They Are Not All the Same! Investigating the Effect of Executive versus Non‐executive Family Board Members on Firm Performance

Drawing on faultlines and challenging the assumption that family board members form a homogenous subgroup, we hypothesize that the distinction between executive and non‐executive family board members can create faultlines that affect firm performance. We propose that the discrepancy between results and goals can activate and exacerbate faultlines. Using a sample of 421 family small and medium‐sized enterprises (SMEs), we find a U‐shaped relationship between the ratio of family executive board members and firm performance showing the consequences of relationship‐based and task‐related faultlines. Moreover, we find that the U‐shaped relationship occurs when firms perceive that they under‐achieve their objectives, whereas a reverse J‐shaped relationship appears when firms over‐achieve their objectives.     

Impact of Outsiders on Firm Performance over Different Generations of Family‐Owned SMEs

From the perspective of agency, resource‐based view, and resource‐dependence theories, we explore the impact of the presence of outside directors on firm performance in family small and medium‐sized enterprise (SMEs). Using survey data from 369 Spanish family SMEs, our findings show an inverted U‐shaped relationship between the proportion of outsiders on the boards of first‐ and second‐generation family firms and firm performance. The results show that a balanced presence of outside directors contributes to value creation in family SMEs and confirm that the composition and the roles of the board of directors differ from generation to generation in family firms.     

Responsible family ownership in small‐ and medium‐sized family enterprises: an exploratory study

The concept of responsible ownership was originally developed with reference to large, publicly held firms. However, the relevance of small‐ and medium‐sized closely held firms, such as family firms, in all economies and the specific governance and organisational characteristics of these firms require further examination of the responsible ownership concept and its operationalisation. Based on the existing literature, we define the construct of responsible family ownership to fill this gap in responsible ownership theory. We propose a scale that can be used to assess the responsible family ownership construct in small‐ and medium‐sized family enterprises. The data used in this exploratory study were collected in an ad hoc survey answered by a representative sample of 84 small‐ and medium‐sized family enterprises. The study contributes to the responsible ownership literature by presenting the responsible family ownership construct, a key driver of balance in family and firm systems that is therefore critical to the health of small‐ and medium‐sized family enterprises. In addition, a scale is proposed as a means to operationalise the construct and to derive practical implications for the governance of this kind of firms.     

The Board's Demography—Firm Performance Relationship Revisited: A Bayesian Approach

Building on behavioral theory, we argue that the effect of board demography on the performance of small and medium‐sized family firms differs significantly at the individual firm level and that the degree by which board task performance meets board task needs explains this effect. Using a Bayesian estimation method, we obtain firm specific estimates of the effect of board demography on firm performance. Analysis of these estimates indicates that the size of the gap between board task needs and board task performance explains the effects of the board demographic characteristics—board size and percentage of family directors—on firm performance.     

Entrepreneurial orientation and innovation in family SMEs: Unveiling the (actual) impact of the Board of Directors

Drawing on stewardship and resource dependence theories, we examine how the board of directors (BoD) influences the link between entrepreneurial orientation (EO) and ambidextrous innovation in small and medium sized family firms (family SMEs). Our analysis of 230 Spanish family SMEs shows that family involvement in the BoD has a negative effect on their ability to turn EO into innovation. Moreover, we show that the BoD's strategic involvement in service and control tasks and the provision of knowledge and skills have positive effects, whereas the intensity of BoD activity has a surprisingly negative effect. These findings underscore that the effects of the BoD on the entrepreneurship-innovation link are more complex than previously thought, pointing to the important role of both BoD composition and BoD functioning for enabling innovation in family SMEs.     

The Influence of IT Management Sophistication and IT Support on IT Success in Small and Medium‐Sized Enterprises

This study examined three factors that influence information technology (IT) success in small and medium‐sized enterprises (SMEs): internal IT support, external IT support, and IT management. Using survey data gathered from 289 small and medium‐sized Chartered Accounting firms in New Zealand, the results suggest that IT management in SMEs is best understood as a multidimensional concept consisting of practices related to: IT planning, IT organizing, IT controlling, and IT leading. This view clarifies and improves our understanding of the nature and character of IT management in SMEs. The results show that some SMEs are significantly more sophisticated than others in terms of their IT management practices. Both IT planning and IT leading were found to influence IT success.     

Innovation's Second Step

Innovative companies often place their emphasis on invention, research, and new product development, even as they neglect the process of bringing products to the marketplace in a way that is advantageous over the long term. Small to medium‐sized businesses that are scaling up are particularly vulnerable to entering into unfavorable distribution arrangements with large mass‐market retailers. Often, managers assume their firm will automatically benefit from a technological or creative breakthrough. Rather than focusing solely on new innovations and viewing distribution as an afterthought, we suggest that innovative firms make channel management a priority as their products are discovered and they attempt to reach more customers. In this article, strategies are offered as paths managers should consider as they use their innovations to scale up from small or medium‐sized firms into large companies. Steps for implementation as well as concurrent risks are also presented. © 2014 Wiley Periodicals, Inc.     

Marketing planning in the larger family business

In recent decades a considerable literature on marketing planning has accumulated. The larger part relates to marketing planning in big firms with specialized, professional managers. There are books on the subject, like that of Malcolm McDonald which has gone through several editions, and there is also a steady stream of articles in the academic journals. In addition, the marketing planning activities of big firms are referred to by many more writers in the overlapping but broader contexts of “strategic marketing” and “strategic planning”. A lesser part of the literature relates to marketing planning in small firms. The small firms in question are usually very small. Typically they are owner‐managed and employ just a handful of people in a single location. The purpose of this study is to fill a gap in the literature by examining a medium‐sized firm; a category which seems to have been neglected by researchers.

Most modern economies are characterized by a significant group of middle‐sized firms, still owner‐managed, but with multi‐million dollar turnovers. Many of these remain family companies and constitute an important reservoir of business initiative. One such family business is the focus of this study. Given the relative lack of scrutiny of such firms to date, the author decided to conduct an in depth evaluation from within one large, family firm rather than seek by means of questionnaire to obtain information from a significant sample of the group. The results of the study suggest that neither the existing typologies of small firm approaches to marketing nor the formal models of marketing planning attributed to big companies necessarily characterize the marketing planning and management of larger, family businesses.     

How Do SMEs with Single and Multiple Owners Finance Their Operations Differently? Empirical Evidence from China

We study the impact of firm‐level characteristics on the capital structures of private small and medium‐sized enterprises (SMEs) as well as the differences between the capital structures adopted by SMEs with single and multiple owners in China. Our findings highlight the limited use of asset‐based financing by Chinese SMEs. We also find that the propensity of SMEs with single‐owners to use external debt was significantly less than those with multiple owners. Furthermore, our findings suggest that single‐owned firms are subject to a more constrained pecking order than those with multiple owners. © 2013 Wiley Periodicals, Inc.     

Comparing Innovation Capability of Small and Medium‐Sized Enterprises: Examining the Effects of Organizational Culture and Empowerment

This study analyzes the impact of organizational culture and empowerment on innovation capability, and examines the peculiarities of these effects. The study's hypotheses are tested by applying both individual and firm‐level analyses to survey data collected from 743 employees from 93 small and medium‐sized firms located in Turkey. For medium‐sized enterprises on both the individual and firm level of analysis, results suggest that collectivism and uncertainty avoidance are positively associated with empowerment, whereas power distance is negatively related to empowerment. Assertiveness focus has no relations with empowerment and innovation capability, yet among cultural dimensions, only uncertainty avoidance is related to innovation capability. For small‐sized enterprises, findings suggest that both power distance and uncertainty avoidance are linked to both empowerment and innovation capability on the individual level, whereas two new paths between collectivism and innovation capability and between assertiveness focus and empowerment are found on the firm level. Also, empowerment is found to be positively related to innovation capability for both small and medium‐sized enterprises (SMEs) on both the individual and firm level. In terms of managerial practice, our study helps clarify the key role played by cultural dimensions in the process of shaping an empowering and innovative work environment. Findings also reveal that managers should focus on participative managerial practices (e.g., empowerment) to promote innovation capability of SMEs.     

Small Business Borrowing and the Owner–Manager Agency Costs: Evidence on Finnish Data

This study investigates the impact that managerial ownership has on loan availability and credit terms. We find that managerial ownership is common in a sample of small and medium‐sized Finnish firms. Our results suggest that an increase in managerial ownership decreases loan availability. The results on loan interest rates suggest that though an increase in managerial ownership initially increases interest rates, the effect is reversed at higher levels of ownership. Collateral requirements increase monotonically with managerial ownership. Overall, the results suggest that banks view that there are agency costs involved with managerial ownership even in small and medium‐sized firms and that this is taken into account when lending to these firms.     

Technological Collaboration: Bridging the Innovation Gap between Small and Large Firms*

This paper analyzes how technological collaboration acts as an input to the innovation process and allows small and medium‐sized enterprises to bridge the innovation gap with their bigger counterparts. Based on a large longitudinal sample of Spanish manufacturing firms, the results show that though technological collaboration is a useful mechanism for firms of all sizes to improve innovativeness, it is a critical factor for the smallest firms. The impact of this collaboration varies depending on innovation output and type of partner. Specifically, the impact of collaboration in small and medium‐sized firms is more significant for product than process innovations. Regarding type of partner, vertical collaboration—with suppliers and clients—has the greatest impact on firm innovativeness, though this effect is clearer for medium‐sized enterprises than for the smallest firms.     

Formal Human Resource Management Practices in Small Growing Firms*

Using data from micro, small, and medium firms in Australia, the paper exams changes with size toward more enunciated and prescribed practices; (2) the changes in HRM in small and medium‐sized firms begin early in the growth process and proceed at a faster rate than during the latter growth phase; and (3) the adoption of formal HRM practices at the managerial level lags behind that at the operational level at the smaller firm sizes.     

Professional HRM Practices in Family Owned‐Managed Enterprises*

This study examines determinants of professional human resource management (HRM) practices within a sample of approximately 700 small to medium‐sized firms. Predictions from the agency theory and the resource‐based view of organizations lead to alternate hypotheses regarding the direct and indirect negative effects of family ownership and management on the usage of professional HRM practices. Results support predictions for both direct and indirect effects. These indirect effects occur through intermediary variables that reflect organizational complexity, such as firm size, (the presence of a) formal business plan, and HRM specialization. The findings lend partial support to both theories.     

Does Trade Credit Affect Technical Efficiency? Empirical Evidence from Italian Manufacturing SMEs

Using firm‐level data from the Italian manufacturing sector, we investigate the relationship between small and medium‐sized firms technical efficiency and trade credit. Our contribution is twofold: we provide evidence on an open empirical question, and disentangle the channels through which trade credit may influence firms' efficiency. According to our findings, based on the Simar and Wilson (2007) procedure, trade credit seems to positively affect firm efficiency by mitigating financial constraints. Indeed, trade credit enhances efficiency especially for firms that are more likely to be financially constrained (i.e., smaller and/or younger firms) and during the most recent financial crisis.     

The Determinants of Growth for Small and Medium Sized Firms. The Role of the Availability of External Finance

We present an empirical analysis of the determinants of growth for a sample of Italian small and medium sized firms. We show that, when investigating a sample which includes firms between 10 and 50 employees and a set of variables larger than those usually considered in the literature, growth – net of industry characteristics and ex ante market power – turns out to be significantly affected not only by size and age, but also by state subsidies, export capacity and credit rationing. By adopting a multivariate approach we also show that these findings are confirmed after controlling for heteroskedasticity, survivorship bias and serial correlation. Our results suggest that the hypothesis of independence of firm growth from the initial size and other factors (usually referred to as Gibrat's law in the literature) is not rejected for large firms, while it does not hold for small and medium sized firms under financial constraints in a "bank-oriented" financial system in which access to external finance is difficult.     

Credit rationing and firm exports: Microeconomic evidence from small and medium‐sized enterprises in China

This paper examines the effect of credit rationing on export performance by small and medium‐sized firms in China. We use a detailed firm‐level data provided by the Small and Medium‐sized Enterprises Dynamic Survey (SMEDS) during 2015–16 to conduct this analysis. The SMEDS provides firm‐specific measures of credit rationing based directly on firm‐level responses to the survey rather than indirect ones, based on firm‐level financial statements. We find that, at the extensive margin, weak and strong credit rationing reduces export probability of small and medium‐sized enterprises (SMEs) by 15.1% and 39.6%, respectively. At the intensive margin, they decrease SMEs' export values by more than 20.0% and over 28.8%, respectively. Different than existing literature, we construct valid firm‐level instruments, firm‐level housing stock, for credit rationing rather than using province‐level instruments. We also employ county‐industry‐level instruments and obtain consistent estimates. In addition, credit rationing exhibits heterogeneous impacts on firms with different liquidity ratios, product portfolios, external collateral and capital utilisation rates.     

Socioemotional Wealth and Innovativeness in Small‐ and Medium‐Sized Family Enterprises: A Configuration Approach

What makes small‐ and medium‐sized family firms (family SMEs) innovative? Some family firm dynamics promote, yet others hinder innovation. It remains unclear whether combinations of family firm dynamics increase innovativeness. Our configurational perspective of socioemotional wealth (SEW) unravels determinants of family SMEs' innovativeness. We conduct a fuzzy set qualitative comparative analysis with 452 Swiss family SMEs. We categorize SEW dimensions into configurations of necessary and sufficient conditions. We contribute to theory on family SMEs' innovativeness because we reveal that the interplay of SEW dimensions leads to innovativeness. This offers practitioners a better framework to choose between SEW configurations.     

International Opportunity Recognition among Small and Medium‐Sized Family Firms*

Current research in the field of entrepreneurship emphasizes the importance of opportunity recognition as a key element in the entrepreneurial process. It has been recognized that network ties, activeness and alertness, and prior knowledge are related to how entrepreneurs recognize new opportunities. However, it is unclear how important these factors are when a firm explores opportunities for entry into a foreign market. In this exploratory case study, covering the international opportunity recognition of eight family‐owned small and medium‐sized enterprises (SMEs), we found that the firms in question mainly recognized international opportunities by establishing new formal ties rather than using existing informal or family ties. The findings also indicated that due to the small size and the flexibility of the management team in family SMEs, these firms were able to react quickly to new international opportunities. However, there was no direct relationship between the prior knowledge of the firms and their international opportunity recognition. In addition, we found that trade exhibitions formed the primary context for the international opportunity recognition of the SMEs in this study. These findings motivate a set of five propositions that may lead to further studies on this topic.     

Uncovering Barriers to Complex Incremental Product Innovation in Small and Medium‐Sized Financial Services Firms*

Developing new products is of the highest importance for the survival of firms. This not only refers to really new products, but firms also need to invest in modifying their existing products. Small and medium‐sized companies are no exception to this rule. The present study focuses on the innovative activities of small and medium‐sized financial service companies and aims to answer how small and medium‐sized financial services firms organize their product innovation processes and what the main barriers during these innovative attempts are. Data from 30 financial small and medium‐sized enterprises were collected to address these issues. The data showed that the firms in our study experience problems in terms of resources, project‐based working, incentives, and information technology, despite the fact that the innovative efforts are aimed at modifying existing services. Although these issues may not be totally unexpected, the results from this study do point at some interesting distinctions with the previous literature. Furthermore, it is suggested that the impact of the barriers may be of lower importance than is often assumed in the innovation literature.