Abstract
This study proposes an original structural model that analyzes the relationship between sustainable firm performance, and a board of directors’ external and internal social capital. Data collected in 232 non-listed and family-run small and medium-sized enterprises in Spain suggest that the effects of boards’ internal and external social capital on sustainable firm performance were partially transmitted through board effectiveness. However, external social capital influences board effectiveness and sustainable firm performance more than internal social capital. Moreover, interlocks only reinforce the relationship between a board’s external social capital and its effectiveness. Our research offers the following main contributions: (1) A proposed structural theoretical model, (2) a focus on both internal and external social capital, unlike previous literature that emphasized only one perspective, and (3) empirical evidence that supports literature on the interlocking interaction between a boards’ internal and external social capital.
Highlights
A board of directors (BoDs), as an entity, has gained increasing attention from academics in family business literature [1,2]
The aim of this study is to assess the impact of BoDs internal and external social capital on family small and medium-sized enterprises (SMEs) sustainable performance, while considering the mediation effects of board effectiveness and the moderating role of boards’ interlocks, crucial for family SMEs survival and growth in competitive markets [8]
Through the availability and use of new knowledge, connections, and skills, we suggest that the BoDs social capital plays an important role in family SMEs sustainable performance perception, dependent on BoDs effectiveness and its ability to interact with other BoDs
Summary
A board of directors (BoDs), as an entity, has gained increasing attention from academics in family business literature [1,2]. Most studies have examined big enterprises, especially publicly-held family companies [3], yet they have produced inconclusive results on BoDs effectiveness in terms of sustainable performance [4,5]. The BoDs of non-listed family SMEs are less regulated and more informal than those of publicly-held family firms. Some scholars highlight that many family SMEs only have a BoDs ‘on paper’ and do not use it to its full extent [7]. The aim of this study is to assess the impact of BoDs internal and external social capital on family SMEs sustainable performance, while considering the mediation effects of board effectiveness and the moderating role of boards’ interlocks (directors sitting on two or more company boards create links known as board interlocks), crucial for family SMEs survival and growth in competitive markets [8]
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