financial performance of SMEs? The mediating role of firm reputation

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  • Dawit Bahta
  • Jiang Yun
  • Md Rashidul Islam
  • Kuyon Joseph Bikanyi

Abstract

This study investigates the link between corporate social responsibility (CSR) and the performance of small and medium enterprises (SMEs) and the mediating role of firm reputation from a developing country perspective. Empirical research was carried out, and data were gathered using a questionnaire from 402 owners/managers of SMEs in Eritrea, a country in East Africa. Smart-Partial Least Squares structural equation modelling was employed. The results showed that CSR significantly influences the performance of SMEs, and this relationship is partially mediated by firm reputation. This research contributes to the knowledge of how CSR activities lead to SMEs’ financial performance. This strengthens prior evidence on the impact of CSR on business performance while also contributing significantly to the literature on the mediating role of reputation between social and financial performance. The application of the relationship to SMEs in developing nations reinforces the originality of this study. It makes substantial contributions to the literature in terms of theory, practice, and policy.

Suggested Citation

  • Dawit Bahta & Jiang Yun & Md Rashidul Islam & Kuyon Joseph Bikanyi, 2021. "How does CSR enhance the financial performance of SMEs? The mediating role of firm reputation," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 34(1), pages 1428-1451, January.
    • Handle: RePEc:taf:reroxx:v:34:y:2021:i:1:p:1428-1451
    DOI: 10.1080/1331677X.2020.1828130
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    Cited by:

    1. Ye Sang & Eunkyoung Han, 2023. "A win‐win way for corporate and stakeholders to achieve sustainable development: Corporate social responsibility value co‐creation scale development and validation," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(3), pages 1177-1190, May.
    2. Luísa Pinto, 2023. "A Qualitative Analysis of Corporate Social Responsibility in Saudi Arabia’s Service Sector-Practices and Company Performance," Sustainability, MDPI, vol. 15(12), pages 1-14, June.
    3. Broccardo, Laura & Truant, Elisa & Dana, Léo-Paul, 2023. "The interlink between digitalization, sustainability, and performance: An Italian context," Journal of Business Research, Elsevier, vol. 158(C).
    4. Edward Fosu & Kaigang Yi & Deborah Asiedu, 2024. "The effect of CSR on corporate social performance: Mediating role of corporate image, green innovation and moderating role of corporate identity," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(1), pages 69-88, January.

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