33 Chapter III Research Methodology This chapter illustrate how the research was executed. This chapter consist of four section that specifically shown the data collection process, the design of the questionnaire used and the hypothesis testing procedure. This study using quantitative approach to get a complete understanding of the corporate social responsibility (CSR) in SMEs phenomenon. III.1 Introduction This study is conducted prominently to compared to large corporations, there is relatively limited research available on CSR practices in SMEs. Most of the existing research in CSR has focused on larger organizations. Thus, conducting research specifically on CSR in SMEs helps fill the knowledge gap and provides a deeper understanding of how CSR is implemented and its impact within this specific context. SMEs play a significant role in the economy of many countries. They are often major contributors to employment, innovation, and overall economic growth. As such, understanding the CSR practices and challenges faced by SMEs is crucial for ensuring sustainable development and responsible business practices at a grassroots level. SMEs, despite their smaller size, can have a considerable impact on local communities and the environment. Exploring CSR practices in SMEs helps shed light on their potential social and environmental contributions, such as promoting community development, supporting local suppliers, reducing environmental footprints, and enhancing social well-being. Research in this area can identify best practices and help SMEs integrate CSR into their operations effectively. SMEs often have close relationships with their stakeholders, including customers, employees, suppliers, and local communities. Understanding how CSR initiatives in SMEs impact these stakeholders and how they can actively participate in CSR activities can foster trust, loyalty, and positive relationships. Research can identify effective strategies for engaging stakeholders in CSR practices and establish guidelines for SMEs to build sustainable relationships with their stakeholders. 34 The population of concern in this study is SMEs Owners or Managers all of the SMEs Actors who especially implemented CSR in Indonesian’s SMEs. The population used in this survey is SMEs Owners or Managers who implemented CSR in Indonesian’s SMEs because considering the questionnaire designed tend to be related to SMEs. In this study a questionnaire was developed based on past literature with some modification related to Corporate Social Responsibility (CSR). The Questions regarding related variables were answered on a 5-point Likert scale. To test the proposed relationships between corporate social responsibility (CSR) variables, namely social responsibilities, legal responsibilities, and economic responsibilities. And also examines the mediation between corporate social responsibility (CSR) and corporate financial performance which consists of access to financing, customer statistics and innovation, Partial Least Square Structural Equation Modelling (PLS-SEM) was used to identify the value items that significantly affect corporate social responsibility (CSR) to Financial Performance. III.2 Research Methods Quantitative data analysis is used in this study because the aim of this study is to get comprehensive understanding of factors Corporate Social Responsibility for SMEs in Indonesia and to understand the effect of Corporate Social Responsibility on the financial performance of SMEs in Indonesia. Therefore, the methodology of this study is divided into three main steps. Figure III.1 shows the three steps of this study including preliminary study in the first step that contains problem identification or reasoning in choosing the topic along with searching the literature review about CSR in SMEs. In second step there is data collection by doing a survey as a method. In final steps there is data analysis, a collected data was analyzed by using Partial Least Square - Structural Equation Modeling PLS-SEM for the hypothesis testing. 35 Figure III. 1 Research Design This study is using survey as research method. The study begins with developed questionnaire on CSR in SMEs. The survey questionnaire was construct with reference to Stakeholder theory, institutional theory and governance theory as well as perceptions of CSR. This framework is used to determine the effect of CSR attributes on Corporate Financial Performance (CFP) mediated by Innovation (I), Access to finance (AF) and customer satisfaction (CS), as well as to determine the effect of Economics Responsibility (ER), Legal Responsibility (LR), and Voluntary Responsibility (VR) to CSR. Therefore, for survey purposes, a structured questionnaire was designed with 184 respondent profile items and 36 main question items which are measured by using five-point Likert- scale with 1 define as strongly disagree, and 5 strongly agree. The operationalization of variables is summarized in Table III.1. The questionnaire Identifying problem Literature Review Survey Data Analysis Reliability/Validation Conclusion Step 1: Preliminary Study Step 3: Data Analysis and Conclusion Step 2: Data Collection Questionnaire design 36 was organized into 10 sections: the Profile of respondents, Voluntary Responsibility (VR), Legal Responsibility (LR), Economics Responsibility (ER), Corporate Social Responsibility (CSR), Innovation (I), Access to Finance (AF), Customer Satisfaction (CS), Control variables which include company size, company age, ownership (FP), and Corporate Financial Performance (CFP), where the list of questionnaires is on the Appendix A. Then, the questionnaire was distributed to respondents who are SME Managers or Owners in Indonesia. Table III. 1 Operationalization Variable and Item Question No. Variable Sub- Variable Question References 1 Voluntary responsibilities VR1 I feel it is important to pay attention to social and environmental impacts in the company's business operations. (Ortas et al., 2015; Tashman & Rivera, 2010; Xie et al., 2019; Yu, 2012) VR2 I believe that companies must contribute to society through CSR programs. (Ortas et al., 2015; Tashman & Rivera, 2010; Xie et al., 2019; Yu, 2012) VR3 I feel that the adoption of ethical and moral values can assist companies in implementing CSR activities. (Ortas et al., 2015; Tashman & Rivera, 2010; Xie et al., 2019; Yu, 2012) VR4 My company is involved in voluntary projects that aim to improve people's quality of life. (Ortas et al., 2015; Tashman & Rivera, 2010; Xie et al., 2019; Yu, 2012) 37 2 Legal responsibilities LR1 Legal obligations have a significant influence on companies in carrying out corporate social responsibility (CSR) activities. (Frederick, 2018; Gainet, 2010; Williams et al., 2008) LR2 Fulfillment of legal obligations is an important factor influencing companies in implementing CSR activities. (Frederick, 2018; Gainet, 2010; Williams et al., 2008) LR3 Companies are expected to routinely carry out CSR activities as a form of fulfilling legal obligations. (Frederick, 2018; Gainet, 2010; Williams et al., 2008) LR4 I feel compelled to learn and understand more about relevant legal responsibilities for MSMEs. (Frederick, 2018; Gainet, 2010; Williams et al., 2008) 3 Economic responsibilities ER1 I believe that MSMEs that have good economic performance tend to be more involved in corporate social responsibility activities (Machmuddah et al., 2020; Oba, 2011; Rossi, 2011; Van Nguyen et al., 2022; Vărzaru et al., 2021) ER2 I feel that MSMEs that are experiencing financial pressures prioritize corporate social responsibility activities less than (Machmuddah et al., 2020; Oba, 2011; Rossi, 2011; Van Nguyen et al., 2022; Vărzaru et al., 2021) 38 activities related to economic performance. ER3 In my opinion, MSMEs that actively implement economic responsibility have a more positive impact on their corporate social responsibility activities. (Machmuddah et al., 2020; Oba, 2011; Rossi, 2011; Van Nguyen et al., 2022; Vărzaru et al., 2021) ER4 MSMEs must be committed to optimizing the use of available economic resources to have a positive impact on the community and the environment. (Machmuddah et al., 2020; Oba, 2011; Rossi, 2011; Van Nguyen et al., 2022; Vărzaru et al., 2021) 4 Corporate social responsibilities CSR1 The implementation of CSR activities in companies has a positive impact on the company's financial performance. (Akben-Selcuk, 2019; Ali et al., 2020; Ameer & Othman, 2012; Fabozzi et al., 2021) CSR2 The company's CSR activities are an important factor in making investment decisions.