This paper aims to examine the role of technological capability in the relationship between corporate governance and small and medium-sized enterprise (SME) performance.
Using panel data comprising 1,357 European SMEs from 2014 to 2020, this paper examines how technological capability acts as a mediator and moderator within the governance-performance nexus.
The results show a positive and significant link between corporate governance mechanisms and SME performance, as well as between technological capability and SME performance. In addition, this paper show that technological capability plays a crucial role in moderating and mediating the governance-performance relationship. Specifically, technological capability accentuates the positive effects of board size, the presence of outside directors and concentrated ownership on SME performance. Conversely, it attenuates the positive impacts of CEO duality and board gender diversity on SME performance. These results highlight corporate governance mechanisms and technological capability’s crucial role in significantly influencing SME performance.
The results suggest that SMEs should prioritize not only the implementation of effective corporate governance mechanisms but also the strategic utilization of technological innovations to boost performance. European policymakers are encouraged to enact supportive policies on technological innovation to strengthen the governance-performance dynamic.
This study contributes to the governance-performance literature by offering new insights into the critical role of technological capability, which has been previously explored in partial and fragmented ways.
