PERTANIKA JOURNAL OF TROPICAL AGRICULTURAL SCIENCE

This study applies the stakeholder theory in understanding the importance of managing good relationships between stakeholders which are useful in establishing network capital for SMEs in practising business responsibility that puts emphasis on calculative, economic, rational and professional factors. This study aims to advance our understanding of how SMEs practise business responsibility by referring to the proposed model. This study was conducted to bridge the gap between the research approach that has been widely used by social capital theory and the stakeholder approach. An exploratory case study research methodology was applied to investigate the research problem. Data was collected from 30 semi-structured open ended interviews with owner-managers of SMES in Java Island, Indonesia. Findings of this study indicated that business responsibility relies on SMEs because there is a demand from important and primary stakeholders such as buyers, suppliers and customers for economic objectives. The results of this study showed the importance of strategic and legitimacy aspects in maintaining sustainability of small and medium business.