Social responsibility and small business: suggestions for research.

SOCIAL RESPONSIBILITY AND SMALL BUSINESS: SUGGESTIONS FOR RESEARCH

Over the last three decades, managers and scholars have been searching for a better understanding of corporations' social responsibility, or the pros and cons of business involvement in resolving social problems (Bowen

1953, Friedman 1962, Heyne 1968, Levitt 1958). Carroll's (1979) construction of the four responsibilities (economic, legal, ethical, and descretionary) comprising a company's total concept of corporate social responsibility is useful for distinguishing between those responsibilities that are market or legally driven, and those that go beyond the law (Stone 1975). This quest has been quite fruitful in advancing the theory of corporate social responsibility (CSR) (Carroll 1979, Epstein 1987, Wartick and Cochran 1985). Nonetheless, there remains a visible gap between CSR theory and management practice that distresses many authorities (Jones 1980, 1983; Preston and Post 1975). This problem is exacerbated by limited informatioon on managing CSR in small businesses. Several factors have contributed to the shallow understanding of small business CSR. First, a distinct large-scale corporation orientation persists in the CSR literature (Chrisman and Archer 1984). Little research and discussion have focused on CSR in small (and medium-sized) businesses. Second, it has been proposed that small businesses lack sufficient influence or resources to adequately address social issues (Spencer and Heinze 1973). Third, small businesses have been encouraged to overlook social activism and to concentrate instead on avoiding irresponsible behavior (Van Auekn and Ireland 1982).

The tenedency for CSR research to be conducted primarily in large-scale corporation ignores the fact that more than 60 percent of the U.S. work force is employed by companies with fewer than 50 employees (Trost 1988). Only 0.08 percent of all businesses employ 1,000 or more people; 95.3 percent of all businesses employ fewer than 50 people (U.S. Department of Commerce 1987). Consequently, when researchers examine CSR in large corporations their findings may not be generalizable to the most prevalent firms where most of the U.S. population works. The research emphasis on big business is detrimental to understanding CSR practices in small business issues. As a result, there are few theoretically or empirically based guideline upon which small business practictioners can draw in formulating CSR policies, objectives, or strategies.

The advances made in CSR theory during the last 30 years are impressive. However, it is also very apparent that CSR is primarily understood from the perspective of large corporations (Fischer and Groeneveld 1976). Therefore, it is appropriate to ask what directions should be taken to reach a better understanding of CSR in small business. The big business orientation of previous CSR research limits its usefulness and applicability to the majority of businesses in the U.S. Further evoloution of theory and empirical research that includes small businesses would greatly enhance the usefulness of CSR concepts for practitioners. The purposes of this study are to: (1) review existing research to identify research-based inferences about small business CSR, (2) identify methodological problems and research gaps, and (3) propose a research agenda that will overcome these problems while leading to a more robust theory of CSR in small business.

RESEARCH ON SMALL BUSINESS CSR

The most notable characteristic of empirical research on CSR in small businesses is the limited number of studies. Table 1 provides a chromological overview of eight leading publications on small business CSR. Six of these articles were published in the American Journal of Small Business and the Journal of Small Business Management while the others were published in a book and conference proceedings. The small number of research studies was explicity acknowledged in 1984 (Chrisman and Archer 1984). Only one additional study has been published since that time. The reasons underlying the limited research are open to speculation, but plausible hypotheses include: (1) small businesses are perceived by the public and by owner-managers to lack sufficient resources for implementing social action programs; (2) research corporations created for large-scale corporations created for large-scale corporations are not readily adaptable to small business; (3) information is more available and accessible on firm performance and social activities in publicly traded large-scale corporations; and (4) large corporations have greater public visibility which generates more interest in theories and research about their CSR.

Each study in table 1 is described in terms of its sample, measures statistical tests, and primary results (Brown and King 1982, Chrisman and Archer 1984, Chrisman and Fry 1982, Gomolka 1978, Kedia and Kuntz 1981, Longenecker, McKinney and Moore 1989, Reeder 1978, Wilson 1980). Only the studies by Longenecker, McKinney, and Moore (1989) and Gomolka (1978) attempted to obtain more than a local/regional sample. Due to inherent problems in construct measurement, many of the studies can be questioned with respect to generalizability to other businesses. Furthermore, the Gomolka study (1978) and the Kedia and Kuntz study (1981) were the only studies utilizing adapted instrumentation from parallel CSR research in large-scale corporations (Behling, Schriesheim, and Schriesheim 1975; Eilbert and Parket 1973). The remaining studies listed in table 1 relied on perceptual instruments or personal interviews. However, these methodologies do have analogs in early CSR research (Ford and McLaughlin 1984; Holmes 1976, 1977; Ostlund 1977). Appropriate to the nature of the study samples and response rates, nonparametric and descriptive statistics were the primary statistical tests employed. On the basis of the published studies, what is known about CSR in small business? The results column in table 1 provides an overview of the major findings in each study. As a whole, the empirical research suggests the following:

1. Customer relations (i.e., customer satisfaction) is viewed as the primary social responsibility of small business (Chrisman and Archer 1984, Chrisman and Fry 1982, Wilson 1980).

2. Consumer relations, product quality, employee concern, and profitability are perceived by managers to be key social responsibility areas of small business (Chrisman and Archer 1984; Chrisman and Fry 1982; Gomolka 1978, Reeder 1978).

3. Managers and owners have perceptions of small business social responsibility that are similar to those of nonbusiness people (Brown and King 1982; Chrisman and Archer 1984; Longenecker, McKinney, and Moore 1989).

4. Social involvement by small businesses may be moderated by the extent of minority ownership (Gomolka 1978).

5. Managers of small businesses and large corporations indicate few differences in their perception of acceptable ethical practices (Longenecker, McKinney, and Moore 1989).

6. Social involvement activities by small businesses are informally structured (Reeder 1978).

Due to the extremely small number of studies, these conclusions should be viewed as preliminary and subject to confirmation by replication.

Equally informative are the issues that have not been researched. First, unlike the CSR literature centering on large corporations, there have been no studies investigating the relationship between firm performance and social action. Firm performance-social activism has been a central focus of CSR research since the mid-1970's (Abbott and Mosen 1979; Alexander and Buchholz 1978; Arlow and Gannon 1982; Aupperle, Carroll, and Hatfield 1985; Bragdon and Marlin 1972; Cochran and Wood 1984; Folger and Nutt 1975). Virtually nothing is known about whether high-performing small businesses undertake more social activities. Second, small business research has not examined variations in levels of corporate contributions or philanthropy. Corporate contributions and policies pertaining to the management of contributions continue to receive discussion in the CSR literature (Burke, et al. 1986; Fry, Keim, and Meiners 1982; Useem 1988; Wokutch and Spencer 1987). Onle one study in table 1 has considered corporate giving as it relates to minority hiring practices and organization size. In sum, small business research has not pursued extensively two major thrusts in CSR research. Instead, small business CSR research appears rooted in the perceptual investigations common in early CSR research (Buehler and Shetty 1976).

METHODOLOGICAL PROBLEMS

IN SMALL BUSINESS CSR RESEARCH

Another perspective on the limitations of small business CSR research is gained by reviewing the existing methodological problems. Table 2 summarizes the sampling, data collection, instrumentation, and analysis problems inherent in the research. Not only is there a limited number of studies (cf. table 1), but most studies contain methodological weakensses, thereby severely limiting the ability to draw meaningful conclusions from them (cf. table 2). Furthermore, tables 1 and 2 underscore the relatively limited empirical knowledge about CSR in small business. This research deserves further cultivation.

Virtually methodological areas in small business CSR studies appear to have serious problems. Samples drawn to this point are very weak in generalizability. They are nonrandom or convenience-based, and limited in geographic representation. The sample sizes are very small and are hampered by low response or compliance rates. To confound matters, different populations of people comprise the sample in some of the studies. It is difficult to ascertain to whom the results are generalizable. This ambiguity is magnified by data collection problems. Inconsistent strategies have been used in some of the studies. Furthermore, almost all of the studies rely on self-reported data without testing for reliability. Collected data are primarily cross-sectional due to rudimentary research designs.

The methodological limitations are compounded by the research instruments utilized in the studies. Measures are based on either respondent perceptions or ratings/rankings of various variables. There are no objective or so-called "hard" measures of independent or dependent variables. Social responsibility measures are primarily subjective. To make matters worse, the research instruments solicit opinions about issues with which respondents may have had little prior experience. Finally, most studies have not adopted instrumentation from mainstream CSR research.

On a positive note, small business CSR research has generally avoided the tendency to over-analyze data or to apply more sophisticated statistical tests than are warranted given the nature of the data. Descriptive and nonparametric statistics are common and may be the preferred analytical test due to sampling and instrumentation problems. However, analytical strategies are constrained by the research designs, which, in turn, undermine the testing of research hypotheses.

The overall profile that emerges on research methodology for small business CSR studies is one of limited sophistication and inherent constraints. These factors hinder the ability to draw meaningful conclusions. However, it must also be recognized that small business CSR research is in its infancy. The studies are exploratory and the foundation from which more rigorous studies will follow.

A RESEARCH AGENDA

In view of the relatively limited of CSR studies in small business, further research appears to be well justified. Very little is known about CSR in either small businesses or medium-sized corporations, and yet the importance of small business and its influence locally, regionally, and nationally make it a topic worthy of further investigation. This presents a propitious opportunity for research. However, the salient issue is not expanding the number of studies but improving upon the quality of research. As this review of prior studies suggests, there are many thorny methodological issues surrounding research on small business CSR. Future endeavors should be guided by two preeminent goals--expanding the scope of CSR topics and improving methodology.

Research Questions

Small business CSR research may have been hampered by the assumption that limited opportunities exist for small firms to exercise their social responsibilities. Small and medium-sized businesses have gained the reputation of being less capable of fulfilling CSR than large corporations. Admittedly, the magnitude of resource investments or corporate contributions by small businesses may be constrained compared to big business. The visibilitty of social actions is also less conspicuous. Nonetheless, an enlightened view of CSR suggests that small business social actions are only limited by the imagination of small business owner-managers.

A primary research question involves managerial objectives and policies by which small businesses fulfill CSR. The studies reviewedd in table 1 focused solely on perceived social responsibilities, nott the actions or behaviors of small businesses and owner-managers. It is not clear that small businesses have much flexibility for substantially revising CSR objectives and policies. Sufficient resources (i.e., cash flow, staff time, CSR knowledge) may not be available. Particularly in businesses with fewer than 50 employees, owner-managers will most likely have sole responsibility for encouraging and implementing commitment to social activism.

Despite extensive discussion about what constitutes CSR responses, ambiguity remains about specifically which behaviors, actions, contributions, investments, and programs constitute CSR. Therefore, a second area for researcch effort involves how small businesses are responding to social issues. What is the range of CSR efforts in small business? Related to this question is research analyizing which variables influence the degree of response. For example, does the size of a firm (i.e., total annual sales, amount of assets, number of employees), its historical level of performance (i.e., profit or loss), the philosophical orientation of owner-managers, industry grouping, age, geographic location, or other characteristics moderate CSR? Multivariate statistical analysis provides a promising approach for determining the moderating effects of these and other variables. However, such statistical tests assume the use of rigorous research designs and large samples that heretofore have been missing in CSR research.

A third area of investigation involves the relationship between firm performance and CSR. Although CSR performance studies have been a guiding research thrustt in large corporations, there are no similar studies for small business. It would be useful for researchers to investigate this relationship in small business and to ascertain whether socially responsible small businesses are more financially successful. Comparisons of empirical findings would then be possible with large corporations.

Methodology

Research on CSR has continually been hampered by instrumentation problems. There has been over-reliance on perceptual measures for operationalizing social responsibility. While attitudinal surveys and perceptual measures are beneficial in defining the boundaries of CSR activities, beliefs, and intentions for business, they are limited in making seminal theoretical or empirical advances. For the field to evolve it is essential that objective measures be developed.

More than any other methodological change, a commitment to studying CSR behaviors insteadd of perceptions would improve the quality of research in small (and large) businesses. Despite their inherent weaknesses, subjective measures are continually used in the research. This tendency to rely on what executives perceive their social responsibilities to be or what activities their firms pursue (or should pursue) overlooks the disparity between perception and practice. A more objective assessement of CSR can be made by observing or measuring behaviors, thereby removing executives' subjectivity. Measures should focus on the acid-test of actions, expenditures, and resource allocations rather than intentions.

The most rigorous measure of small business CSR would be the amount of money spent on social issues. In small businesses, resource allocations leading to dollar expenditures may occur across a wide variety of social activities: charitable contributions, discounts to senior citizens, expenditures on employee alcoholism and substance abuse treatment, responses to customer complaints, product warranties, processes for exchanging purchases, community service (by both employees and owner-managers) in volunteer or governance capacities, employee education (i.e., compensation for tuition and paid time-off for attendance), child care or flexible hours for employees with children, advertising or promoting community events, sponsoring sports teams (e.g., Little League), recycling, special services to the handicapped, and so forth. To accurately capture small business CSR, the scope of these activities must be measured as well as the precisee dollar support.

The major problem in measuring social actions is the confusion surrounding what is legally required by corporations (legal responsibilities), what actions are market (or consumer) responses (economic responsibilites), and what actions go beyond these requirements (ethical and discretionary responsibilities). Although compliance with the law is certainly one attribute of CSR, legally supportive behavior is an expectation placed on all businesses. Socially responsible behavior must also go beyond legal expectations (Carroll 1979, Frederic 1987, Stone 1975). Therefore, measuring a company's compliance with the law may not truly capture CSR behavior. Similarly, firm responses to competitive pressures should not be incorprated as CSR measures. For example, if a corporation develops extensive customer services conistent with other firms in the industry, the action more closely resembles a market response than an example of CSR.

Rigorous measures of social issues in small business should incorporate total dollars spent on actions that go beyond a company's economic and legal responsibilities in order to measure Carroll's (1979) third and fourth dimensions of CSR, ethical and discretionary responsibilities. The key is to assess the action rather than the intention and to ensure that the measures are connveyed in specific terms (i.e., dollars) which facilitate comparisons. Without a common denominator the ability to compare relative CSR investments is problematic.

Instrumentation is inevitably tied to data collection. For small business CSR research it is difficult to separate whether instrumentation drives data collection or vice versa. The lack of public information on small business performance is a significant deterrent to improved research. In contrast, large corporations report substantial opeating and financial data when satifying SEC or other regulatory requirements and when preparing their annual report. Similar data are extremely difficult to retrieve from small business owners and managers due to the percieved confidentiality of the data. In other cases the data simply may not be available because of rudimentary management information and control systems.

The lack of publicly availabe information from small businesses may partially expalin why CSR researchers have concentrated on large-scale corporations. However, consideration should be given to the challenges of designing creative data collection strategies for all types of corporations. Rather than avoiding CSR studies in small business, researchers should look for ways to overcome the data collection problems. A pivotal strategy is to collet data that are already available in small business financial reports and operating statements. Objective CSR measures can then be combined with objective measures of firm performance. This will facilitate determining the association among measures and provide insight on the validity of perceptual measures.

The review of small business studies in table 1 underscores the need for larger sample sizes, more diverse geographic dispersion, and controls for the type of small businesses studied. Considering the few CSR studies completed on small businesses (and mediumsized businesses), the ability to draw meaningful conclusions is extremely limited. Not only would the quality of information improve from larger sample sizes, so too would the ability to use multivariate and inferential statistics. Checks for reliability and validity can then be introduced. Clearly, there are logistical and budgetary problems in deriving these smaples. Data collection via mail questionnaires will not overcome the self-reported data problems nor facilitate researchers' insight into social responsibility issues at the operating level. More likely than not, researchers will need to rely on personal interviews. Despite these problems and the implications for funding, the research must be undertaken if theory is expected to advance.

CONCLUDING COMMENT

CSR in small business is a promising research topic. Few studies have been completed, with the result that we know little about the goals, policies, or practices of small businesses. More studies using sophisticated research methodology could promote commensurability with CSR theory and research done on large-scale corporations. However, the real issue at stake is a comprehensive and enlightened theory of small business CSR.

As long as research is limited to big business, it can only be inferred that similar practices occur in small or medium-sized businesses. The exclusive emphasis on big business in CSR research ignores the more than 60 percent of the American work force employed by companies with fewer than 50 employees (Trost 1988). In other words, the vasst majority of employees in the U.S. may not be enjoying the benefits and privileges that attention to CSR in small businesses could bring. Therefore, the practical benefits of a more complete picture of CSR behaviors in small business are immediately apparent for both small business owners and their employees. Additional research and theory building in this area could make a major contribution to small business practices by further investigating CSR in small businesses. Finally, the inclusion of small business within the existing theoretical framework for corporate social responsibility could yield valuable contributions to CSR theory and research by broadening its scope and its applicability to big and small businesses alike.

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