Determinants of board participation in the strategic decisions of small corporations
Determinants of board participation in the strategic decisions of small corporations
FiegenerM.K. Entrepreneurship Theory and Practice (USA), September 2005, Vol. 29 No. 5, Start page: 627, No. of Pages: 24
Purpose – To study the involvement of boards of directors in the strategic decisions of small private businesses in the USA. Design/methodology/approach – Points out that board involvement research usually looks at large corporations, cites anecdotal evidence that small-firm boards are passive and that strategic decisions are made by chief executive officers (CEO), and suggests that a range of organizational, board and decision-related factors influence the likelihood of board involvement in decision making, hypothesizing that strategic participation is more likely in larger and older small firms, when there are more outsider directors on the board, when the CEO is not a majority shareholder, when there is a large proportion of owner-directors on the board, when organizational change is being considered, and when the decision affects firm survival. Tests the hypotheses by question survey of 2382 small corporations. Findings – Reports that board involvement was more likely in larger small firms, notes that firm age, nor the number of outside directors, were influencing factors, records that involvement was unlikely when the CEO was a majority shareholder, but finds that decision-related factors, e.g. when the decision concerned survival, were positively related to involvements. Originality/value – Shows that most small-firm CEO rely on their own judgment.
Style: Research paperISSN: 1042-2587Reference: 34AW108
Keywords: Boards, Chief executives, Decision making, Directors, Small enterprises, Strategic management
