SME heterogeneity and board configurations: an empirical typology

Abstract

PurposeThe purpose of this paper is to model SME board configurations and then to examine empirically their diversity. Polarity in corporate board research around two primary tasks (control and service/strategy), neither captures comprehensively the range of SME board types, based on what they actually do, nor elucidates how boards configure and why. SME heterogeneity is problematic for understanding how the triumvirate of power and control – owners, directors and executives – governs in such firms.Design/methodology/approachSurvey research is used to examine 186 French private SMEs. Factorial and cluster analyses are used to classify board configurations according to board task performance.FindingsResults reveal six different board types among small firms. The findings indicate that both organisational and board design need to be adjusted to align with the differentiation between the ownership and the management, and between the ownership and the directorship. The greater the differentiation between these power/control functions in response to increased internal and/or external contingencies, the more varied will be the board’s portfolio of tasks, with implications for the director capabilities and board competence.Research limitations/implicationsThe research extends SME board governance theory and practice by bringing greater clarity to the field of board task performance in SMEs. It provides insights into explicit board task-related configurational behaviour through recognising the degree of differentiation between the triumvirate power/control functions at the apex of the small firm. SME boards in the sample show not just a single configuration but a combination from a portfolio of tasks with different emphases on each according to their circumstances. This finding implies that a particular type of board may select a task, or set of tasks, from the portfolio, depending on the nature of the SME in terms of its proximity – whether it is characterised more by specificity or by denaturation. Further research is needed to understand the variation in these configurations over time in response to internal and external contingencies and what board emphases and processes are involved in transitioning through these evolutions.Practical implicationsThe findings are important because the extent of knowledge about what the configuration comprises will determine how effectively a board will execute its tasks. This knowledge is useful in helping boards place emphasis on how best to concentrate their efforts on creating value for the SME, by selecting an effective combination of tasks from a given board configuration depending on their circumstances.Originality/valueThe research extends SME board governance theory and practice by bringing greater clarity to the field of board task performance in SMEs. It provides insights into explicit board task-related configurational behaviour through recognising the degree of differentiation between the triumvirate power/control functions at the apex of the small firm.