Skip to main content
SpringerLink
Log in

Board members’ contribution to strategic decision-making in small firms

  • Published:
Journal of Management & Governance Aims and scope Submit manuscript

Abstract

This article explores how the boards of small firms actually undertake to perform strategic tasks. Board strategic involvement has seldom been investigated in the context of small firms. We seek to make a contribution by investigating antecedents of board strategic involvement. The antecedents are “board working style” and “board quality attributes”, which go beyond the board composition features of board size, CEO duality, the ratio of non-executive to executive directors and ownership. Hypotheses were tested on a sample of 497 Norwegian firms (from 5 to 30 employees). Our results show that board working style and board quality attributes rather than board composition features enhance board strategic involvement. Moreover, board quality attributes outperform board working style in fostering board strategic involvement.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

References

  • Andrews, K. (1981a). Replaying the board’s role in formulating strategy. Harvard Business Review, May–June, 18–26.

  • Andrews, K. (1981b). Corporate strategy as a vital function of the board. Harvard Business Review, Nov–Dec, 174–184.

  • Baysinger, B., & Hoskisson, R. E. (1990). The composition of boards of directors and strategic control: Effects on corporate strategy. Academy of Management Review, 15(1), 72–87.

    Article  Google Scholar 

  • Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.

    Article  Google Scholar 

  • Brauer, M., & Schmidt, S. (2006). Exploring strategy implementation consistency over time: The moderating effects of industry velocity and firm performance. Journal of Management and Governance, 10(2), 205–226.

    Article  Google Scholar 

  • Carpenter, M. A., & Westphal, J. D. (2001). The strategic context of external network ties: Examining the impact of director appointments on board involvement in strategic decision making. Academy of Management Journal, 4(1), 639–660.

    Article  Google Scholar 

  • Castaldi R., & Wortman, M. (1984). Board of directors in small corporations: An untapped resource. American Journal of Small Business, 9(2), 1–11.

    Google Scholar 

  • Charan, R. (1998). Boards at work: How corporate boards create competitive advantage. San Francisco: Jossey-Bass Publishers.

    Google Scholar 

  • Daily, C. M., & Dalton, D. R. (1993). Board of directors leadership and structure: Control and performance implications. Entrepreneurship: Theory and Practice, 17, 65–81.

    Google Scholar 

  • Daily, C., Dalton, D., & Cannella, A. A. (2003). Corporate governance: Decades of dialogue and data. Academy of Management Review, 28(3), 371–382.

    Google Scholar 

  • Demb, A., & Neubauer, F. (1992). The corporate board. Oxford: Oxford University Press.

    Google Scholar 

  • Dyer, W. G. (1986). Cultural change in family firms. San Francisco: Jossey-Bass.

    Google Scholar 

  • Eisenhardt, K. M. (1989). Agency theory: An assessment and reviews. Academy of Management Review, 14(1), 57–74.

    Article  Google Scholar 

  • Fama, E., & Jensen, M. C. (1983), Separation of ownership and control. Journal of Law and Economics, 26(2), 301–325.

    Article  Google Scholar 

  • Fiegener, M. K. (2005). Determinants of board participation in the strategic decisions of small corporations. Entrepreneurship Theory and Practice, Sept, 627–652.

  • Finkelstein, S., & Hambrick, D. (1996). Strategic leadership: Top executives and their effects on organizations. Minneapolis: West Publishing.

    Google Scholar 

  • Finkelstein, S., & Mooney, A. (2003). Not the usual suspects: How to use board process to make boards better. Academy of Management Executive, 17(2), 101–113.

    Google Scholar 

  • Filatotchev, I. (2006). Effects of executive characteristics and venture capital involvement on board composition and share ownership in IPO firms. British Journal of Management, 17, 75–92.

    Article  Google Scholar 

  • Filatotchev, I., & Toms, S. (2003). Corporate governance, strategy and survival in a declining industry: A study of UK cotton textile companies. Journal of Management Studies, 40(4), 895–920.

    Article  Google Scholar 

  • Forbes, D., & Milliken, F. J. (1999). Cognition and corporate governance: Understanding boards of directors as strategic decision-making groups. Academy of Management Review, 24(3), 489–505.

    Article  Google Scholar 

  • Ford, R. (1988). Outside directors and the privately-owned firm: Are they necessary? Entrepreneurship Theory and Practice, Fall, 49–57.

  • Gabrielsson, J., & Winlund, H. (2000). Boards of directors in small and medium sized industrial firms: Examining the effects of the board working style on board task performance. Entrepreneurship and Regional Development, 12, 311–330.

    Article  Google Scholar 

  • Golden, B. R., & Zajac, E. J. (2001). When will boards influence strategy? Inclination × power = strategic change. Strategic Management Journal, 22, 1087–1111.

    Article  Google Scholar 

  • Hambrick, D. C., & Jackson, J. (2001). Are you sure you have a strategy? Academy of Management Executive, 15, 48–59.

    Google Scholar 

  • Hendry, K., & Kiel, G. C. (2004). The role of the board in firm strategy: Integrating agency and organisational control perspectives. Corporate Governance, 12(4), 500–520.

    Article  Google Scholar 

  • Henke, J. W. (1986). Involving the board of directors in strategic planning. The Journal of Business Strategy, 7, 87–96.

    Google Scholar 

  • Herman, C. (1981). Corporate power and corporate control. Oxford: Oxford Press.

    Google Scholar 

  • Hillman, A., & Dalziel, T. (2003). Boards of directors and firm performance: Integrating agency and resource dependence perspectives. Academy of Management Review, 28(2), 383–396.

    Article  Google Scholar 

  • Huse, M. (1990). Board composition in small enterprises. Entrepreneurship and Regional Development, 2, 363–373.

    Article  Google Scholar 

  • Huse, M. (2000). Boards of directors in SMEs: A review and research agenda. Entrepreneurship and Regional Development, 12, 271–290.

    Article  Google Scholar 

  • Huse, M. (2005). Accountability and creating accountability: A framework for exploring behavioural perspectives of corporate governance. British Journal of Management, 16, 65–79.

    Article  Google Scholar 

  • Huse, M. (2007). Boards, governance and value creation. Cambridge: Cambridge University Press.

    Google Scholar 

  • Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.

    Article  Google Scholar 

  • Judge, W., & Zeithaml, C. P. (1992). Institutional and strategic choice perspectives on board involvement in the strategic decision process. Academy of Management Journal, 35(4), 766–794.

    Article  Google Scholar 

  • Kosnik, R. D. (1987). Greenmail: A study of board performance in corporate governance. Administrative Science Quarterly, 32, 163–185.

    Article  Google Scholar 

  • Leblanc, R., & Gillies, J. (2005). Inside the board room. Ontario: Wiley.

    Google Scholar 

  • Lehmann, E., Warning, S., & Weigand, J. (2004). Governance structures, multidimensional efficiency and firm profitability. Journal of Management and Governance, 8(3), 279–304.

    Article  Google Scholar 

  • Lerner, J. (1994). Venture capitalists and the decision to go public. Journal of Financial Economics, 35, 294–316.

    Article  Google Scholar 

  • Levinthal, D. (1988). A survey of agency models of organizations. Journal of Economic Behavior and Organization, 9, 153–185.

    Article  Google Scholar 

  • Lorsch, J., & MacIver, E. (1989). Pawns or potentates. The reality of America’s corporate boards. Boston: HBS Press.

    Google Scholar 

  • Mace, M. (1971). Directors: Myth and reality. Boston: Harvard Business School Press.

    Google Scholar 

  • McNulty, T., & Pettigrew, A. (1999). Strategists on board. Organization Studies, 20, 47–74.

    Article  Google Scholar 

  • Minichilli, A., & Hansen, C. (2007). The board advisory tasks in small firms and the event of crisis. Journal of Management and Governance, 11(1), 5–22.

    Article  Google Scholar 

  • Nunnally, J. C., & Bernstein, I. H. (1994). Psychometric theory. USA: McGraw-Hill, Inc.

    Google Scholar 

  • Pelled, L. H., Eisenhardt, K. M., & Xin, K. R. (1999). Exploring the black box: An analysis of work group diversity, conflict and performance. Administrative Science Quarterly, 44(1), 1–28.

    Article  Google Scholar 

  • Pettigrew, A. (1992). On studying managerial elites. Strategic Management Journal, 13(SI), 163–182.

    Article  Google Scholar 

  • Pfeffer, J. (1972). Size and composition of corporate boards of directors: The organization and its environment. Administrative Science Quarterly, 17(2), 218–228.

    Article  Google Scholar 

  • Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A resource dependency perspective. New York: Harper and Row.

    Google Scholar 

  • Randoy, T., & Nielsen, J. (2002). Company performance, corporate governance, and CEO compensation in Norway and Sweden. Journal of Management and Governance, 6(1), 57–81.

    Article  Google Scholar 

  • Ravasi, D., & Zattoni, A. (2006). Exploring the political side of board involvement in strategy: A study of mixed-ownership institutions. Journal of Management Studies, 48(3), 1672–1704.

    Google Scholar 

  • Rindova, V. (1999). What corporate boards have to do with strategy: A cognitive perspective. Journal of Management Studies, 36(7), 953–975.

    Article  Google Scholar 

  • Ruigrok, W., Peck, S., & Keller, P. (2006). Board characteristics and involvement in the strategic decision making: Evidence from Swiss companies. Journal of management Studies, 43(5), 1201–1226.

    Article  Google Scholar 

  • Rutherford, M. A., & Buchholtz, A. K. (2007). Investigating the relationship between board characteristics and board information. Corporate Governance, 15, 576–584.

    Article  Google Scholar 

  • Schoonhoven, C. B., Eisenhardt, K. M., & Lymann, K. (1990). Speeding products to market: The impact of organizational and environmental conditions on waiting time to first product introduction in new firms. Administrative Science Quarterly, 35(2), 177–207.

    Article  Google Scholar 

  • Schmidt, S., & Bauer, M. (2006). Strategic governance: How to assess board effectiveness in guiding strategy execution. Corporate Governance An International Review, 14(1), 13–23.

    Article  Google Scholar 

  • Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52, 737–783.

    Article  Google Scholar 

  • Stiles, P. (2001). The impact of the board on strategy: An empirical examination. Journal of Management Studies, 38(5), 627–650.

    Article  Google Scholar 

  • Stiles, P., & Taylor, B. (2002). Boards at work how directors view their roles and responsibilities. New York: Oxford University Press Inc.

    Google Scholar 

  • Useem, M. (2003). Corporate governance is directors making decisions: Reforming the outward foundations for inside decision making. Journal of Management and Governance, 7(3), 241–253.

    Article  Google Scholar 

  • Van Den Heuvel, J., Van Gils, A., & Voordeckers, W. (2006). Board roles in small and medium sized family businesses: Performance and importance. Corporate Governance: an International Review, 14(5), 467–486.

    Article  Google Scholar 

  • Voordeckers, W., Van Gils, A., & Van den Heuvel, J. (2007). Board composition in small and medium-sized family firms. Journal of Small business Management, 45(1), 137–156.

    Article  Google Scholar 

  • Westphal, J. D. (1999). Collaboration in the boardroom: Behavioural and performance consequences of CEO-board social ties. Academy of Management Journal, 42(1), 7–24.

    Article  Google Scholar 

  • Westphal, J. D., & Fredrickson, J. W. (2001). Who directs strategic change? Director experience, the election of new CEOs, and change in corporate strategy. Strategic Management Journal, 22(12), 1113–1137.

    Article  Google Scholar 

  • Williams, K. Y., & O’Reilly, C. A. (1998). Demography and diversity in organizations: A review of 40 years of research. Research in organizational behaviour, 20, 77–140; JAI Press Inc.

    Google Scholar 

  • Zahra, S. A. (1990). Increasing the board’s involvement in strategy. Long Range Planning, 23(6), 109–117.

    Article  Google Scholar 

  • Zahra, S. A. (1996). Governance, ownership, and corporate entrepreneurship: The moderating impact of industry technological opportunities. Academy of Management Journal, 39(6), 1713–1735.

    Article  Google Scholar 

  • Zahra, S. A., & Filatotchev, I. (2004). Governance of the entrepreneurial threshold firm: A knowledge-based perspective. Journal of Management Studies, 41(5), 885–897.

    Article  Google Scholar 

  • Zahra, S. A., Neubaum, D., & Huse, M. (2000). Entrepreneurship in medium-size companies: Exploring the effects of ownership and governance systems. Journal of Management, 26(5), 947–976.

    Article  Google Scholar 

  • Zahra, S. A., & Pearce, J. (1989). Boards of directors and corporate financial performance: A review and integrative model. Journal of Management, 15(2), 291–334.

    Article  Google Scholar 

  • Zahra, S. A., & Pearce, J. (1990). Determinants of board directors’ strategic involvement. European Management Journal, 8, 164–173.

    Article  Google Scholar 

  • Zajac, E. J., & Westphal, J. D. (1998). Toward a behavioural theory of the CEO-board relationship. How research can enhance our understanding of corporate governance practices. In D. C. Hambrick, D. A. Nadler, & M. L. Tushman (Eds.), Navigating change. Boston: Harvard Business School Press.

    Google Scholar 

Download references

Acknowledgements

We wish to acknowledge Prof. Morten Huse, and Cathrine Hansen for their valuable comments and suggestions; we are also grateful to the University of Naples “Federico II” for their financial support through the “Research Mobility Programme”. In addition, we thank two reviewers and the editor for their helpful comments. The two authors have contributed equally.

Author information

Authors and Affiliations

  1. Dipartimento di Economia Aziendale, Università degli Studi di Napoli “Federico II”, via Cinthia 4, Naples, 80122, Italy

    Amedeo Pugliese

  2. Department of Innovation and Organization Economics, BI Norwegian School of Management, Oslo, Norway

    Pingying Zhang Wenstøp

Authors
  1. Amedeo Pugliese
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Pingying Zhang Wenstøp
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Amedeo Pugliese.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Pugliese, A., Wenstøp, P.Z. Board members’ contribution to strategic decision-making in small firms. J Manage Governance 11, 383–404 (2007). https://doi.org/10.1007/s10997-007-9036-3

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10997-007-9036-3

Keywords

Search

Navigation