Smes' perspective on how ethical leadership supports community engagement in buyer-supplier power asymmetric relationships

Mamabolo, Anastacia; Myres, Kerrin; Pogrund, Gideon Article Smes' perspective on how ethical leadership supports community engagement in buyer-supplier power asymmetric relationships Administrative Sciences Provided in Cooperation with: MDPI – Multidisciplinary Digital Publishing Institute, Basel Suggested Citation: Mamabolo, Anastacia; Myres, Kerrin; Pogrund, Gideon (2025) : Smes' perspective on how ethical leadership supports community engagement in buyer-supplier power asymmetric relationships, Administrative Sciences, ISSN 2076-3387, MDPI, Basel, Vol. 15, Iss. 3, pp. 1-18, https://doi.org/10.3390/admsci15030072 This Version is available at: https://hdl.handle.net/10419/321216 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Received: 22 October 2024 Revised: 9 February 2025 Accepted: 16 February 2025 Published: 22 February 2025 Citation: Mamabolo, A., Myres, K., & Pogrund, G. (2025). SMEs’ Perspective on How Ethical Leadership Supports Community Engagement in Buyer–Supplier Power Asymmetric Relationships. Administrative Sciences, 15(3), 72. https://doi.org/10.3390/ admsci15030072 Copyright: © 2025 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/ licenses/by/4.0/). Article SMEs’ Perspective on How Ethical Leadership Supports Community Engagement in Buyer–Supplier Power Asymmetric Relationships Anastacia Mamabolo * , Kerrin Myres and Gideon Pogrund Gordon Institute of Business Science, University of Pretoria, Illovo 2196, South Africa; myr[email protected] (K.M.); [email protected] (G.P.) *Correspondence: [email protected] 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. Keywords: ethical leadership; community engagement; small and medium enterprises; buyer–supplier relationships 1. Introduction Research into the relationship between ethics and leadership in entrepreneurial businesses has been explored in many studies, with some scholars finding that entrepreneurs’ ethical leadership can enhance the growth and performance of small firms (Slavec Gomezel & Stritar,2023). However, our understanding of leadership in entrepreneurial businesses that are fraught with ethical complexities in different cultural contexts remains fragmented (Aftab et al.,2022). There is still much to be discovered about how context influences the ethical behavior of entrepreneurial leaders (Vallaster et al.,2019). Such knowledge would be important because it is generally accepted that entrepreneurial businesses are engaged with the communities in which they operate (Madden et al.,2006;Wigren-Kristoferson et al.,2022). Community engagement plays a significant Adm. Sci. 2025,15, 72 https://doi.org/10.3390/admsci15030072 Adm. Sci. 2025,15, 72 2 of 18 role in the ability of entrepreneurial leaders to mobilize and acquire resources, as well as their capability to generate new resources. However, a recent review criticizes the literature for failing to treat the entrepreneur as actively engaging with their community context (Wigren-Kristoferson et al.,2022) and other stakeholders within their business environment. We argue that ethical leadership can better explain how entrepreneurs engage with their communities. The existing literature has studied community engagement as part of corporate social responsibility (CSR) (Rudito et al.,2022). Since there is no unified definition of CSR, the concept is grounded on the idea that “socially responsible companies take into account all their activities, reconcile their interests with the interests of shareholders, employees, consumers, the environment, their community and other stakeholders, as well as take responsibility for their impact on the environment” (Barauskaite & Streimikiene,2021, p. 284). An organization will require its leaders to champion the firm’s CSR engagement. In this area of research, scholars report that ethical leadership is a predictor of engagement in CSR activities (Ullah et al.,2022). While the relationship between ethical leadership and CSR activities is already known (Aftab et al.,2022;Kim & Thapa,2018;Ullah et al.,2022), it is argued that other contextual contingencies in CSR-related decisions should be explored (Nicoara & Kadile,2024). The definition of CSR by Barauskaite and Streimikiene (2021) shows that CSR has many aspects, but our interest in this case is in community engagement. Our research responds to the call for greater research into these aspects of contextual contingencies by examining the relationship between ethical leadership and community engagement in South African small and medium enterprises (SMEs) influenced by external contingencies in buyer–supplier relationships. Focusing on South Africa, one of the leading economies in Africa, could help to explain how the contextual nuances influence CSR in how SMEs engage with large companies and community engagement activities (Oduro et al.,2024). To help elucidate the relationship between ethical leadership and community engagement (Nicoara & Kadile,2024), our study provides insights into the moderating role of the treatment of SMEs as suppliers and customers by large companies in the buyer–supplier relationship, an area of research not adequately explored before. Our submission is that the relationship between ethical leadership and community engagement is contingent on two factors. First, the treatment of SMEs as suppliers has negative implications on profitability, especially if there is a power imbalance (Nabee & Swanepoel,2021). If SMEs as suppliers do not obtain their payments on time, they will not be able to engage in community activities. The same will happen when SMEs are buyers. Their limited ability to purchase in large quantities from large companies could negatively affect their businesses’ operations and performance through being charged higher prices for smaller volumes (Madden et al., 2006), ultimately having an impact on their engagement activities. Therefore, we decided to explore the relationship between ethical leadership and community engagement, as moderated by the treatment of SMEs as suppliers and customers. Our research matters because the establishment and growth of entrepreneurial businesses plays a pivotal role in the future economic and social development of South Africa. However, many markets are dominated by large companies, making it difficult for small businesses to access these markets and compete for the resources they need in an ethical manner. This situation exists, despite Broad-Based Black Economic Empowerment (B-BBEE) legislation, which incentivizes corporate South Africa to become more inclusive by integrating previously disadvantaged entrepreneurial businesses into their value chains (Shai et al.,2019). However, in practice, entrepreneurs experience the exercise of corporate power in such inclusive supply chains to the extent that it actively damages the ability of the entrepreneurial businesses to survive and grow. Entrepreneurial businesses that are Adm. Sci. 2025,15, 72 3 of 18 embedded in local communities because of their ethical management practices might have to find a way to offset the exercise of corporate power. The manuscript is organized as follows: First, we presented the introduction, which provided the theoretical framing of the study. Second, the literature review delves deeper into explaining the study’s key concepts and the formulating of the conceptual model. Third, the methodology section explains how the data were collected and analyzed. Fourth, we present the study’s findings, followed by the discussions of the findings against the existing literature. The study concludes by providing the implications for practice and suggestions for future research. 2. Theoretical Framework 2.1. Ethical Leadership The moral challenges faced in running and managing organizations have made ethical leadership important in today’s business world (Amory et al.,2024). Ethical leadership is defined as the “demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement, and decision-making” (Brown et al., 2005, p. 120). In simple terms, ethical leadership is the moral conduct of a leader in a way that follows rules and promotes the wellbeing for stakeholders (Banks et al.,2021). Moral conduct includes behavioral qualities, such as honesty and trustworthiness, promoting ethics among employees, and giving employees the opportunity to raise ethical questions (Slavec Gomezel & Stritar,2023). While ethical leadership has been studied extensively in general management and leadership literature (Banks et al.,2021;Peng & Kim,2020), the entrepreneurship space appreciates the role of ethical leadership for entrepreneurs (Pauceanu et al.,2021). This allows entrepreneurs to play a significant role in enhancing the ethical orientation of their businesses (Slavec Gomezel & Stritar,2023). Within entrepreneurial activities, the focus has been on the antecedents and outcomes of ethical leadership. The antecedents research shows that ethical leadership emerges from the entrepreneur’s own value system that is used to manage the ethical challenges within the organization (Lingwati & Mamabolo, 2023). The focus on the outcomes of ethical leadership within the entrepreneurial businesses reveals that entrepreneurs with ethical leadership can drive their firms’ growth (Slavec Gomezel & Stritar,2023). Our research focuses more on expanding the research to include the outcomes of ethical leadership. We argue that entrepreneurs with ethical leadership traits and capabilities will have a stronger engagement within their communities. 2.2. Community Engagement Community engagement is embedded within the CSR engagement research (Barauskaite & Streimikiene,2021). It can be argued that community engagement is the critical part of the firm’s CSR journey that ensures shared value creation (Rudito et al.,2022). A recent systematic literature review showed that there is a growing number of research studies on SMEs engaging in CSR activities within their communities (Oduro et al.,2024). These latest findings show that literature is shifting from the earlier focus of CSR within large companies to showcasing small businesses (Russo & Tencati,2009). SMEs are already deemed suitable for being involved in CSR because of their potential to approach social activities personally and informally, as they connect better to the needs of the communities, and they are known to engage with the communities out of real interest (Panwar et al., 2016). Further, their proximity to communities enables SMEs to be part of community activities, despite the shortage of resources (Beckmann et al.,2023). SMEs in industries that have less regulations tend to integrate CSR activities in their business models for shared Adm. Sci. 2025,15, 72 4 of 18 value rather than those in highly regulated industries, for example manufacturing, which are mandated by laws (Pillai et al.,2022). This means that engagement in social issues is inherently context-specific (Nicoara & Kadile,2024). Within the entrepreneurship literature, it was noted that small enterprises view community engagement as a duty, one that is not to be begrudged but accepted willingly (Beckmann et al.,2023;Madden et al.,2006). The authors explained that the significant driver of community engagement is to contribute to local causes and to be seen as being active in the community. The work of small enterprises within communities is seen through both active and passive activities. These activities include donations, providing training, and supporting volunteer work (Lorenz et al.,2016). We argue that ethical leaders within entrepreneurial businesses promote community engagement. However, this relationship will be influenced by how SMEs as customers and suppliers are treated by other stakeholders, such as large businesses. As large businesses contribute to the revenue of SMEs, in turn, this enables entrepreneurs to engage with their communities. 2.3. Power Asymmetry in Buyer–Supplier Relationships Business activities of SMEs involve engaging with different large companies as suppliers and customers. Buyer–supplier relationship dynamics are anchored in the supply chain, and thus help us to understand how entrepreneurs engage with large companies (Scuotto et al.,2017). Research has focused mostly on SMEs as suppliers and how they manage buyers’ experiences for competitive advantage (Kumar et al.,2022). These small businesses ensure that they meet their buyers’ expectations by enhancing their sustainability orientation, their management capabilities and their technological capabilities (Kumar et al.,2022). Understanding the nature of the relationship between the entities is important because it has implications for the parties involved during the engagement, regardless of their size (Morrissey & Pittaway,2006). Both the buyers and suppliers would want the relationship to work for the achievement of a competitive advantage, organizational resourcing, cost reduction, and innovation (Maleki et al.,2023); therefore, ensuring that the relationship is successful and is built on trust is critical in achieving the desired goals (Chen & Lewis,2024). Although small businesses participate in buyer–supplier relationships, these entities might not have a noteworthy purchasing and selling power (Adams et al.,2012). The reason for their limited purchasing power could be the fact that they are resource-constrained and disadvantaged because of their size, and some are not adequately capable of delivering goods and services on a large scale (Drotskie & Okanga,2016;Morrissey & Pittaway,2006). These factors result in asymmetry, which allocates power to the better-resourced entity, thus resulting in a power imbalance (Touboulic et al.,2014). When the power is applied by the better-resourced organization in a fair manner, it affects the achievement of various organizational goals. These include economic, environmental, and social sustainability for both buyers and suppliers (Talay et al.,2020). Another perspective argues that the negative impact could be more severe for the less-powered entity (Touboulic et al.,2014). For example, small South African firms that feel bullied by large businesses sell directly to the public (Nabee & Swanepoel,2021). There are various instances where SMEs are able to navigate the existing power imbalance. For example, internally, SMEs can use technical adaptations of their products and services to generate congruity between their partners (Soontornthum et al.,2020). Some SMEs also adjust their price strategies to ensure that their prices are preferable to those of their competitors, thus giving them more leverage to engage large companies (Nabee & Swanepoel,2021). However, this pricing strategy could affect the profitability of the business (Ouppara et al.,2024), and long term, their sustainability. Externally, SMEs can Adm. Sci. 2025,15, 72 5 of 18 leverage the strong connections they have with communities to continue their activities, regardless of the power dynamics they experience from the large companies (Beckmann et al.,2023). Lastly, SMEs are in constant negotiations with their customers as a way of minimizing the power imbalance (Nabee & Swanepoel,2021;Ouppara et al.,2024). The existing literature has focused on SME as either a supplier or buyer in different studies, without exploring SMEs as both suppliers and buyers in the same or single study (Adams et al.,2012). Our study explored the experiences of scenarios when these businesses engage with large companies to purchase goods and when they sell goods to these big businesses. 2.4. Treatment of SMEs as Buyers The owner–manager of a small business is responsible for making purchases and maintaining the relationships with suppliers (Morrissey & Pittaway,2006). Despite the owner–manager’s good intentions of maintaining relationships as a buyer, the business’s size asymmetry can influence the levels of cooperation which a purchasing SME could expect from a larger supplier (Mudambi et al.,2004). For example, small and medium enterprises do not have adequate purchase volume; therefore, they often experience power asymmetry (Drotskie & Okanga,2016;Touboulic et al.,2014). The small business’s lack of power when compared to larger businesses makes it challenging for small businesses to request lower prices and negotiate to be granted better terms and conditions (Finley,1984). In other words, the degree of closeness to the larger company and the SME, even asking for price reductions, is dictated by the larger suppliers (Morrissey & Pittaway,2006). However, an entrepreneur with specific managerial and behavioral characteristics will determine the approaches to strategic purchasing activities (Talay et al.,2020). 2.5. Treatment of SMEs as Suppliers In most cases, in their role as suppliers, large businesses work to ensure that small businesses adhere to their requirements (Touboulic et al.,2014). It was found that market-oriented SMEs that supply large companies tend to have a competitive advantage (Mainardes et al.,2022). In South Africa, large companies put their small business suppliers through the supplier development programs to ensure that they deliver quality products and services (Shai et al.,2019). However, the lack of required capabilities (financial and operational) to be able to deliver and the liability of their small size expose small businesses to some form of bullying by large companies (Nabee & Swanepoel,2021). For example, the large business, in its role as the more powerful firm, could act opportunistically and make agreements that will favor its own interests rather than those of a small business (Touboulic et al.,2014). Other examples of bullying include late payments and long payment terms, which will affect the performance of the small enterprise in a negative manner (Nabee & Swanepoel,2021;Ouppara et al.,2024). Unfortunately, in such situations, the less powerful firm might be reluctant to collaborate, or even might feel pressurized to work with their suppliers on their terms (Touboulic et al.,2014). 2.6. Hypotheses Development Figure 1is the conceptual model of the study. The model shows that ethical leadership influences community engagement. However, the relationship is dependent on how large companies treat SMEs as buyers and suppliers. Adm. Sci. 2025,15, 72 6 of 18 Adm. Sci. 2025, 15, x FOR PEER REVIEW 6 of 19 2.6. Hypotheses Development Figure 1 is the conceptual model of the study. The model shows that ethical leadership influences community engagement. However, the relationship is dependent on how large companies treat SMEs as buyers and suppliers. Figure 1. Conceptual model. The outcomes of ethical leadership are mostly studied from within the organizations, focusing on employees and organizational performance (Peng & Kim, 2020). Tran et al. (2023) report that broader ethical leadership practices could result in firms’ community engagements, which ultimately have an impact on the employees’ commitment to the firm. Further, ethical leaders play a critical role in encouraging employees to be pro-social (Eva et al., 2020). Therefore, organizations need to have ethical leadership, which is an element beyond general or pure leadership, to achieve their sustainable strategies (Saha et al., 2020). While these studies have been conducted in the broad management literature, there is a need to explore ethical leadership in the context of SMEs embedded in communities (Pauceanu et al., 2021; Wigren-Kristoferson et al., 2022). Based on these discussions, we suggest that: Hypothesis 1. There is a positive relationship between ethical leadership and community engagement. We further argue that the relationship between ethical leadership and community engagement is contingent on other factors. We introduce the treatment of SMEs as buyers to moderate the relationship. When SMEs buy from large companies at reasonable prices, and if they receive reasonable prices for the goods they purchased, they will be able to conduct the community engagement activities. However, if SMEs are bullied and forced to pay high prices for products purchased from large retailers, they will not be able to conduct their community engagement activities. SMEs can be regarded as customers if they have the capacity to purchase significant quantities from big businesses (Drotskie & Okanga, 2016). Bulk purchases matter for big businesses because of the potential sales revenue. Therefore, big businesses would opt to supply an SME if there is the potential for consistent, ongoing purchases. Therefore, we hypothesize that: Ethical leadership Community engagement Treatment as buyers Treatment as suppliers H1 H2 H3 Figure 1. Conceptual model. The outcomes of ethical leadership are mostly studied from within the organizations, focusing on employees and organizational performance (Peng & Kim,2020). Tran et al. (2023) report that broader ethical leadership practices could result in firms’ community engagements, which ultimately have an impact on the employees’ commitment to the firm. Further, ethical leaders play a critical role in encouraging employees to be pro-social (Eva et al.,2020). Therefore, organizations need to have ethical leadership, which is an element beyond general or pure leadership, to achieve their sustainable strategies (Saha et al.,2020). While these studies have been conducted in the broad management literature, there is a need to explore ethical leadership in the context of SMEs embedded in communities (Pauceanu et al.,2021;Wigren-Kristoferson et al.,2022). Based on these discussions, we suggest that: Hypothesis 1. There is a positive relationship between ethical leadership and community engagement. We further argue that the relationship between ethical leadership and community engagement is contingent on other factors. We introduce the treatment of SMEs as buyers to moderate the relationship. When SMEs buy from large companies at reasonable prices, and if they receive reasonable prices for the goods they purchased, they will be able to conduct the community engagement activities. However, if SMEs are bullied and forced to pay high prices for products purchased from large retailers, they will not be able to conduct their community engagement activities. SMEs can be regarded as customers if they have the capacity to purchase significant quantities from big businesses (Drotskie & Okanga, 2016). Bulk purchases matter for big businesses because of the potential sales revenue. Therefore, big businesses would opt to supply an SME if there is the potential for consistent, ongoing purchases. Therefore, we hypothesize that: Hypothesis 2. The treatment of SMEs as buyers moderates the relationship between ethical leadership and community engagement. Research has shown that there are better organizational outcomes when the supplier and buyer are in a trusting relationship (Saha et al.,2020;Strupinski & Witek-Hajduk,2024). The break in trust, especially when there is power asymmetry, could have unintended consequences. For example, research conducted in a South African context shows that Adm. Sci. 2025,15, 72 7 of 18 the dominant behavior (of late payments and unfair penalties for late delivery) by large and powerful enterprises affects the cash flow of SMEs (Nabee & Swanepoel,2021). Some forms of dominant behaviors include the abuse of power, absence of transparency, intimidation, unfair practices, and business opportunism (Ouppara et al.,2024). Additionally, powerful customers could pressurize SMEs by having stringent technical requirements or specifications for products and services (Stekelorum et al.,2024). Furthermore, large firms could impose SME compliance with their CSR activities (D. A. Baden et al.,2009; D. Baden et al.,2011). Accordingly, SMEs are then forced to adopt these CSR requirements to keep their customers. Such dominant behavior tends to lead to the SMEs risking losing contracts, competitiveness, and profitability (Nabee & Swanepoel,2021;Ouppara et al., 2024). The fear of losing business limits the entrepreneurs from being able to, or even consider to, retaliate against large firms, which results in them continuing with business activities despite the unfair practices (Nabee & Swanepoel,2021). Therefore, our study hypothesizes that: Hypothesis 3. The treatment of SMEs as suppliers moderates the relationship between ethical leadership and community engagement. 3. Research Design and Methods 3.1. Research Design Our philosophical approach in conducting this research was positivist in nature, guided by the logic that a single reality exists (Weber,2004). In other words, we focused on testing how ethical leadership contributes to community engagement, while the relationship is moderated by the treatment of SMEs as buyers and suppliers. Further, we used the deductive approach to develop hypotheses from the existing literature (Edmondson & McManus,2007). These hypotheses were part of testing the theoretical perspectives on ethical leadership, community engagement, and power asymmetry. Our research design was a survey collecting data at one point in time. We used quantitative methods to collect the data from SMEs in South Africa. Entrepreneurship in South Africa is gaining momentum (Bowmaker-Falconer et al.,2023), thus making the country a suitable context to explore how these small businesses engage with large companies. 3.2. Operationalization of Variables We used the GIBS Ethics Barometer, which has been built on a rigorous and comprehensive assessment tool, developed at Harvard Business School (HBS) to assess the extent to which organizations adhere to global norms and standards around business conduct (Paine et al.,2005), based on the Global Business Standards (GBS) Codex. Using focus groups made up of subject matter experts, the GIBS Ethics and Governance think tank contextualized and localized the HBS tool, ensuring that it also addresses specific South African problems and challenges—especially with regard to “transformation” and “correction of historical wrongs”. Our motive for adapting the questions was based on the notion that South Africa’s business environment has suffered the consequences of the apartheid era (Shai et al.,2019). During the era, black people (African, Colored, and Indian) were segregated and did not have access to any business support (Shai et al.,2019). As a result, the South African government introduced regulations, known as Broad-Based Economic Empowerment, to provide previously disadvantaged groups with an enhanced access to economic opportunities (Shai et al.,2019). Some of those economic opportunities include programs such as supplier development activities. The government requires corporate businesses to initiate Adm. Sci. 2025,15, 72 8 of 18 programs to support SMEs as suppliers. This means that SMEs have the opportunity to experience being suppliers and customers. This contextual setting influenced our decision to include the treatment of SMEs as suppliers of big companies. Considering the challenges facing many SMEs in South Africa, our aim was to adapt the questionnaire to ensure that it was locally relevant while remaining aligned with the global framework. In adapting the questionnaire, we also followed Oduro et al. (2024), who argue that there is a need to study the African countries to understand the cultural nuances affecting community engagement and CSR activities. The GIBS Ethics Barometer measures 68 behaviors and 6 constructs, cutting across key stakeholder relationships. Both quantitative and qualitative data were collected and analyzed for the purpose of this paper. In the present study, the focus was on four constructs: SMEs ethical leadership, community engagement, treatment of SMEs as buyers, and treatment of SMEs as suppliers. While SMEs’ ethical leadership highlights the ethical orientation of entrepreneurs, the treatment of SMEs as buyers and suppliers reveals the level of big corporate companies’ ethical leadership. The size of the big corporate companies serves as an advantage and therefore, it makes these entities more powerful than SMEs. Dependent variable: SMEs’ community engagement focuses on the key activities run by the small business in the community, their stakeholder focus, community development, and how they engage with the cultural environment. The measures included considering the views and needs of the community, creating employment and running impactful activities. Independent variables: SMEs’ ethical leadership shows how they run their businesses on a daily basis by incorporating ethical principles. Ethical leadership focuses on being honest, transparent, making ethical decisions, and treating people equally. Moderators: The treatment of SMEs as suppliers explains the interaction experiences they have when supplying goods and services to large businesses. The measures included corporate customers breaking their promises; paying later than 30 days from the date of invoice; being forced to enter contracts that are unfair just to obtain the service; and corporate customers abusing their power and treating SMEs unfairly. Lastly, the treatment of SMEs as customers shows how they are treated when they buy goods and services from large businesses. Measures included price considerations set by corporates; the quality of products and services supplied by corporates; clear terms and conditions; and the general treatment of SMEs in comparison to large corporate suppliers. Control variables: The control variables included the SME’s age, size, and industry (Stekelorum et al.,2024). We chose to include the specified control variables for several reasons. First, the SME size will have an impact on community engagement activities. Large SMEs have CSR programs, through which they engage with communities. Second, the SMEs’ age also has an impact on community engagement and the way it is able to interact with the large companies. For example, old SMEs are embedded in their communities and will have obtained legitimacy to operate (Beckmann et al.,2023). It means that older firms will have better community engagement than new firms that are still in the process of obtaining their legitimacy to operate. Lastly, some industries, such as manufacturing and pharmaceuticals that follow strict rules and regulations, engage in CSR activities as an obligation from government (Pillai et al.,2022). 3.3. Data Collection Since there is no publicly available complete list of SMEs in South Africa, survey links were emailed to privately held databases of 40,000 business owner–managers. In South Africa, small enterprises employ up to 250 people and their revenue does not exceed 220 million ZAR (12 million USD) (Department of Small Business,2019). The researchers Adm. Sci. 2025,15, 72 15 of 18 the notion that community engagement is rather seen as a moral duty that is accepted voluntarily (Beckmann et al.,2023;Madden et al.,2006). In sum, the findings demonstrated the significance of ethical leadership in achieving organizational and societal outcomes, despite other contextual factors. Therefore, research in buyer–supplier relationships should consider integrating ethical leadership to understand the interaction between the buyers and suppliers. Furthermore, the inclusion of ethical leadership could enhance the understanding of how power asymmetry can be leveraged in the buyer–supplier relationships. Lastly, our study provided insights into the role of SMEs as suppliers and buyers in a single study. This is contrary to the existing literature that focused separately on the SMEs as suppliers or buyers. Perhaps, future research could match SMEs with their buyers and suppliers to understand the power dynamics within their relationship. 6. Conclusions Our study’s main contribution was identifying the role of ethical leadership in SMEs’ community engagement when they are buyers and suppliers of large companies. It was evident that the ethical leadership practiced in SMEs is the key driver of community engagement, despite the challenges they encounter when engaging with large corporates. The findings showed that the treatment of SMEs as suppliers and buyers did not moderate the relationship between ethical leadership and SMEs’ community engagement. These findings suggested that ethical leadership is instrumental in overcoming contextual challenges. Therefore, entrepreneurs are encouraged to adopt ethical leadership as a practice that will enable their SMEs to function, even in a perilous context. Further, despite the SMEs being treated unfairly by large businesses, they continued to engage with their communities and deliver services. These findings demonstrated that community engagement drives the very purpose of SMEs’ existence when driven by ethical leadership. No research is without limitations. The first limitation was that the final sample size was not the true representation of the population that was surveyed. As a result, the study cannot make generalizations based on the sample that was studied. More research is required to test the study’s hypotheses and theoretical arguments in other contexts. Second, our data were collected cross-sectionally, showcasing the power dynamics at a point in time. Future studies should consider understanding community engagement and power dynamics faced by SMEs from a longitudinal perspective. Third, our research was limited in demonstrating the effects on industry. Community engagement and power dynamics can differ from one context to another; therefore, it would be of benefit to have industryspecific studies. Fourth, the study relied on self-reported data obtained from the SMEs, potentially leading to self-report bias. Future studies could focus on how large companies engage with SMEs. Also, the studies could consider the affected communities’ perspectives. Lastly, the study referenced the large company research due to limited research on how SMEs interact with large companies as suppliers and customers. There is a need for more research to unpack the relationships that SMEs have with large businesses. Such research will also provide insights into SME empowerment and bullying when they are engaging with experienced businesses. Expanding on the future research suggestions, we studied the direct relationship between ethical leadership and community engagement. Therefore, future research could explore the mediators of the relationship, as well as the moderators or contextual factors that explain the relationships. The study found that the moderating role was not supported; therefore, future research could focus more on qualitative studies to understand the experiences of SMEs as customers and suppliers; perhaps there are other factors that explain the relationship. Adm. Sci. 2025,15, 72 16 of 18 Author Contributions: A.M. contributed to the conceptualization of the study and leading the writing process. K.M. contributed to the conceptualization of the study, writing the manuscript and qualitative data analysis. G.P. contributed to developing the research instrument and the collection of the data. All authors have read and agreed to the published version of the manuscript. Funding: This research was funded by E-squared Investments. Institutional Review Board Statement: Ethical clearance was obtained from the Gordon Institute of Business Science (Date: 21 April 2020). Informed Consent Statement: Informed consent was obtained from all subjects involved in the study. Data Availability Statement: The data used in this article are not readily available because of the privacy statement. Conflicts of Interest: The authors declare no conflicts of interest. References Adams, J. H., Khoja, F. M., & Kauffman, R. (2012). An empirical study of buyer-supplier relationships within small business organizations. Journal of Small Business Management,50, 20–40. [CrossRef] Aftab, J., Sarwar, H., Amin, A., & Kiran, A. (2022). Does CSR mediate the nexus of ethical leadership and employee’s job performance? Evidence from North Italy SMEs. Social Responsibility Journal,18, 154–177. [CrossRef] Amory, J., Wille, B., Wiernik, B. M., & Dupré, S. (2024). 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