Exploring the mediating role of intellectual capital and competitive advantage on the relation between CSR and financial performance in SMEs

Abstract

Purpose The relationship between corporate social responsibility (CSR) and financial performance (FP) is a much-researched topic in academic arena. Recent studies disclosed that intellectual capital (IC) significantly impacts the success and survival of organizations. Moreover, theoretical assertions confirm that competitive advantage (CA) mediates the association between IC and FP. This has opened up new dimensions for the study. Therefore, this study aims to develop a theoretical model, first, to specify these relations and, second, to explore the mediating role of IC and CA on the relation between CSR and FP in the context of small- and medium-sized enterprises (SMEs). Design/methodology/approach Hypotheses are tested through a survey conducted on 384 SMEs in Rajasthan state. A structured questionnaire having 38 variables was used, and collected data are subjected to confirmatory factor analysis. Structural equation modeling was used to validate the measurement model and to test the mediating effect. Findings The findings indicate a weak positive relation between CSR and FP. The empirical data provide supportive evidence that IC has a profound impact on CSR and FP relationship. Specifically, it was noticed that the mediating role of CA on this relationship was not as reflective as described in the literature. Research limitations/implications The limitation of this study is that it is limited to one country, more specific to one geographical area of a country; therefore, findings of the study cannot be generalized in terms of its implications to other regions and countries. Originality/value Very few empirical studies have analyzed the mediating role of IC and CA on the relationship between CSR and FP. This study is expected to enable scholars and practitioners to have a more definite and direct understanding of the implication of IC and CA in association between CSR and FP.

Intellectual Capital, Entrepreneurial Strategy and New Ventures Performance: Mediating Role of Competitive Advantage

“…For instance, Jain et al (2017) and Nardo and Veltri (2014) scrutinized that CA fully mediates the relationship between IC and a firm's performance. Hence the same results are found in the present study and confirmed H6 of the study.…”

“…Moreover, it is contended that IC does not directly impact performance, but firm's internal strategic posture and CA mediate the relationship (Kianto, Andreeva, & Pavlov, 2013;Talebi, Rezazadeh, & Najmabadi, 2015). In the same nature, some studies have argued that IC is a set of intangible assets and resources to help firms to build CA which in turn provides the benefit of higher performance and profitability (Berzkalne & Zelgalve, 2014;Jain et al, 2017). Thus, we propose a hypothesis as:…”

“…SMEs gain CA and increase values by using IC. Having higher level of IC, SMEs can create maximum customer values and positive image for their products and services, thus they establish long-term relationship with society and customers, which in turn leads toward greater performance (Jain, Vyas, & Roy, 2017). Moreover, it is contended that IC does not directly impact performance, but firm's internal strategic posture and CA mediate the relationship (Kianto, Andreeva, & Pavlov, 2013;Talebi, Rezazadeh, & Najmabadi, 2015).…”

Investment in intangible resources and capabilities spurs sustainable competitive advantage and firm performance

“…Prior studies documented the significant contribution of CSR (Javed et al, ; Rivera, Muñoz, & Moneva, ), IC and FC (Čater & Čater, ; Ling, ; Monteiro et al, ) to SCA and FP (Branco & Rodrigues, ; Fonseka et al, ; Surroca et al, ). Nonetheless, the role of the aforementioned factors is debated extensively in large firms mainly in developed and Western countries (Ayuso & Navarrete‐Báez, ; Jain, Vyas, & Roy, ; Kim, Kim, & Qian, ), but SMEs in the emerging economies seldom are articulated despite their dominant role in these markets (Bai & Chang, ; Khalique, Bontis, Abdul Nassir bin Shaari, & Hassan Md. Isa, ; Lee, Kwak, & Park, ).…”

Sustainability and financial performance of small and medium sized enterprises: A bibliometric and systematic literature review

“…Iraldo, Testa, Lanzini, & Battaglia, 2017) and the benefits of environmental policies on financial performance(Bagur-Femenias, Perramon, & Amat, 2015) in the other. Some articles employ empirical analysis to the emerging economies by observing interrelationships among resources, capabilities, and financial performance, also referring to the issues and theoretical approaches mentioned above(Jain, Vyas, & Roy, 2017) Sok, O'Cass, and Miles (2016),. for example, situate the analysis on the resource-based view, considering product innovation and marketing as resources and capabilities.…”