Discussion
The empirical results of our study reveal that government intervention positively influences the sustainability performance of an SME which in turn positively influences business performance of the organization. This implies that government role is instrumental in making the SMEs more responsible towards the social and environmental impacts of their operations. This result is in line with the earlier studies in the context of other geographical areas. Regulatory and legislative interventions by the government and increased number of awareness programs, related articles and journals have boosted up some socially responsibility practices in SMEs in Romania (Violeta and Ileana, 2011). Also the market pressures and laws are major key drivers for CSR in SMEs (Elena et al, 2011). Mohammed et al (2016) suggested that Government action and introduction of green taxes, high energy price are some of the factors promoting environmental practices in SMEs in UK.
Our results also show that collaborative approach of operation impacts sustainability performance in SMEs in a positive way. Enhancement of sustainability performance through collaborations has been well supported in earlier studies. A cluster approach or a network model can address the limitations faced by the SMEs while trying to implement CSR individually (Heidi and Shankar, 2011). Sustainability practices can be strengthened by forming a forum where in different NGO can facilitate sharing CSR best practices and can jointly address different sustainability related issues and challenges (Janet and Nina, 2010). A network perspective has much to offer in facilitating the transition towards a network level culture of sustainable business practices (Jamsa et al, 2011). Operating together, in the form of clusters, or with the support of NGOs in introducing CSR can address the resource constraint and implementation challenges faced by the SMEs (Magdalena and Popowska, 2015).
The result of our analysis with data from 225 Indian MSME also supports that enhanced sustainability performance help the SME organizations improve their business performance. This means that SMEs also through communication of their sustainable and responsible business practices can create a positive image in the society which in turn help them to achieve customer loyalty, employee satisfaction which ultimately lead to improved business performance. This finding has also been supported by earlier researcher for SMEs in different parts of the world. Heather and Gapp (2014), in Australian SME context has mentioned that greater social and environmental engagement have directly attributed to the SMEs’ improved business performance. In Netherlands, SMEs with sustainability integrated in their innovation processes show improved economical performance (Hilke, 2010). Luis and Ricardo (2014) empirically established the existence of a valid positive relationship between companies’ social performance and key business results for SMEs in Portugal.
Moreover our results on moderating effect of company size on the relationship between the sustainable performance and business performance shows that sustainability performance in driving business growth is more effective in case of medium size companies than smaller firms. Smaller companies have an added advantage of structural flexibility over bigger firms and are more driven by the individual value system of their owner managers. This suggests that a strong value system and an ethical consideration on the part of the SME owner will help in driving sustainable business practices in the organization. Moreover small firms need to bring in more internal discipline and better stream line their operations at individual firm level before leveraging from collaborative operation at industry level and government facilitations at policy level.