Productivity and Corporate Governance in Smaller Firms

Our starting point was to argue that the entrepreneur is central to the organisation of production in smaller firms. We also contended that it was crucial to understand how differences in corporate governance structures affect productivity. This is particularly important given that many small firms have relatively unsophisticated and non-complex governance structures. Our results show positive, and significant, effects from the founding entrepreneur, the board of directors and the management team on productivity. We also find that the majority of smaller firms face increasing returns to scale. In total, our results cast serious doubts on the relevance of "black box" theories of production which exclude a role for the entrepreneur.