University of Tasmania
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Proactive corporate sustainability practices and performance in small and medium enterprises

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posted on 2023-05-26, 05:38 authored by Torugsa, N
Proactive corporate sustainability practices (CSPs) are normally delimited as voluntary practices in which a firm engages, and that go beyond regulatory requirements, in order to: reduce or minimize negative economic, social and environmental impacts that might affect its competitive position; and thereby enhance performance and competitive advantage. Proactive CSPs have been well researched in large enterprises; however, so far little attention has been given to the challenge that the adoption of such practices poses for small and medium enterprises (SMEs). It is conventionally assumed that SMEs have constrained or inadequate resources to engage in proactive CSPs, and that this means SMEs are unlikely to reap the benefits that proactive CSPs offer. Nevertheless, evidence has been presented in recent research into sustainable environmental practices (EnvPs) (Aragon-Correa, Hurtado-Torres, Sharma & Garcia-Morales, 2008), that SMEs possess distinctive organizational capabilities which can aid in the adoption of proactive business practices and which in turn can contribute positively to SME financial performance. However, there is a need for research that extends this work to include the two other constituent dimensions of proactive CSPs ‚Äö- economic practices (EconPs) and social practices (SocPs) ‚Äö- with the aim of developing an integrative strategy model and holistic view of proactive CSPs and SME financial performance. This empirical study addresses that research need. The study aims to develop an understanding of the role that proactive CSPs play in mediating the relationship between three specific organizational capabilities (shared vision, stakeholder management and strategic proactivity) and SME financial performance. Two hypothesized models, showing how proactive CSPs and the interaction between its three constituent dimensions (EconPs, SocPs and EnvPs) might mediate that relationship in SMEs, are proposed. Using longitudinal survey data collected from a sample of 171 Australian SMEs in the machinery and equipment manufacturing industry sector, structural equation modeling is used to test the research hypotheses derived from the theoretical models. Qualitative data collected through open-ended survey questions is also used in order to help explain the quantitative data findings in greater depth. This study has several key findings. These include that: proactive CSPs, and the interaction that occurs between EconPs, SocPs and EnvPs, represent a necessary and sufficient mechanism through which the specified three capabilities are able to influence SME financial performance positively; and the adoption of each dimension of proactive CSPs by SMEs is influenced differently by each capability. The study also presents evidence that SMEs which deploy all three capabilities are more likely to engage in the wide range of proactive CSPs. The study concludes that each dimension of proactive CSPs influences financial performance differentially. These findings contribute to a more comprehensive understanding of proactive CSPs in the SME context. They show that SMEs, even with constrained resources, are able to adopt proactive CSPs when the three capabilities of shared vision, stakeholder management and strategic proactivity are used in tandem. Recognizing the importance of the interaction between proactive EconPs, SocPs and EnvPs is a critical factor in enabling SMEs to understand how to make best use of these capabilities and to achieve an improvement in financial performance


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