Board of directors in small firms : An exploratory study on small business owners in Västerbotten’sperception of the role of the board, board composition and its impact onfirm performance
This study examines small business owners at small firms in Västerbotten’s perception on board composition, board diversity and the role of the board together with its impact on firm performance. We were interested in knowing what kind of characteristics these firms are looking for in their board composition and explore their attitudes towards their choice ofinside or outside directors, and also the impact of homogeneity and heterogeneity in theboard. Further, we wanted to examine the general role of the board in small firms and get insight on whether the small business owners believe this had any impact on firm performance or not.
The subject of board of directors can be found within the field of corporate governance, in which it has a central role. Existing literature on the subject left a gap of knowledge on board of directors in small firms, from which the opportunity of research was found. Since a vast amount of firms on the Swedish market are small firms, this subject is of significant meaning for understanding and gaining insight into how small business owners in these firms view the board of directors. To get a deeper view into the subject we explored if any differences were detectable between three different industries, and the selected industries were; IT, transportation and construction.
This qualitative study was conducted by using a semi-structured interview technique. The objectives of having a qualitative study was to obtain in-depth understandings and perceptions from the participants in order to answer our research questions; What kind of characteristics are small business owners looking for when selecting new board members, what type of different resources can different types of directors bring, and what impact do small business owners believe this has on firms’ performance?
The findings from this study revealed that small business owners at small firms in Västerbotten did not value and use the board in the same extent as larger firms had been found to do in other empirical studies. However, indications were found among our sample that small firms in the IT industry uses their boards in another way than other firms do. Moreover, it was of common occurrence that small firms only have one singe director on their boards both due to that they have a board solely due to legal reasons and also due to that the owners, which is also the directors in these firms, does not want to reduce their level of control over the firm. Overall, the impression from the participants’ perceptions and views were that the board was not used in the way it could be and that for many small firms the costof recruiting more directors is too high.
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