Relation between CSR and Financial Performance in SMEs

The aim of this paper is to explore and analyse an implementation of corporate social responsibility (CSR) by small and medium-sized enterprises (SMEs) in the Czech Republic and explore if there is a relation between CSR activities and financial performance. Even though CSR has been in the spotlight for quite some time, it has been mainly due to activities of corporation, whereas activities of SMEs still tend avoid any publicizing. There is also lack of studies on this topic and most of the existing ones were conducted prior to the Czech National Strategic Plan on CSR. Results of this study therefore show whether there has been any development in the wake of this programme. Design/methodology/approach:The research follows study from Torugsa, O'Donohue and Hecker (2012) published in the Journal of Business Ethics and further develops this study by adding new areas as suggested by Srpová, Kunz and Mísař (2012). The research was conducted among Czech SMEs, using contacts from the Albertina database. The pilot study was done on 10 respondents prior to the main research and in order to improve the overall quality. Data collection was conducted by a phone communication followed by sending a questionnaire to the selected e-mail addresses and (if necessary) follow up communication with respondents. The majority of questionnaires were filled in by business owners or top managers. After rejecting uncompleted questionnaires, the final research sample consisted of 463 SMEs. Authors are aware that there are research limitations connected to the representativeness due to the fact that the contact list came from a research database. However, the numberof respondents is still almost three times higher than in the original paper from the Journal of Business Ethics, where the authors clearly stated that they used mainly personal contacts to get respondents, which clearly led to biased selection. This also further supports our claim that there is simply a lack of good studies on this topic. The data was analysed using SPSS and Excel. The main method was Spearman's correlation coefficient which helped to determine validation of hypothesis: CSR is positively associated with SMEs financial performance. Findings:The findings show the progress in perception as well as implementation of CSR among Czech SMEs, the areas of their focus and how they perceive advantages of these activities. The leap between 2012 and 2016 is significant. The paper proved that there is a link between CSR and financial performance in SMEs through an empiric quantitative study. The positive monotonic correlation is weak which proves that there is still a lot of room for improvement during implementation and planning. Research/practical implications:The research clearly shows that CSR is no longer a playground for corporations only butthat there is a strong trend among small enterprises to behave responsibly. Proof ofpositive relation between CSR and financial performance will encourage yet reluctant entrepreneurs to implement CSR activities. Originality/value:The research brings a fresh look on CSR activities of SMEs just after nationwide promotion of this concept. It is one of very few papers aimed at financial efficiency of CSR in SMEs as many authors avoid this topic due to its difficult and lengthy process of both data collection and consequent analysis and interpretation.