Prepared by: Main Supervisor :Adam Muza Muhayen Assoc. Prof Dr Norlida Abd Hamid2013409182 – Ph.D Mixed Mode AAGBS, UiTM Shah Alam

• What is CSR?• Why SME?• Problem Statement• Research Questions & Research Objective• Hypothesis • Research Framework• Research Methodology• Future research area

CCorporate Social Responsibility and Financial Performance; The Case of Malaysia’s SME

WHAT IS CSR? WHAT IS CSR?

Corporate Citizenship (CC) - Political science

•Promotes the social and environmental behavior especially in the global context (Carroll, 1998; Matten and Crane, 2005; Crane and Matten, 2007 and Frederick 2008).

Corporate Social Performance (CSP) - Sociology

•Emphasis on achieving better performance out of the socially responsible initiatives (Carroll, 1979, Wartick and Cochran 1985, Wood 1991) •Defined in terms of the observed CSR policies, processes and outcomes

Socially Responsible Investing (SRI) - Religion, Ethics & Economics

•Evaluate the managers’ socially responsible behavior through their SRI initiatives (Sparkes, 2002; Friedman and Miles, 2001). 

Why SME? Why SME?

99% of all private sector businesses in England are accounted by SMEs (Federation of Small Businesses UK, 2012)

97.8% of all U.S. exporters are SMEs (U.S. Census Bureau, 2009). 90% of all businesses within APEC are accounted by SMEs (APEC, 

2013)

In 2012, there are 645,136 SMEs in Malaysia comprising varies sectors. The major sectors involve SMEs including Services (major), Manufacturing, Agriculture, Construction and Mining & Quarrying

(SMECorp, 2012).

Malaysian SMEs can be grouped into three categories Micro, Small, or Medium. These groupings are decided based on (SMECorp, 2012): either the numbers of people a business employs  the total sales or revenue generated by a business in a year

CSR Practices in SME contextCSR Practices in SME context

Social responsibility takes place informally and not necessarily reflected in formal company commitments (Observatory of European SMEs, 2004, Perrini et al.,2007).

Hence the lack of relationship between CSR activities and SME company strategy.

Practical implications for SMEs (UNIDO, 2002)• more eco-efficient management• improvements to service standards• raising quality levels• boosting employee satisfaction• better environmental management

Achieving CSR Objectives in SMEAchieving CSR Objectives in SME

Previous researches have shown that a few factors have an effect on both engagement in a CSR process and on SME’s financial performance.

1.Age - The age of SMEs could have a maturity effect, experience and even on the level of institutionalization (St-Pierre, 2010)

2.Internationalization - Being exposed to new cultural, regulatory, social and environmental context probably different. Exporters SME must adapt to these new conjunctions (Blomback and Wigren, 2009)

3.Size - behavior of firms varies according to size as visibility and organisational awareness raises the stakeholder pressure on SMEs (Vives and al, 2005, Walker and Tobias, 2006).

PROBLEM STATEMENTPROBLEM STATEMENT

1. The theoretical development of the relationship of CSR and business performance (Porter, 2011) as well as previous researches are made exclusively in the context of large enterprises (Orlitzky, 2005; Van de Velde and al,. 2005; Jamali, 2008; Lindgreen and al, 2009)

2. SMEs are better situated than large firms to take advantage of the CSR strategies (Sarbutts, 2003; Jamali, 2009).

3. Despite the importance of the SMEs impact on the natural and social environment, academic studies on socially responsible practices in the context of SMEs appear virtually absent (Jamali and al, 2009)

UNDERPINNING THEORIESUNDERPINNING THEORIESSlack Resource Theory

1.Solid financial performance (slack) allow resources to be invested in long-term strategies (Bourgeois,1981; Jensen,1986)2.Companies with financial limitations usually allocate their resources in projects with a shorter horizon (Waddock and Graves, 1997).

Resource-based view (RBV)

1.Firms have many resources and capabilities that can result in competitive advantages for firms that have superior resources or capabilities (Wernerfelt,1984; Barney, 1991) 2.CSR activities and attributes may be used in a differentiation strategy

RESEARCH QUESTION & OBJECTIVESRESEARCH QUESTION & OBJECTIVES

Research Questions Research Objectives Methodology

1. Is there a relationship between CSR practices and SME’s financial performance (FP)?

To understand the interdependencies between CSR and SME’s financial performance (FP)

Regression Analysis (Sekaran & Bougie, 2009, Research Methods for Business. G.Britian: Wiley, 348).

2. What are the factors for successful CSR practices in SMEs especially in developing economy (eg Malaysia)

To determine the importance of each of the CSR dimensions in SMEs practices (social, enviromental and economical).

The Pearson’s correlation- indicate the direction, strength, and significance of the bivariate relationship among all the variables that measured at an interval or ratio level (Sekaran & Bougie, 2009, Research Methods for Business. G.Britian: Wiley, 321).

RESEARCH QUESTION & OBJECTIVESRESEARCH QUESTION & OBJECTIVES

Research Questions Research Objectives Methodology

3. Is there a relationship between CSR practices and SME’s financial performance (FP)?

To observe and analyze the limiting factors towards successful CSR practices in SMEs

Regression Analysis (Sekaran & Bougie, 2009, Research Methods for Business. G.Britian: Wiley, 348).

4. What are the practical CSR practices for SME’s organisational activities.

To understand the most valued CSR efforts that SME would respond to

The Pearson’s correlation- indicate the direction, strength, and significance of the bivariate relationship among all the variables that measured at an interval or ratio level (Sekaran & Bougie, 2009, Research Methods for Business. G.Britian: Wiley, 321).

HYPOTHESISHYPOTHESIS

H1 : Measure of environmental dimension of CSR will be positively and significantly associated with SME business performance.

H2: Measure of social dimension of CSR will be positively and significantly associated with SME business performance.

H3: Measure societal dimension of CSR will be positively and significantly associated with SME business performance.

H4 : There is a negative relationship between CSR and age of SMEs

H5 : There is a positive relationship between CSR and the internationalization of SMEs

H6 : There is a positive relationship between CSR and SME size.

Theoretical FrameworkTheoretical Framework

Figure: Theoretical Framework

Independent Variables Moderating Variables Dependent Variable

Alexander, 1978; Aupperle et al. 1985; Cochran and Wood, 1984; Shane and Spicer, 1983; Ullman, 1985).

RESEARCH DESIGNRESEARCH DESIGN

a. Research Design - Exploratoryb. Quantitative – Hypothesis testingc. Type of investigation - causal study

to investigate related element for independent variables and Financial Performance

Research Instruments:1.Interview – Non contrived 2.Questionnaire - Administered through email or hand delivery3.Secondary Data – SMECorp

a. Data Collection/Source - SMECorp Malaysia

b. Coverage - Top performing SMEs in Malaysia from multiple industries

c. Time horizon – This study is cross-sectional. Data are gathered just one over are period of days in order to answer a research question

Sampling :•Population – Malaysian SMEs – multiple industries•Type – Convenience Sampling•Samples will be selected based on Krejcie and Morgan’s (1970) sampling table

Data Analysis:1.Correlation analysis2.Regression analysis

Research Limitations:1.Co-operation from organizations2.Confidentiality of data collected

Future Research AreasFuture Research Areas

Study the relationship between CSR and SME performance and the process that govern the relationship

Study of the arrangement of activities or behaviors that link CSR objectives and SME activities

Further studies should aim at evaluating the long-term relation existing between CSR and Business Performance of SMEs.

Need to explore the causal mechanisms linking CSR to profitability

Significance of StudySignificance of Study

REFERENCESREFERENCES Browen, Howard (1953). Social responsibilities of the businessmen. New York, Harper and Row.

Callan, Scott J., and Janet M Thomas (2009). “Corporate financial performance and corporate social performance: An update and reinvestigation,” Corporate Social Responsibility and Environmental Management, 16 (2), 61-78.

Jamali, Dima (2008). “A stakeholder approach to corporate social responsibility: A fresh perspective into theory and practice,” Journal of Business Ethics, 82, 213-231.

Jenkins, Heledd (2009). “A business opportunity model of corporate social responsibility for ‟small and medium sized enterprises,” Business Ethics: A European Review, 18 (1), 21-36.

Longo, Mariolina, Matteo Mura, and Alessandra Bonoli (2005). “Corporate social responsibility and corporate performance: the case of Italian SMEs,” Corporate Governance, 5(4), 28-42.

Porter, M. E. and M. R. Kramer (2002). “The Competitive Advantage of Corporate Philanthropy,” Harvard Business Review, 80 (12), 56-68

Sarbutts, N. (2003). “Can SMEs "do" CSR? A practitioner-s view of the ways small- and medium-sized enterprises are able to mange reputation through corporate social responsibility”, Journal of Communication Management, 7(4), 340-347

CCorporate Social Responsibility (CSR) and Financial Performance (FP);

The Case of Malaysia’s SME

Thank you for your kind attention

Prepared by: Main Supervisor :Adam Muza Muhayen Assoc. Prof Dr Norlida Abd Hamid2013409182 – Ph.D Mixed Mode AAGBS, UiTM Shah Alam