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

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.

How environmental awareness and corporate social responsibility practices benefit the enterprise? An empirical study in the context of emerging economy

“…The findings also show that “firm reputation” positively and significantly impacts firm performance ( β = 0.425, p < 0.001). The result of this study is in line with the findings of Bahta et al (2020) in which firm reputation significantly affects SME performance. Corporate reputation enhances investors, customers and employees' satisfaction and plays a vital role in increasing profitability.…”

“…The results revealed that except for “indirect support to the community,” the three determinants are positively and significantly correlated with enterprise reputation and firm performance. Additionally, these results also have been confirmed by previously published studies including Khan and Yu (2020), Khan and Dong (2017), Khan et al (2019), Bahta et al (2020), Hertel and Wiesent (2013), Dues et al (2013), Saha et al (2020).…”

“…Corporate reputation enhances investors, customers and employees' satisfaction and plays a vital role in increasing profitability. Firm reputation also helps firms gain a competitive advantage; the firm should also work to improve its reputation through CSR, which helps in the economic and societal development of communities (Bahta et al , 2020). They also stated that the firm's reputation retains and attracts motivated and skilled employees, hence increasing firm performance.…”

Incorporating Islamic Value in Corporate Social Responsibility (CSR) Practice of Malaysia Small Medium Enterprises (SMEs) Food Operators: Does Manager’s Religiosity Influence CSR Practice?

“…The finding of this study is also congruent with several studies (Iguchi et al, 2021;Mazereeuw et al, 2014;Tahir et al, 2015) who revealed that managers perceived religiosity and CSR practices are an important part of business. Some studies have demonstrated that CSR practice lead to a firm's corporate reputation (Bahta et al, 2021;Chef et al, 2021;Diogo & Neil, 2017;Gagalyuk, 2017). The finding suggests that the responding firms realise the benefits of CSR practice in enhancing their corporate image.…”

“…Corporate reputation could be referred as a reflection of the degree to which the public is satisfied that firms are meeting their expectations with products and services (Brammer & Pavelin, 2016) and enhance the firm's performance (Bahta et al, 2021;Chef et al, 2021;Pallathadka & Pallathadka, 2020). New and emerging issues in the market have called upon firms to focus on building their reputation in order to enhance their credibility and image.…”