SMEs’ perspective on how ethical leadership supports community engagement in buyer–supplier power asymmetric relationships

Abstract

The increasing moral challenges facing organizations flag the significance of ethical leadership. Despite the significance of promoting moral behavior, the existing literature has scarcely looked at ethical leadership in small and medium enterprises (SMEs) and studied its outcomes beyond the organization. Therefore, this study investigated the relationship between ethical leadership and community engagement moderated by the treatment of SMEs as suppliers and customers. The study argues that ethical leadership is important in helping SMEs execute community engagement activities, but that this depends on external factors. When entrepreneurs are treated unfairly by the powerful larger corporates, they will not be able to execute their activities. We conducted a quantitative study to answer the research objective and test the hypotheses. The final sample consisted of 276 participants, and the data were analyzed by using multiple hierarchical regression. The study found that ethical leadership predicted community engagement. However, the moderating role of the treatment of SMEs as suppliers and buyers on the role of ethical leadership and community engagement was not significant. The study provides insights on ethical leadership in the context of community engagement and buyer–supplier relationships. Also, the study shows that SMEs continue practicing ethical leadership and community engagement, regardless of how they are treated as suppliers and buyers by large companies, alluding to the importance of ethical leadership. Lastly, the study provides insights into the interactions between leadership and community engagement in the context of buyer–supplier power asymmetry.