The relationship between business strategy and SMEs’ performance: does CSR matter? evidence from an emerging market

Abstract

. This study aims to measure the relationship between business strategy and SMEs’ performance in the Kingdom of Saudi Arabia (KSA). In addition, we examine the moderating role of corporate social responsibility (CSR) on this relationship, focusing on prospector and defender strategies. Data was collected depending on questionnaires handed to SMEs in KSA with a response rate was 73.6% (184 of 250 questionnaires were received). Data was analyzed using descriptive and multivariate analysis. Results revealed a significant positive effect of business strategy on SMEs’ performance. CSR has a significant positive effect on SMEs’ performance. In addition, we found that CSR has a significant positive effect on the relationship between prospector strategy and SMEs’ performance. However, CSR has a significant negative effect on the relationship between defender strategy and SMEs’ performance. Additional analysis ensures that integrating CSR towards environmental, customers’ and employees’ perspectives with prospector firms enhances financial performance of SMEs. Integrating CSR towards customers with defender firms enhances SMEs’ performance. However, integrating CSR towards society, environment, and employees mitigates the positive effect of defender firms on SMEs’ performance. This study enriches literature in the field of business strategy and CSR in SMEs by focusing on the importance of integrating business strategy and CSR to enhance SMEs’ performance.