Nexus between corporate social responsibility and firm's perceived performance: evidence from SME sector of developing economies.

Abstract

The objective of this study is to understand the impact of corporate social responsibility on firm performance and measure the difference of this impact on local and foreign companies. The data collected from 83 companies were based on questionnaires of small and medium enterprise (SME) entrepreneurs of Pakistanin two times and each time within 2 months. The literature analysis method and structural equation theory are used to do the research. The results show that (i) there is a positive and significant relationship between corporate social responsibility (CSR) and the two determinants (corporate reputation andemployee engagement) of company performance; (ii) for Pakistani companies, both social and environmental CSR contribute positively to firm performance; and (iii) environmental aspects of CSR are the most important to the reputation and employee commitment for Pakistani companies. This study intends to provide more empirical knowledge on how CSR contributes to corporate performance. It also proposes theoretical and practical implications, highlighting what local and foreign companies in developing countries still need to do in terms of CSR. The study provides valuable information for policymakers.