The business case and small firms’ social responsibility

The business case for social responsibility (BCSR) is one of the most widely studied topics in the business and society literature that focuses on large firms. This attention is understandable because large firms have an obligation to shareholders who, as commonly assumed, seek to maximize returns on their investments, in turn, pressing corporate managers to show that firms’ social engagement pays off. Small firms, on the other hand, rarely face such pressures, yet the BCSR logic is increasingly applied to small firms as well. Two propositions are repeatedly made: (i) small firms can gain significant business benefits from social engagement, and (ii) they should tie their social engagement with competitive strategies. Yet at the same time, there is evidence to suggest that small firms’ motivations to engage in social issues are fundamentally different than those espoused in a business case view. To resolve this dilemma, I set out in this study to examine (a) whether and how much do small firm owners’ perceptions of BCSR affect the firm’s social engagement, and (ii) to what extent small firms’ community and environmental engagement is associated with their competitive strategies. Drawing on a multi-industry sample of 478 small firms in the US, I find that social engagement is related with owners’ perceptions about potential intangible benefits, but not with tangible benefits. Similarly, links between competitive strategies and community and environmental engagement exist only marginally.