Sustainability Beyond Profits: Assessing the Impact of Corporate Social Responsibility on Strategic Business Performance in Hospitality Small and Medium Enterprises

Abstract

In today’s business world, small and medium enterprises (SMEs) are increasingly dedicated to social responsibility and environmental sustainability, gaining recognition from communities, investors, and customers who view them as socially and environmentally conscious. Thus, this research examines how Corporate Social Responsibility (CSR) orientation, commitment, and participation affect strategic business performance (SBP) of SMEs in hospitality sectors, along with the potential mediation function of CSR engagements. To investigate the proposed model, this study employed a cross-sectional dataset of 163 hospitality SMEs, incorporating 482 valid responses. The representative sample was analyzed using structural equation modeling (SEM), regression analysis, and bootstrapping techniques to test direct and indirect effects. Findings indicate that CSR orientation, commitment, and participation play vital roles as antecedents of SBP. In hospitality SMEs, adopting CSR practices is imperative for increasing SBP. This study bridges a crucial research gap, particularly in understanding how hospitality SMEs engage in CSR and its impact on business success, offering valuable insights for SME management, practitioners, and stakeholders.

1. Introduction

In the evolving context of modern business, strategic business performance (SBP) management is an essential framework that integrates long-term vision with actionable insights to address complexities and maintain a competitive edge [1]. SBP involves a thorough evaluation and enhancement of a firm’s strategies, processes, and outcomes, focusing on sustaining competitive advantage [2], maximizing stakeholder value [3], and aligning organizational resources with long-term goals [1]. This approach is especially pertinent in the realm of hospitality small and medium enterprises (SMEs), where the sector’s unique challenges and opportunities necessitate a tailored approach to strategy implementation [4]. Hospitality SMEs include a diverse range of SMEs operating in lodging, food services, and tourism [5]. To achieve their objectives, these SMEs need a strong SBP to navigate the competitive landscape and meet customer expectation [6]. This concept encompasses several elements, including strategic planning [7], operational efficiency [8], customer satisfaction [9], and market positioning [10]. Compared to other global economies, this phenomenon is particularly notable in mainland China, where SMEs are central to the nation’s economic transformation, encompassing 99% of all business categories [11]. Since the economic reforms of the 1980s, SMEs in China have become crucial to the economy, contributing over 59% of GDP, 50% of tax revenue, 68% of international trade, and 75% of urban employment each year [11,12]. By aligning SBP elements with the unique characteristics and challenges of hospitality SMEs, such as limited resources, localized customer bases, and a high dependency on service quality businesses, can effectively enhance their competitive edge and achieve sustainable growth.

Amidst the competitive pressures and dynamic market conditions, the integration of Corporate Social Responsibility (CSR) has emerged as a vital component of SBP [13]. Anser, Yousaf [4] found that stakeholders, including government delegations, international-level, celebrities, and high-ups, prefer different sectors, i.e., hotels, travel agencies and related services in hospitality industry that pay attention to social and environmental concerns. For hospitality SMEs, CSR is not merely a compliance or public relations effort, it is an integral part of their strategic framework that can lead to sustainable business practices and improved performance metrics [14]. In this context, customer expectations have evolved, with a marked shift toward ethical consumption and socially responsible business practices [15]. Modern customers increasingly demand transparency, ethical behavior, and contributions to societal and environmental well-being from businesses they patronize [16]. This shift underscores the need for hospitality SMEs to align their business strategies with socially responsible practices as a means to achieve competitive advantage, attract and retain ethically conscious customers, and foster loyalty among stakeholders [17]. The commitment to CSR in hospitality SMEs not only enhances service quality, product standards, managerial conduct, and customer interactions but also aligns with contemporary customer expectations. Customers today expect businesses to embed sustainability, ethical sourcing, and community engagement into their core operations, thereby elevating the overall customer experience and reinforcing brand loyalty [15]. This alignment with customer expectations is critical, as it deepens customer relationships and positions the business as a responsible and forward-thinking entity [17]. Moreover, meeting these expectations involves more than passive compliance; it requires active engagement in sustainable practices and community initiatives. By integrating CSR into strategic objectives, hospitality SMEs can strengthen their market position and foster a motivated workforce aligned with the company’s social mission [1]. The alignment of business strategies with socially responsible practices is increasingly seen as a means to achieve a competitive advantage, attract and retain customers, and foster loyalty among stakeholders. The commitment to CSR by hospitality SMEs can enhance service quality, product standards, managerial conduct, customer interactions, business motivation, alignment with customer expectations and employee attributes [4]. Although CSR can be broken down into various components such as commitment, orientation, and participation, the core idea is to embed these values into the SMEs strategic objectives. Where, the commitment component involves dedicating resources and leadership attention to CSR initiatives, ensuring that these efforts are not just peripheral activities but central to the business strategy [18]. CSR orientation refers to the alignment of a company’s mission and values with ethical and social considerations, guiding strategic decisions in a way that balances profit making with positive societal impact [19]. Finally, CSR participation encompasses the active involvement in community and environmental initiatives, reflecting the company’s ongoing engagement with external stakeholders [20]. By effectively aligning CSR with evolving customer expectations, hospitality SMEs can achieve sustainable growth and a competitive edge in the market [1].

This study examines the impact of CSR integration on SBP within hospitality SMEs in China. While existing CSR research has explored various dimensions such as innovation [21], business ethics [22], CSR communication and return [23], staff retention [24], and corporate sustainability [25], the application of CSR and its drivers can differ significantly across industries. Managerial motivation to adopt CSR practices varies depending on the sector, with much of the literature focusing on industries such as manufacturing [26]. However, the hospitality sector presents unique characteristics that make it particularly relevant for CSR analysis. In China, the hospitality industry, especially among SMEs, is pivotal to the service economy and faces distinct operational and societal pressures, such as customer engagement, environmental impact, and local community integration [27,28]. Despite this, research specifically addressing CSR practices in hospitality SMEs remains under-developed [29]. Given the sector’s close interaction with local communities and its reliance on human resources, understanding CSR’s role in enhancing business sustainability is essential. Thus, the primary research question guiding this study is: How does the integration of CSR into strategic frameworks influence the SBP of hospitality SMEs in China? By addressing this, the study aims to illuminate the benefits and challenges of aligning business practices with social responsibility within this sector. It seeks to provide a nuanced understanding of how CSR contributes to the strategic goals of hospitality SMEs, offering insights into how these practices can enhance competitiveness and foster long-term sustainability in a rapidly evolving market. This focus on hospitality SMEs in China is crucial, as the sector is both under-explored in the CSR literature and uniquely positioned to benefit from CSR integration due to its societal and environmental footprint.

To investigate these strategic challenges, we draw upon the Resource-Based View (RBV) and Stakeholder Theory to examine the impact of CSR on SBP. RBV suggests that firms gain a competitive advantage through unique, valuable, and inimitable resources [30]. CSR initiatives can be viewed as such strategic resources, contributing to enhanced reputation, stakeholder relationships, and operational efficiency [31]. By integrating CSR into their strategic framework, hospitality SMEs can leverage these resources to differentiate themselves from competitors and achieve superior performance outcomes. Simultaneously, Stakeholder Theory underscores the importance of addressing the interests and needs of all stakeholders in business decisions [32]. CSR practices align with this theory by engaging various stakeholders, including customers, employees, and the broader community. By addressing stakeholder concerns through CSR [33], hospitality SMEs can build stronger relationships, enhance stakeholder satisfaction, and improve overall performance. Effective CSR strategies that resonate with stakeholder values can lead to increased customer loyalty, improved employee morale, and better market positioning. Overall, combining RBV and Stakeholder Theory provides a robust theoretical framework for analyzing the role of CSR in SBP. RBV highlights CSR as a strategic resource that contributes to competitive advantage [30], while Stakeholder Theory emphasizes the importance of meeting stakeholder expectations to improve business performance [32]. This integrated approach will guide the study in understanding how CSR practices can drive strategic success and sustainable growth for hospitality SMEs in China.

To examine study hypotheses, this study utilized a cross-sectional research design. We collected data through self-administered questionnaires distributed to hotel staff in small- and medium-sized enterprises (SMEs) within the hospitality sector. The study yielded a robust dataset comprising 482 valid responses, representing a range of managerial positions. The primary dependent variable in our analysis was strategic business performance (SBP). In line with established research methodologies [34,35], we operationalized the SBP construct using 16 items. These items primarily focused on the achievement of strategic goals, business strategies, comparative strategic performance, and comparative financial performance. For the independent variable concerning Corporate Social Responsibility (CSR) and its components, we adapted constructs from previously validated scales [36,37,38,39]. To explore the relationships between the research constructs, we employed correlation analysis and structural equation modeling (SEM). The comprehensive analysis revealed a significant positive relationship between CSR and SBP. This positive relationship can be attributed to the strong alignment between CSR initiatives and organizational goals, which enhances overall sustainable performance. Furthermore, our findings emphasize the crucial role of CSR in the success of hospitality SMEs. Specifically, the achievement of strategic goals is bolstered when organizations are led by individuals with a strong focus on CSR, thereby reinforcing the reliability and validity of our results.

This study significantly enriches the literature by addressing the underexplored role of Corporate Social Responsibility (CSR) within the strategic frameworks of hospitality SMEs in China. Unlike prior research that has often centered on larger corporations or other industries, this study provides a nuanced examination of CSR’s strategic utility in a sector vital to China’s economic transformation. By integrating the Resource-Based View (RBV) and Stakeholder Theory, the research offers a comprehensive perspective, positioning CSR as both a strategic resource and a stakeholder engagement tool. This dual-theoretical approach highlights CSR’s potential to enhance reputation, stakeholder relationships, and operational efficiency, thereby contributing to competitive advantage and long-term sustainability. For practitioners, the study underscores the importance of embedding CSR deeply into the core business strategies, not merely as a peripheral activity but as central to achieving strategic objectives. This integration can drive customer satisfaction, employee engagement, and overall business performance, while also aligning with broader societal and ethical considerations. The findings provide valuable guidance for both business leaders and policymakers, advocating for a holistic approach that balances profit making with positive societal impact. Thus, this research offers a vital roadmap for hospitality SMEs aiming to leverage CSR for sustainable growth and competitive differentiation.

The content of this paper is neatly laid out. Following this, there will be a literature review wherein the factors that went into the study will be discussed. The data are then analyzed using various statistical methods covered in the subsequent methodology and analysis section. There is also a detailed discussion of the data’s findings. At last, we presented a thorough discussion, including relevant theoretical and practical consequences, suggestions for future studies, and considerations of the current study’s limitations.

2. The Literature Review

2.1. The Role of SMEs in Hospitality Sector

SMEs play a crucial role in driving economic growth and development in any country. They are widely recognized for their contribution to job creation, innovation, and overall economic dynamism. Globally, SMEs represent about 90% of businesses and more than 50% of employment, according to data from the World Bank [40]. Their significance lies not only in providing employment but also in enhancing competition, increasing productivity, and contributing to social stability by fostering entrepreneurship. SMEs often drive innovation due to their ability to adapt quickly to changing market conditions, and they also facilitate income distribution across different sectors of society, thereby reducing economic inequality [41,42,43].

In the hospitality sector, SMEs are particularly significant, especially in countries like China where tourism and hospitality play a central role in the economy. The Chinese hospitality industry has seen tremendous growth, driven in part by the proliferation of SMEs, which offer diverse services ranging from small hotels, guesthouses, and restaurants to travel agencies. These enterprises not only contribute to employment but also enhance the country’s cultural and economic appeal by offering unique and localized services that cater to both domestic and international tourists [44,45]. In China’s hospitality industry, SMEs are crucial for their ability to cater to niche markets, provide personalized services, and create value in local economies, which large corporations might overlook [28].

Furthermore, SMEs in the hospitality sector contribute to regional development by promoting tourism in less-developed areas, thereby driving infrastructure improvements and creating employment in regions outside major urban centers. This regional economic development is important for balancing economic growth and addressing rural–urban disparities [27,28].

2.2. The Role of Corporate Social Responsibility in Enhancing Strategic Business Performance

SBP is a crucial metric that gauges an organization’s success in achieving its strategic objectives and maintaining a competitive edge [13]. It encompasses various aspects such as financial performance, market positioning, customer satisfaction, and operational efficiency, collectively determining a company’s long-term sustainability and success [2,4]. Within this framework, CSR and its component play significant roles, representing a company’s commitment to ethical practices and societal contributions [21,46]. CSR goes beyond mere regulatory compliance, encouraging businesses to adopt voluntary initiatives that positively impact social and environmental well-being [13,20]. CSR orientation refers to the strategic incorporation of ethical and moral considerations into a company’s business model [19]. This approach guides organizational policies and actions towards practices that benefit society and the environment, often being reflected in the company’s mission and vision statements. A strong CSR orientation not only enhances a company’s reputation and customer loyalty but also distinguishes it from competitors by prioritizing social and environmental stewardship alongside financial goals [47]. Further, CSR commitment, on the other hand, denotes the depth of dedication a company exhibits in implementing and sustaining CSR initiatives [24]. It is demonstrated through consistent actions and policies supporting social and environmental causes, influenced by leadership values and corporate culture [18]. High levels of CSR commitment can lead to greater employee engagement and motivation, improve overall performance, and enhance the company’s image. It also helps attract talent and build stronger relationships with stakeholders, including customers, investors, and the community [22]. Finally, CSR participation involves the active engagement of employees and management in CSR activities, such as volunteering, ethical business practices, and community development projects [20]. This participation is a tangible demonstration of a company’s commitment to social responsibility and contributes to building a positive corporate culture. Employee involvement in CSR activities is often driven by the company’s CSR orientation and commitment, fostering a culture of social responsibility [6,24,47]. Such engagement not only boosts public perception and customer loyalty but also improves employee satisfaction and morale. Collectively, CSR orientation, commitment, and participation are interconnected elements that shape a company’s approach to social responsibility, influencing its reputation, stakeholder relationships, and strategic business performance [18,20,47]. By embedding CSR into their core operations, companies can achieve sustainable growth and create long-term value for both the business and society.

2.3. CSR Orientation and SBP

CSR is a comprehensive concept that involves a company’s commitment to managing its operations in a socially responsible manner [48]. This commitment includes addressing the environmental, social, and economic impacts of its activities through ethical practices that go beyond mere regulatory compliance [21]. CSR reflects a company’s dedication to contributing positively to society and fostering sustainable development, aligning its operations with broader societal values. A key aspect of CSR is CSR orientation, which refers to the strategic approach a firm adopts to integrate moral and ethical considerations into its business practices [49,50]. CSR orientation involves setting and pursuing ethical goals that guide corporate behavior and decision-making processes. For hospitality SMEs, CSR orientation is crucial for aligning business objectives with societal expectations, thereby creating a competitive edge [4,47].

Managers who are deeply committed to CSR embed ethical principles into their strategic vision, influencing both internal and external business practices [34,51]. This alignment fosters a corporate culture that values social responsibility, significantly impacting the organization’s strategic performance [52]. For instance, when managers prioritize CSR, they not only enhance the company’s reputation but also attract and retain customers who value ethical practices [13,25]. In the hospitality industry, this is particularly important as it builds a positive corporate image and goodwill, leading to increased customer loyalty and advocacy [47,52]. Customers who feel emotionally connected to a brand due to its CSR efforts are more likely to become repeat guests and recommend the establishment to others, further enhancing the business’s market presence [53]. Furthermore, CSR orientation contributes to employee engagement and satisfaction. Employees are more likely to be motivated and committed to an organization that reflects their values and ethical standards [51,54]. This alignment enhances productivity and reduces turnover rates, creating a more stable and effective workforce. In the hospitality sector, where customer service is paramount, engaged employees can significantly enhance guest experiences, reinforcing the organization’s reputation and fostering customer loyalty [4,53]. Additionally, CSR orientation in hospitality SMEs often includes a focus on environmental sustainability. Given the growing awareness and concern for environmental issues, hospitality businesses that prioritize sustainability can differentiate themselves in the market [55]. This appeal to environmentally conscious guests can attract a niche customer base and enhance the company’s attractiveness to investors and partners who prioritize sustainability.

Overall, CSR orientation is a vital strategic component that enhances overall business performance by improving corporate reputation, increasing customer loyalty, and fostering employee engagement. By integrating CSR orientation into their core strategies, hospitality SMEs can achieve significant competitive advantages, ensuring long-term success and sustainability in the competitive hospitality marketplace. Based on the above discussion, we hypothesized the following hypothesis:

H1: 

Employee’s CSR orientation predicts the SBP of hospitality SMEs.

2.4. CSR Commitment and SBP

The vision of CSR commitment among employees can provide high-quality services to the customers in alliance with socially responsible beliefs. For this purpose, the hospitality SMEs have developed a unique environment and workplace where the managers are hired, which follows the conceptions of responsibility to society and is highly motivated towards CSR practices [29,56]. The core beliefs of committed managers towards CSR are based on selflessness, humility, and gratitude towards society and nature. These managers are committed to being as helpful and peaceful for society as possible [46]. When acquired by the hospitality SMEs in the form of managers, these traits shape their CSR commitment and are highly beneficial for the business for achieving SBP [24,57].

CSR commitment also aids the managers in promoting the business in the best way by providing the best services to the customers and attracting them. The managers with high CSR commitment are humble and present the best attitude towards customers and each other, thus gaining customer loyalty [58]. A good working environment is a basic necessity for everyone doing their job, which is also a priority in the current business world. SBP is always higher in those organizations because they are committed to CSR and focus on providing their stakeholders with a safe working environment. Thus, due to the availability of a good and effective working environment, CSR-committed managers give their maximum output to the business, thereby increasing its strategic performance [4,25]. These CSR-committed managers are loyal and honest with the related industries and emotionally attached to the workplace [58]. CSR commitment provides an advantage to the hospitality SMEs with the best managers in motivation, dedication, and hard work. These managers are fully committed to their job and try to give their best, which causes superior performance [22,59]. Managers directly deal with customers and represent hospitality SMEs with their dealing, personality, and traits [22]. Managers in hospitality SMEs based on CSR commitment have minor customer complaints compared to traditional hotels [60]. From the discussion above, we formulated the following hypothesis:

H2: 

Employee’s CSR commitment predicts SBP in hospitality SMEs.

2.5. Employee CSR Orientation and Employee CSR Participation

CSR orientation can be considered an integral part of a business to enhance manager participation in CSR activities [53]. CSR participation initiated through CSR orientation helps minimize those activities against the environment, society, and stakeholder interests [20,50]. The engagement of firms to participate in CSR initiatives is highly affected by the acceptability of their managers for that type of initiative based on their beliefs and CSR orientation [25]. Managers with a high level of CSR orientation have abilities like an optimistic attitude, cooperation, supporting each other, fair dealing, and so on as part of their personality [21]. Such qualities of managers enrich them with social responsibility, and they happily participate in CSR activities.

Moreover, these managers are comprised of significant areas to exert institutional pressure for adopting CSR practices. El-Kassar, Yunis [61] found that the interest and origination of managers in CSR activities are directly associated with CSR engagement of business. CSR orientation has also been explored by [47], which shows that managers are highly engaged in CSR activities when they have CSR orientation. CSR orientation motivates managers to treat the customers and society favorably and positively, and these managers are highly concerned about the benefits of both business and customer [53]. Managers’ CSR orientation theological beliefs have a core value of good dealing and stress treating theirs optimistically. These qualities of CSR orientation are beneficial for enhancing a good attitude toward society and CSR participation. CSR-oriented managers do not participate in misconduct and ill-treatment of the customer because of a strong connection with social interactions learned through CSR orientation [53,62]. Misconduct and fraudulent activities are strictly avoided by managers having roots in CSR participation built through CSR orientation. Managers prefer those business activities that are environmentally friendly and participate in them as responsible personals [25]. CSR orientation guides managers on how to promote society and its welfare. Further, managers of hospitality SMEs, either from the top or lower-level management, are motivated to participate in those CSR activities that promote the welfare of society [56]. Based on the preceding discussion, the following hypothesis was proposed:

H3: 

Employees’ CSR orientations predict their CSR participation.

2.6. CSR Commitment and CSR Participation

CSR commitment is the readiness of the managers to perform CSR activities to enhance the effectiveness of the business [24]. Managers with a high level of CSR commitment are well-motivated to engage in social and environmental welfare activities on the job [20]. The policies and strategies made by high-level management from the perspective of CSR are highly accepted by managers because of their commitment [55]. CSR-committed managers rarely show any reluctance to participate in the participation of CSR activities. Managers having CSR commitment have a peak level of motivation to “go the extra mile”. Instead of enrichment in job description by the high-level management, the CSR commitment of managers makes them ready to carry out CSR-based activities [24]. For instance, a manager’s commitment to a sustainable environment encourages them to perform environmentally friendly practices [59]. Managers highly support managerial decisions to engage in CSR practices to compete in a sustainable business environment. Managers highly provide voluntary assistance to hospitality SME projects, which enhances society’s life quality [56]. CSR commitment enables managers in voluntary service and charitable activities in the community and participates in CSR activities to a large extent. The CSR commitment of managers enables them to perform in a way that meets the philanthropic expectations of the customers [22]. The above discussion justifies establishing the link between managers’ CSR commitment and CSR participation. The insights discussed above lead us to propose the following hypothesis:

H4: 

CSR commitment predicts CSR participation.

2.7. CSR Participation and SBP

CSR participation emphasizes a manager’s dedication to helping others and benefiting the environment and society [58]. These managers are inclined to serve and help others and work for the betterment of society, which highly attract customers and lead to strategic performance [51]. Hence, we built our argument that CSR participation is a prerequisite for SBP of organizations. The services provided in the hospitality SMEs are based on CSR in terms of a good environment, healthy and good-quality food, polite and respectful behavior towards customers, a place to worship, and comfort and satisfaction for customers [50]. These CSR services provided to customers through hospitality SME managers set a direction toward achieving superior performance. Managers participate in these activities and services with dedication and motivation, and following CSR protocols enables them to perform strategically [20]. These individual performances help improve the hospitality industry’s overall strategic implementation. The managers who participate in these activities with the perception of benefiting customers with CSR activities are in a better position to achieve targets of long-term goals [56].

Also, the hospitality SME services are considered CSR because they are unique and benefit customers, which is vital to SBP. These services are focused on giving customers the best food possible. This shows that the hospitality SMEs management cares about the health and safety of customers, which is suitable for SBP [6]. Supporting all kinds of CSR participation shows that the hospitality SME management respects customers’ beliefs and religious freedom and respects them [50]. This makes customers more likely to stay at the hotel, and such loyalty is essential to confirm SBP. The management of the hospitality SMEs also shows deep concern about the protection and safety of the environment. In this regard, the management of hospitality SMEs invests their share of profits in the safety and health of the environment through different projects, which turn into superior performance [63]. Managers’ CSR participation shows deep concern and respect for treating customers and offers discounts to the customers to establish support social norms, which leads to SBP [55]. Participation in CSR activities is crucial in providing good services to customers and making them loyal. The involvement of managers in CSR activities positively impacts strategic performance and helps the hospitality SMEs to build a unique and competitive image and reputation in the hospitality industry [56]. Hence, a manager’s participation in CSR activities results in positive outcomes from the perspective of SBP on the hospitality SMEs. The aforementioned analysis leads to the establishment of the following hypothesis

H5: 

CSR participation positively predicts SBP.

2.8. CSR Participation Mediates Between CSR Orientation and SBP

CSR participation is the practical steps managers take to perform business tasks that reflect them as socially responsible regarding stakeholder beliefs. Managers who highly participate in CSR activities pursue a high level of performance and positively support CSR [20]. The participation of managers in CSR activities improves internal processes, customer dealing, and other practices, therefore, improving the firm’s productivity [64]. Manager orientation is the critical ability of the business that shapes its CSR participation, thereby enhancing the effectiveness and efficiency of the company [47]. This research hypothesized that managers’ CSR participation is deterministic in gaining good business performance, and CSR orientation constitutes CSR participation. The attitude and behavior of managers related to CSR activities include preferring environmental sustainability, inclination towards the creation of employment for society [25], focusing on providing safe and quality products [13], and motivating the managers to participate in such activities, thus leading to increase the performance [60]. Based on the theoretical evidence, a mediating link between managers’ CSR participation has been established between managers’ CSR orientation and business performance. Therefore, it leads to the development of the following hypothesis:

H6: 

CSR participation mediates the relationship between CSR orientation and SBP.

2.9. CSR Participation as the Mediator Between CSR Commitment and SBP

The effectiveness of manager CSR commitment contributes to SBP, where manager CSR participation plays a role as a byproduct [55]. It makes the connection between CSR commitment and SBP very strong. Previous searches have analyzed the positive outcomes of CSR commitment from the perspective of CSR participation [24]. Therefore, this manager’s CSR participation laid the foundation for increasing the efficiency and effectiveness of hospitality SME performance in the long run [65]. Therefore, it can be argued that managers’ CSR participation drives CSR commitment to achieve good hospitality SME performance. The main focus is on the needs and requirements of the hotel’s guests and their satisfaction, which include multiple aspects, like preparing the meal in a specific manner and as per the stakeholders’ requirements [56]. CSR commits managers to work with a solid affinity to fulfill customer needs and perform CSR-based activities [66]. Thus, fulfilling the customer’s desires leads the hospitality SMEs to achieve its goals and improve efficiency [64]. Traditions and customs characteristics may be impacted and constrain the operating systems, structures, furnishings, fittings, furniture, and building style materials [67]. The CSR-committed top management customizes these offerings to customer environmental needs and satisfaction, thus providing the platform for their theological value implementation [59]. This CSR participation thus enhances customer loyalty to the business, assisting the company in increasing its customer pool size and profitability [65].

The hospitality SME intangible service, environmental, and physical aspects are related to protecting the environment and can be observed through the system, environment, and within the hotel’s contact. Environmental-based CSR allows top management and managers to provide such services to the customer [52,65]. Such practices lead to maximizing customer satisfaction and hospitality SME reputation in the market, thus increasing the long-run performance of the hospitality SMEs [64]. Based on the above arguments, the following hypothesis is made:

H7: 

CSR participation mediates the relationship between CSR orientation and SBP.

3. Methods

The methodological approach employed in this study aligns effectively with the theoretical frameworks of RBV and Stakeholder Theory. RBV asserts that a company’s unique resources and capabilities, including its CSR activities, are pivotal in securing a competitive advantage and improving SBP [68]. This perspective supports the examination of CSR orientation, commitment, and participation as critical resources influencing strategic outcomes. Concurrently, Stakeholder Theory highlights the importance of addressing stakeholder expectations through CSR initiatives, which can enhance organizational performance [69].

The current study utilized a cross-sectional research design to capture a snapshot of CSR practices and their immediate effects on SBP within the hospitality industry. This design allows for the assessment of relationships between CSR components and SBP at a single point in time, providing valuable insights into current dynamics. To establish associations between the research constructs, correlation statistics were applied. Furthermore, structural equation modeling (SEM) was employed to analyze the gathered data, which were collected with written informed consent over a five-month period, from 5 April 2023 to 10 September 2023. This approach facilitates a comprehensive evaluation of the proposed hypotheses. Regression analysis, a method standard for exploring direct effects between variables [70], was used in conjunction with SEM to analyze the relationships. Additionally, bootstrapping techniques were employed to assess the robustness of mediation effects, offering a reliable approach for evaluating indirect relationships within the model [71]. While these methodologies are established practices in empirical research, their application in this study is innovative in its specific focus on the hospitality sector and the role of CSR engagement as a mediator. This contextual application of RBV and Stakeholder Theory not only validates the methodological approach but also contributes to the literature by providing new insights into how CSR impacts performance in a distinct industry setting.

3.1. Context and Sample

SMEs are a key driver of China’s economy, significantly contributing to employment, local community integration, environmental sustainability, and economic development. This study employed a survey methodology within the tourism sector to ensure a statistically significant sample. SMEs dominate China’s business landscape, driving both regional economies and national GDP [27,28]. In the tourism industry, they are particularly vital, promoting regional development, supporting hospitality services, and fostering cultural and economic exchange while influencing environmental outcomes.

Self-administered questionnaires were utilized to gather data from hotel staff within the tourism sector. Our data source was derived from the official list of tourism industry provided by the Chinese Ministry of Culture and Tourism, which encompassed a total of 700 plus 3- and 5-star hotels with a collective managerial staff population of 6115 members. From this extensive list, we judiciously selected a representative sample of 631 managers from 163 hotels, utilizing a random sampling technique. The adoption of this random sampling method ensured that each unit within the population had an equal opportunity of being selected [72]. For this purpose, we applied Yamane [73] random sampling formula, which is widely recognized for its effectiveness in obtaining a random and representative sample.

$$n={\displaystyle \frac{N}{1+N{\left(e\right)}^2}}$$

(1)

where “n” shows sample size, “N” shows total population, and (e)² shows level of significance (0.05), leading to the following equation:

$$n={\displaystyle \frac{6116}{1+6115\ast {\left(0.05\right)}^2}}=375$$

Our targeted sample size consisted of 631 individuals. Over a span of five months from 5 April to 10 September, and with the valuable assistance of ten research assistants, we successfully collected 592 responses from this carefully chosen pool of managers with their written consent. Separating the survey into two parts helped reduce respondent lethargy and standardized error rates [74]. The staff questionnaire was first administered in the native tongue (Chinese) before being translated into English to facilitate universal comprehension of the study’s objectives and methodology. Before distributing the questionnaire to respondents, it was reviewed by experts and academics to eliminate any ambiguity or gaps. After rigorous data cleaning that involved the removal of incomplete surveys and outliers, we identified a robust dataset consisting of 482 viable responses. Notably, Equation (1) guided us to anticipate a sample size of 375 within our targeted population. However, our final usable sample, which was drawn from the intended population of 631, was only 482. This figure equates to an impressive response rate of 76 percent, which is thought to be an effective response rate.

3.2. Variable Measurement

The information regarding CSR orientation, CSR commitment, CSR participation, and SBP was obtained from the managers of various hospitality SMEs.

3.2.1. Employee CSR Orientation

CSR orientation was assessed using a six-item scale adapted from a recognized scale by [36]. This adaptation ensured the items were relevant to the study’s context while maintaining the integrity of the original scale. The internal consistency of the adapted scale was confirmed with a Cronbach’s alpha of 0.87, indicating high reliability [75]. To enhance the accuracy of data collection, the questionnaire underwent a thorough review by specialists and academics. This review process helped to identify and resolve any ambiguities or flaws, ensuring the clarity and validity of the questions.

3.2.2. Employee CSR Commitment

Employee commitment to CSR was assessed using a nine-item scale, drawing inspiration from the research conducted by [37]. The items were designed to capture the extent of employee engagement and alignment with the organization’s CSR initiatives. The reliability of this scale was established with a Cronbach’s alpha of 0.88, indicating a high level of internal consistency and reliability [75]. The nine-item scale was carefully developed to encompass various dimensions of CSR commitment, including employees’ awareness, participation, and perceived importance of CSR activities. This comprehensive approach ensures that the scale effectively measures the multifaceted nature of CSR commitment among employees [76].

3.2.3. Employee CSR Participation

The participation of employees in CSR activities was measured using a five-item scale, as developed and utilized by [38,39]. This scale was carefully constructed to assess the degree to which employees actively engage in and contribute to their organization’s CSR initiatives. The items were designed to capture different aspects of participation, including involvement in CSR projects, volunteering activities, and support for the company’s social and environmental efforts. The scale demonstrated strong internal consistency, with a Cronbach’s alpha value of 0.89. This high alpha value indicates that the items reliably measure the underlying construct of CSR participation, ensuring that the responses are consistent across different items [75]. The reliability of the scale suggests that it effectively captures the extent of employee engagement in CSR activities, providing a solid basis for subsequent analysis and interpretation of the data.

3.2.4. Strategic Business Performance

For this study, we operationalized the SBP construct with the help of 16 items and used it as the dependent variable. The extents to which the business achieves its strategic goals, business strategies, comparative strategic performance, and comparative financial performance are the four dimensions of SBP used for analysis. Cavusgil and Zou [35] developed a 7-item scale to evaluate strategic aims. Davis and Schul [77] proposed a 5-item scale to assess the success of business strategies like marketing, promotion, distribution, etc. Implementing the standards set out by [35], we used a 4-item scale to evaluate our SBP compared to our three main competitors, and we found an alpha of 0.86.

Based on the aforementioned methodology, this study presents the following framework presented in Figure 1. Further, the development of constructs for each contributing factor of this study is detailed in the questionnaire provided in Appendix A.

3.3. Common Method Bias

To address potential common method bias (CMB) in this cross-sectional study, we implemented several precautionary measures. Following the recommendations of [78], we carefully designed our research to ensure the constructs used were robust and resistant to external influences, minimizing potential data collection biases. Furthermore, to validate the items related to hospitality SMEs, CSR orientation, CSR commitment, CSR participation, and SBP, we sought expert evaluations. In addition to these steps, we employed a range of statistical techniques, drawing from the methodologies proposed by [79], to further mitigate the impact of CMB [25]. Our data analysis involved correlation statistics, SEM, regression analysis, and bootstrapping techniques to empirically examine the study research question. To mitigate common method bias, the study incorporated expert evaluations and statistical techniques like Confirmatory Factor Analysis (CFA) and Harman’s one-factor test, specifically chosen to prevent any potential issues related to CMB. As a result of our rigorous investigation, we can confidently assert that CMB is not a significant concern in this study. This framework provides valuable insights into how CSR influences SBP in the hospitality sector.

4. Analyses

The results in

Table 1. Results of alpha, CR, and AVE.

Variable Details	F-L	t-Value	Alpha	CR	AVE
CSR Orientation			0.87	0.91	0.71
ECSRO1	0.77	14.23
ECSRO2	0.74	15.44
ECSRO3	0.79	13.32
ECSRO4	0.84	15.44
ECSRO5	0.82	13.47
ECSRO6	0.86	14.55
CSR Commitment			0.88	0.92	0.72
ECSRC1	0.74	14.56
ECSRC2	0.76	15.44
ECSRC3	0.79	13.36
ECSRC4	0.83	14.74
ECSRC5	0.85	13.74
ECSRC6	0.86	14.36
ECSRC7	0.73	15.66
ECSRC8	0.83	13.48
ECSRC9	0.84	14.16
CSR Participation			0.89	0.93	0.74
ECSRP1	0.79	15.44
ECSRP2	0.83	14.55
ECSRP3	0.82	13.22
ECSRP4	0.75	15.78
ECSRP5	0.74	13.64
Strategic Business Performance			0.86	0.96	0.75
SBP1	0.82	14.43
SBP2	0.83	13.34
SBP3	0.74	14.55
SBP4	0.76	15.74
SBP5	0.72	15.21
SBP6	0.79	14.22
SBP7	0.81	14.66
SBP8	0.73	15.02
SBP9	0.77	13.74
SBP10	0.78	14.11
SBP11	0.82	14.56
SBP12	0.83	15.55
SBP13	0.74	15.36
SBP14	0.75	14.23
SBP15	0.76	14.77
SBP16	0.78	14.66

proved that the validity and reliability of the scales are not an issue. Both convergent and discriminant validity show scales that were valid. Results of convergent validity were satisfactory, i.e., factor as loading > 0.70 and AVE > 0.50. Discriminant validity was also confirmed by Murray, Kotabe [80] as AVE was greater than shared variance constructs with every other construct. Composite reliability (CR) was >0.60, and α (Cronbach alpha) was >0.70. Hence, above all, measurements, results, and findings of the study were valid and reliable.

CFA was used to evaluate the model’s efficacy, and the results are shown in

Table 2. CFA results.

Model Detail	χ2	Df	χ2/df	RMESA	GFI	CFI
Hypothesized four-factor model	1030.21	450	2.289	0.05	0.91	0.92
Three-factor model	1184.22	320	3.701	0.013	0.88	0.89
Two-factor model	1190.56	330	3.608	0.16	0.72	0.73
Single-factor model	1240.22	370	3.352	0.26	0.63	0.64

. Our four-factor model was found to be statistically significant ($x^2=1$030.21; df = 450; $x^2$/df = 2.289; RMSEA = 0.05; CFI = 0.92; GFI = 0.91); these numbers are consistent with little bias.

The average, standard deviation, alpha, and correlation are shown in

Table 3. Mean, SD, and correlations.

Variable		Mean	SD	Alpha	1	2	3	4	5	6	7	8
1	Business Age	3.03	1.04	0.81	1.00
2	Business Size	1.47	0.56	0.80	0.113 *	1.00
3	Res−experience	1.78	0.51	0.83	0.06	0.641 **	1.00
4	Res−education	1.43	0.05	0.82	0.02	0.086 *	−0.19	1.00
5	CSR Orientation	3.7	0.44	0.86	0.06	−0.04	−0.15	−0.01	1.00
6	CSR Commitment	3.5	0.48	0.87	0.02	−0.07	−0.04	−0.10	0.572 **	1.00
7	CSR Participation	3.89	0.70	0.85	−0.07	−0.16	−0.15	0.078 *	0.381 **	0.296 **	1.00
8	SBP	0.55	0.69	0.84	−0.02	−0.18	−0.06	−0.08	0.201 **	0.268 **	0.380 **	1

Note: Table 4 shows correlation matrix, where ** and * indicate statistical significance at the 5% and 10% levels (two-tailed test) and SD (standard deviation), respectively.

. Employee CSR orientation (EO), commitment (EO), and involvement (EC) were shown to be favorably related to and significantly impact strategic business performance (SBP). There is a strong relationship between EO and SBP (r = 0.20 **, p-value = significant). The correlation between EC and SBP is positive and statistically significant (r = 0.26 **, p-value = significant). A positive and statistically significant relationship exists between EP and SBP (r = 0.38 **, p-value = significant). The VIF scores also show that multi-collinearity is not a problem with this study since all values are less than 10.0.

Table 4. Hypothesis results.

Sr. No	Hypotheses	Beta	F	T	Sig.	Remarks
H1	CSR Orientation → SBP	0.201	34.215	11.620	0.000	Proved
H2	CSR Commitment → SBP	0.268	62.990	12.830	0.000	Proved
H3	CSR Orientation → CSR Participation	0.381	137.81	11.740	0.000	Proved
H4	CSR Commitment → CSR Participation	0.296	77.824	14.022	0.000	Proved
H5	CSR Participation → SBP	0.380	137.05	16.273	0.000	Proved

Note: Statistical significance at the 1%, 5%, and 10% levels (two-tailed test).

displays the outcomes of Hypotheses 1–5. Table 4 shows the results of a simple linear regression analysis. H1 demonstrated a clear correlation between CSR direction and SBP ($\beta$ = 0.20, p 0.001). H2 was also supported by data showing a positive correlation between CSR commitment and innovation performance ($\beta$ = 0.26, p 0.001). Further, results from H3 showed a positive correlation between CSR orientation and CSR participation ($\beta$ = 0.38, p 0.001). Findings from H4 exhibited a positive correlation between CSR commitment and CSR participation ($\beta$ = 0.29), and results from H5 demonstrated a positive correlation between CSR participation and SBP ($\beta$ = 0.38).

To explain the connection between CSR orientation and SBP, H6 postulated that CSR involvement acts as a mediator. We employed the 5000-bootstrap approach with a 95% confidence level, as described by [81].

Table 5. Results of paths (a, b, c, and c’).

Hypothesis Details			Coefficient	t	SE	Sig
(Path a) CSR Orientation → CSR Participation			0.558	11.740	0.048	0.000
(Path b) CSR Participation → SBP			0.377	10.127	0.037	0.000
(Path c) CSR Orientation → SBP			0.313	5.849	0.053	0.000
(Path c’) CSR Orientation → SBP			0.102	1.877	0.055	0.061
Model summary for DV Model: R2 = 0.1483; F = 70.5036; p = 0.000
Bootstrap for indirect effect of IV on DV through mediator “ab path”
Model Detail	Data	Boot	Bias	SE	Lower	Upper
CSRO → CSRP → SBP	0.2102	0.2091	−0.001	0.033	0.1475	0.2795
Sobel Test Z Score = 7.65

Note: Statistical significance at the 1%, 5%, and 10% levels (two-tailed test).

displays the indirect influence of CSR orientation on SBP, as measured by employee CSR involvement (EO, EP, SBP). In Table 5, we see the combined impact and the direct and indirect effects through the channels shown as a, b, c, and ab. The “a” path ($\beta$ = 0.558, t = 11.740, p = sig) demonstrated CSR orientation as a predictor of CSR involvement. Path ‘b’ established a direct relationship between CSR engagement and SBP ($\beta$ = 0.377, t = 10.127, p = sig). The total impact of EO on SBP was shown by the “c” path ($\beta$ = 0.313, t = 5.849, p = sig). Path “c’” demonstrates that when CSR involvement was regulated, the direct impact of EO on SBP was diminished and non-significant, indicating complete mediation ($\beta$ = 0.102, t = 1.877, p = non-sig). The final section of Table 5 displays the outcomes of indirect influence, as shown by path ‘ab’. With a beta value of 0.2102 (lower = 0.1475 to upper = 0.2795), the findings of the indirect impact showed that CSR involvement acted as a mediator. The mediating impact of CSR involvement was also verified using a conventional test. The last row in Table 5 demonstrates that the Sobel Test result is statistically significant at the “z” level, yielding a 7.65, confirming H6, and demonstrating that the OR is a mediator between the DPC and the IP connection.

Total impact, immediate impact, and indirect impact through pathways “a”, “b”, “c”, and “ab” are shown in

Table 6. Results of path (a, b, c, and c’).

Hypothesis Details				Coefficient	t	SE	Sig
(Path a) CSR Commitment → CSR Participation				0.381	8.821	0.043	0.000
(Path b) CSR Participation → SBP				0.350	9.843	0.036	0.000
(Path c) CSR Commitment → SBP				0.367	7.937	0.046	0.000
(Path c’) CSR Commitment → SBP				0.234	5.104	0.046	0.000
Model summary for DV Model: R2 = 0.7112; F = 83.6729; p = 0.000
Bootstrap for indirect effect of IV on DV through mediator “ab path”
Model Detail	Data	Boot	Bias		SE	Lower	Upper
CSRC → CSRP → SBP	0.1332	0.1348	0.002		0.028	0.0860	0.1970
Sobel Test Z Score = 6.5

Note: Statistical significance at the 1%, 5%, and 10% levels (two-tailed test).

. The $\beta$ = 0.381, t = 8.821, p = sig, and path a demonstrated that EC predicts CSR involvement. Path ‘b’ established the direct relationship between CSR involvement and SBP ($\beta$ = 0.350, t = 9.843, p = sig). The complete impact of EC on SBP was shown by the ‘c’ path ($\beta$ = 0.367, t = 7.937, p = sig). Adding a mediator, CSR involvement, reduces the impact of EC on SBP ($\beta$ = 0.234, t = 5.104, p = ns), demonstrating mediation. Finally, Table 6 displays the indirect impact findings along path ab. Indirect impact results demonstrated that CSR involvement mediates the relationship between EC and SBP ($\beta$ = 0.1332, CI = −0.0860 to 0.1970). H5 is acceptable due to a Sobel test ‘z’ score of 3.0699.

5. Discussion

CSR initiatives are highly valued in the modern corporate world, particularly for companies whose values align with the opinions of their constituents. This study aims to investigate the impact of CSR on the performance of hospitality SMEs in China, addressing a notable gap in the existing literature regarding the specific effects of CSR practices in this hospitality sector. This study’s findings build upon and expand previous work [82], suggesting a positive and direct relationship between CSR orientation and the performance of hospitality SMEs [4]. The results highlight that hospitality SMEs achieve better performance outcomes when managed by individuals with a strong CSR focus. This aligns with the RBV, which posits that unique resources, such as CSR orientation, can provide firms with a competitive advantage, thereby enhancing strategic business performance [68]. A clear correlation between CSR commitment and hospitality SME performance was found in this study, supporting Hypothesis 2 (H2). This finding extends the results of previous research that identified a link between CSR dedication and the success of hospitality SMEs. The dedication of managers to CSR policies positively affects productivity, benefiting the organization as a whole. This observation is also consistent with Stakeholder Theory, which suggests that firms engaging in CSR can improve performance by addressing the interests of various stakeholders [69].

Further, this research examines the correlation between CSR orientation and CSR participation (H3), finding that a CSR-oriented approach fosters managerial engagement in CSR activities. This finding emphasizes the necessity for hospitality SMEs to integrate CSR into their core strategies to effectively navigate their unique operational challenges. This adds to the study [59], indicating that CSR orientation can lead to increased involvement in CSR initiatives. Hypothesis 4 (H4) explores the relationship between CSR commitment and CSR participation, revealing a positive association between the two. This supports findings from previous studies that demonstrated a beneficial link between CSR activity and employee engagement [65]. The study’s findings also support Hypothesis 5 (H5), which posited a positive relationship between CSR participation and strategic business success. These results extend previous conclusions about the connection between CSR participation and hospitality SME performance, suggesting that management’s involvement in CSR initiatives directly enhances strategic success [83,84]. The mediating role of CSR participation between CSR orientation and SBP (Hypothesis 6) was confirmed, highlighting that CSR involvement facilitates the translation of CSR orientation into tangible business outcomes. This is in line with research that has explored the mediating effect of CSR job involvement on outcomes like innovation and productivity [85].

Lastly, Hypothesis 7 (H7) explored whether CSR participation mediates the relationship between CSR commitment and SBP. The findings revealed that CSR participation does play a mediating role, further emphasizing the importance of active engagement in CSR activities to leverage the benefits of CSR commitment for SBP. This comprehensive analysis not only integrates RBV and Stakeholder Theory but also provides valuable insights into how CSR orientation, commitment, and participation contribute to the success of hospitality SMEs.

Overall, this research highlights a significant gap in the existing literature regarding the specific impacts of CSR on hospitality SMEs in China. It underscores the necessity for hospitality SMEs to not only adopt CSR initiatives but also to actively engage with them to achieve sustainable growth and maintain a competitive advantage in a rapidly evolving market. By embedding CSR into their core strategies, these firms can effectively respond to evolving customer demands for transparency and ethical behavior, thereby enhancing overall service quality and brand loyalty. This study offers valuable insights for practitioners seeking to enhance their strategic frameworks by incorporating CSR as a fundamental element of their business models.

5.1. Managerial Implications

This study offers valuable managerial insights for the hospitality industry, specifically for hospitality SMEs, on integrating CSR initiatives into their operations. Implementing CSR activities can significantly boost hospitality SME competitiveness and sustainability. Managers should focus on adopting energy-efficient measures, producing high-quality products, and reducing waste to enhance both economic performance and environmental impact. To effectively incorporate CSR, it is crucial that managers enforce mandatory practices supported by incentive-based schemes. This ensures that CSR activities are not only adopted but also actively pursued. The paper also highlights the role of societal perceptions in shaping managerial decisions. Establishing and enforcing mandatory CSR guidelines can align organizational practices with societal expectations, thereby improving overall performance.

Additionally, the paper emphasizes the importance of managerial training and support. Investing in training programs and workshops to promote CSR can facilitate high-level adoption and effective implementation. Enhancing CSR reporting and evaluation systems is also essential, as a robust framework will track progress and reinforce commitment. By following these recommendations, managers can integrate CSR effectively into their strategies, leading to improved performance and sustainability for hospitality SMEs.

5.2. Theoretical Implications

This study makes a significant contribution to the literature on hospitality SMEs and has several theoretical implications. It offers a nuanced understanding of how CSR orientation, commitment, and participation impact SBP. The findings highlight that when managers in hospitality SMEs prioritize CSR, it positively influences strategic performance. This supports the Resource-Based View (RBV), which posits that CSR activities can be considered a strategic resource that enhances competitive advantage and organizational performance. The research extends existing knowledge by demonstrating how managerial involvement in CSR activities is associated with improved strategic performance in hospitality SMEs. By establishing and empirically testing a model that links CSR commitment to SBP, this study provides new insights into the impact of CSR from the perspective of hospitality SMEs. Furthermore, the study reveals the mediating role of CSR participation, which connects managerial orientation and commitment to performance outcomes. This finding aligns with Stakeholder Theory, which underscores that engaging in CSR helps address stakeholder interests and can lead to improved organizational performance by fostering better stakeholder relationships.

Overall, the integration of RBV and Stakeholder Theory into the study of hospitality SMEs provides a fresh perspective on how CSR activities contribute to strategic success. This research not only fills gaps in the current literature but also suggests new avenues for enhancing the strategic performance of hospitality SMEs through effective CSR practices.

5.3. Limitations and Future Research Directions

Instead of having several practical managerial and theoretical implications, this research has a few limitations. These limitations relate to the conceptual framework, scope, and other aspects. These imitations are the guidelines for future research, giving them direction. Firstly, the focus on the hospitality sector limits the generalizability of the results to other industries, such as manufacturing or mining, where CSR dynamics might differ. Future research should include diverse sectors to broaden applicability. Secondly, the cross-sectional design restricts the ability to capture changes over time in CSR practices and their impact on performance. A longitudinal approach would address this gap. The study also did not account for potential moderating variables, like organizational CSR policies, which might influence the CSR–performance relationship. Including such variables could enhance the theoretical framework. Finally, conducting comparative or cross-country analyses could provide further insights into CSR’s impact across different contexts. Addressing these limitations in future research would strengthen the findings and their applicability.