Small and Medium Enterprises (SMEs)

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This chapter deals with the more practical issues of choosing and justifying appropriate research strategies to answer the research questions, and then designing instruments to generate and analyse data used in this study to achieve the underlying objectives introduced in Chapter 1.
The chapter is divided into four major sections and structured that the first part reiterates the research problem and provides rationale for embarking on this study. The second part discusses and justifies the epistemological approach adopted for the study. The third part outlines the research design and how the qualitative methodology was operationalised. The final part of the chapter provides an overview of the data collection and analytical process followed for analyzing the results.


This study looks at SR initiatives embarked upon by small businesses. This will lead to the development of a framework that explains the link between activities, practices and motivation for undertaking corporate social responsibility from the small business perspective. Chapter 2 reviewed the literature on this study’s three parent disciplines – social responsibility, small businesses, and stakeholder theory. The study seeks to identify latent underlying or non-obvious issues around social responsibility initiatives embarked upon or undertaken by a very distinct type of entity – SME so that descriptions, explanations and processes of social responsibility can be explained. Accordingly, this will enhance the theory for social responsibility in small businesses. In essence this work addresses the following research questions:
Social responsibility activities small businesses engage in.
The motivation behind engaging in social responsible activities.
Motivation for engaging in social responsible activities and how they are linked.


Having established the research problem, the study pursued the qualitative methodology. The qualitative methodology was chosen because there is very little or nothing known about small business social responsibility practices. The methodology was developed by systematic categorization of observations and interactive examination of the information in the annual reports and interview data until patterns emerged. The data that emerged was analyzed using the NVIVO software. The software will be discussed in detail in the data analysis section.


This section aims to create an understanding of how research methods for the study are implemented within a phenomenological approach.
This study is venturing into a new area that calls for a qualitative approach and it is on that basis that the epistemological approach is phenomenological in nature. It would not have been appropriate and adequate to use the positivist approach because positivists view the social world, and believe that facts about this external world can be gathered through a specific set of methods (Easterby-Smith, Thorpe & Lowe 1991). These methods are usually objectively described and measured (Lincoln & Guba 1985).
Positivists are mostly concerned with the confirmation of theories (Deshpande 1983) and less with the discovery, development or “context of discovery” of theories (Lincoln & Guba 1985, p. 25). Quantitative data collection methods, including controlled experiments and surveys, are used to test sets of hypotheses within this paradigm (Tsoukas 1989). A positivist paradigm was not suitable for this research for mainly three reasons:
A lack of existing theories related to socially responsible behaviour in SMEs, especially in South Africa. There is very little theoretical material available for the researcher to test CSR in the South African context.
This research involves the experiences and life stories of people and was concerned more with theory building/modifying than with theory testing. Positivists usually establish approaches that are used to support or reject hypotheses, or explanations of phenomena rather than trying to explain why and how the phenomena occurred. In contrast, this research aimed to explore and explain an existing phenomenon realistically. It should also be noted that this research finally evaluated the relevance of the stakeholder theory to explain SMEs’ approaches but does not test any existing SR theories.
The positivist paradigm was not appropriate because this research investigated a business management practice in a situation that cannot be controlled.
Positivism was not considered as a suitable paradigm for this kind of research problem.
Within a research context, there exist numerous paradigms as identified by various authors. Easterby-Smith, Thorpe and Lowe (1991) group paradigms as positivist and phenomenological (interpretivist) based on deductive and inductive orientation. Lincoln and Guba (1994), Perry, Riege and Brown (1999) summarize paradigms as positivism, constructivism, critical theory and realism. In 2001, Jennings proposed six paradigms: positivism, interpretive social science approach, critical theory orientation, feminist perspectives, the post-modern approach and the chaos theory orientation. Whilst a detailed discussion of each category is beyond the scope of this research, an overview of the two major paradigms – positivist and interpretivist is shown in Table3.2 below.
Owing to this subjective and exploratory theory building aspect of the research, an interpretivist paradigm seemed more appropriate than a positivist approach entailing an objective interaction (Jennings 2001). In the words of Perry and Coote (1999), “in many areas of the social sciences, existing deductive theory testing research methods do not adequately capture the complexity and dynamics of organizational settings”. Similar conclusions are drawn by Carson et al. (2001); Easterby-Smith, Thorpe and Lowe (1991) and Parkhe (1993) as they suggest an interpretivist strategy employing a realist epistemology can better access a “hidden slice of reality” such as managerial perceptions. This research undertook a qualitative study from an interpretivist perspective.
As shown in chapter two, there is no study in South Africa that has looked at small business social responsible initiatives. There are no studies that link SR initiatives and motivation. The most comprehensive study on small enterprise CSR in South Africa was conducted by Soobramoney Chetty, (2008). In his study, he looks at social responsibility among small and medium enterprises in one province, KwaZulu-Natal. He examined the perceptions and behaviours of the owners/managers of small and medium-sized enterprises regarding the social responsibility of their businesses. He also examined whether SMEs are less socially responsible than large organizations.


The target population of this research was SMEs listed on the ALT exchange (alternative exchange) The ALTX is a division of the JSE focused on good quality, small and medium sized high growth companies. Information about this population was gathered from ALT exchange. The total number of the ALT exchange listed small business is fifty two (52). The sectorial breakdown is as follows:
Four (4) in construction,
Seven (7) in mining,
Eleven (11) in manufacturing,
Eleven (11) in finance and insurance,
Twelve (12) in Real Estate and Business Services,
Five in Travel and Personal Services,
One in Electricity, Oil, Gas and Water Supply, and
One in Agriculture.


Twenty four (24) of the fifty two (52) companies listed on the ALT exchange were selected to be part of the study. Of the twenty four (24) a further five (5) was selected for interviews. The companies were selected from nine (9) industries – which included Construction, Mining, Manufacturing, Finance, Real Estate, Wholesale and Retail, Transport Storage and Communication, Transport, Electricity, Oil and Gas, and Agriculture. The annual reports analyzed were between 2008 and 2012. This process involved collating the electronic copies of the company’s annual reports of companies listed on the ALT exchange. The interviews involved open ended questions to verify the information gathered from the annual reports. This study made use of publicly available information or secondary data and data obtained from the interviews. Table 3.3 below outlines description of the sample.
In summary, the conditions for the sample companies were stipulated so that:
Companies are listed on the JSE ALT exchange,
Companies must have issued and published audited annual reports between 2008 and 2012, and
Annual reports must have been available on the ALT exchange.
The research focused on medium enterprises who have developed to the extent of listing because as mentioned before this is an area that has not been explored in South Africa. It made sense to commence by investigating these small businesses with high growth before micro and small businesses are investigated. The researcher decided to look at the upper end which consists of the big competitors of this important sector of SMEs. The researcher would not have been able to consider all SMEs because of the magnitude of this sector. As mentioned in chapter 2 of this study the SME sector accounts for 90% of businesses in South Africa. Future studies could investigate at the lower end consisting of micro and small enterprises.


As mentioned before there are fifty two (52) companies on the ALT exchange and the researcher decided to consider all of them to be representative of the study. Only companies that have published annual reports for the past five years were selected. The next stage was investigating only those companies that had generated annual reports over the last five (5) years and omitted those that have not been operating or publishing annual reports. The researcher then decided to categorise the companies according to sectors. The study started off by selecting all the listed companies and categorizing them into sectors as shown in table 3.4.
The table above and the explanation that was done before show that the selected samples were not randomly selected. They were selected on the basis of known attributes, criteria and features.
They were selected on the basis of being listed on the JSE Alt exchange, and publishing annual reports between 2008 and 2012. Denscombe (2008) argues that all cases studies need to be chosen on the basis of their relevance to the practical problems or theoretical issues being researched. The cases selected will give a clear representative of the items. The number of companies examined is fifty two (52) for the years 2008 to 2012 respectively. Companies, for which annual reports for the period between 2008 and 2012 could not be found, were omitted. Because of this condition and process four (4) industries (Wholesale, Retail Trade, Catering and Accommodation, Transport, Storage and Communication, Electricity, Oil, Gas and Water Supply, Agriculture) were omitted. Six (6) industries were represented, i.e. Construction, Mining, Manufacturing, Finance and Insurance, Real Estate and Business Services and Travel and Personal Services.


The study will be carried out in South Africa with companies that are listed on the ALT exchange. There are fifty two (52) companies listed on the ALT Exchange, in the following sectors: four (4) in construction, seven (7) in mining, eleven (11) in manufacturing, eleven (11) in finance and insurance, twelve (12) in Real Estate and Business Services, five (5) in Travel and Personal Services, 0 in Wholesale, Retail Trade, Catering and Accommodation, 0 in Transport, storage and communication, one (1) in Electricity, Oil, Gas and Water Supply, and one (1) in Agriculture. It’s a longitudinal method, whereby companies’ annual reports from a number of years, were selected.
Of these companies, only those with published annual reports over 5 years (2008 to 2012) were used for the purposes of this study. The sectors contribute the following to GDP:
Mining: 10% Manufacturing: 12.3% Finance, Real Estate and Business Services: 21.2% Construction:
3.9%Electricity and Water: 2.6%Wholesale, Retail and motor trade: 16.2% Transport, Storage and
Communication:  9%  Government  Services:  16.7%Personal  Services:  5.9%  Agriculture:  2.2%.
Percentages based on 2012 GDP data from Statistics SA.
All the companies included in the study were according to categories in industry and are listed in Table 3.4.


The preceding sections described the research paradigm and justified the research methodology and sampling procedure that was adopted for this research. This section describes the data collection activity that was undertaken through analyzing annual reports and semi-structured in-depth interviews following the protocol developed for this study.

Research Instruments

This research used annual reports and interviews as a data source. There are advantages in using annual reports as a data source because it is readily available and accessible. Since it is a secondary data source, information disclosed in annual reports does not involve any subjectivity. Also, annual reports are the chief communications path for the transmission of communication of environmental and social information from the companies to their stakeholders. Since information in annual reports was audited under the bounds of corporate law, annual reports are considered to be more formal, authoritative and accurate for researchers. The annual reports will be accessed from the ALT exchange, a division of the JSE which caters specifically for small to medium enterprises with high growth but that are not yet eligible to list on the JSE.


There are mainly three interview types, i.e. structured interviews, semi-structured interviews, and unstructured interviews (Jennings 2001; Merriam 1998; Minichiello et al. 1995). Structured interviews are described as “oral surveys”, in which the same standardized, carefully ordered questions are asked of each respondent (Minichiello et al. 1995). They use a broad research topic to formulate a set of interview questions used to guide the conversation. It allows scope for the researcher to ask probing questions in order to clarify responses (Minichiello et al. 1995). The other type is the unstructured interviews without any formal interview schedule.
Semi-structured interviews were adopted for this study. The semi-structured interviews technique was adopted because of its ability to collect detailed information. (Jennings 2001).
The advantages of semi-structured interviews are outlined in this section. The section justifies its use in this research. See table 3.5.

Table of Contents
List of Tables
List of Figures
Statement of Original Authorship
1.1 Introduction
1.1.1 Socio-Economic problems in South Africa
1.2 Gap in knowledge and Problem statement
1.3 Research Questions
1.4 Research Objectives
1.5 Research Design
1.6 Contribution to Knowledge
1.7 Conclusion
2.1 Introduction
2.2 Corporate Social Responsibility
2.3 Small and Medium Enterprises (SMEs)
2.4 Corporate Social Responsibility in SMEs
2.5 Stakeholder Theory
2.6 Johannesburg Stock Exchange (JSE)
2.7 Conclusion
3.1 Introduction
3.2 Research Problem
3.3 Research Design
3.4 Phenomological Issues
3.5 Study Population
3.6 Sampling Issues
3.7 Qualitative Data collection
3.8 Interviews
3.9 Pilot study
3.10 Analysis guide
3.11 Data Collection and Analysis
3.12 Analytical Tool (NVIvo)
3.13 Unit of Analysis
3.14 Validity and Reliability Issues
3.15 Limitations and Suggestions for Future Research
3.16 Ethical Considerations
3.17 Conclusion
4.1 Introduction
4.2 ALT Exchange
4.3 Analysis of Individual Cases
4.4 Content Analysis Findings
4.5 Detailed analysis per Sector
4.6 Terminology Preference for Social Responsibility
4.7 Analysis of Social Responsibility Activities
4.8 Analysis per Sector
4.9 Motivation for Social Responsibility involvement engaging
4.10 Link between Initiatives and Motivation
4.11 Social Ethics Committee
4.12 Phrases/Words that yielded no results
4.13 Telephone Interviews
4.14 Conclusion
5.1 Introduction
5.2 Discussions of Research Findings
5.3 Summary of Findings
5.4 Conclusion on the Research Problem
5.5 Contributions of this Research
5.6 Contributions to Stakeholder Theory
5.6.1Contribution to Social Responsibility in Small Businesses
5.7 Implications of Research Findings and further Research Directions
5.8 Conclusion to this Chapter
An analysis of small business social responsibility practices in South Africa

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