Strengthening SME Performance Through Integrated CSR, Innovation, and Competitiveness

This study investigates the influence of Corporate Social Responsibility (CSR) and competitiveness on SME performance through innovation in Indonesia. Employing a quantitative approach, data were collected from 200 SMEs using structured questionnaires and analyzed through Structural Equation Modeling (SEM-AMOS). The analysis explores both direct and indirect relationships among CSR, innovation, competitiveness, and performance. The results demonstrate that CSR significantly influences innovation, and innovation significantly affects competitiveness. However, CSR does not have a direct impact on competitiveness or SME performance. Instead, competitiveness serves as a significant mediator between innovation and performance, while innovation mediates the relationship between CSR and competitiveness. This research provides an integrated framework connecting CSR, innovation, and competitiveness in driving SME performance, highlighting the pivotal role of innovation-driven CSR strategies. The findings underscore the need for SMEs to adopt CSR initiatives that foster innovation to enhance competitiveness and performance. Policymakers are also encouraged to design programs that support innovation-based CSR activities to promote regional economic growth. Despite its contribution, the study’s scope is limited to SMEs in East Java, suggesting the need for future research across wider geographic contexts and with longitudinal data to validate and extend the proposed model.