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.

Citation

Jain, P., Vyas, V. and Roy, A. (2017), "Exploring the mediating role of intellectual capital and competitive advantage on the relation between CSR and financial performance in SMEs", Social Responsibility Journal, Vol. 13 No. 1, pp. 1-23. https://doi.org/10.1108/SRJ-04-2015-0048