This article analyzes the impact of board composition (i.e. size, independence, and human capital), roles (i.e. control and strategy), and effectiveness (i.e. historical contributions) on innovation (i.e. internal product-service innovation) in small and medium-sized enterprises.
A four-stage process, including various key components of the board of directors (BoD), was developed and then tested on a sample of Canadian small and medium-sized enterprises using structural equation modeling.
The main findings that emerged from the analysis are as follows: An increase in board size and independence tends to dilute the overall human capital of the board. Conversely, enhanced human capital is a key factor that enables the board to effectively fulfill its strategic responsibilities. This strategic role significantly drives board effectiveness, which ultimately serves as the binding element linking the board to a specific organizational outcome in small and medium-sized enterprises: internal product-service innovation.
The originality of this article is multifaceted. First, it presents a unique multistage theorization that allows for the examination of interaction effects within a sequential framework of various key components of the BoD. Additionally, this study incorporates several rarely analyzed variables, enriching the existing literature on corporate governance, innovation, and small and medium-sized enterprises. Finally, contextual elements such as the choice to specifically analyze small and medium-sized enterprises in Canada enrich the current literature on the subject, which continues to be dominated by large companies and countries like the United States.
