Happy employees, innovative firms: unpacking the micro-level CSR link through a generalized structured component analysis approach

Mei Peng Low and Paulo Duarte

Social Responsibility Journal, 2026, vol. 22, issue 5, 1122-1145

Abstract: PurposeThis study aims to examine the impact of micro-level Corporate Social Responsibility (CSR) on employee happiness and innovativeness, using a Generalised Structured Component Analysis (GSCA) framework.Design/methodology/approachThis study draws on Stakeholder Theory, Social Exchange Theory and Organisational Support Theory, to conceptualise micro-level CSR as a higher-order construct comprising seven dimensions. Using purposive sampling, the survey was distributed to employees in Malaysian small and medium-sized enterprises (SMEs). Responses collected were analysed using the GSCA approach.FindingsThe findings reveal that micro-level CSR is significantly and positively associated with employee happiness (ß = 0.935) and innovativeness (ß = 0.546), with happiness mediating the relationship between micro-level CSR and innovativeness (ß = 0.356). Micro-level CSR emerges as a stronger predictor of innovativeness compared to its influence on employee happiness. The model explains 87.4% of the variance in happiness and 83.2% of the variance in innovativeness, highlighting the critical role of employee-centred CSR practices in fostering positive employee outcomes.Research limitations/implicationsThis study only examines the influence of micro-level CSR on employees’ happiness and firms’ innovation. Other internal factors, such as organisational culture, and external factors, like national policy and economic conditions, could also potentially affect employees’ well-being and the firm’s innovation. In addition, this study focused on Malaysian SMEs, which limits its ability to generalise the findings to other organisational contexts.Practical implicationsThis study provides a strategic rationale for integrating micro-level CSR into organisational culture to enhance both employee well-being and innovation. These findings hold significant implications for managers seeking to cultivate resilient, engaged and forward-thinking workforces in knowledge-driven and ethically conscious organisational environments.Originality/valueThis study offers a novel contribution by conceptualising micro-level CSR as a multidimensional higher-order construct. In addition, it applies GSCA, which enables robust parameter estimation and rigorous model fit assessment. By leveraging GSCA, this study captures the interrelations between psychological and organisational constructs with greater statistical precision.

Keywords: Micro-level CSR; Happiness; Innovativeness; GSCA; Model fit (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:srjpps:srj-07-2025-0751

DOI: 10.1108/SRJ-07-2025-0751

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