IntroductionandBackgroundoftheStudy
Smalla n d M e d i u m - s i z e d e n t e r p r i s e s ( S M E s ) a r e u n i v e r s a l l y a c k n o w l e d g e d a s e f f e c t i v e v e h i c l e s foremploymentgenerationandeconomicgrowth(Basil,2005).Evenincountryw i t h l a r g e c o r p o r a t i o n s l i k e U n i t e d S t a t e o f America.S M E s c o n t r i b u t e subst antiallyt o e m p l o y m e n t o p p o r t u n i t i e s a n d s u p p l y g o o d s a n d s e r v i c e s t o c o n s u m e r s a n d l a r g e o r g a n i z a t i o n s InAsiaPacific,wheretheprivatesectoringeneralisnotwelldevelo ped,SMEsc o u l d playa c r i t i c a l r o l e i n s t i m u l a t i n g e c o n o m i c d e v e l o p m e n t a n d alle viatingp o v e r t y ( Beyene,2002).
VietnamingeneralandHCMCinparticular,SMEsareincreasinglybecomingthebackboneo f theecon omy.Theyplayacrucialroleincreatingjobopportunitiesthatmaketheattainmento f equitableandsustainab legrowthanddevelopmentpossible.Itisestimatedthatthereareo v e r 423,000SMEsinHCMC, providingemploymentandincomegenerationopportunitiest olowincomeearnersoftheeconomy(ht tp:// www.dpi.hochiminhcity.gov.vn).Forexample,S M E s constituteover90percentofbusinessesoperatingint heprivatesector,theycontributeto45percentofGDPandemployapproximately
2.5millionpeople.However,morethanah a f t ofSMEsinHCMCfailduringtheirfirstyear(ht tp:// www.dpi.hochiminhcity.gov.vn).D e s p i t e theirgrowingimportance,theirhighfailurerateisthusac auseforconcern.
Analyticalandpracticalcasestudiesonappropriatestrategiesthatcanaidthecompetitivenesso f SMEsinHC MCarelimited.Owingtheglobalcompetition,technologicaladvancesandc h a n g i n g n e e d s o f c o n s u m e r s , c o m p e t i t i v e paradigmsa r e c o n t i n u o u s l y c h a n g i n g These c h a n g e s aredrivingbusinessesintostiffcompetitioninareassuchasdesignanddevelopmento f product s,manufacturing,distribution,communicationandmarketing(Singh,GargandD e s h m u k h , 2008)
ApositiverelationshipbetweenCSRactivitiesofSMEsandtheirenhancedcompetitivenessexists,at leastifalong-termperspectiveisconsider(EuropeanCompetitivenessReport,2008
).Toremaincompetitive,businessesneedtobeabletoadapttonewdemandsfromthemarketa n d societyinwhi chtheyoperate.AlthoughCSRhasbeenmainlydiscussedinthecontextoflargerenterprises,it’salsostr ategictooltoenhancethecompetitivenessofSMEs(Szabo,2008).Hence,thisstudyseekst oevaluatetheapplicationofCSRasacompetitivestrategyf o r SMEsinHCMC.
ProblemStatement
– shouldengageinCSRactivities.Thereshouldbeajustificationotherthanhumanitarian c o n si d e r a t i o n s , forSMEstoinvesttimeandmoneyinissuesoftennotdirectlyrelatedtotheirb u s i n e s s objectives.SucceedinginshowingtherelationshipbetweentheengagementinCSR andeconomicallypositiveoutcomesfor thebusiness can,therefore,be seenas animportantf a c t o r forSMEstoengageinCSR(MandlandDorr,2007).
AlthoughSMEsrepresentthebackboneoflocaleconomiesinmostdevelopingcountri es,theyoftenfacegreatconstraintsintheiroperation.Thesesmallentrepreneursoperateagainstm a n y o ddsandevensmallchangesintheexternalenvironmentcouldaffectthem greatly.Theya r e c o n f r o n t e d w i t h f i e r c e l o c a l a n d i n t e r n a t i o n a l c o m p e t i t i o n a n d theyo f t e n l a c k generalskillsinmanagementandmarketing.Theseconstraintssubstantiallylimitthep r o d u c t i v e capacityandefficiencyforSMEsinHCMCandtheirabilitytobecompeti tivew i t h i n thecontextofaglobalizedworld(Ocici,2003).
While there is optimism about the role of SMEs in enhancing business responsibility, research has predominantly focused on large businesses, often adapting their models for SMEs Despite the growing interest in Corporate Social Responsibility (CSR) and its influence on the competitiveness of SMEs, there is a lack of theoretical and empirical contributions, particularly in Vietnam and Ho Chi Minh City Given the perceived impact of CSR practices on SMEs, it is essential to closely examine the relationship between CSR and the competitiveness of SMEs in HCMC This study aims to analyze and document the CSR-related factors affecting the competitiveness of SMEs and identify mechanisms to enhance their competitiveness within the CSR framework.
PurposeofStudy
ThepurposeofthisstudyistodevelopframeworkofCSRforSMEsinHCMCasanavenueto enhanceco mpetitivenessandfostereconomicdevelopment.Furthermore,thestudyintendst o developscalesandaninstrume ntformeasuringthefactorsinfluencingthecompetitivenesso f SMEsinHCMC.Inthepast,thesubjectofCSR hasmainlybeenfocusedonmultinationalcorporations.ResearchregardingSMEsandCSRhasbeenlack ing,particularlyindevelopingcountry.Thisstudywillputforwardseveralrecommendationst h a t canhelpine nhancingthec o m p e t i t i v e n e s s o f S M E s l o c a l l y a n d globally.T h e s t u d y w i l l a l s o a d d tot h e bodyofk n o w l e d g e ofCSRactivitieslocallyandglobally.
ResearchObjective
PrimaryResearchObjective
SecondaryResearchObjective
Toadd res st hese p r i m a r y o bj ect iv es, t h e f o l l o w i n g sec on dar y objectives hav e be enformulated:
- Tod e v e l o pa h y p o t h e s i z e d model,s u g g es t a p p r o p r i a t e h y p o t h e s e s a n d c o n s t r u c t a p a t h diagramo f r e l a t i o n s h i p s b e t w e e n t h e i n d e p e n d e n t v a r i a b l e s ( CSR a c t i v i t i e s ) a n d t h e i r i n f l u e n c e onthecompetitivenessofSMEs(dependentvariable)
ScopeAndDemarcationofStudy
6 ; a n d M o r s i n g , 2 0 0 6 ) , e s p e ci a l ly comparedtoothermanagementissuessuchastot alqualitymanagement,b en ch m a r k in g , r e l a t i o n s h i p m a r k e t i n g a n d c o s t e f f i c i e n c y A fews t u d i e s onS M E s inHCMChaveaddressedquestionsan dproblemsconcerningfinancing,productandprocesstechnologies,policyframeworkandi nstitutionalenvironment.Therehavehardlybeenanystudiesonproblemsrelatedtostrategic competitiveness inHCMC A few studies haveco n ce n t r a t ed o n s u p p l y c h a i n s , b u s i n e s s s t r a t e g y a n d p e r f o r m a n c e o f
S M E s T h i s studyfocuseso n CSRandthec o m p e t i t i v e n e s s o f SMEsi n HCMC,th ebiggestcityin Vietnam.T h is isbecauseHCMCisprivatesector- ledeconomyandSMEsconstitutemorethan90p e r c e n t ofthissector.SMEsalsosignificantlyco ntributetosocio-economicdevelopment oft h e country.Sizeisanimportantcontrolvariableforthisstudysincelargerfirmsseemtoa d o p t CSRprinciplesmoreoftenthanSMEs.
ResearchMethodology
SecondaryResearch
Athoroughliteraturesearchwasconductedinordertoidentifyasmanyfactorsasp o s s i b l e t h a t c o u l d i n f l u e n c e t h e competitivenesso f S M E s i n H C M C I n t e r n a t i o n a l a n d n a t i o n a l d a t a s e a r c h e s w e r e c a r r i e d o u t a t l i b r a r i e s o f U n i v e r s i t y ofE conomicHCMC.Thes e a r c h e s i n c l u d e : Googles e a r c h e s , a n d l e a d i n g j o u r n a l s suchasthe
BusinessE t h i c s ReviewTheoryandPracticeandEntrepreneurshiptheoryandPractice.Sec ondarydata wasalsosourcedfromCSRa n d S M E s l i t e r a t u r e T h e p r o p o s e d h y p o t h e s i z e d mod eldepicted inFigure2.4isthereforederivedfromandbasedonananalysisofrelevantsecondarysources.
PrimaryResearch
Thep r i m a r y r e s e a r c h o f t h i s i n v e s t i g a t i o n i n v o l v e d t h r e e a s p e c t s : i d e n t i f y i n g t h e m o s t appropriater e s e a r c h paradigm;i d e n t i f y i n g t h e s a m p l e a n d c o l l e c t i n g t h e d a t a ; a n d analyzingthedatacollected.Foreachofthefacets, abriefintrod uctionisprovidedinthesubsequentparagraphs.Amoredetaileddiscussionontheseelementsisp resentedinn e x t chapters.
Structure ofStudy
Chapter1c o v e r s t h e i n t r o d u c t i o n , p r o b l e m statementa n d d e m a r c a t i o n o f t h e study.I t introducest h e researchbyprovidingabackgroundoftheissuesunderinvestigationthat l e a d t o t h e p r o b l e m statement,t h e p u r p o s e o f t h e study,a n d t h e r e s e a r c h objectives.
Ah y p o t h e s i z e d modelisthenproposed,whichformsthebasisforthegenerationofseveralr esearchquestionsandhypotheses.Then a t u r e ofthes e c o n d a r y andprimaryresearchi n thisstudyi s a l s o introducedi n t h i s chapter.Furthermore,thescopeanddemarcationofthef i e l d o f s t u d y i s d e s c r i b e d , p r i o r r e s e a r c h o n s m a l l a n d m e d i u m - s i z e d e n t e r p r i s e s (SMEs)i s i denti fied , andthecontributionsofthestudyarehighl ighted.Thechapterconcludeswithdefinitions ofthemostimportanttermsused inthe studyaswell as anoverviewofthestructureofthestudy.
Chapter2pr ov idesanoverviewofthenatureandimportanceofsmallandmedium- sizedenterprises.I n t h i s c h a p t e r , S M E s a r e d e f i n e d a n d conceptualized,a n d t h e i r m ostimportantcontributionsarehighlighted.B e s i d e s t h a t , t h e T h e o r e t i c a l F r a m e w o r k a n d L i t e r a t u r e Reviewwillbeanalyzed.Afterthat,the Relationship betweenfactors:ConceptualO v er v i e w arediscussedtoproposethehypothesesandresearchmodel.
Chapter3 d i s c u s s e saboutmethodology.Atchapter3,wewillseethescaleandite x p l a i n s t h e r e s e a r c h methodologyimplementedinthisstudybyelaboratingonthesampleframe,m easuringi n s t r u m e n t , methodo f p r i m a r y d a t a c o l l e c t i o n , a n d t h e s t r a t e g i e s t h a t w e r e i m p l e m e n t e d inadministeringthemeasuringinstrument.Thedataanalysesa ndstatisticaltechniquesusedarealsodescribed.
Chapter4 p r e s e n t st h e empiricalr e s u l t s I t d i s c u s s e s t h e r e l i a b i l i t y a n d v a l i d i t y o f t h e measuringi n s t r u m e n t u s e d i n t h e s t u d y I n t h i s c h a p t e r , t h e e m p i r i c a l r e s u l t s a r e p r e s e n t e d bys t r u c t u r a l e q u a t i o n m o d e l l i n g ( S E M ) o f C S R f a c t o r s i n f l u e n c i n g t h e mediatingandd e p e n d e n t variables A d d i t i o n a l l y , th einfluence ofselected demographic v a r i a b l e s onthemediatinganddependentvariablesisa lsoexplained.
Chapter5 p r e s e n t sthesummary,conclusionsandrecommendationsoftheresearch.Th ec o n t r i b u t i o n s an dp o s s i b l e s h o r t c o m i n g s o f t h i s s t u d y are alsoh i g h l i g h t e d Fin ally,r e c o m m e n d a t i o n s anddirectionsforfutureresearcharemade.
SignificanceoftheStudy
Corporate Social Responsibility (CSR) is a relatively new concept in Ho Chi Minh City (HCMC), and there has been limited systematic research on the topic The existing literature on CSR, particularly in Asia, is underdeveloped, highlighting the importance of this research on CSR in small and medium-sized enterprises (SMEs) to address both academic and strategic gaps As businesses in developing economies aim to export to Europe and other Western countries, there is an increasing demand for adherence to high ethical standards, which include prohibitions on child labor and commitments to worker health, safety, and minimum wage requirements This study will assess the awareness of HCMC SMEs regarding these ethical requirements and their intentional incorporation into business strategies The anticipated outcomes aim to establish a practical model that illustrates the relationship between CSR and the competitiveness of SMEs.
S M E s throughthedefinitionofb e s t p r a c t i c e t o o l s a n d methods.Themodelca n b e ex t e n s i ve l y usedbySMEs i n HCMCandelsewhereintheworldasanintegralpartoftheoveralls trategytoenhancetheircompetitiveness.ThepotentialofSMEsi n p r o m o t i n g e c o n o m i c g r o w t h ind e v e l o p e d a n d d e v e l o p i n g countriesiswidelyaccepteda n d documentedbyscho larsandpolicymakers.Thisstudyoffersgreatopportunitiesforp r o p e r m a n a g e m e n t o f
S M E s i n H C M C , witha v i e w o f enhancingt h e i r c o m p e t i t i v e n e s s locally a n d g l o b a l l y A p p r o p r i a t e C S R a c t i v i t i e s ( a s identifiedi n t h i s study),w i t h i n t h e H C M C c o n t e x t c o u l d s e r v e a s a s t r a t e g i c t o o l t o improvet h e c o m p e t i t i v e n e s s o f S M E s Thiscouldinturnimprovethesurvivalrateoft h e s e SMEs,thussignificantlyc o n t r i b u t i n g t o t h e s o c i o - e c o n o m i c d e v e l o p m e n t o f HCMC.
Studyprocess
Wedefinethreeorfourscenarios.Wechoosescenariosthatwewanttoworktoward.Baseo nthe scenarioswedescribethesolutionchoices.
Report and Summary Data Analysis Empirical study
Usingt h e S P S S s o f t w a r e t o o l t o analyzed a t e t o f i n d o u t E F A a n d C r o n b a c h ’ s Al pha, combinewithAMOStooltoanalyzeSEM,M L G andANOVA
DefinitionofConcepts
CorporateSocial Responsibility(CSR)
SocialResponsibility( C S R ) i s ane v o l v i n g c o n c e p t t h a t c u r r e n t l y d o e s not h a v e auniversallyaccepteddefinition.Tosomestudies,CSRreferstotheintegrationofsociala n d environmen talconcernsintothebusinessoperationsandintheirinteractionwith theirs t a k e h o l d e r s o n a v o l u n t a r y b a s i s , i e g o i n g b e y o n d c o m p l i a n c e w i t h l e g a l o b li g at i o n s (Zsolnai,2006,Mandl,2009).AccordingtoKok,Weile,McKennaa ndBrown( 2 0 0 1 ) , CSRisdefinedas“theobligationo f thebusinesstouseitsresourcesinw ayst o benefitsociety,throughcommittedparticipationasamemberofsociety,takingintoa c c o u n t thesocietyatlargeandimprovingwelfareofsocietyatlargeindependentofdirectgains ofthebusiness”.
Corporate Social Responsibility (CSR) reflects a business's commitment to ethical behavior and sustainable economic development by engaging with employees, their families, local communities, and society to improve quality of life in ways that benefit both business and sustainable growth The voluntary adoption of CSR practices contributes to the success and sustainability of both businesses and society as a whole Recent studies define CSR as a business system that facilitates the production and distribution of wealth for the betterment of stakeholders through the implementation of ethical systems and sustainable management practices Consequently, businesses consider CSR a strategic management tool to enhance competitiveness This study focuses on CSR activities that impact SMEs' workforce, society, the market—including customers, suppliers, and business partners—and the physical environment to boost their competitiveness.
Smalland Medium-SizedEnterprises(SMEs)
(Beyene,2 0 0 2 ) T h e r e f o r e , i d e n t i f y i n g a c o m m o n d e f i n i t i o n o f S M E s i n d e v e l o p i n g countriesismorechallenging,aseconomiestendtovaryconsiderablyint h e i r s ocioeconomica n d p o l i t i c a l f a c t o r s (Hannun,2 0 0 4 ) F o r d e v e l o p i n g c o u n t r i e s , t h e term“small- scale”isgenerallyusedtorefertobusinesseswithlessthan50workersa n d medium- sizeenterpriseswouldusuallymeanthosethatemploybetween50and9 9 workers(Hannun, 2004:6).Ontheotherhand,definesSMEsashavingbetween10 0-
In Ho Chi Minh City (HCMC), small-scale enterprises are defined as businesses employing more than five but no more than fifty employees, with assets valued under USD 30,000 and an annual income turnover between USD 6,000 and USD 30,000 Medium-sized enterprises employ between 50 and 100 workers, although other defining characteristics are still under development Based on these definitions, small and medium-sized enterprises (SMEs) are classified as businesses with a workforce of more than five and fewer than 100 full-time employees.
Competitiveness
Competitivenessh a s becomea c e n t r a l p r e o c c u p a t i o n o f b o t h a d v a n c e d a n d d e v e l o p i n g c o u n t r i e s i n a n i n c r e a s i n g l y o p e n a n d i n t e g r a t e d w o r l d economy.D e s p i t e i t s acknowledged importance,theconceptofcompetitivenessisoftencontro versialandmisunderstood.Assuch, thereisnoaccepted definitionofcom pe ti ti ve ne ss andnogenerallya c c e p t e d t h e o r y t o e x p l a i n i t ( L i -
Competitiveness is a widely debated topic among economists and policymakers, with various studies offering different definitions At the business level, indicators such as profitability, costs, productivity, and market share are commonly associated with competitiveness Generally, competitiveness is viewed as synonymous with success, which can be defined as the achievement of business objectives A business's competitiveness reflects its ability to retain customers, enhance market share, demonstrate growth, and ensure continuous productivity improvement According to Pitts and Lagnevik, a competitive business possesses the sustained ability to profitably gain and maintain market share in both domestic and foreign markets While short-term profits may be sacrificed for long-term market share gains, no single measure of competitiveness exists; however, market share and profitability provide valuable insights into overall competitiveness This study defines competitiveness as a business's ability to sustain long-term performance better than its competitors, as indicated by profitability, market share, sales, and growth rate.
TheoreticalFrameworkand LiteratureReview
Classicaltheory
The classical concept of Corporate Social Responsibility (CSR) in the USA historically emphasized that society could best identify its needs through the market This view suggested that businesses, driven by self-interest, would fulfill societal demands by responding to market signals However, the rise of large corporations in the late 1800s marked a shift away from this classical economic perspective By the 1950s, CSR gained significant acceptance, expanding its definition to include specific issues such as product safety, honest advertising, employee rights, affirmative action, environmental sustainability, ethical behavior, and global CSR Today, CSR represents a business's commitment to fostering positive social change, acknowledging that while profit generation remains a primary goal, companies must also seek sustainable ways to thrive.
Milton Friedman (1970) argues that the primary role of businesses is to increase profits, asserting that socially responsible activities should only aim to generate profit rather than serve voluntary purposes Classical theory emphasizes that a business's main goal is to meet shareholders' financial interests (Akgeyik, 2005) Friedman, as cited by Dusuki (2008), contends that extending social responsibilities beyond serving shareholder interests misrepresents the nature of business in a free economy, where a business's sole social responsibility is to utilize its resources to enhance profits while adhering to established rules Businesses may recognize socially responsible activities only if they contribute to profit generation, rather than being merely philanthropic (Dusuki, 2009) However, as the economic landscape shifted from small businesses to larger corporations with concentrated power, questions regarding business responsibilities to society emerged (Nae and Grigore, 2008) Contemporary scholars on corporate social responsibility (CSR) and business ethics challenge Friedman’s views, advocating for managers to be responsive to a diverse range of stakeholders, including customers, employees, suppliers, governments, communities, and activist groups (Coelho, McClure, and Spry, 2003).
Socialcontracttheory
Thebackgroundofsocialcontracttheoryisrootedinthehistoryofpoliticaltheory,morep r e c i s e l y intheworkofsomegreatpoliticalthinkersfromtheseventeenthandeighteent hc e n t u r i e s S o c i a l c o n t r a c t t h e o r y i s s l i g h t l y c o n f u s i n g i n t h a t c o m p l e t e l y d i f f e r e n t a n d m u t u a l l y exclusiveinterpretationshavebeenv e n t u r e d underthe labelofasocialcontractforb u s i n e s s (Wempe,2002).H o w e v e r , recenttimeshaveseenasurgeinthen umberofresearchinformedandinfluencedbythenotionofsocialcontracts(Khor,2009).Thecent ralideaoft h e socialcontracttheoryist h e relationshipbetweena businessa n d society(Dusuki,2 0 0 9 )
T h i s t h e o r y i s b a s e d ont h e i d e a t h a t societyr e s i d e s ona numbero f socialc o n t r a c t s w h i c h a r e h e l d b e t w e e n d i f f e r e n t g r o u p s i n t h e society(Blombọcka n d Wigren,2 0 0 9 ) Gray,OwenandAdams,
(citedbyMoir,2001)describesocietyasaseriesofsocial c o n tr a c t s betweenmemberso f s ocietyandsocietyitself.InthecontextofCSR,iti s notthatab u s i n e s s mightactinaresponsibleman nerbecauseitisinitscommercialinterest,butb e c a u s e itispartofhowsociety implicitlyexpectsbusinessestohavealicensetooperate.H e n c e , businesseswhichadoptaviewofso cialc o n t r a c t s w o u l d d e s c r i b e t h e i r involvementinCSRactivitiesaspartofsocietalexpectat ion.
Businesses thrive through the cooperation and commitment of society, as outlined by the social contract paradigm, which views businesses as social institutions that should collaborate with other societal structures like families, educational systems, and religious institutions to enhance life and meet needs This corporate social contract theory posits that businesses and society are equal partners, each possessing rights and reciprocal responsibilities, creating a mutual obligation (Dusuki, 2009) While businesses rely on society for resources and sales, society expects businesses to operate responsibly, given their control over significant economic and productive resources such as technology, finances, and labor, which can impact the communities they serve (Lantos, 2001) Consequently, there exists an implicit corporate social contract, wherein businesses commit to being good stewards of society's resources (Lantos, 2002), despite not always fulfilling their obligations.
Somemoralphilosophers,suchasRousseau(1987),arecriticalofsocialcontracttheory.The ynotethatnosuchcontractsactuallyexistand,ashypotheticalcontracts,theydonotp r o v i d e f o r m e a n i n g f u l c o n s e n t a n d a g r e e m e n t ( S m i t h , 2 0 0 0 ) I n d e e d , t h e s o c i a l contrac tt h e o r y isimplicitlyappliedbysomebusinesses.
Instrumental theory
Instrumental theory views Corporate Social Responsibility (CSR) as a strategic tool for businesses to enhance profitability and maximize shareholder wealth According to this perspective, CSR initiatives, including resource allocation and philanthropic investments, are employed to gain a competitive advantage Proponents argue that businesses can engage in social programs to improve their image and achieve strategic goals without compromising the interests of their primary stakeholders, particularly shareholders This approach emphasizes the quantifiable benefits of CSR in alignment with business objectives.
Maintaining a strong business reputation through Corporate Social Responsibility (CSR) initiatives can lead to long-term profitability, as market forces reward perceived socially responsible behavior (Dusuki, 2009) Businesses may engage in socially responsible actions to uphold their credibility and legitimacy as responsible societal actors (Dima, 2007) Instrumental theory illustrates the connection between stakeholder management and goal achievement, highlighting its relevance to CSR by emphasizing the pursuit of economic objectives through social activities, ultimately maximizing shareholder value in the long run.
Legitimacytheory
Thei d e a t h a t l e g i t i m a c y i s e s s e n t i a l f o r b u s i n e s s e s isn o t n e w L e g i t i m a c y i s a p h e n o me n o n t h a t c o n s t r a i n s c h a n g e a n d p r e s s u r e s b u s i n e s s e s t o c o n f o r m t o t h e i r institutionalenvironments.Legitimacyt h e o r y emergesoutoftheinteractive onofthestakeholdersandbusinesses(KuznetsovandKuznetsova,2008).Forabusiness,themos tt a n g i b l e formo f l e g i t i m a c y p r o b a b l y comesi n t h e formo f d i r e c t s u p p o r t fromi t s stakeholders.Assuch,themorebusinessesattendtotheseinstitutionalelements,themorel i k e l y th eya r e tobes e e n asc o n f o r m i n g t o s o c i e t a l n o r m s ( C h i u a n d S h a r f m a n , 2 0 0
AccordingtoZalka,Downes,Friday,PerryandRussell(ascitedbyKuznetsovandK u z n e t s o v a , 2 0 0 8 ) , l e g i t i m a c y t h e o r y a s s u m e s t h a t b u s i n e s s e s w i l l makea r a t i o n a l a n d pragmaticstrategicresponsetostakeholderexpectationsinordertomaintainsomes ortofs o c i a l compactw i t h society.S u c h a r e s p o n s e i s motivatedbyt h e r e a l i z a t i o n t h a t compliancewithsocietalexpectationsisnecessarytosafeguardsomespaceforthef r e e d o m ofactionofbusinessinthepursuitofprofit.Hence,thelegitimacytheorysuggeststh eexistenceofanimplicitsocialcontractinwhichbusinessisaccountabletosociety’sexpectationsorde mands(KuznetsovandKuznetsova,2008).
Thelegitimacyt h e o r y a n d CSRhaveanobviouscommonfoundationina c k n o w l e d g i n g thatf o r t h e b u s i n e s s t o e f f e c t i v e l y f u n c t i o n , i t i s s u b j e c t e d t o sociale x p e c t a t i o n s a n d c onstraintsthatundercertaincircumstancesmaye n c o u r a g e ittogobeyondstatutorynorms( K u z n e t s o v a n d K u z n e t s o v a , 2 0 0 8 ) B u s i n e s s e s mustg o b e y o n d l e g a l compliance a n d s i n g l e - m i n d e d p r o f i t maximizationb e c a u s e theymustm e e t society’slegitimizationc r i t e r i a tobeallowedtoexistandprosper.ThelegitimacytheoryacknowledgesthatCS R i s a r e s p o n s e t o t h e e n v i r o n m e n t a l p r e s s u r e s i n v o l v i n g s o c i a l , p ol it ica l a n d economicf o r c e s ( D u s u k i , 2 0 0 9 ) S u c h m a n ,
( a s c i t e d byD a w k i n s a n d Ngunjiri,2008),v i e w s l e g i t i m a c y asa g e n e r a l i z e d p e r c e p t i o n t h a t t h e a c t i o n s o f a businessaredesirable,proper,orappropriatewithinsomesoc iallyconstructedsystemofnorms,values,andbeliefs.
Legitimacytheoryarguesthattheperceptionsofsocietytowardsthebusinessesarec r u c i a l , andtheymayaffectthesurvivalofthebusiness.Businessesmustensurethattheyo p e r a t e w i t h i n t h e b o u n d s a n d normso f theirr e s p e c t i v e s o c i e t i e s A s s u c h , b u s i n e s s e s lookf o r a b a l a n c e b e t w e e n t h e i r a c t i o n s a n d h o w theya r e p e r c e i v e d byo u t s i d e r s a n d w h a t isthoughtbysocietytobeappropriate(Deegan,2002).Ba sedonlegitimacytheory,businessesarep e r c e i v e d t o undertakevariousactions tolegitimizetheiro p e r a t i o n s as pe r c e i v e d bysocieties.H e n c e , e f f e c t i v e businesse sreactswiftly tochanges r e g a r d i n g communityconcernsandpriorities(Khor,2009).
H e n c e , legitimacytheorypositsthatbusinessescontinuallyseektoensurethattheyo p e r a t e w i t h i n t h e b o u n d s a n d n o r m s o f t h e i r r e s p e c t i v e s o c i e t i e s ( G u t h r i e , C u g a n e s a n an d Ward,2 00 6) Bus in esses thatta keo n thischa lle ng e c a n devel opab et ter relationshipwithc o m m u n i t y , b o o s t e m p l o y e e m o t i v a t i o n , i n c r e a s e c u s t o m e r l o y a l t y , r e d u c e o p e r a t i o n a l c o s t s andbuildabetterb u s i n e s s r e p u t a t i o n , allofwhichhaveadirectori n d i r e c t influenceo n a b u s i n e s s’sc o m p e t i t i v e ne s s ( C h i u a n d S h a r f m a n , 2 0 0 9 ) Stakeholderthe oryanditsrelevancetoCSRisdiscussedinthenextsection.
Stakeholdertheory
Stakeholdert h e o r y e n c o m p a s s e s t h e i d e a thatb u s i n e s s e s c a n b e s e e n a s systemsw h o s e survivaldependsontheirabilitytosatisfyaparticularsetofaudiences.Theseaudiencesarer e f e r r e d t o a s s t a k e h o l d e r s w h o c a n b e i d e n t i f i e d byt h e i r o w n e r s h i p , r i g h t s , o r interestsin abusinessanditsactivities,past,present,orfuture(BlombọckandWigren,2009).Hence,atte ntions h o u l d b e p a i d tot h e n e e d s a n d rightso f i m p o r t a n t stakeholdersofabusiness a s ausefulwayofdevelopingsociallyresponsiblebehaviorbymanagers(MaiganandFerrell,2 0 0 4 )
Stakeholdertheoryhasgainedprevalenceinthebusinessandsocietyliteratureinrecent yearsi nl i g h t o f i t s p r a c t i c a l i t y f r o m t h e p e r s p e c t i v e o f managersa n d s c h o l a r s (Dima,2007).
Stakeholder theory posits that businesses have a responsibility to consider the interests of various groups beyond just shareholders, including creditors, employees, customers, suppliers, and communities This theory emphasizes that corporate actions can benefit or harm these stakeholders, and their rights must be respected As such, management should integrate stakeholder interests into decision-making processes to fulfill their social responsibilities While stakeholder theory and corporate social responsibility (CSR) literature were developed independently, they complement each other by providing a framework that encompasses economic, legal, ethical, and philanthropic responsibilities, along with strategies to address these obligations.
0 4 ) H e nc e, s t a k e h o l d e r theoryi s concernedwithgroupsofpeoplethatarenottoodistantfroma busin ess.Thetheoryr e l i e s o n theidea t h a t b o n d s e x is t b e t w e e n a b us i n e ss activities a n d t h e stakeholders’s i t u a t i o n , orb e t w e e n t h e s t a k e h o l d e r s‟a c t i v i t i e sa n d t h e b u s i n e s s environment(Blombọ ckand
Fromthestakeholderapproach,itcanbearguedthatifbusinessesarecitizens’,thentheyalsohaverights, d utiesandres po nsi bi li ti es totheirstakeholders.CSR activities forbusinessesarea n i m p o r t a n t w a y t o r e a l i z e t h e s e d u t i e s a n d r e s p o n s i b i l i t i e s , a n d o f f e r severalb e n e f i t s tostakeholders(Akgeyik,2005).W h i l e theCSRconceptstillsuffersfromalevelofg e n e r a l i z a t i o n , t h e s t a k e h o l d e r a p p r o a c h o f f e r s a p r a c t i c a l a l t e r n a t i v e f o r a s s e s s i n g theperformanceofbusinessesv i s - à - v i s keystakeholdergroups(Dima,2007).Thenextsectiond i s c u s s e s ethicaltheoriesandtheirrelev ancetoCSR.
Ethicaltheories
ThefundamentalideabehindCSRisthatabusinesshasanobligationtoworkforsocialbett erment.ThecallforCSRhasbeenjustified byresearchersondifferentgroundsusingec onomic,s t r a t e g i c , l e g a l i s t i c a n d e t h i c a l a r g u m e n t s ( S m i t h a n d Nystad,2 0
Ethical theories emphasize the intrinsic relationship between business and society, rooted in ethical values Businesses are encouraged to embrace social responsibilities as a fundamental ethical obligation, surpassing mere economic and legal duties (Nielsen and Thomsen, 2007) Ethical responsibilities encompass actions expected by society, such as respecting individuals, preventing social harm, and addressing social injustice (Dima, 2007) Ethical Corporate Social Responsibility (CSR) entails fulfilling ethical duties, even at the potential cost of profits (Lantos, 2001) Neglecting ethical conduct can lead to significant financial losses for investors Decisions regarding social responsibility often involve trade-offs, particularly between short-term profits and moral actions Ultimately, ethical behavior fosters trust and enhances a business's reputation, attracting customers, employees, and suppliers, thus securing stakeholder goodwill (Lantos, 2001) Among various ethical theories, Langer (2006) identifies three relevant approaches: utilitarianism, justice, and moral rights, with the latter focusing on individuals' moral rights and the responsibilities of moral agents to respect and protect those rights (Lantos, 2002).
Eachrighthasacorrelativeresponsibility EthicalCSRissometimesframedasawayto respects t a k e h o l d e r s’r i g h t s A s s u c h , i t i s s t a n d a r d p r a c t i c e t o i n v o k e r i g h t s inheateddisputesaboutsocietalissuessuchasaffirmativeaction,workplaceprivacy, environmentalprotection,truthinadvertisingandproductliability.However,becauset h e r i g h t s a r e n o t alwaysf u l l y u n d e r s t o o d , b o t h b u s i n e s s a n d g o v e r n m e n t a r e charge dw i t h p r o t e c t i n g r i g h t s f o r w h i c h p e r h a p s t h e y a r e n o t r e s p o n s i b l e
M o s t rightstheoriesb e l i e v e t h a t t h e i n d i v i d u a l ’ s moralr i g h t s t a k e p r e c e d e n c e overt h e r i g h t s o f businesses.R i g h t s applytocommunitystakeholdergroups,forinstance,but onlyinsofarast h e r i g h t s d e r i v e f r o m t h o s e o f e a c h i n d i v i d u a l m e m b e r ( L a n t o s , 2 0 0 2 ; P a r v e z , 2000).Ontheotherh an d , j u s t i c e theoriesa r e c o n c e r n e d withf a i r n e s s a n d equityindecisionmaking( L a n g e r , 2 0 0 6 a n d L a n t o s , 2 0 0 2 ) W h a t o n e p a r t y m i g h t d e s e r v e a n o t h e r partyhasaresponsibilityt o provide.Anydenialofsomethingtowhi chsomeonehasarightorclaimisaninjustice.T h u s , thejusticetheoryisduty- based(Lantos,2002).Itshouldbenotedthatjusticetheoryd o e s notsupportaltruisticCSR ,becauseitisunfairt o takeawayshareholders’earnings,whichareearnedattheirrisk,ortolo weremployeepayorraiseconsumerprices,unlessthesegroupsarewillingtosacrificeforthecause.
Individualbusinessesdonothavetheresponsibilitytomakeupforthedeficiencieso fcapitalis m,whichleavessomeindividualsandgroupsmarginalized.Togivebusinessess u c h ad utyisbasedonsocialisticthinkinginwhichthefamilymodelofprovidingforitsmembersis generalizedtothecommunityorsocietyatlarge(Langer,2006andLantos,2002).
Utilitarianismt h e o r y f o c u s e s o n t h e c o n s e q u e n c e s o f a c t i o n s b a s e d o n t h e p r i n c i p l e ofseekingthegreatestgo od forthegreatestnumberofpeople.Utilitarian- basedphilosophy j u d g e s m o r a l i t y b a s e d o n t h e o u t c o m e s o f a c t ions( L a n g e r , 2 0 0 6 ) E t h i c a l C S R mandatesthatbusinesseshaveresponsibilitiestohelpsolvesocia lproblemstheycreatedort o preventsocialharmstheycouldpotentiallycause.Assuch,businesseshav especialmoralo b l i g a t i o n s totheirvariousstakeholders,whointurnhaverightstomakecertainclaims ,sucha s c u s t o m e r s i n s i s t i n g onr e a s o n a b l y p r i c e d , s a f e a n d e f f e c t i v e p r o d u c t s , a n d w o r k e r s e x p e c t i n g s a f e w o r k i n g c o n d i t i o n s a n d f a i r payf o r a f a i r daysw o r k ( L a n t o s , 2002).
Sincet h e e t h i c a l f r a m e w o r k w i t h i n w h i c h a b u s i n e s s o p e r a t e s a n d t h e s o c i a l a n d environmental problemscausedbythebusinessdiffer,itishardtopinpointwhataspectsa businesss h o u l d f o c u s o n ( T i m o , 2 0 0 6 ) H o w e v e r , everyb u s i n e s s h a s c e r t a i n o bligations towardssocietyaspartofasocialcontract.Thedetailsofthiscontracta r e subjectt o c h a n g e a n d diff erforeverysituation,butthebasicnotionisthatbusinessesgainlegitimacythrought h i s socialc ontract.Hence,thedifferentviewsonthes p e c i f i c roleofbusinessi n societycanbesummedupa samoralobligationbusinesseshavetowardssocietya n d s o c i e t y h a v i n g c e r t a i n e x p e c t a t i o n s fromb u s i n e s s e s ( T i m o , 2 0 0 6 )
Ithasbeenr e c o g n i z e d t h a t mostethicalargumentsarederivedfromreligiousprincipl es,p h il o s o p hi ca l r e f e r e n c e s o r p r e v a i l i n g s o c i a l norms( B r a n c o a n d R o d r i g u e s , 2 0 0 7 ) Suche t h i c a l argumentssuggestthatabusinessshouldbehaveinasociallyre sponsiblemannerb e c a u s e i t ism o r a l l y c o r r e c t t o dos o W h i l s t t h e u t i l i t a r i a n a r g u m e n t s c a n b e associatede a s i l y w i t h t h e c l a s s i c a l v i e w o f s o c i a l r e s p o n s i b i l i t y a n d t h e n e g a t i v e – dutyargumentsw i t h theinstrumentaluseofstakeholdertheory,thepositive-duty argumentscanbea s s o c i a t e d withthenormativeu s e ofstakeholdertheory( B r a n c o andR o d r i g u e s , 2007).
There is significant overlap among the theories that explain Corporate Social Responsibility (CSR) and its application in business operations Businesses cannot rely solely on theoretical discussions to implement CSR; they must also address the interests and demands of various stakeholder groups to maintain legitimacy By doing so, companies can build a positive reputation, secure a competitive advantage in the market, and achieve long-term profitability (Dusuki, 2009) Therefore, especially for small and medium-sized enterprises (SMEs), it is essential to establish practical procedures, regulations, guidelines, benchmarks, and examples to effectively adopt CSR practices (Timo, 2006) The nature of CSR activities and their execution in SMEs will be explored in the following sections.
Corporate Social Responsibility (CSR) involves collaborating with local communities, making socially responsible investments, and fostering relationships with employees, customers, and their families, while also engaging in environmental conservation and sustainability efforts (Maimunah, 2009:2) CSR activities for SMEs can take various forms and benefit numerous stakeholders (UNIDO, 2008:3) Engaging in ethical practices, such as boosting staff morale and protecting the environment, not only reflects good business sense for SMEs but also responds to pressures from customers, communities, and regulators advocating for responsible entrepreneurship (Nejati and Amran, 2009:4) To stay competitive, businesses must adapt to market demands and societal expectations, including being good neighbors and participating in initiatives that promote ethical practices SMEs, due to their close proximity to stakeholders, are uniquely positioned to address expressed needs and actively contribute to their communities (UNIDO, 2008:3) Many SMEs now include CSR statements in their annual reports, indicating that CSR has become integral to their business operations (Ariyabandu and Hulangamuwa, 2002:10) Charitable activities supporting various social causes are crucial, with key CSR initiatives applicable to SMEs including community engagement and environmental stewardship (Ariyabandu and Hulangamuwa, 2002:29; Nedelea and State, 2009:2).
TheCSRactivitiesabovecanbeclassifiedintofivemaincategoriesinwhichwerelackedint h e o r y n a m e l y : e n v i r o n m e n t a l c o n c e r n s , i n v o l v e m e n t inw e l f a r e o r charity,c o m m u n i t y i n v o l v e m e n t , productorservicesandnaturaldisaster-relatedissues.
Relationshipbetweenfactors:ConceptualOverviewandProposedHypotheses
WorkforceorientedCSRactivities
Workforceo r i e n t e d C S R a c t i v i t i es i n v o l v e t h e f a i r treatmento f employeesa n d a r e o f t e n r e l a t e d t o t h e a t t r a c t i o n a n d r e t e n t i o n employees.T h e s e a c t i v i t i e s c a n a l s o compriset h e b u s i n e s s asbeingacompassionateemployer,extendingtopeoplewho aredisadvantaged,suchas minoritygroups.It’saboutgivingemployeesafairchancetodevelopand maximizethepotential(AshridgeCentreforBusinessandSociety,2005)
In today's competitive global market, businesses face constant rivalry across all industries, making it essential to view their workforce as a key competitive resource To gain a competitive edge, organizations must implement strategies that significantly enhance workforce productivity, thereby driving greater value (Wan, 2007) Workforce-oriented CSR activities focus on improving working conditions through training, development, equal opportunities, and promoting work-life balance A survey of Czech SMEs (Polásek, 2010) highlighted the substantial benefits of adopting socially responsible and ethical practices, including increased employee job satisfaction, enhanced loyalty, and improved recruitment of qualified talent.
Donato,andIzzo(2007)themeasuresofworkforceorientedCSRactivitiesarebasedonhealthand safety systems,systemsforemployeetrainingandd e v e l o p m e n t , equalopportunitiespolicies,system sforgoodemployeerelations,systemsforjobcreationandsecurity.
F o r e x a m p l e , a s u r v e y of 9 0 0 E u r o p e a n b u s i n e s s e s i n d i c a t e d t h a t a n u m b e r o f b u s i n e s s e s wereactivelyengagedinpromotingworkplacediversityandanti-discrimination Thisis becauseithelpsresolvelaborshortagesandtorecruitand retainhigh qualitystaff(E u r o p e a n Commission,2005).AsurveyofDanishSMEs(EuropeanCom mission,2005)alsos h o w s t h a t t h e b u s i n e s s e s w h i c h h a d i m p l e m e n t e d w o r k f o r c e e l a t e d C S R a c t i v i t i e s e x p e r i e n c e d apositivefinancialimpact.Apartfromthe directfinancialimpact,businessesindicatedthatworkforceorientedCSRactivitieshave apositiveimpactinrelationtotheirr e p u t a t i o n andabilitytoattractandretainemployees. SucheffectsofCSRactivitieshaveapositiveinfluenceonthelongtermcompetitivenessofSMEs. Dependonthisbackground,thefollowingarehypothesized:
SocietyorientedCSRactivities
This study focuses on society-oriented CSR activities that target culture, sports, health and well-being, education, support for low-income groups, and communication participation These initiatives are viewed as vital support for social and cultural community activities, community development, and related issues (Vives, 2005) A socially responsible business aims to foster good-neighbor relationships by minimizing negative impacts on the local environment and actively addressing local problems and concerns The local community is recognized as a valuable source of potential customers and employees for the business.
Tobecomeagood corporatecitizen,the business canengageitselfinsuch variedinitiativesasprovidingfinancialandmaterialsupportforlocalactivitiesandprojectsbymakingthetime a n d theprofessionalknowledgeofitsemployeesavailabletothelocalcommunity(Polásek,2010).S p o r t i n g , c u l t u r a l , h e a l t h a n d w e l f a r e a c t i v i t i e s a r e t h e m o s t c o m m o n c o m m u n i t y activitieswhich businesssupportinEuropeancountries.Accordingly, support t osportingactivitiesisthepreferredactivityamongstSMEsinnearlyallthecountriesinEuro(EuropeanC o m m i s s i o n , 2002) Similarly, SMEs seemtobethe most activein supporting sports, healthandculturalactivitiesinLatinAmerica(Vives,2005).
Research by Polásek (2010) emphasizes the importance of society-oriented CSR activities for SMEs, including financial and in-kind donations, volunteerism, public education, and support for local quality of life through sports and culture The study highlights the benefits of these activities, such as enhanced business reputation and image, increased employee and customer loyalty, easier access to local resources, reduced security costs due to lower crime rates, and new business opportunities Overall, these initiatives contribute to improving the competitiveness of SMEs by fostering a positive community impact.
MarketorientedCSRactivates
ThemarketorientedCSRactivitiesrefertothewayinwhichabusinessfocusesontheneedso f itscustom ersbyrespondingquicklyto customer’sorders and complaintsout its productsa n d services,isopenatconvenienttimes,providescustomerswithusefulinformation,treats customersfairly,chargesfairpricesandgeneratesprofitwithoutcheatingthecustomers.Ita l s o ent ai ls i s s ue s sucha s re s p o n s i b le a d v e r t i s i n g, d e a l i n g w i t h cu s t o m e r c o m p l a i n t s a n d ethicalpractices.
Marketorientedenvironmentontoday,asocially- responsiblebusinessisexpectedtoconducti t s activitiesinatransparentmannerandtohavepositiver elationshipswithitscustomers.T h e b u s i n e s s ’ s a b i l i t y t o c r e a t e l a s t i n g a n d h i g h q u a l i t y sales n e t w o r k s f o r i t s p r o d u c t s ( P o l á s e k , 2 0 1 0 ) Ma r k e t o r i e n t e d C S R ac t i v i t i e s may,h o w e v e r , a ls o g o beyondt h e d i r e c t buyer- sellerrelationshipbyincorporatingissuesintheinterestoftheclient,suchasproducinge n v i r o n m e n t a l l y - friendlyproducts.
AsurveyamongCzechSMEs (Polásek,2010)revealed thattheyhadincreasedcusto merl o y al t y a n d theys t o o d o u t amongc o m p e t i t o r s a s a r e s u l t o f t h e b e n e f i t s d e r i v e d f r o m i m p l e m e n t i n g marketorientedCSRactivatesareimportantdriversofb usinessreputation(Tuppen,2004).ThecompetitivebenefitsofCSRfromacustomerpersp ectiveappeartobestrengtheningasaresultofagrowingdemandofCSRactivitiesfromcustomers( EuropeanC o m m i s s i o n Report,2008)Similarly,asurveyofDanishSMEsindicatedthatmarketoriented
BusinesstodayarepracticingCSRbecausecustomersaredemandingmoreethicalbehaviorsf r o m them MarketorientedCSRactivateshelpbusinessestoattractandretaincustomersandt h i s isturnensureslong- termsurvivalofthebusiness.BergerandDrumright,ascitedbyAli,Rahman,Yama,NasirandAli(2010) confirmedthatbusinesseswith soundmarketorientedCSRactivatesdevelopapositivereputationandenjoyincreasedcustomerl oyalty,whichinturninfluencesthecompetitivenessofbusiness.
EnvironmentalorientedCSRactivates
Thisfactorrefertothemeasuresabusinesscantaketominimizeitsnegativeimpactonthen a t u r a l environment,suchasecologicalandeconomicuseofnaturalresources,en viro nmentally f r i e n d l y p a c k a g i n g , recycling,wastereduction,energya n d waterc o n s e r v a t i o n , poll utioncontrolandprotectionofthenaturalenvironment.Themostimportantenvironment o r i e n t e d C S R a c t i v i t i e s c o n c e r n t h e c o n s u m p t i o n o f materialsa n d e n e r g y , h a n d l i n g poll utionandwasteinthemostenvironmentallyfriendlyway possible(EuropeanCo mmi ssio n , 2005).ThisisinlinewithasurveyofEuropeanSMEsw hichrevealedthatenvironmentorientalCSRactivitiesgenerallya r e aimedatdesigningen vironmentallyf r i e n d l y productsorproductionprocesses(includingtheecologicandeconomicuseofnaturalr e s o u r c e s ) orbeingactivelyengaginginrecyclingactivities(MandlandDorr,2007).
Businesses that aim to minimize their negative environmental impact can unlock new opportunities, as highlighted by Polášek (2010) Companies that prioritize environmental care are more likely to secure tenders from larger businesses and the public sector, while also attracting environmentally-conscious consumers According to a survey of Polish SMEs by the European Commission (2007), 75% reported reducing energy and resource consumption, 59% decreased the use of natural resources, and 56% implemented recycling management Additionally, 56% of SMEs are developing environmentally friendly products and services, with 46% adhering to environmental standards at their production sites.
Furthermore,i t i s a c k n o w l e d g e d t h a t a p o s i t i v e r e l a t i o n s h i p e x i s t s b e t w e e n e m b r a c i n g en v i r on m en t al orientedCSRactivitiesandincreasedcompetitivenessinter msofprofitability( Viviers,2009).Itisempiricallydemonstratedthatthereisapositiverelations hipbetweenenvironmentalpracticesandcustomerloyalty,whichinturninfluencesbusinessperformance.H e n c e, somecompetitivenessgainsassociatedwiththeadoptionofenvironmentalpracticesinclud ecostreductions,resourcesavings,opportunitiesforinnovation,customerretentiona n d loyaltyandimprovedemployeemorale(KassinsandSoterious,2003).
Employeesatisfaction
Weseethattherearemanyfactorsthatinfluenceemployeesatisfactionsuchasemploye eb e n e f i t s , jobcontentandperformanceappraisalsystems,jobsafety,improvingtheworkplaceconditions andtherelationshipbetweenmanagersorotheremployees(AydinandCeylan,2 0 0 8 ) Accor dingly,employeesatisfactionisviewedasthecombinationofaffectivereactionstothedifferentialperceptionsof whatonewantstoreceivecomparedwithwhatoneactuallyr e c e i v e s T h e e m o t i o n a l s t a t e o f employeesi n f l u e n c e s t h e i r s a t i s f a c t i o n s i n c e s a t i s f i e d employeeswill workmorewillinglyandthiscontributesto thebusiness’s competitiveness(AydinandCeylan,2008).Inthisresearch,employeesatisfactionreferstothebusinesshaving employeeswhoseetheirroleinthebusinessassatisfyingandenjoyingworkingtogetherinthebusi ness.Inotherwords,employeesatisfactionentailsattracting,developing, motivatinga n d retainingqualifiedandhappyemployeeswhofeelthattheyhaveachie vedsomethingw i t h aviewofenhancingabusiness’scompetitiveness.
Tsai,Yu an d F u w i t h t h e st u d y i n t h e T a i w a n S h i p p i n g i nd ust ry confirmedt h e p o s i t i v e r e l a t i o n s h i p betweenemployeesatisfactionandSMEs’competitiveadvantage(Tsai,Yaand Fu,2005).SMEscanuseemployeebenefitstoincreaseemployeeproductivityandachievecom petitiveadvantage.
Businessreputation
Businessr e p u t a t i o n i s i m p o r t a n t m e a s u r e ofb u s i n e s s s u c c e s s I t i s t h e m osti m p o r t a n t strategicandvaluableasseta b u s i n e s s can pr ocess Shamean d Has san (2
Business reputation is considered the ultimate asset that organizations strive to achieve, yet it is challenging to quantify Annual rankings by Fortune Magazine and Financial Times offer insights into business reputation through key indicators such as management quality, financial stability, social responsibility, and product/service quality (Money and Gardiner, 2005) Overall, business reputation is fundamentally linked to the strong relationship between customers and the business, emphasizing the importance of client relationship-building (Omar, Williams, and Lingelbach, 2009).
Today,businessincreasinglymeasuretheirassetsintermintangibles,suchasknowledg e,b r a n d visibilityandcustomerloyalty.Itisn’twhatabusinessmakesordoesanymore,buritsp e r c e p t i o n thatmatters(MoneyandGardiner,2009).Inthisstudy,Businessreputationreferst o attribute sthatformstakeholders’perceptionsoftheextenttowhichabusinessiswellk n o w n , reliable,tru stworthy,reputableandbelievable,Businessesshouldfocusonbuildingtrustandgoodwilltobepro fitableandcompetitive.
Research indicates a positive relationship between corporate social responsibility (CSR) and business competitiveness (Weber, 2008) Hunt and Morgan, as cited by Elbert and Schwinger (2005), suggest that a strong business reputation serves as an intangible asset that can lead to competitive advantages and superior financial performance An empirical study by Forerun and Rindova (as cited by Omar et al., 2009) found that businesses with positive reputations consistently project their core mission and identity more effectively than those with lower rankings Therefore, a satisfactory business reputation is crucial for fostering successful customer relationships, which ultimately impacts overall business performance (Ewing, Caruana, and Loy, 1999).
Empiricalfindings(ShammaandHassan,2009)highlightvisionandleadership,emotionala p p e al andsocial,environmentalresponsibilityastheimportantelementsthatbusinessesneedt o focusonastheirrep utationprogresses.Theseelementsareatthehighestlevelofbusiness reputationa n d r e p r e s e n t a n importants o u r c e o f l o n g t e r m s u s t a i n a b i l i t y a n d c o m p e t i t i v e a d v a n t a g e Furthermore,empiricalresultsfrombothautoregressiveprofitmodel sandp r o p o r t i o n a l hazardsregressionmodels (RobertsandDowling,2002)consist entlysuggestt h a t successfulbusinesseshaveagreaterchanceofsustainingsuperiorperformanceovert imei f t h e y a l s o p o s s e s s r e l a t i v e l y g o o d b u s i n e s s r e p u t a t i o n B u s i n e s s r e p u t a t i o n i s t h u s a n importantstrategicassetthatcontributestothesustainabilityofprofits bybusinesses.
Customerloyalty
Developingc u s t o m e r l o y a l t y i s a c c e s s e d a s a n i n d i s p e n s a b l e i s s u e f o r a n y b u s i n e s s Asmarketsbecomemorecompetitive,businessesaremorelikelytoattempttomai ntaintheirmarketsharebyfocusingonretainingcurrentcustomers (Lee,LeeandFeick, 2001).Inthisstudy,Customerloyaltyreferstoabusinesshavingloyaltyandsatisfiedcustomer sthatarew i l l i n g tosupportitbyrecommendingitsproductsandarecommittedtobuyingitsproduct si n thefuture.Indeed,suchlong- termrelationshipscanenhancethecompetitivenessSMEsa n d loyalcustomerscanfrequent lyrecommendabusinesstoothers.
Customer loyalty is measured differently by scholars, often linked to high levels of satisfaction It can be viewed as both a behavioral and an attitudinal concept A study on mobile phone marketing in France (Lee et al., 2001) identified key indicators of customer loyalty, including repurchase intent, resistance to switching to competitors, and willingness to recommend a preferred vendor Customers who intend to repurchase and recommend products are more likely to stay with the business This aligns with Brimpong's (2008) findings, which highlighted the duration of customer relationships and the propensity to recommend products or services as critical indicators of loyalty.
Ashiftinfocusfromfindingcustomerstokeepingcustomershasbecomeprominentinrecentyearsandthispersp ectivehasbeenadoptedbymanybusinesses.Empiricalresearch(Gable,F i o r i to a n d T o p o l , 2 0 0 8 ) i n d i c a t e s t h a t c u s t o m e r l o y a l t y i s keytob u s i n e s s s u c c e s s a n d r etai ning exist ingcustomerscostsfarlessthanacquiringnewones.
H7::Thereisapositiverelationship betweenachieving CustomerloyaltyandIncre asedcompetitiveness ofSMEs.
Increasedcompetitiveness
T o effectivelycompeteinlocalandglobalmarket,SMEsmustbequickandflexiblein theirresponseorstakeholder’sneeds.Competitivenesscanbetreatasadependent,independentoraninter mediaryvariable,dependingontheperspectivesfromwhichtheissueisapproached.Suchlevelsandap proachesactuallyreflectthewideapplicationsofthisconcept(Man,
Laua n d Chan,2012).However,inthisstudy,increasedcompetitivenessistreatedasdependent v a r i a b l e , itreferstoabusiness’sabilitytosustainitslongtermperformancebetterthanits c o m p e t i t o r s inthemarket,asindicatedbyprofitability,marketshare,salesandgrowthrate.
Measuring competitiveness presents a significant challenge for scholars, traditionally relying on financial indicators such as profit, market share, sales, and growth rate (Singh et al., 2008; Manet al., 2002) However, various other indicators can reflect competitiveness based on the study's nature, industry, and business size For example, research on founder-managed natural food stores in the USA assessed competitiveness through net worth, profitability, sales revenue, market share, and sales volume (Segal, Borgia, and Schoenfeld, 2010) Additionally, Mandy and Dorr (2007) discovered that CSR activities of SMEs contribute to competitive advantage, resulting in enhanced competitiveness as evidenced by increased sales volume, market share, and profitability A survey of independent Greek SMEs similarly utilized profitability, sales growth, sales volume, and market share as key indicators of business success.
S a l a v o u a n d A v l o n i t i s , 2 0 0 8 ) S i m i l a r l y , Jamald i n a n d H a m s u n ( 2 0 0 7 ) me asuredc o m p e t i t i v e n e s s ofthebusinessbycomparingtheactualperformanceofthebusines ssales,marketshare,profit,growth,demandandcustomerloyaltywiththeforecast.
Base on thisdiscussion, itcanbe concludedthatmostSMEs useprofitability,marketshare,salesandgrowthrateasmeasuresofcompetitiveness.
ProposedModel
Increased enterprise’s competitive Business reputation
PreliminaryResearch
After conducting a literature review, a hypothesized model was developed to identify factors influencing the competitiveness of SMEs This model serves as the basis for an empirical survey Prior to creating the measurement instrument, feedback was gathered from various stakeholders, including academics with expertise in CSR and SMEs, regarding the proposed model The model was also presented at an international academic conference, where discussions aimed to identify potential limitations, measurement instruments, and challenges related to the research methodology Ultimately, the model underwent formal testing among SME owners and managers in Ho Chi Minh City, Vietnam.
Measurement
Workforceoriented
Marketoriented
Societyoriented
Environmentoriented
Employeesatisfaction
ForC S R a c t i v i t i e s tos u c c e e d , e m p l o y e e s playa verys i g n i f i c a n t r o l e H a v i n g a g o o d r e p u t at i o n sociallyimpliesthatabusiness’sbehaviortowardsitpeopleiscon sistent.Thus,employeesatisfactioninclude:
Businessreputation
Warrick(1992)defines businessreputationas“theaggregation o f asingle stakehol der’sp e r c e p t i o n s ofhowwellbusinessresponsesaremeetingthedemandsandexpe ctationsofm a n y businessstakeholders”.Thus,businessreputationisalsodefinedsuchas:
Customerloyalty
Jacobsen,Fjelkner.OlssonandStovall(2004)arguethatbusinesses,includingSMEs,arethel o n g term relationshipswithcustomerslikelytobemoreprofitableandtheywerescaledbyt h e factorsasbelo w:
Ind e v e l o p i n g t h e s c a l e t o measuret h eI n c r e a s e d c o m p e t i t i v e n e s s o fS M E s , t h e e x i s t i n g literatureonthemeasurementscalesf o r competitivenesswasconsulted.F o r examp le,D e p p e r u a n d C e r r a t o ( 2 0 0 5 : 1 0 ) a s s e r t t h a t a n y m e as u r e o f a b u s i n e s s ’ s c o m p e t i t i v e n e s s shouldtakeintoaccountthetimeperspective.Assuch,adynamicanalysise mphasisesthetrendsofcompetitivenessindicatorsovertimeratherthansingle-periodmeasures.
CSR activities of SMEs can have both internal effects, such as increased employee satisfaction, and external effects, like enhanced customer loyalty due to improved service These initiatives may focus on various aspects, including working conditions, safety, social development, human rights, ethical business practices, and environmental impact The primary goal of these activities is to enhance the business image and boost motivation and loyalty among employees, customers, and other stakeholders, such as suppliers and retailers.
SMEsexertalargeimpactontheeconomythroughtheiroperations.Theyarerequiredtopayattentiontotheso cial,economic,ethicalandenvironmentaldimensionsofCSR.Byengagingindialoguewithimportantstake holders,SMEscandevelopagoodcorporateimage,achieveemployeesatisfactionandcustomerloyalt y,therebyenhancingtheircompetiveness.
ResearchMethodologyf o r Quantitative TestingandAnalysis
QuestionnaireDesign
This study aimed to utilize a measuring instrument to gather primary data for testing the hypothesized relationships within the model and to identify the CSR factors influencing the competitiveness of SMEs The instrument, detailed in Annexure A, included a cover letter outlining the study's purpose and the type of information requested, along with assurances of confidentiality and instructions for responding to the questionnaire Section A comprised 36 randomized statements concerning CSR factors and mediating variables affecting SMEs' competitiveness, designed to enhance the accuracy of responses to sensitive questions The randomized response technique is a survey method aimed at improving data validity when addressing sensitive topics, as respondents may otherwise provide biased answers Table 3.2 presents an overview of the sections in the measuring instrument and the corresponding number of items created to test specific variables in the proposed model.
The questionnaire aimed to gather demographic information about respondents and the SMEs they represent, including gender, years in business, position, and education level It also sought details about the business itself, such as enterprise form, sector, number of full-time employees, and annual turnover A nominal scale was used to classify the data, while a semantic differential scale allowed respondents to express their agreement with various statements regarding CSR factors influencing SME competitiveness A 7-point Likert-type interval scale was chosen to enable more precise responses from SME owners and managers compared to a 5-point scale This interval scale facilitates the application of inferential statistical analyses, offering a higher level of measurement than ordinal scales, and allowing for the calculation of central tendencies and dispersion metrics.
An ordinal scale ranks objects or alternatives based on their magnitude, allowing researchers to express relationships in terms of "greater than" or "less than" (Zikmund, 2003) This scale facilitates the ranking of data, hence its name "ordinal" (Leedy and Ormrod, 2005) Additionally, it expands the range of statistical techniques available for data analysis, including the median and percentile rank (Han, 2006) The relationship between two characteristics can be assessed using Spearman’s rank-order correlation, a non-parametric measure based on the ranks of data values (Leedy & Ormrod, 2005) However, despite the advantages of statistical analysis with ordinal data, its inherent limitations render it unsuitable as a measurement scale for this study.
Datacollection
Ac o m p r e h e n s i v e l i t e r a t u r e s e a r c h w a s c o n d u c t e d i n o r d e r t o i d e n t i f y a p p r o p r i a t e C S R activitiesandotherfactorsthathaveanimpactonthelong- termcompetitivenessofS M E s Therefore,severaldatasearchesweredoneatEconomicsU n i v e r s i t y l i b r a r i e s , u s i n g d a t a b a s e s suchasEmeralds e a r c h e s , Googles e a r c h e s , Yaho os e a r c h e s , D i s s e r t a t i o n Ab str act s, andleadingCSRandSMEsJ o u r n a l s T h e r e v i e w c o v e r e d j o u r n a l a r t i c l e s , o n li n e r e p o r t s a n d g o v e r n m e n t documents.
The scientific method, while varying across disciplines, enables researchers to gain insights into the world and observable phenomena, with the primary goal of discovering new, confirmable knowledge while minimizing biases (Driscoll, 2011) In business research, surveys are the predominant method for generating primary data (Zikmund, 2003) Defined as a research technique that collects information from a sample through questionnaires (Eybers, 2010), surveys systematically gather data from individuals to describe the attributes of a larger population This method allows researchers to record personal behaviors, attitudes, identities, and definitions from a significant number of respondents (Gerhardt, 2004) Surveys are particularly valuable for obtaining information on topics that cannot be measured through observation, such as risk, fear, religious beliefs, and racial attitudes They provide a means to acquire data from a large group quickly and efficiently (Gerhardt, 2004), highlighting their versatility as a primary data collection approach (Cooper and Schindler, 2008).
Surveys can differ significantly in their methodology, including how populations are contacted, how instruments are administered, and how surveys are presented to respondents These variations can dramatically impact the quality of the data collected (Bowling, 2005; Lee, 2009) There are two primary types of questionnaires: self-administered questionnaires and structured interviews Self-administration tends to encourage respondents to disclose sensitive information more readily compared to face-to-face or telephone interviews Therefore, sensitive questions are more effectively addressed through personal, self-administered methods, leading to higher reporting levels (Bowling).
2 00 5; Ko po nen, M ọk i- Opas and Tolonen, 2011) This studyu s e d t h e s u r v e y t e c h n i q u e t o c o l l e c t t h e r a w d a t a o n t h e C S R f a c t o r s t h a t p o t e n t i a l l y i n f l u e n c e t h e competitivenesso f S M E s A c c o r d i n g t o C o l l i s a n d
H u s s e y ( 2 0 0 3 ) , a self- a d m i n i s t e r e d questionnaireiscommontoapositivisticresearchparadigm.Itisthiskindofq u e st i on n ai r e thatwasfoundappropriateforthisstudy.
Int h e s e c t i o n s b e l o w , t h e d e v e l o p m e n t o f t h e m e a s u r i n g i n s t r u m e n t i se x p l a i n e d T h e discussion includesidentifyingthequestionsthatdeterminewhether respondentsqualifytop a r t i c i p a t e int h e s t u d y o r n o t , a s w e l l a s o p e r a t i o n a l l y d e f i n i n g t h e v a r i a b l e s o f interest.Theprocessthatwasfollowedtodevelopvalidandreliablescales ofmeasureisa l s o described,andthequestionnaire-administeringprocessisalsosummarized.
Sampling is a crucial aspect of statistical practice that involves selecting a subset of individuals from a population to draw inferences about that population (Palit, 2006) It allows researchers to gather information without needing to examine the entire population (Cooper and Schindler, 2008) The sampling unit refers to the specific cases related to the variables under study, from which data is collected and analyzed (Collis and Hussey, 2003; Sigmund, 2003) Stratified sampling, which ensures that the sample includes elements from various segments, was employed to categorize businesses into industrial sectors (Cooper and Schindler, 2008) Additionally, purposive sampling, a non-probability method that adheres to specific criteria, particularly judgmental sampling, was utilized to select respondents from different industrial sectors in HCMC, whose workforce varied significantly.
1 0 0 e m p l o y e e s As a m p l e s i z e b e t w e e n 30and50 0a t a 5 % confidencel e v e l is g e n e r a l l y sufficient(Wahid,RahbarandShyan
(2011).However,tobespecificthisstudyadoptedCrecyandMorgan’ssimplified heuristics a s c i t e d byS a h a r a n ( 2 0 0 0 ) , t o d e t e r m i n e t h e samplesize.UsingtheCrecyandMorgan’s simplified heuristics, thesamplesize of130wasdeterminedata59%levelofcertainty andb a s e d o n t h e p o p u l a t i o n o f 4 2 3 , 0 0 0 S M E s i n H C M C H e n c e , 2 2 1 S
M E owners/ managers,w h o a r e j u d g e d tohavespecificinformationabouttheirbusinesses,w e r e i d e n t i f i e d a ndselectedw i t h thehelpofbusinessassociationsforthisstudy.
Atotalof130usablequestionnaireswerereceivedfromrespondents,resultinginar e s p o n s e rateof59%.Table3.3belowpresentsafurtherbreakdownoftheresponserate.
Dataanalysis
Measurement tools are evaluated based on practical issues and technical characteristics, specifically reliability and validity According to Cooper and Schindler (2008), effective measurement must satisfy the criteria of validity, reliability, and practicality, with practicality encompassing economy, convenience, and interpretability (Kappiantari, 2009) Reliability indicates the consistency of an instrument in measuring its intended target, while validity refers to the extent an instrument accurately measures what it is supposed to measure (Whichard, 2006) Assessing an instrument's reliability and validity is crucial for determining the quality of data interpretation This study presents statistical techniques used to evaluate the reliability and validity of results, employing various data analysis methods An Analysis of Variance (ANOVA) was conducted to examine the impact of demographic variables on mediating and dependent variables, while Multiple Linear Regression (MLR) analysis assessed the influence of ordinal demographic variables Additionally, Structural Equation Modeling (SEM) was utilized to test and corroborate factors affecting the competitiveness of SMEs Detailed discussions of these techniques will follow in subsequent sections.
M i s s i n g Data
Each returned questionnaire was carefully examined for missing data upon receipt There were very few questionnaires lacking demographic data from Section B, making them statistically insignificant However, some incomplete items from Section A, intended to measure the constructs in the model, were replaced with the mean score for that variable to facilitate data processing without distorting the results As Adcock (2005) noted, using mean substitution is justified as the mean serves as a reasonable estimate for a value from a normal distribution This method, commonly practiced in research, replaces missing values with the mean of the observed values (Peng, Harwell, Liou, and Ehman, 2006; Rubin, Witkiewitz).
Validityresults:Sub-modelCSRfactors–EFAAnalysis
Kaiser-Meyer- OlkinMeasureofSamplingAdequacy.Bartlett'sTestof
Ther e l a t i o n a l n a t u r e o f t h e C S R f a c t o r s ( M a r k e t - o r i e n t e d C S R a c t i v i t i e s , E n v i r o n m e n t a l or ient ed CSRactivities,Workforce- orientedCSRactivities,andSociety-orientedCSRactivities)suggeststhatthefactorsinthesub- modelCSRf a c t o r s w i l l becorrelatedwitheacho t h e r Asaresult,PrincipalComponentAnaly siswithKaiser-Meyer-
The extraction and rotation method specified for the analysis was OrinRotation, with Bartlett’s Test of Sphericity yielding a KMO value of 0.810 (p