Current Lack of Studies on Social Responsibility in Puerto Rico: Its Impact on Small Businesses ()
1. Introduction
Corporate social responsibility (CSR) is conceived as the contribution that organizations make to the well-being of the community or communities located around their productive space (Aguilera & Puerto, 2012). These contributions encompass aspects such as the quality of products and services, human well-being, and competitive advantage (Morello, 2009). Currently, there has been a growing interest in studying the role that business entities play in the social context (Aguinis & Glavas, 2012). In particular, small businesses, which, unlike large corporations, are not well positioned to face the responsibility of providing benefits to communities (Spence, 2007).
In the field of business management, CSR has gained significant relevance (Hahn & Kühnen, 2013; Montiel, 2008; Perdomo & Escobar, 2011). First, because it helps manage and implement more responsible and transparent business practices. Second, it provides a clear vision of what the main concepts of sustainable development are (Ligteringen & Zadek, 2005). The development of this study represented an opportunity to disseminate the concept of social responsibility in small businesses in Puerto Rico. At the same time, it allowed for contrasting the postulates of stakeholder theory with the reality faced by microenterprises in the Caribbean country.
Addressing the impact of the lack of literature on CSR in small-scale businesses promotes a deeper understanding of how these companies operate and progress in social and economic matters. Proper corporate social responsibility enables a better corporate image, greater benefits for employees, and increases the chances of positioning themselves in the labor market (Rivera-Cruz & López-Paláu, 2014). The implicit variables in the theoretical approach include: 1) employees, who are individuals responsible for exchanging their time, energy, and effort for the development of the small business for a fixed salary (Fernández Fernández & Bajo Sanjuán, 2012); 2) customers, meaning potential or actual buyers of the product or service offered by the establishment (Kotler & Armstrong, 2012); and 3) the community, or group of people living around the organization. When discussing CSR, it refers to the commitment that public or private institutions undertake to collaborate with the common good of their environment (Duque et al., 2013). This concept also refers to the ability to assess the consequences that a company’s actions and decisions have on society (García, 2014). Contributing to social well-being is an act that transcends legal obligations imposed by governments; rather, it results from awareness regarding the damages and benefits that productive operations can bring to social stakeholders (Ciro, 2011). CSR encompasses three main objectives: promoting environmental sustainability, contributing to social prosperity, and generating economic profitability for owners (European Commission, 2001; Global Reporting Initiative, 2013).
From another perspective, corporate social responsibility (CSR) is the result of recognizing and integrating social, labor, environmental, and human rights concerns into the management and operations of the organization, generating policies and procedures that address these concerns and shape its relationships with stakeholders (Valverde-Chávez & Bermúdez-Mora, 2012). In this sense, it is important to note the perception of entrepreneurs regarding the level of commitment of small businesses in Puerto Rico to their stakeholders and what their contribution may be. CSR generates value-driven innovation, grounded in human management (Riaño, 2013).
Moreover, corporate social responsibility has been considered synonymous with corporate citizenship; that is, a legal entity made up of natural persons must also be a good citizen by fulfilling its duties, legal mandates, and ethical standards (Oshiro, 2014). Naturally, in relation to its stakeholders, this will practically imply the duty to contribute, as has been mentioned several times before, to solving the major social problems that exist in their surrounding environment (Lizcano, 2017; Pérez & Rodríguez, 2012). This was previously regarded as the exclusive responsibility of the government or state, but it is now a shared duty among businesses due to the social character that has been recognized (Rivarola Ganoza, 2013).
2. Theoretical Framework
Stakeholder Theory
In all modern organizations, communication inherent to social responsibility is promoted, as it is considered an opportunity to achieve social legitimacy and greater awareness of their commitments to stakeholders (Marín & Ruíz, 2007). According to this theory, communication and engagement with stakeholders are vital elements that should be evaluated in small businesses in Puerto Rico from the perspective of Puerto Rican small business owners. Companies committed to society achieve good results from their communication because consumers generally choose brands that value the well-being of their audience and disregard those that do not follow CSR practices (Fernández, 2011).
It is noteworthy that this perception of a responsible company adds value to the organization, enhances its image, and helps foster a transparent, credible, and smooth relationship with its customers, employees, suppliers, and partners (López & Sebastián, 2009). For branding purposes, stakeholders and the company will establish a relationship of mutual trust, thereby elevating image and reputation indices (Navarro-García, 2012).
Another important aspect in light of this theory is communication with stakeholders. When a company works collaboratively with all involved parties, it could reach a new level of competitiveness and increase the likelihood of executing viable and successful projects (Duque et al., 2013). A company should not be conceived as a mere collection of individuals interacting daily; rather, shared desires, dreams, and common goals should emerge so that each individual focused on their own matters does not negatively affect or get affected by the actions, decisions, practices, or objectives of the organization (Aguilera & Puerto, 2012). In developing socially responsible business management, one of the most complex tasks is creating trust-based relationships with stakeholders (Viteri Moya, 2010). For this purpose, it is essential for each company to differentiate its stakeholders so that once their demands and expectations are heard and their interests defined, these can be incorporated into its vision, mission, objectives, and policies (Volpentesta et al., 2014).
Once the relevant stakeholders for an organization have been identified, it is essential to develop communication channels that allow their voices to be heard (Volpentesta et al., 2014). It is important to emphasize the genuine need to plan, implement, measure, and publish results related to social responsibility by the company (Duque et al., 2013). This should go beyond merely meeting a specific requirement or becoming part of the growing group of companies with corporate social responsibility reports and disclosures (Vaughan-Whitehead, 2010). Companies need to establish transparent and trustworthy communication with stakeholders, as they are the ones who evaluate the social performance of the organization (Duque et al., 2013). The more committed companies are to promoting environmental care, providing quality, and creating experiences for users, the greater their potential for success (Navarro-García, 2012).
This study addressed three stakeholder groups: customers, employees, and the community. From the perspective of small business owners, it explored how the lack of studies on CSR affects activities aimed at benefiting these groups. Considering that the priority of any organization is to meet the demands of its workers and customers (Azuero, 2009; Navarro-García, 2012; Raghubir et al., 2010), once these groups are satisfied, the ideal would be to undertake actions that benefit the community (Pérez & Rodríguez, 2012). This means contributing to the local environment by investing in social projects, engaging in practices that protect the environment, and managing natural resources appropriately (Moreno & Graterol, 2011; Skudiene & Auruskeviciene, 2012).
A satisfied workforce demonstrates that the organization is socially responsible and operates under principles of commitment, honesty, respect, and improvement of working conditions (Buciuniene & Kazlauskaite, 2012; Koveshnikov et al., 2011; Mirvis, 2012; Turker, 2009). In turn, this enhances the company’s reputation; when rights are protected, fair payments are made, and beneficial social programs are in place, workers increase their productivity and become more loyal to the organization. This also attracts talent in various areas (Ellemers et al., 2011).
3. Use of Corporate Social Responsibility Indicators
The use of CSR indicators has two main purposes: 1) to contribute to the management and implementation of more responsible and transparent business practices, and 2) to provide a clearer vision regarding the environmental sustainability assumed with local communities (Ligteringen & Zadek, 2005; Strandberg, 2010). In summary, the application of indicators seeks for the company and its personnel to take actions that shape the behavior of the involved parties (communities, potential customers, investors, etc.). This study did not fully describe how the CSR actions undertaken by Puerto Rican small businesses relate to achieving such indicators.
4. Corporate Image
This is linked to the perception that stakeholders develop towards the organization regarding its liquidity, ethics, and social responsibility (Alvarado & Sclesinger, 2008). One of the keys to acquiring a good reputation and remaining in the financial market is precisely demonstrating responsibility towards social stakeholders (Lizarzaburu & Del Brio, 2016). A good corporate image is determined by customer loyalty and satisfaction, employee commitment, and contributions to the local community (Valenzuela et al., 2015). Therefore, the positive image of a small business may have implications for its social responsibility actions.
5. Motivations for Adopting Corporate Social Responsibility
There are many reasons that lead a company to want to implement practices aimed at CSR (Duque et al., 2013). Among these is the idea of building a strong integration with the society in which it operates and from which it derives its economic benefits (Roitstein, 2009). In this way, they aspire to improve their image and gain competitive advantage; this implies making commitments to global economic realities, selling at affordable prices, offering quality products and services, as well as keeping their workers satisfied (Valverde-Chávez & Bermúdez-Mora, 2012). The literature also points out that companies should constantly observe the interests of society and its organized groups, readjusting their actions to reflect the values of their environment, their group or internal customers, and their workers (Castaño González, 2011; Valencia, 2015). A greater concern for companies should be their working conditions, as these are necessary for the company’s integration into society and the market according to the principles of corporate social responsibility. In this context, it is important to mention some companies in Latin America that are recognized for including CSR in their management model; among them are Nestlé, Adelca, Produbanco, and Avitalsa (Valencia, 2015). This study also examined how small businesses interact with the stakeholder group composed of their employees and why.
6. Competitiveness in Small Businesses
Small businesses can respond to changes in their environment and can connect within productive and marketing chains (Solarte, 2004). In these organizations, corporate social responsibility (CSR) can also play a role in managing intangibles and generating value, as well as being seen as a means to improve competitiveness (Gallardo & Sánchez, 2013; Mellado, 2009). Hence, the importance of incorporating CSR practices in small businesses (Escobedo Lizarazo, 2008; González-Babón, 2012). Additionally, various studies have confirmed that implementing CSR actions positively impacts the competitiveness of companies through several avenues, such as reducing costs, creating new value, entering new markets, improving human resource performance, conserving or attracting top talent, building better relationships with employees, customers, suppliers, and communities, and enhancing corporate image and reputation (Montgomery & Ramus, 2011).
It has also been found that when small businesses engage in CSR actions, the performance of human resource management may decline (Peláez-León et al., 2014). Not only that, but the operational efficiency and retention of new customers are also affected (Dini et al., 2011; Guibert, 2009). This is often due to a misunderstanding of the objective of CSR, which is perceived in terms of conflicts where some win and others lose (Guibert, 2009). In reality, it is a win-win situation where business behaviors contribute benefits for all (Riveros, 2010).
7. Benefits of Implementing Corporate Social Responsibility Actions
Although there are not many conclusive studies on the benefits of CSR in small businesses, the literature suggests that it can positively influence them (Aristimuño et al., 2010). According to this author, social responsibility improves products and/or production processes, resulting in greater customer satisfaction and loyalty. It also generates increased motivation and loyalty among workers, enhancing their creativity and innovation. Furthermore, it favors positioning in the labor market (Alvarado et al., 2011). Additionally, it allows for cost reduction and increased profitability due to greater efficiency in the use of human and productive resources (García, 2014; Herrera et al., 2016; Martínez et al., 2015; Miras et al., 2015).
In this context, CSR fosters innovative processes in small businesses (Nakamura, 2015). The development of innovative products and services is enhanced by dialogue with different stakeholder groups combined with the search for solutions linked to sustainability objectives and social impact. This promotes the development of novel products that allow access to new market segments (Uribe-Saldarriaga, 2014). On this point, the study found that the impact of the lack of CSR studies in Puerto Rico is significant regarding small business owners’ intentions to implement corporate social responsibility actions in their communities. According to other authors, small businesses face challenges such as low innovation capacity, limited use of information and communication technologies, restricted access to adequate financing, poor financial culture, absence of management information systems, few statistics regarding their production processes, low competitiveness, issues marketing their products and obtaining supplies, as well as limited participation in public procurement markets—factors that directly affect their sustainability and performance (Montoya et al., 2010; Puyana, 2010; Sánchez et al., 2013).
The accumulation of knowledge on how CSR should be implemented helps improve internal communication flow transmitted to collaborators. This increases their environmental awareness as errors, corrective measures, and results are disseminated (Nakamura, 2015). In addition to all the aforementioned benefits, CSR enhances energy efficiency. This enables companies to meet their environmental objectives through actions such as recycling materials and various initiatives aimed at reducing natural resource consumption (Nakamura, 2015). Responsible behavior is reflected in good governance practices, ethics, and transparency that positively influence the company’s credibility in markets and improve access to financing (Strandberg, 2010). Besides tax advantages, responsible companies reduce contingency risks by offering added value that increases their stock value and reinforces trust among current and potential investors (Nakamura, 2015).
CSR has a close relationship with profitability. According to a study conducted on 55 companies listed on the Santiago Stock Exchange in Chile, those that have adopted socially responsible practices were more profitable compared to those that did not. They also obtained economic benefits associated with greater market permanence and growth (Valenzuela et al., 2015). CSR is not practiced uniformly across all companies. In fact, there are factors influencing its implementation; one study determined that labor quality, environmental care, and social marketing are elements that help explain an organization’s responsible behavior (López Salazar, 2013).
A study conducted among leading Colombian companies demonstrated that when asked about the value that social responsibility brings to the company, a wide majority (69.5%) attributed it to reputation/brand value or risk management (40.3%). In contrast, access to market niches (25.3%) or cost efficiency (22.3%) did not receive high scores (National Association of Entrepreneurs of Colombia, 2009). Another survey shows that only 2.98% of surveyed companies document their corporate social responsibility actions while 8.21% evaluate and measure them. This suggests that companies perceive this topic as having little relevance as a lever for differentiation or purchase preference (Colombian Center for Business Responsibility, 2009).
8. Additional Research on Corporate Social Responsibility
Corporate social responsibility (CSR) has evolved significantly in recent decades, becoming a central topic in contemporary business management. Interest in CSR has led to numerous studies exploring its multiple dimensions and impact on both organizations and the communities in which they operate.
One of the most researched aspects is the relationship between CSR and employee job satisfaction. Various studies have shown that responsible practices can improve employees’ perceptions of their work environment. For example, De Roeck & Delobbe (2014) show that a greater perception of CSR initiatives is associated with increased job satisfaction, which translates into better organizational commitment and performance. This link suggests that companies that implement effective CSR policies not only benefit society but also create a more rewarding work environment for their employees.
Furthermore, CSR has been closely linked to innovation and learning within organizations. Vilanova et al. (2009) argue that business competitiveness is fostered by a continuous process of learning and innovation, in which CSR values are constantly reviewed and adapted. This dynamic not only drives continuous improvement in business practices but also fosters an environment conducive to creativity and initiative among employees.
Another crucial aspect is the role of ethical leadership in promoting CSR. Recent studies, such as those conducted by Javed et al. (2020), highlight that responsible and adaptive leadership is essential to strengthening the relationship between CSR, company reputation, and employee performance. Leaders who model ethical behavior not only inspire their teams but also set a standard for CSR practices throughout the organization.
The connection between business and community has also been the subject of study. Mayers (2015) suggests that organizations that adopt sustainable development goals can align their interests with those of local communities, creating a sense of shared purpose. This alignment not only benefits the community by promoting economic development but also improves the company’s image and social acceptance.
Finally, the impact of CSR on companies’ financial performance has been a recurring theme in the literature. Zhou et al. (2018) indicate that a high level of CSR perception among employees can lead to greater engagement, which translates into superior financial performance. This link reinforces the idea that CSR investments are not merely altruistic but can also result in tangible economic benefits for organizations.
9. Methodology
In the present study, a quantitative approach was followed, with a descriptive, non-experimental, and cross-sectional design. This was deemed appropriate to explore the perceptions of small business owners in Puerto Rico regarding the impact of the lack of corporate social responsibility (CSR) studies on the growth of their businesses. In this information collection process, the exploratory survey technique was used, which has been defined as a strategy to examine viewpoints, opinions, and perspectives surrounding a research problem (Hernández-Sampieri et al., 2014). The quantitative method allows for the testing of existing theories based on a series of hypotheses derived from those theories; this necessitates obtaining a sample that is either random or discriminated but representative of the population or phenomenon under study (Tamayo, 2003).
It is important to note that data collection in this research paradigm involves designing questionnaires, inventories, and demographic analyses that produce numbers, which can be statistically analyzed to verify, support, or reject relationships between the operationally defined variables. Additionally, the presentation of results from quantitative studies is typically supported by statistical tables, graphs, and numerical analysis (Rodríguez, 2010).
In general terms, the central objective of the quantitative method is to test hypotheses based on numerical measurement and statistical analysis to establish patterns of behavior and test theories. This approach is sequential and confirmatory; each stage precedes the next, and steps cannot be omitted. The order is rigorous; however, it is possible to redefine any phase and part of an idea that becomes more focused. Once delineated, objectives and research questions are derived, literature is reviewed, and a theoretical framework or perspective is constructed (Hernández-Sampieri et al., 2014).
Given this context, the hypotheses for this study were formulated to guide the research regarding what it aims to prove or demonstrate (Torres, 2014). Although there is no intention to generalize conclusions to all businesses operating in Puerto Rico, there is a desire to suggest a relationship between variables that demonstrates or explains what impact the current lack of studies on social responsibility in Puerto Rico has on the perceptions of small business owners and managers regarding the usefulness of implementing practices aimed at promoting social good. For this research, the following three hypotheses were formulated:
For Employees
H0: The impact of the lack of CSR studies in Puerto Rico is significant in the intention of small business owners to implement corporate social responsibility actions for the employees of the organization.
H1: The impact of the lack of CSR studies in Puerto Rico is not significant in the intention of small business owners to implement corporate social responsibility actions for the employees of the organization.
For Customers
H0: The impact of the lack of CSR studies in Puerto Rico is significant in the intention of small business owners to implement corporate social responsibility actions for the customers of the organization.
H1: The impact of the lack of CSR studies in Puerto Rico is not significant in the intention of small business owners to implement corporate social responsibility actions for the customers of the organization.
For the Community
H0: The impact of the lack of CSR studies in Puerto Rico is significant in the intention of small business owners to implement corporate social responsibility actions for the community where they operate.
H1: The impact of the lack of CSR studies in Puerto Rico is not significant in the intention of small business owners to implement corporate social responsibility actions for the community where they operate.
10. Research Instruments
A questionnaire was designed based on the operationalization of variables derived from stakeholder theory. The level of interest in learning about CSR studies in small businesses was estimated as an independent variable (see Table 1). Additionally, dependent variables included CSR practices among small businesses for each stakeholder group: employees, customers, and community (see Table 2). The operationalization of variables facilitated understanding conceptual definitions and their measurement (Espinoza Freire, 2018).
The expectation from applying the questionnaire was to contribute new knowledge to this discipline and share it with both academic and professional communities. First, it aimed to identify business owners’ perceptions regarding the importance of having CSR studies in Puerto Rico for implementing practices aimed at promoting social good with their stakeholders. Second, it sought to recognize socially responsible practices and behaviors by classifying them according to their stakeholder groups. Thirdly, it aimed to identify driving factors behind socially responsible practices implemented by government agencies.
To evaluate corporate social responsibility actions directed at customers, specific indicators associated with responsible practices in their relationship with this stakeholder group were identified. Customers, as the primary target audience of a business, have a direct influence on its sustainability and reputation. Therefore, we sought to understand small business owners’ perceptions of the frequency and type of actions implemented with this group (see Table 3).
Table 1. Independent variables.
Construct |
Definition |
Indicators |
Scale |
References |
|
|
I am interested in learning about studies on corporate social responsibility and its impact on employees. |
|
Fernández Fernández & Bajo Sanjuán (2012) |
Level of interest in learning about studies on corporate social
responsibility in small businesses |
Defined as the
inclination someone shows towards a
particular issue or matter. |
I am interested in learning about studies on corporate social responsibility and its impact on customers. |
1 - 5 Likert Scale |
|
|
I am interested in learning about studies on corporate social responsibility and its impact on attracting more clientele to small
businesses. |
|
Note: Own elaboration.
Table 2. Dependent variables: employees.
Construct |
Dimension |
Definition |
Operationalization |
Scale |
References |
Corporate social
responsibility practices of small
businesses |
Employees |
Employees will be the
primary Corporate social responsibility practices of small businesses
Employees stakeholder group for the purposes of this study, referring to
individuals who work for another person or for a small business in
exchange for a salary. In this work, this type of stakeholder will be
established as a
dependent variable
concerning the corporate social responsibility
practices of small
businesses (Fernández
Fernández & Bajo Sanjuán, 2012). |
We treat employees with respect and
consideration. We respect employees’ rights. We hire and
compensate staff
according to the law. We provide a safe and
dignified working
environment. We strive to provide
gender equality when
hiring employees. We maintain a positive and responsible
working environment for employees. |
1 - 5 Likert Scale |
Fernández
Fernández & Bajo Sanjuán (2012) |
Note: Own elaboration.
Table 3. Dependent variables: customers.
Construct |
Dimension |
Definition |
Operationalization |
Scale |
References |
Corporate
social
responsibility practices of small
businesses |
Customers |
A customer is
defined as “the
potential or actual buyer of products or services” (Kotler & Armstrong, 2012). As the primary
audience of a small business, the aim is to identify whether they hold equal
relevance when
implementing social responsibility
actions. |
1. We treat customers with respect and
courtesy. 2. We are honest with customers. 3. We set fair prices for products or services. 4. We respect customers’ rights. 5. We provide customers with products or services that meet legal
standards. 6. We comply with laws, rights, and guarantees that protect consumers. |
1 - 5 Likert Scale |
Kotler & Armstrong (2012) |
Note: Own elaboration.
Likewise, corporate social responsibility practices geared toward the communities where small businesses operate were explored. This dimension is essential, as it allows for the assessment of a business’s commitment to its social, environmental, and civic environment. The goal was to determine the extent to which companies adopt actions that benefit their neighboring communities (see Table 4).
Table 4. Dependent variables: community.
Construct |
Dimension |
Definition |
Operationalization |
Scale |
References |
Corporate social
responsibility practices of small
businesses |
Community |
This variable
describes the
relationship between a group of people living near the respondent’s business and the
development and
implementation of
social responsibility actions (Fernández Fernández & Bajo Sanjuán, 2012). |
1. We undertake
initiatives to improve the environment. 2. We avoid disturbing our neighbors (noise, parking, etc.). 3. We participate in civic activities. 4. We make donations for social causes. 5. We help solve
community problems. 6. We engage in recycling behaviors, such as waste separation. 7. We organize or
participate in fundraising activities for community projects. |
1 - 5 Likert Scale |
Fernández Fernández & Bajo Sanjuán (2012) |
Note: Own elaboration.
The questionnaire was structured in three parts: the first related to the profile of the interviewee, their interest in learning about studies on how to provide better benefits to customers, employees, and the community where their business is located. The second part covered the interviewee’s perception of the frequency with which they practice social responsibility actions in their business with their stakeholder group, and the third included sociodemographic data, such as the geographical location of the business, years of operation, and number of employees.
The items or questions were organized on a Likert scale, consisting of five response categories: 1) Strongly disagree, 2) Disagree, 3) Neither agree nor disagree, 4) Agree, and 5) Strongly agree. The questionnaire consisted of a series of statements that included closed-ended inventory questions where respondents were provided with a list of alternatives to indicate applicable aspects. Prior to administering this instrument, participants signed an informed consent document agreeing to participate in this study. Regarding the content of the instrument, it was structured as a questionnaire and consisted of three sections.
In the first section, participants were asked to evaluate a series of statements in terms of whether they are related to socially responsible businesses and how frequently they practice them in their operations. The second section required participants to express their level of interest in learning about studies on corporate social responsibility. Additionally, the questionnaires included a section to gather demographic information such as age, gender, education level, and other questions related to the research questions. As noted in the literature, all empirical research depends on the quality of the data collected (Carballo Barcos & Guelmes Valdés, 2014).
The procedure for administering the questionnaires involved calling or emailing the owners or managers responsible for microenterprises or those in charge of related matters to request permission to conduct research at their company. Specifically, a formal contact letter was sent explaining the objective, scope, and importance of this study, along with a request for their participation. Qualified companies that agreed to participate in the research were sent an informed consent form via email or delivered in person to confirm their participation, along with the agreed date and time for interviews to formalize and establish a sense of commitment from them.
The collection of quantitative data was fundamental because it reveals important and significant information regarding the research conducted (Carballo Barcos & Guelmes Valdés, 2014). By using electronic channels, information gathering was expedited. The digital format was chosen for completing the questionnaire because it reduced time in data collection and tabulation. Additionally, being an eco-friendly format saved costs by avoiding paper purchase and reproduction. Obtaining results “online” allowed them to be generated directly in digital format, significantly simplifying data management and reducing potential errors that could arise from manual tabulation by the researcher (Herrera et al., 2016).
10.1. Validity and Reliability of the Study
To validate the proposed research model, Structural Equation Modeling (SEM) was employed, along with the Partial Least Squares (PLS) technique using the “Smart-PLS” software, version 3.2.3. The PLS-SEM model encompassed two elements: the structural model (internal model) and the measurement model (external model), according to Wong (2013). The analysis and interpretation of results from a PLS SEM model consisted of two stages: reliability and validity of the measurement model, and evaluation of the structural model (Claver-Cortés et al., 2017; Leyva & Olague de la Cruz, 2014). The structural model represents the constructs and their relationships, while the measurement model shows the relationships between the construct and its indicators (Hair et al., 2014). The results of the structural model provided an opportunity to evaluate the relationships between the constructs of the suggested study model, with the aim of supporting or rejecting the hypotheses presented in this research. However, before analyzing the structural model, it was necessary to verify that the measures used were valid and reliable (Henseler et al., 2009). Therefore, the measurement model was studied to determine its validity and reliability.
The evaluation of the model was carried out through:
•Internal consistency (Cronbach’s Alpha and composite reliability)
•Convergent validity (Average Variance Extracted—AVE)
•Discriminant validity (Fornell-Larcker criterion) and cross-loadings between indicators and latent variables (Heterotrait-Monotrait ratio—HTMT).
To apply Cronbach’s Alpha test, a widely used model in research with “Smart PLS SEM” software was utilized to establish fundamental relationships between the lack of CSR studies in Puerto Rico and small business owners’ intentions to implement their actions. The analysis was conducted for a series of questions that measured the constructs of the research model.
Composite Reliability (CR) allowed for measuring the internal consistency of indicator blocks and is a preferred alternative to Cronbach’s Alpha because it can yield higher estimates of true reliability. Composite Reliability varies between 0 and 1. For exploratory purposes, a value of 0.6 is acceptable. A value of 0.7 is considered adequate for confirmatory models (Henseler et al., 2009), while a value of 0.8 or higher is regarded as suitable for confirmatory research. For this research, the indicators of validity and reliability yielded values reflected in Table 5.
10.2. Results
As shown in Table 5, the results for Cronbach’s Alpha indicate that the constructs are well specified (>0.7), except for the variable “Customers”. In this case, composite reliability (CR = 0.755) can be considered adequate, as well as AVE = 0.507. Therefore, it can be assumed that although the alpha is low, this variable’s contribution is important to the model and does not affect its internal consistency.
Additionally, it was necessary to calculate discriminant validity. This serves to confirm that a construct is unique and captures phenomena that are not represented by other constructs in the model according to Hair et al. (2014). In this regard, the most accepted method in PLS SEM involves checking each construct’s AVE value against the square of its correlation with each variable as proposed by Fornell & Larcker (1981). Table 6 presents the results of discriminant validity.
Table 5. Indicators of study validity (Smart-PLS Software).
Variable |
Cronbach’s Alpha
(0.70 - 0.90) |
Composite Reliability (0.70 - 0.90) |
Ave (>0.50) |
Customers |
0.597 |
0.755 |
0.507 |
Community |
0.92 |
0.944 |
0.808 |
Employees |
0.819 |
0.89 |
0.803 |
Note: Own elaboration.
Table 6. Results from Smart-PLS for discriminant validity (Fornell-Larcker Criterion).
Variable |
Customers |
Community |
Employees |
Customers |
0.712 (*) |
|
|
Community |
0.266 |
0.899 (*) |
|
Employees |
0.577 |
−0.008 |
0.896 (*) |
Note: Own elaboration. (*) Square root of the AVE value for each variable Source: Self-constructed.
Table 7. Loadings of the indicators of the latent variables in the Smart-PLS model.
Item |
Loadings |
CLIENT3 |
0.758 |
CLIENT4 |
0.725 |
CLIENT6 |
0.649 |
COMU3 |
0.834 |
COMU4 |
0.919 |
COMU5 |
0.919 |
COMU7 |
0.92 |
EMPL1 |
0.989 |
EMPL4 |
0.793 |
INTERCLIENT2 |
0.811 |
INTERCOMU3 |
0.84 |
INTEREMPL1 |
0.825 |
Note: Own elaboration.
The values with an asterisk indicate the square root of the AVE value for each variable, while the other data represent the correlations of the latent variables. It can be observed that for each latent variable, the square root of the AVE is greater than the correlations it has with the other variables, indicating that the model is valid. Additionally, in line with the validity of the model, it is necessary to compare the cross-factor loadings of the indicators of one latent variable with the loadings of the indicators of the other latent variables. The results of this measurement are shown in Table 7.
After considering the structural model, the coefficients of causal relationships between the constructs were examined. The purpose of this step is to validate the effects for the hypotheses developed through the literature review and proposed in the study model (Henseler et al., 2015). The PLS algorithm was used to estimate all relationships between the constructs, the load of the indicators, and the explanatory power of the latent variables in the model based on R2.
Figure 1 below displays the results from the Smart-PLS program, using the Partial Least Squares algorithm to generate the path model. The circles represent latent variables, while the yellow squares represent the constructs of the research. The value found within the circles represents the coefficient of determination R2. The values on the arrows that connect one construct to another indicate the relationship coefficient between paths (beta value = β), which shows the relationship between constructs. The rectangles represent the indicators of the constructs. These indicators are coded using abbreviations of their respective constructs. The arrows point from constructs to indicators, as this is a reflective study. The values on these arrows represent the loadings of the construct indicators.
Note: Own elaboration.
Figure 1. Results of PLS-SEM (path model analysis).
10.3. Hypothesis Testing
To corroborate or dismiss each hypothesis, the value of the Student’s T-statistic was examined. These values are summarized in Table 7. This procedure revealed that the relationship between Implementing and Community (0.547) is moderate, while the relationship between Implementing and Customers (0.178) is weak. The same applies to Implementing and Employees (−0.130). Observing the p-value of the constructs, the only significant relationship was Implementing and Community (p = 0.000). For this study, the only hypothesis that is verified is: “The impact of the lack of CSR studies in Puerto Rico is significant in small business owners’ intention to implement corporate social responsibility actions in their community”.
The magnitude of path coefficients is observed as standardized values ranging from +1 to −1; a higher value indicates a stronger relationship (prediction) between constructs, while a value closer to 0 indicates less convergence to the construct. If a path value result contradicts the sign posited in the hypothesis, it indicates that the hypothesis will not be supported (George & Mallery, 2016). The level of significance is determined from the Student’s t-value derive from resampling or bootstrapping, a non-parametric technique (there are no initial parameters; it tests whether paths between variables are feasible), which evaluates the accuracy of PLS estimates (Ávila & Moreno, 2018).
Regarding factor loading analysis, an indicator with a loading of 0.649 corresponding to the customer construct was removed from the model, considering that appropriate loadings should be greater than 0.707 and those below this range should be discarded (Carmines & Zeller, 1979; Hair et al., 2014). However, upon evaluating its p-value (p = 0.000), it was statistically significant for the model. Consequently, it was necessary to retain it as part of it. Table 8 summarizes the Loading Factor of model coefficients and their statistical significance.
Table 8. Loading factor of the model coefficients and their statistical significance.
Variable |
Item |
Loading Factor (>0.70) |
p-value |
Customers |
CLIENT3 |
0.758 |
0.064 |
CLIENT4 |
0.725 |
0.000 |
CLIENT6 |
0.649 |
0.000 |
Community |
COMU3 |
0.834 |
0.000 |
COMU4 |
0.919 |
0.000 |
COMU5 |
0.919 |
0.000 |
COMU7 |
0.92 |
0.000 |
Employees |
EMPL1 |
0.989 |
0.000 |
EMPL4 |
0.793 |
0.000 |
Note: Own elaboration.
10.4. Predictive Power of the Model
The study allowed for a comparison between stakeholder theory and the reality experienced in the context of corporate social responsibility (CSR) among small businesses in Puerto Rico. Additionally, it demonstrated through research the validity of its hypotheses. These indicate that the lack of CSR studies in Puerto Rico significantly impacts small business owners’ intention to implement corporate social responsibility actions towards their stakeholders: employees, customers, and the community where they operate.
Two hypotheses were rejected, and one was accepted based on the evidence obtained through the bootstrapping technique, which proved to be significant. The results confirm that the lack of CSR studies does not significantly impact the implementation of corporate social responsibility actions among employees and customers; however, it does affect the community where they reside. Therefore, this highlights the particular need to develop more studies on the Island that demonstrate the benefits for small businesses of implementing social responsibility actions in their communities.
11. Discussion
Most owners indicated strong agreement that more studies are needed to discover the benefits that CSR offers for their employees. They consider their workers a crucial element for productivity, as previously analyzed by Aguinis (2013), Ali et al. (2010) and Lam & Khare (2010). The intention to explore studies on CSR to improve labor relations stems from the belief that employees are the primary asset of any organization, regardless of size (Jamali et al., 2009; Vives, 2014).
Additionally, they expressed total agreement with the idea of accessing studies focused on deepening those CSR actions that enhance customer care and well-being. Like employees, customers constitute a priority stakeholder group for maintaining business in the market (Aguilera & Puerto, 2012). This finding also aligns with results obtained by Barroso (2008), which demonstrated that small business owners focus their CSR actions on the well-being of their employees and customers, who are considered a driving force in competitiveness (Escobar, 2010).
On one hand, literature reveals that customers are more attracted to consume products or services from companies that are highly responsible towards society (Carvalho et al., 2010; Marquina & Reficco, 2015; Tian et al., 2011). It also reflects the impact of CSR on employees’ perceptions of the company and its owner (Bauman & Stika, 2012). In this regard, various studies have documented that CSR actions create expectations for fair and competitive wages (Ali et al., 2010; Awwad, 2011; Vaughan-Whitehead, 2010). This research confirmed that a large majority of respondents treat their employees respectfully and considerately.
This decision aligns with ethical principles of CSR as proposed by other authors as a fair measure that promotes trust and loyalty among staff (Arnaud & Wasielesky, 2014; Cohen, 2010; Guadamillas & Donate, 2011).
Treating employees fairly and considerately also implies respecting their rights, paying benefits according to the law, and addressing their needs for recognition, training, and time off, as noted by Sharma (2009) and Aguinis (2013). Among appropriate CSR practices is providing compensation to staff in accordance with current laws (Bridoux et al., 2016), as well as maintaining a safe and comfortable work environment (Glavas, 2016). This study showed that 92% of small business owners in Puerto Rico fully agree that they provide a dignified work climate and physical space for their workers.
In this context, respondents asserted that they set fair prices for their products and services. According to López Salazar (2013) and Abdullah et al. (2017), this is crucial both for responsible administrative management and for customer loyalty. Social responsibility in small businesses involves establishing fair prices but also integrity regarding materials, quality, and durability of products offered to the public (Dodd & Supa, 2011). For this research’s purposes, it was found that most small business owners in Puerto Rico respect their customers’ rights. As reflected in Abdullah et al. (2017), this study revealed that products and/or services offered by small businesses undergo quality control and meet legal standards.
Regarding CSR measures benefiting the surrounding community, this study found that 91% of small business owners protect the environment and avoid disturbing their neighbors with noise, parking issues, unpleasant odors, among others. This aligns with Martín & Aroca (2016) assertion regarding the increasing importance placed on generating social and environmental well-being in recent years. These organizations in Puerto Rico seem aware that they can—and should—contribute to sustainable development in their communities (Sanclemente, 2015). However, it was evident that only half fully agree that they undertake initiatives to improve the environment.
This is a negative aspect when compared to findings from De la Torre & Maruri (2011) and Nakamura (2015), who discovered that consumers admire companies developing social projects and caring for the environment because this creates an effect on consumer loyalty. Only 36% claimed to participate in civic activities while 51% fully agreed with making donations and participating in charitable works. The low scores on these items indicate that the lack of CSR studies affects small businesses’ contributions to surrounding communities—a fact that could long-term impact their reputation and sustainability in the financial market (Hameed et al., 2016; Jones et al., 2017).
12. Conclusion
The product of this work, which utilized research methods, allows for the discovery of the current situation of small businesses in Puerto Rico regarding their corporate social responsibility (CSR) actions, which could lead to discussions on recommendations, descriptions, or publications that address such social and economic needs in Puerto Rico. These results align with what the literature indicates regarding the necessity of conducting research on the benefits of implementing CSR actions by small businesses in the community (De Miguel, 2011; Duque et al., 2013; Moura-Leite, 2011).
Despite the advances made in academic research on corporate social responsibility, many questions remain unanswered (Aguinis & Glavas, 2012; Lizarzaburu & Del Brio, 2016). Given the complexity of today’s businesses, it is essential to continue conducting multidisciplinary and quantitative studies that provide new variables and perspectives to improve both the application of CSR and the training of young future leaders and entrepreneurs who understand and navigate business with its particularities.
It is necessary to reflect on educational programs and redefine the success of companies and their leaders from a broader perspective that incorporates the study of ethics and social responsibility linked to traditional economic development (Ferreira & Ribeiro, 2017). Similarly, there is a need to develop new CSR models tailored to the changing needs of small and medium-sized businesses while considering strategies from larger companies (Alonso-Almeida et al., 2012).
There is a significant scarcity of empirical studies on CSR practices in Latin America. This work contributes to that direction by demonstrating the importance of understanding what small business owners think about misinformation or lack of preparation in CSR and how this influences the non-implementation of actions related to this concept.
This research has helped raise awareness about CSR among small businesses in Puerto Rico (Navarro-García, 2012). It also provided an opportunity to compare stakeholder theory with the reality experienced in the context of CSR on the Island. Another achieved objective of this study was to gather information about how entrepreneurs in Puerto Rico manage CSR issues and how this aligns with theoretical expressions in stakeholder theory. This allowed for the empirical development of a business model that will promote a greater understanding of how a company should operate concerning this concept and its significance for entrepreneurship.
13. Limitations
The main limitation of this study was data collection. Candidates were invited to participate in the research via email and direct visits to their businesses. The email invitations used a database from the Hecho en Puerto Rico Association’s member directory, which comprises 420 Puerto Rican companies across manufacturing and service sectors from 103 different categories. This database provided a wide variety of business types throughout Puerto Rico. An informative letter was sent that included details on how to correctly access the research questionnaire link, security measures for handling data confidentiality, and participants’ rights. For in-person contact, 96 businesses were visited across five municipalities in Puerto Rico: Bayamón, Toa Alta, Toa Baja, Naranjito, Corozal, Cataño, Dorado, and Barranquitas.
However, participation was relatively low; 100 entrepreneurs completed the questionnaire, representing only 19% of the total contacted businesses. Among the difficulties encountered during in-person visits were: the owner or manager not being present at the time of visit or being occupied, as well as visits occurring in December 2021 when Puerto Rico experienced a surge in COVID-19 cases, limiting access to businesses during that period. In the case of distributing the questionnaire via email, follow-up invitations were sent through another email and phone calls. These mentioned situations hindered higher participation rates.