Board Tasks in Small Firms: The Importance of Motivation and Evaluations

The attention to board of directors in small firms is increasing. Traditionally they have been considered to be passive and labeled paper boards or aunt boards. However, boards in small firms are now undergoing major changes. In this paper we test hypotheses of what makes boards active and allows them to contribute to value creation. Activity is seen in relation to board task involvement. Predictions based on agency theory, resource dependence theory and the resource based view of the firm are used to explore board task involvement. In a sample of 347 small firms we got strong support for hypotheses highlighting the use of the knowledge of the board members and various board maintenance tools, such as regular board evaluations, to increase board task involvement. Various contextual variables were included as control variables, but few were significantly related to board task involvement. Actionable advice to boards in small firms is provided.

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