Boards of Directors in SMEs, Strategy and Performance: An Empirical Analysis

Unlike in other countries, in Italy industrial production is dominated by small and medium sized firms (SMEs), particularly family-owned ones. Selecting in Italy a significant sample of family-controlled, small- and medium-sized companies, the paper shows that the board of directors is of significance within the variables which influence strategic change and the performance of family SMEs. Through multiple regression analysis of the data collected, we demonstrated an absence of outsiders can be associated with a lack of the resources and competences necessary to bring about strategic change, that the presence of outsiders increases cognitive diversity useful for the provision of alternative possibilities in strategy-making, therefore, contributing to strategic change and, finally, that changes to the set of outsiders (i.e. addition or substitution of outsiders on boards) may facilitate change in strategy. Finally, we analysed the financial performances which are associated with the recruitment of outsiders to the boards of the SMEs in the sample and, in this way, we found that the simple presence of outsiders is not sufficient to increase the firm’s financial performance since the firms which achieve the best results are those which are the most dynamic in making changes to the set of outsiders on their boards.