Productivity and Corporate Governance in Smaller Firms

Abstract

Previous research suggests that founding entrepreneurs have little effect on firm productivity. The validity of this theory was examined using data gathered from a random sample of 427 independent, unquoted U. K. companies in 1995. During the following two years, the survey was supplemented with information from historical accounts. Findings indicated that in smaller firms, founding entrepreneurs played an integral part in firm productivity that is not easily replicated by others. However, as firms increased in size, the effect of the founding entrepreneur lessened making it more important to establish both a board of directors and an effective management team. In addition, board size was found to increase productivity—the largest returns were generated by increasing the size of the board and expanding the management team. (SFL)

Keywords: Founders, Theoretical, Firm productivity, Firm governance, Management teams