CSR logics of SMEs: The case of F&B service and construction sectors in Malaysia

Abstract:

There is a growing interest in Corporate Social Responsibility (CSR) in developing countries in the literature. This paper focuses on CSR in Malaysia’s Small and Medium-Sized Enterprises (SMEs). The objective is to explore the multiple logics that drive the practices of CSR. This involves in-depth recorded interviews with owner-managers of SMEs in the construction and food & beverages (F&B) sectors. The results show that CSR policy intervention for SMEs are underdeveloped. However, owner-managers CSR behaviour is shown to be influenced by cultural norms, including karma. The paper concludes with a discussion of the implication to theory and practice.

Keywordscorporate social responsibility, institutional logics, karma, small and medium-sized enterprises, developing

countries, Malaysia Introduction

Corporate Social Responsibility (CSR) in Small and Medium-Sized Enterprises (SMEs) has started to gain its momentum in the beginning of 21th century, with increasing numbers of scholars looking into the peculiarities of CSR in SMEs and some actively contributing to the CSR literature (Spence & Rutherfoord, 2003; Jenkins, 2006; Perrini, et al., 2007; Jamali, etal., 2009; Wickert, et al., 2016). The reason for this increasing attention for investigating CSR of SMEs in a developing context is because, (1) the substantial part of the world’s population is made up of developing countries (Jamali & Neville, 2011), (2) SMEs are important part of the economy in developing countries (Jamali & Neville, 2011; Lee, et al., 2012; Jamali, et al.,2017a) as they provide jobs and employment to the society, gives people who have fewer qualifications to work and gain experiences (Gao, et al., 2011), alleviation of poverty and foster innovations through entrepreneurs (Jamali, et al., 2017a), (3) the majority of business establishments are SMEs and in aggregate would have a significant impact on the economic, social and environmental well-being of the country. (Luetkenhorst, 2004; Eurostat, 2012; deKoK, et al., 2013; ERIA, 2014). However, social and environmental problems in developing countries particularly in SMEs could be problematic as a few authors have highlighted the labour rights abuses and the environmental pollution created by some SMEs (Lund-Thomsen,et al., 2016). Therefore, there is a need to investigate the factors that drive and hinder CSR of SMEs in a developing country context as such studies is limited (Jamali, et al., 2017a). Furthermore, the formation of CSR is contextual based and therefore studies conducted in developed countries should not be apply to developing countries because of their idiosyncratic conditions such as market forces, social-political environment and cultural difference (Tilt, 2016). Even the variation of industries within in the same country is an important aspect when comes to firm’s innovation and policy making (Autio, et al., 2014). Therefore, sectoral CSR research is encouraged and highlighted by researchers due to the lack of sector comparison studies in the literature (Aguinis & Glavas, 2012; Amaeshi, et al.,2016; Wickert, et al., 2016).

The aim of this paper is to investigate the CSR logics of SMEs in different sectors by understanding their conceptualisation and practises of CSR. Studies regarding CSR of SMEs in Malaysia are relatively scares, only a handful of studies have been conducted without sectoral focus. Therefore, this paper will focus on Malaysia’s SMEs in F&B service and

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construction sector. The key questions we pose in this paper are what is the logic being used by owner-managers in SMEs for constructing CSR logics? How multiple logics are used in the implementation of CSR strategies by owner-manager of SMEs? And what are the reasons behind the competing and complementary logics of SMEs owner-managers in an inter-institutional system? In order to address the key questions, we adopt the institutional logics perspective, which helps to focus on the influence of ideal type logics such as state, market, religion, family, corporation and professions when investigating the thought process of CSR and the stakeholder theory to explore whom the practices of CSR is performed to. In order to do this, in depth recorded interviews are conducted with 48 SMEs in Malaysia’s food and beverages (F&B) service and construction sector. The sample is split into 25 SMEs in construction and 24 SMEs in F&B service sectors and 20 firms around Klang and 27 firms around Kuala Lumpur region to highlight any regional differences. Definitions of CSR varies across the literature, in order to give a fuller understanding of what CSR is, we classify CSR into three levels as follow, (1) low-level CSR which focuses on basic compliance to the law and regulations, (2) mid-level CSR is where firms go beyond basic compliance but limited to primary stakeholders1, (3) high-level CSR is where firms’ contribution is beyond primary stakeholders. We explore and compile the subtle logics surrounding CSR, revealing the thought process and the practices that underpin and hinder CSR.

This paper aims to make several contributions. On a theoretical level, this research addresses the significant gap in the literature by adding more knowledge to CSR in SMEs. While institutional theory is widely used in the study of CSR (Frynas & Yamahaki, 2016), institutional logics remains limited (Jamali, et al., 2017c) hence, we are using institutional logics approach to tease out the embedded logics in CSR. Empirical studies in this area is particularly scant (Nejati & Amran, 2012; Nejati, et al., 2014), hence this research will also contribute to the knowledge with primary empirical data, not just conceptual. There is still lack of sector comparison in the literature and also individual analysis (Aguinis & Glavas,2012; Amaeshi, et al., 2016; Wickert, et al., 2016). Hence this research will be focusing on sector comparison and individual as the core of research, and linked them to wider level such as organisational and institutional level. This study also contributes to the CSR literature in the context of developing countries, particularly Malaysia that is aiming to transform into a developed country. On a practical level, the pressure from stakeholders of SMEs, especially their key clients or customers are one of the significant drivers for their CSR practices and therefore, SMEs are beginning to feel the importance of having CSR practices (Nejati, et al.,2014). However, the ‘one fits all CSR agenda’ by the Malaysian government does not always work because different businesses in different sectors would have their own motivation and obstacles when comes to CSR practices. Therefore this research aims to fill the gap of practitioners’ perspectives and practices on CSR, particularly in the F&B service and construction sector.

Literature review

It is clear that the CSR literature is divided into two groups, the big and the small firms’ CSR. This separation is due to the distinguishable criteria such as sales turnover, number of employees and asset (Curran & Blackburn, 2001). Moreover, small firms are less visible than big firms and therefore less pressure is imposed on them (Hoogendoorn, et al., 2015) and pressure is even less when comes to developing countries because of weak enforcement that fails to materialise social goods (Romano, et al., 2017). However, the concepts of CSR are not new to developing countries and this is because of different factors such as community

1 Primary Stakeholders – Stakeholders that is essential for the survival of the firm (Clarkson, 1995).

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norms, values and religions are the drivers that shape the CSR environment (Desta, 2010;Jamali & Karam, 2016; Barkemeyer, 2007; Hou, et al., 2016). In other words, CSR has been long established as part and a role of the value system in the developing countries without formally recognised and practised systematically. Globalisation is also one of the major factors that drive the movement of CSR in developing countries (Jamali & Karam, 2016;Visser, 2008; Scherer & Palazzo, 2008). The internationalisation of firms has spread the formalised idea of CSR and practise across various countries. As suggested by some scholars, in order for firms to win contracts or become as part of the global supply chain, they have to comply with the institutionalised CSR in order to meet their demands (Soundararajan, et al.,2018). For example, a study conducted by Lim and Phillips (2008) shows that some contractors of Nike were incentivised to confirm to Nike’s CSR code in order to win business relation. However, some owners-managers of firms frequently violate such demands (Soundararajan, et al., 2018; Jamali, et al., 2017b) and therefore it creates the notion of SMEs are poor at CSR. Some scholars suggest that CSR does exist within SMEs in developing countries (Jamali, et al., 2017a) although SMEs do not always apply ethical practices in their business. However, the existence of CSR is rather unsystematic and it is largely depends on individuals or owners-managers perceptions, personal values and philosophies (Jamali &Karam, 2016) hence, the existence of heterogeneity among SMEs.

CSR in Malaysia Context

CSR policies, guidelines and encouragements are promoted by several governmental bodies in Malaysia such as (1) The Companies Commission of Malaysia (SSM)2 which regulates all businesses and cooperate affairs in Malaysia, (2) The Brusa Malaysia (2015) provides guidelines and enforcing corporate social reporting in MNCs as part of the listing rules. (3) The Security Commission (SC) of Malaysia responsible for the corporate governance code in Malaysia (Suruhanjaya Sekuriti, 2016). The CSR agenda was published by the Companies Commission of Malaysia (SSM) as Corporate Responsibility (CR) in year 2009. SSM (2009,p. 27) defines CR as “Commitment by corporations and businesses towards achieving sustainability in the social, economic and environmental conditions in furtherance to the pursuit of profitability.” According to SSM (2009, p. 28), the definition above encompasses four elements. The first suggests that CR concept is apply to all companies regardless whether it is public or private, the operation sizes, nature of the business and whether it is listed or not. The second highlights the concept of triple bottom line (people, planet, profit) should not be limited to large companies with separate legal entity status but also to sole trader and partnership. The third includes the quest for sustainability and conduciveness, which encourage businesses to co-exist with concept of sustainability that dictates triple bottom line. The fourth suggests the potential of harmonisation of profitability and sustainability, which also implies that sustainability, can be one of the drivers for pursuing profitability. Despite the elaboration of the elements regarding CSR, its definition reflects minimal of these four elements. Hence, it manifests the extent of elusiveness when comes to Malaysia’s definition of CSR. The CR agenda promotes one fits all CSR policy to all the companies in Malaysia regardless size and sectors (SSM, 2009) but such policy is rather too general and it does not fit all firms and sector for a number of reasons. Firstly, it is clear that small firms are not little big firms (Dandridge, 1979; Welsh & White, 1981) , this is because small firms have limited resources and rather informal structure (Gibb, 2000; Jenkins, 2006) Secondly, expectation of stakeholders from different sector would have an impact on firm’s

2 SSM is the abbreviation for Suruhanjaya Syarikat Malaysia that is widely used in English translated policy documents or English written journal articles. Therefore it is common to see The Companies Commission of Malaysia with the Malay abbreviation SSM.

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CSR initiatives (Baylis, et al., 1998), and therefore, it is not surprising if their focus and beliefs in CSR is different from big firms.

The CR agenda by the SSM is the only document that provides illustrations on the CSR activities that can be carried out by SMEs but the materialisation of it remains inconclusive. Most of the CSR guidelines and attention in Malaysia are currently catering towards big firms (Lu & Castka, 2009), such as corporate governance code by SC (2011), sustainability reporting guidelines from Brusa Malaysia (2015) and the silver book for government linked companies (GLC). Albeit SSM established a Training Academy in 2007 to promote communication on expected responsibility business conducted (RBC) among owners-managers (OECD, 2013), the lack of CSR initiative for SMEs is still very prominent (Yacob, et al., 2013). For example in the Corporate Responsibility: Guidance to Disclosure and Reporting published by SSM (2013) stated that no reporting required for SMEs, despite their highlight on the importance of SMEs’ contribution (SSM, 2013, p. 6). This is due to SSM (2013, p. 7) presumes that CSR of SMEs is likely be influenced by the CSR policies of the larger companies they worked with. However, in reality not all SMEs are incorporated in the supply chain of large companies, especially on certain sectors such as the F&B service sector. Therefore, it indicates that CSR policy in Malaysia needs improving as it is impossible to have a CSR policy that fits all sectors and hence a more sector based CSR policy is needed.

The impact of public policies on CSR in Malaysia

Public policies are the building blocks that underpins the CSR agenda of Malaysia(Belmonte, 2012). Figure 1 shows the overlapping of social, environmental and economic policy that impact on CSR.

Figure 1 Public policies in Malaysia and CSR

The National Policy on the Environment (DASN)3 is the only policy document by far proposed by The Ministry of Science, Technology & the Environment to harmonise profitability objective and sustainability of the environment (Mosti, 2002). The policy also sets out strategies toward key areas that would enhance the knowledge of private and public sectors regard to management and importance of the environment (Mosti, 2002). However, 3 DASN is the abbreviation for Dasar Alam Sekitar Negara and it means National Policy on the Environment. English term with Malay abbreviation is commonly used in the website of the Ministry of Natural Resources & Environment. (see: https://www.doe.gov.my/portalv1/en/tentang-jas/pengenalan/dasar-alam-sekitar)

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Social policy

Environmental policyEconomic policy

CSR

the question of to what extent and how effective are these principles and strategies for SMEs still remains inconclusive. Besides, the environmental policy in Malaysia is also subject to critiques from scholars as weak, fragmented and inconsistent (Hezri & Hasan, 2006). Despite the infancy of Malaysia’s environmental policy, the rise of global standards such as International Organisation for Standardization (ISO) and United Nations global compact has influenced significantly in Malaysia’s participation (Hezri & Hasan, 2006). Therefore, despite the patchy environmental policy in Malaysia, the global standard has reinforced some standards that eclipse the imperfections of Malaysia’s environmental policy.

Work overload and poor conditions of work in SMEs are very common (Lai, et al.,2015) and it is not surprise that work life balance is also particularly poor in Malaysia SMEs(OECD, 2016). Moreover, discrimination, stereotypical beliefs tend to involve in SMEs’ management and resulting in social exclusion (Kitching, 2006).The Ministry of Human Resources (MOHR) have specific laws that protect employees, child and young labour, such as Act 265 and Act 1966 respectively (Employment Act, 1955; Children and Young PersonEmployment Act, 1966). The law sets out specific working hours but the minimum wage is still varied and subject to the Minister’s approval (Employment Act, 1955, p. 18). Although both Acts seem to have control and fairness toward employees, the actual workload being given from the employers and discrimination at workplace remained questionable. In other words, the laws and regulations may protect Malaysian’s labour to a certain extent, such as the amount of working hours. However, there are more underlying issues behind the veil that are not protected by the laws. The government of Malaysia has also introduced Unemployment Insurance (UI) in the New Economic Model (NEM) (NRAC, 2010). The UI protects laid-off workers by providing allowances to cover expenses and training programmes for up-skilling (NRAC, 2010). However, the funding for UI is through levies on employers and employees (NRAC, 2010). The government considered this as part of CSR obligations has raised question on whether such CSR initiative is actually beneficial, or just another additional burden for businesses (The Star, 2016). The 11th Malaysia Plan 2016-2020 for pursuing the ‘Vision 2020’ has also incorporated some imperative elements of CSR. The most prominent suggestion from the plan is to avoid the costly model of ‘grow first, clean up later’ (EPU, 2015). This indicates that the Malaysian government is promoting CSR practices as wealth creation rather than more towards philanthropy particularly in the form of “donation”. However, philanthropy is always been seen as part of CSR in the literature, even in some of the policies in Malaysia and as a criteria for CSR award. As majority of MNC’s suppliers are SMEs, the Malaysian government also encourages MNCs to influence SMEs when come to CSR and this is because, MNCs have stricter guideline, better knowledge and policies regarding CSR management. The Prime Minister’s CSR Awards that is open to all types of firms would also act as an incentive for SMEs to participate in CSR activities (OECD, 2013; Belmonte, 2012; OECD, 2016) but not many SMEs participate in such activity(ACCA, 2015).

F&B service and construction sector

The F&B service sector such as restaurants and cafés are common businesses in Malaysia and most of them are SMEs. The busy Malaysian lifestyle result in a surge of entrepreneurs to exploit the opportunity for business, the amount of restaurants and cafés proliferated substantially over the years and it is expected to grow continuously in the future(Euromonitor, 2016). Hence, the benefit from this sector to the socio-environmental well-being can be extensive in aggregate. However, according to International Labour Organisation (IOL) (2011), the working conditions in the catering sector are largely considered as poor. Besides, the environmental issues created by the F&B service sector are

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also worrying. The Thimmakkas Resource for Environmental Education (2004, p. 12), stated “that an average restaurant catering to 1,200 to 1,500 customers a week generates enough garbage to fill two 8-yard-long dumpsters”. The sector is also responsible for oil wastewater creation (Wu, et al., 2009; Alade, et al., 2011) and restaurateurs in Malaysia are weak at maintaining grease trap (Mustafa, 2017; Nathan, 2017; Zahiid, 2017). Despite of aforementioned, “approximately 95% of the waste a restaurant produces can be recycled and/or composted” (San Francisco Department of Public Health, 2009, p. 4), however, implementation of environmental friendly practices by the restaurateurs in Malaysia remains scant (Kasim & Ismail, 2012). SMEs are generally weak in the compliance with laws and regulations; this is because the lack of awareness and perception of cost associated with the compliance (Petts, et al., 1999). For example, the unavoidable cost for grease trap maintenance that has enforced by Kuala Lumpur City hall on January first 2017 for only about 6000 restaurants has upset some restaurateurs (Mustafa, 2017; Zahiid, 2017). The reason for this enforcement is due to restauranteur weak management, which restaurateurs strongly opposed (Mustafa, 2017; Nathan, 2017; Zahiid, 2017). However the enforcement only applies for the restaurants in Kuala Lumpur, which indicates that restaurants outside Kuala Lumpur are exempted so far. The weak enforcement of the legislation by the government is also one of the major factors which drive weak compliances in SMEs (Petts, etal., 1999; Revell & Blackburn, 2007; Revell, et al., 2010). Therefore owner-managers are the main dependent when enforcement is frail (Revell, et al., 2010). Hence, by understanding the factors that drive and hinder owner-managers to be socially and environmentally responsible is crucial for the well-being of the society.

The construction sector on the other hand, their social-environmental practices has reached some level of maturity. This is because the momentum for green/sustainable construction is growing (Kibert, 2012; Yusof, et al., 2016). Moreover, there is also a rising pressure to implement effective working practices across stages of construction (Ikau, et al.,2013; Ikau, et al., 2016). Construction sector in Malaysia demonstrates promising growth in the fourth quarter of 2016 (DOSM, 2017b). According to the Malaysia SMEs 2012-2020 Masterplan (2012, p. 46) construction related services are expected to have new growth opportunities for SMEs. SMEs are the core of construction sectors in Malaysia, they accounting for approximately 90% of companies that accept construction work (Kamal &Flanagan, 2014). However, this sector is responsible for one of the single largest waste streams in the country as a result of increasing demand for infrastructure, residential development and so on (Begum, et al., 2010; Ikau, et al., 2016, p. 12). Albeit there are a number of policies, legislation targeting social and environmental issues (Bohari, et al., 2015;Ikau, et al., 2016), self-regulation remains one of the crucial drivers in the construction sector for social and environmental well-being (Revell & Blackburn, 2007). Yet there is little knowledge about owner-managers SMEs CSR practices in the construction sector of Malaysia. However, the increasing pressure from large clients and their awareness of CSR due to the rising of sustainable constructions seems to influence SMEs in the construction sectors to be more aware of their CSR practices. This is because “small businesses are not autonomous and they are subject to the actions of others” (Spence, 2016, p. 32). Particularly when SMEs in the construction sector that are involved in the value chain or as a supplier of a large firm. As suggested by Abidin et al, (2013) the involvement and demand of client in sustainable construction will improve sustainable condition in the construction sector. Therefore, in theory, SMEs will accommodate their client’s need in order to win contract and one of the ways to do so, is to practice CSR. However, the situation might be different if their clients do not practice CSR and are more radical capitalist minded. Hence, it would be very likely to have an adverse effect on the consistent CSR practices of owner-managers in SMEs.

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Theoretical Backdrop

Businesses cannot survive without a person’s control and people’s support, owner-manager is the person who has control over the business and their stakeholders are the people who support their business. We adopt institutional logics perspective to understand the conditions that influence the formation of CSR logics of owner-managers in SMEs, and stakeholder theory to further reveal the major stakeholders that supports of hinder the practises of CSR. The adoption of these two theories as analytical framework will provide rich complementary insights of external and internal drivers of CSR in SMEs. Institutional logics perspective analyses the interrelationships among owner-managers, the firm in a social system (Thornton,et al., 2012). This would help us to see which of the ideal type logic such as family, religion, state, market, professions and corporation influence the CSR logics of owner-managers in SMEs. Values are inalienable elements of logics but defining values can be difficult as different scholars would have their own definition of values. The definition of values defined by Rokeach (1973, p. 5) as “enduring beliefs that a specific mode of conduct is personally or socially preferable to an opposite or converse mode of conduct or end-state of existence”. Furthermore, Schwartz and Blisky (1987) discovered five features that are commonly shared by most definitions of values: (1) concepts or beliefs, (2) about desirable end states or behaviour, (3) transcend specific situation, (4) guide selection or evaluation of behaviour and events, and (5) are ordered by relative importance. In this paper, we treat individual’s values as an enduring beliefs which drive the “latent guides for evaluations of the social world” (Hitlin & Piliavin, 2014, p. 365). For example, Dahlman and Grosvold (2017) found that the environmental managers talked about their belief, values and norms that trigger moral imperative to act and the values are reflected in the emerging central environmental logic.

Stakeholder theory is well-known in organisational and CSR studies, the theory involves managing stakeholders that are more than simply direct financial contribution but also the interest and well-being of the non-financial contributors to the firm (Phillips, et al.,2003). Although stakeholder theory is generally being used for evaluating MNCs in terms of CSR, many authors have been using stakeholder theory for evaluating SMEs as well. For example, Tang and Tang (2012) used stakeholder theory for evaluating Chinese SMEs in terms of their CSR engagement and CSR orientation. Hoogendoorn, et al. (2015) applied stakeholder theories in order to investigate SMEs motivation towards environmental practices in 36 countries. Despite stakeholder theory received criticism as not so appropriate to be used for analysing CSR in SMEs, Russo and Perrini (2010) suggest that the theory should not be ignored. This is because the firm would have their own particular number of stakeholder regardless sizes and the theory can also be used for complementing other theories, thus it promising to be part of the CSR analysis in SMEs.

Methodology

In-depth recorded interviews were conducted with owner-mangers of SMEs in F&B service and construction section in Malaysia. A total of 48 companies were interviewed, 23 in F&B service sector and 25 in construction sector. Interviews lasted between 30 minutes to 2 hours and were also split into Klang area and Kuala Lumpur area to highlight any regional differences. Interview based data collection is commonly used on institutional logics, e.g., (Greenwood & Suddaby, 2006; Reay & Hinings, 2009; Dahlmann & Grosvold, 2017), and provide rich source when the research focus is to understand individuals’ patterns of activities. Recorded interviews allow us to reply their thoughts, interpretations, justifications

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and explanations and therefore to tap into emic perspective of owner-managers’ CSR logics and practices. The interview questions were open-ended, this is to promote freedom and encouragement in continuous discussion, providing rich information in comparison with closed ended questions (Patten, 2002). Examples were also encouraged to tease out participant’s recent experiences which give insights to CSR practices (Sharma, et al., 1999). Questions were designed with basic simple wording and indirectly tease out CSR thoughts and activities, the CSR terminology will reveal around the end of the interview in order to test participants’ familiarity towards CSR.

The research design employs a purposeful sampling technique that is used and it is also considered as an appropriate technique for qualitative research as far as the attitudes and the behaviour of the subject matter is concerned (Marshall, 1996; Etikan, et al., 2016). Small firms in F&B sector is being approached through convineint sampling, this is because the number of restaurants and cafes are substantial and it is not difficult to find another if one is being rejected. In fact, restaurants are easier to apporach incomparison with construction firms, this is because for restaurants and café owners view everyone as their potential future customers, therefore chances of them for participantion is higher than construction firm. SMEs in construction sector is more difficult to access due to their busy schedule and therefore personal contacts and snocallball method is used to gain access to interview these firms, snowball sampling is the most effective way to gain trust, because of the previous participant’s refereal.

As for the definition of SMEs we follow the SME corp Malaysia’s definition as follows,

Table 1 Definition of SMEs in Malaysia

Company Size Services and other sectorsMedium-sized Sales turnover: RM 3 mil ≤ RM20 mil OR Employees (full-time) : From

30 to ≤ 75Small Sales turnover: RM300,000 < RM3 mil OR Employees (full-time): From

5 to <30Micro Sales turnover: <RM300,000 OR Employees (full-time):From <5

‘Full-time employees include all paid workers working for at least 6 hours a day and 20 days a month; or at least 120 hours a month. Full-time workers also include foreign and contract workers. However, the definition excludes working proprietors, active business partners and unpaid family members or friends who are working in the business and do not receive regular wages’ (SME Corp., 2013, p. 3).

The sample of SMEs in both sector fulfilled the criteria of: (1) the firms is not publicly listed on any stock exchange, (2) not a subsidiary of a large firm, (3) not subsidiary of a listed firm. For SMEs in F&B services they all would have a premise or an area where seats are available for consuming food and drinks. Premises that are shared with other food and drinks businesses for example hawker centre, food court, restaurants and cafes in the malls where owner-managers is not the main authority are excluded. The area for food and drink consumption can be indoor, outdoor or partially indoor or outdoor. The sample does not include street hawkers. The sample chosen for this research must also have both food and drinks preparations in their premises. Food and drinks preparations are from scratch and/or outsource from other companies. Preparation methods include cooking, heating up food or

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any methods that would lead to waste creation. Sample of SMEs in construction sector includes firms that are involving in partial or whole project of build or deisgn or both. Sample includes, developers, main contractors, sub-contractors, architecture firms, and interior designers.

Data Anlysis

The recorded interviews were manually transcribed and analyse using computer assisted qualitative data analysis software Nvivo11. Transcribed data were analyse in six phases using Braun and Clarke’s (2006) step by step guide (but flexible) for thematic analysis. In phase 1, transcribed data were read several times to have grab the settings and the social reality of owner-managers, the recorded interviews is the main source evidence with post interview conversation notes as other source of evidence reinforcing the main source. In phase 2, we look for conditions that fall under the three levels of CSR that is being defined, (1) low-level CSR which focuses on basic compliance to the law and regulations, (2) mid-level CSR is where firms go beyond basic compliance but limited to primary stakeholders, (3) high-level CSR is where firms’ contribution is beyond primary stakeholders. An initial of 195 codes were generated, the codes consisted attributes of attitudes, values, practices, beliefs and obstacles that is scattered across 195 codes. In phase 3, the 195 codes were constantly reviewed and compared with other codes, this was where first order codes were formed. Codes were carefully selected for their similarities and differences, several codes were being merged and some were being grouped into categories. Some codes are generated but do not seem to belong anywhere but it is being kept for possible future use. In phase 4, all categories went through several times of reviewed and compare again with other categories to ensure that the pattern is coherent. This was where second order codes are formed as themes, which consisted of grouping the same categories to form a higher level explanation. In phase 5, we group the themes to infer the presence of institutional logics in both F&B service and construction sector and in phase 6, we display the data in a systematic manner to demonstrate the relationship among the levels of CSR, stakeholders, CSR practices, first order coding, second order coding and institutional logic triggers.

Main Findings (Preliminary)

The findings are structured into two divisions, F&B service and construction sector. Comparison is made by listing the stakeholders, levels of CSR and CSR practices from the two sectors. This demonstrates the different stakeholders in the two sectors and firm’s CSR practices. The stakeholders are being organised into three levels in corresponds to the firms’ CSR levels and the first and second order coding shows the drivers behind CSR practices towards different stakeholders. Lastly, the second order coding are grouped into aggregate dimensions where logics are presented as the embedded drivers behind CSR logics and practices. The findings show that low-level CSR practices appears to be the same in both sector, but the idea behind such practice is different. For F&B SMEs, compliance is essential for business operation but in construction sectors appears to be seen as professional and also for fulfilling their client’s need. Despite the differences, both of their intentions fall under legitimacy which it is part of market logic. Market logic consists elements associate with basic

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Figure 2 Structure coding of CSR logics

Low-level CSR F&B service stakeholders CSR Practices First order coding Second order coding for themes Logic triggersBasic compliance to law and regulation

Local council Government agencies

Comply to federal laws Comply to state laws Comply to local government

laws

Essential for business operationAvoid penalty and fines

Legitimacy Market logic

Mid-level CSR Employees Customers Suppliers

Employee benefits Develop relationship

through communication Shows care

Take care of employees they will take care of your business Maintain and attract new customers Free marketing

Win-win Karma logicBeyond basic compliance but limited to primary stakeholdersHigh-level CSR Local school

Local community Local charitable

organisation Local religion affair Competitors

Donation and Sponsorship Internship for students Feeding the poor and

homeless in the local area Provide job opportunity for

people with stigma

Chain reaction Cycle FairnessGive and take

What goes around comes aroundContribution beyond primary stakeholders

Low-level CSR Construction stakeholders CSR Practices To be seen as a professional to stakeholders Fulfil client’s need

Legitimacy Market logicBasic compliance to law and regulation

Local council Government agencies Project provider

Comply to federal laws Comply to state laws Comply to local government

lawsMid-level CSR Employees

Customers Suppliers Business associates

Employee benefits Develop relationship

through communication Shows care Adopt green tool and

certification

Retain employees Maintain good relationship with client Establish connections Win a tender Maintain good relationship with business associates Requirement of a project

Win-win Karma logicBeyond basic compliance but limited to primary stakeholders

High-level CSR Local community where their project is or going to be.

University students

Donation and Sponsorship Internship for students Involve in community

project

Establish presence in the local Gain fresh ideas and knowledge from internship students Provide job opportunity and experience for students

Business strategy Market logicContribution beyond primary stakeholders

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Market logic of F&B services SMEs

Legitimacy Businesses cannot start operation without complying with the basic regulations, local council will come to the premise and check.

Failure to comply with the regulations, fine will be introduced and this is a cost to the business that owner-managers want to avoid at all cost.

Market logic“it is part of the requirement of the licencing agreement that we must have a grease trap, at least have grease trap under the basin so that the oil does not goes to the drain and caused blockage”

“Every restaurant is the same, they must have grease trap and it is part of the registration for the licence, we have to do that as well.”

“this is a must, when the health inspector comes, when these people come to inspect you need to have licencing and bomba certificate as well”

Karma logic of F&B services SMEs

Win-win Owner-managers take good care of their employees as if they are

their family members, they believe if they treat their employee well, they are more likely to perform well in the company thus better business performance.

Giving their best in their service to customers, treat customer as king in exchange of good word of mouth and good business performance.

What goes around comes aroundOwner-managers not only believe in such concept but it is an idea that can be logically pattern by the owner-managers.

They see acknowledge that what they do in present is going to affect the future in some ways, therefore they feel responsible for every action they take.

Karma logic“Because we are a family restaurant, we are supposed to help each other…..We always think that give more received more…..Yeah, you help people and hopefully one day people will help you back. But it is just the way we are, I guess”

“Actually I'm a big fan of Tony Fernandes, he says that treat your employee well they will take care of your business.”

“when you are tired of what you're doing and you think about it that you are actually helping people who need food like this, then you will feel better”

“they pension (old) already and they want to find another job also very hard....so if they come here, first thing they can help me, second thing I give them food and they go back they do not need to cook anything...hahaha...and they can pass time easier...yea....this means I help you and you help me”

“Because I believe if someone do good things, good things will come to you….well life is like a magnet if you do good you will attract good”

“I believe good people will have good things happen to them”

“I definitely yes, because for me I believe in Karma, so what goes around comes around so, yeah...”

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Market logic of construction SMEs

Legitimacy Networking plays an important role in construction sector, therefore complying with the basic law is essential for the company to be seen as legitimate and capable to their clients and local authority when comes to handling projects.

Business Strategy Helping the local community, particularly in where their project is planned to carry out will establish strong presence, gain trusts and good image for the company, hence have stronger competitive advantage.

Recruiting interns give the firm new insights in building designs, interns are cheaper to hire and thus helps reduces the cost of the firm.

Market logic

“Need to meet different local councils and their regulations. Even though the general regulations accept it, does not mean the local councils will accept it…… So we have to fulfil all different local councils”

“if you want to fulfil these kind of housing, a lot of regulations which you need to follow”

“I’m still in the process of applying for one (CIDB licence), but it’s still not ready yet. Because nowadays it is very strict, if you don’t have one, no one dares to let you do”

“actually Pahang is really small, so there are not many competitions, we just need to do a bit of CSR, changed a bit, use better materials, and then business can be built”

“It is also our business strategy, we did not need to pay a lot for those experienced architects because their salaries are very very high, we cannot afford them to work with them, because to pay their salary I think we cannot do a lot of things and we are more in trying to get young graduates, because they are still fresh, they are still er....still keen and still curious, about doing things, that is actually a very good based for us, at the same time we have young people with us, we do not need to pay a lot but we pay quite reasonable”

Karma logic of construction SMEs

Win-win Retain talent and like-minded employees by offering employee benefits, treating them like a family. Owner-managers believe that showing care and making employees happy, in return they will performed better in business.

Adopting green tool and certification is to win certain tenders and also requirement of certain projects.

Maintaining good relationship through trusts triggers good word of mouth, which is a free advertisement and connections to new clients.

Karma logic

“Companies that know how to do business would normally know how to take good care of their customers, if you take good care of your customers, your customers will take care of you”

“Trust, trust means that when you give your word to your contractor and supplier, about on time on payment you should follow as you always given your promises. The trust is very important in this market in Malaysia, and whatever you promise you must perform so you only can demand your contractor and supplier their deliver and perform their work to you, come back again to win-win situation, to be in the win-win situation, so the trust, the trust can create a lot of happiness, cut down a lot of arguments, dispute, and hanky panky things”

“company with ISO, your customers will feel more easy and know you are capable to manage your company and construction site, you will know how to manage your construction in a systematically way”

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legal compliance in order for the business to operate and strategies towards obtaining new market share and being competitive. We also found that market logic is more visible in the high level CSR of small and medium-sized construction firms, their CSR practices are incorporated as part of their business strategies to stay competitive in the market. By helping the local community through means such as donations and sponsorships, internships for local universities and involving in community projects has led to good impression for the firms. The good impression has brought positive impact on their business such as locals are much more willing to let them to develop their lands, which indicate positive trust creation. On the other hand, the high and mid-level CSR practices in small and medium-sized F&B firms intertwines with the logic of karma. The logic of karma consists the idea of every action has its own consequences, which is culturally embedded in both sectors but presence in different levels of CSR. In F&B service firms, data shows that practices of high-level CSR are associated with the idea of what goes around comes around. Owner-managers believe every good intent contributes to good return and happiness, which result in owner-managers to make donation to charitable organisation, such as to old folks homes and orphanages. Furthermore, our data show some restaurants are willing to hire people with stigma, such as the homeless and ex-convicts with the intention of bringing these people back on their feet again. Mid-level CSR for both sectors are associated with the concept of win-win, the owner-managers of the firms gain tangible benefit by doing good to their primary stakeholders such as customers, employees and suppliers. The tangible benefits they observed are returning customers, good reviews, less employee turnover.

Other findings in F&B sector

We found that eateries owner-managers involve minimum in recycling. This is because (1) The lack of awareness about recycling, (2) The local council did not provide facilities for them to do so, (3) Lack of companies that do the collection, (4) owner-managers view recycling as an extra job that takes time to do so, (5) Absent of policy from the state. Some respondents confirmed as follows:

“…we do not have a proper recycling bin on site and er…I don't think they (the local council) encourage now because everybody, the whole role is using this one bin.”

“…I do not think that anybody is doing because I do not see any coloured bins you know and also the rubbish picker they just put everything in there's no separate compartment for it I don't think that probably, cause this is KL, DBKL I do not think that they encourage to do, even they do I do not think they are implementing.”

“Malaysia, our awareness on environmental is not as much as other countries so they (the local council) have not implemented like, restaurants have to do this, you know.”

“…mainly operation issues, we have to sort out the rubbish and that will be all another job together, another chore to do. But we would love to do that if there people to help out there who can help us to sort out the rubbish.”

Food waste management is usually introduced by owner-manager themselves because of two reasons, to save cost and it is culturally embedded food should not be wasted.

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“Other than the cost as part of the restaurant because it is very tight as you can imagine, er.... it's also we feel better because we are using everything as much as possible. We also design our menu a way that we can use the same things for different dishes, so one ingredient can be used in a lot of items, so that the turnaround is faster and less wastage.”“…social responsibility probably from my parents…they will say oh don't throw the rubbish here and make sure that you close your tap whenever that you wash hands, while brushing don't open the tab while brushing, you know all these things. But I always thought that it was because they wanted to save some cost but actually no it is some kind of social responsibility, like make sure you off you lights before you come out from the room all these small things actually makes you go bigger, that is why social responsibility does not start with the big corporation it start small, within yourself in your daily life.”

Other findings in construction sector

Compliance to CIDB is frail, borrowing licence appears to be normal practice in the industry. Despite it is mandatory for every firm to have the licence in order to carry out construction work, not all firms have the licence. The reason why they are still able to operate their business is because they are taking private projects such as individual houses. In order not to lose job opportunities, they are willing to accept the jobs even when the licence was not ready, as the process of getting the licence would normally take around three months to one year. Building private projects such as individual houses, trust trumps legal form, the client is putting trust in the contractor to carry out the best of their work. The constructions sector in Malaysia is always in a fast moving state, datelines are strict and contractors will have to pay compensation if they there is any delay on their work as agreed in the agreement. On the other hand, when comes to paying the contractor, it seems that delaying payment to contractors is a common practice in the sector. Despite there is an agreement on writing, it is powerless because contractors do not want to ruin the relationship with their clients. Therefore they are willing to wait for the delayed payment. Policy protection for contactors seems not very effective as they value the business relationship and connection more. Some contractors are aware of the Construction Industry Payment & Adjudication Act (CIPAA) where they can used to claim for their payment but they concern about the process taking too much of their time and energy, therefore they focus on obtaining new projects instead.

Discussion

We examine the institutional logics behind the formation of CSR logics in F&B services and construction SMEs in a developing country, Malaysia. CSR in Malaysia is strongly influence by the western ideas as shown in Corporate Responsibility Agenda published by Companies Commission of Malaysia. It is misconception that western/large firms are reflected as the standard for developing countries (Abdulrazak & Ahmad, 2014; Soundararajan, et al., 2018). Moreover, existing Malaysian CSR in SMEs studies is either focusing on one sector or involving various sectors without specific sectors comparison. Our study focuses on SMEs in F&B and construction sector, comparing two sectors in order to tease out the idiosyncratic logics behind CSR behaviour. Because of the fragmented definitions of CSR in the literature, we redefine CSR for a clearer understanding. We classify CSR into three levels and we define low-level CSR as firms focuses on basic compliance to the law and regulations, mid-level CSR is where firms go beyond basic compliance but limited to primary stakeholders, high-level CSR is where firms’ contribution is beyond primary stakeholders.

By using institutional logics perspective as a guideline in the study, our data suggest that the three levels of CSR are underpinned by karma and market logics that are culturally

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embedded in SMEs of F&B and construction sectors in Malaysia. However, when comes to the different level of CSR in each sector, one logic appears to be more influential than the other. This indicates that there is a difference in sectors when comes to motivation and practices of CSR, which contribute to the CSR literature that is lack of sectoral comparison studies (Aguinis & Glavas, 2012; Soundararajan, et al., 2018). Previous study in Malaysia highlighted that SMEs did not receive any benefits for practicing CSR activities (Nejati &Amran, 2009). However, our data suggest otherwise, specifically in construction sector as they do receive benefits for practicing CSR activities such as donation and sponsorship, adopting green tool and certification, involve in local community projects and so on (See Figure 2). These CSR activities has brought benefits such as winning a tender, gaining good impression and trust which allow the firm to penetrate the local market easier, which consistent with the findings of Perrini, et al. (2007) in Italy. On the other hand, SMEs in F&B practicing CSR with the belief of what goes around comes around, signalling stronger karma logic embedded in the sector. Despite owner-managers do not see any tangible benefit for doing CSR which is consistent with Nejati and Amran’s study (2009), they do believe by doing such good deed would result in good fortune and prevent unfortunate events. Our results give some insights into sectoral context significant when comes to CSR.

Policy intervention on CSR in Malaysia

CSR in Malaysia is influence by a number of public policies (see Figure 1) and government bodies. Corporate social reporting is being enforced on big firms in Malaysia as part of the listing rule. However enforcing CSR in small firms is still being neglected despite encouragements are delineated in Corporate Responsibility Agenda without the consideration of sector difference. Our result shows the comparable and differences between the two sectors which indicate that one fits all CSR policy/agenda should be reconsidering the focuses, especially on (1) sectoral level CSR, (2) SMEs CSR. Moreover, policy maker needs to ensure that the timing process for obtaining licence is in line with the sector. We found that certain construction firms fail to comply with the basic rules because of the poor regulatory process that takes too long to obtain a licence for construction. Because the sector is moving in a very fast phase, owner-managers do not want to miss the job opportunities and therefore operate without the licence or borrow licence from other company who has it. Such practice has become normalised as a common practice in the sector. Therefore, policy maker needs to reconsidered the burden of firms might go through for such compliance, if it is too complicated and process is taking too long, it might result in vast firms not complying which defeats the purpose of such policy.

Institutional logics

This article has introduced a different form of institutional logic called the Karma logic. This logic appears to be driven by religious beliefs but not entirely. Because some owner-managers believe in the concept of karma but not the religion. This is because owner-managers are able to logically conceptualise the consequences of their actions and in order to avoid trouble, they will avoid creating trouble. With that in their mind, they are willing to do more than just basic compliance, by taking one step further has resulted in winning more customers, better suppliers and low employees turnover.

Conclusion

This paper serves to explore the CSR in Malaysia’s Small and Medium-Sized Enterprises (SMEs) by filling the relatively underexplored CSR in developing countries. We focus on SMEs in construction and F&B sector. We discover that multiple logics drive the practices of

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CSR, most prominently karma and market. The CSR behaviours are shaped by the cultural norms which linked to the formation of karma and market logics. Despite authors have different findings regarding benefits of practicing CSR in SMEs, our results suggest that SMEs in construction sector do receive benefits such as winning a tender, gaining good impression and market penetration from practicing CSR. On the other hand, SMEs in F&B do not see any tangible benefit but their personal beliefs that is culturally embedded motivates their behaviour in CSR. Previous studies has failed to look into sector specific CSR studies, our paper contributes to the literature by showing two utterly distinctive sectors regarding their motivation and obstacle behind CSR behaviour, further showing that one fits all CSR should be reconsider.

The paper has practical implication by highlighting the struggle in construction sector SMEs for complying with the basic rules of the game. This has raised questions regarding policy and the timing process of getting licence, which shows that government could hinder SMEs in complying with the rules because of the poorly designed process. On theoretical level, this paper has contributed to the limited use of institutional logics on CSR in SMEs studies.

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