Effects of Corporate Social Responsibility Initiatives on the Financial Performance of SMEs

Abstract

This study examines the effect of Corporate Social Responsibility (CSR) initiatives on the financial performance of Small and Medium-sized Enterprises (SMEs), focusing on their financial aspect rather than examining larger industries' CSR practices. A cross-sectional descriptive survey design was used for this study. A sample of 77 wholesalers and retailers from Santiago City owners or appointed representatives by the business owner responded, given that such a representative is a continuing employee with at least three years of service in the business. The study finds a strong positive relationship between CSR initiatives and the financial performance of SMEs, wherein CSR initiatives serve as a business strategy to improve their business operations. It further suggests that CSR does not lead to financial gain but engagement in various economic, social, and environmental activities that significantly indirectly affect SMEs’ financial performance. The paper discusses the role of CSR initiatives in SMEs' business strategies, highlighting their potential to enhance operations, financial performance, competitiveness, and revenue growth, contributing to the business industry, economics, and environment.