Nav: Home

An involved board of directors, a key component in innovation in family SMEs

June 26, 2018

The vast majority of enterprises worldwide are small and medium-sized, family-run ones (SMEs). Their small size and special family nature determine their strategies on innovation and how they function. They have limited resources available and experience barriers such as the difficulty in accessing funding or highly qualified personnel. At the same time, the need to balance the interests of the family and of the enterprise influences their strategic decisions, including those geared towards innovation. Faced with this predicament, family-run SMEs more and more often opt to set up boards of directors so that, besides controlling the decisions taken by the managers of the enterprise, they support and instruct these professionals when it comes to designing and implementing specific strategies and projects relating to innovation.

Yet many family-run SMEs that have opted for this measure have not achieved the objectives set. So one is forced to ask the following question: Is it a mistake to form boards of directors as a body to support the achieving of satisfactory innovation aims?

The study is part of the international PhD thesis by Unai Arzubiaga, written up under the supervision of Dr Amaia Maseda and Dr Txomin Iturralde, lecturers at the UPV/EHU's Faculty of Economics and Business. It was produced using a sample of 230 family SMEs across Spain and focussed on two crucial aspects when it comes to innovating: the composition of the board and how it works. With respect to the composition of these bodies, the advantages and disadvantages of including family board members were analysed in terms of involvement in and connection with the business as well as in terms of access to competences, capabilities, networks and contacts. With respect to how they function, they studied the strategic involvement of the board members, their contribution, knowledge and capabilities in practice and, finally, the intensity of the activity of the board itself in terms of meeting frequency and duration.

Although the importance of the board of directors and the drive of innovation is recognised in the academic literature, the research by the UPV/EHU provides a novel approach since until now there has been no analysis as to which elements of the board are the most defining, and much less in the sphere of family-run SMEs that comprise the largest portion of the business base worldwide.

Involvement and commitment, key aspects in innovating

The study reveals the clear difference between, on the one hand, having a merely formal board of directors (as many family-run enterprises have) set up for symbolic reasons to fulfil specific legal obligations, and, on the other hand, having one involved in and committed to the business activity, and which acts as a true governing body of the enterprise, with active involvement in decision-making strategic in generating value. So a board of directors that not only performs the usual task of supervising the management, but has a high degree of strategic involvement, and facilitates the design and deployment of new innovation processes.

Knowledge, competences and capabilities of the members of the board of directors are decisive in promoting entrepreneurial attitudes within the company. "The strategic involvement of the board members beyond their origin (family or non-family board member) is what allows the family SME to decide to move from the wish to innovate to the actual decision to innovate," said the researchers.

The intensity of the activity of boards of directors could be a double-edged sword when it comes to successfully implementing innovation strategies. "Only in the case of boards with a high degree of involvement of the family members can one see that the greater activity of the board encourages innovation. In other cases, overdoing their action may cause difficulties and tensions to surface between the board and the family and which could affect the deployment of these processes," they added.
Additional information

The work was published in the international Journal of Business Venturing, regarded by the Financial Times as one of the 50 most influential global publications and which enjoys great prestige among academics, business people and leaders of the public sector worldwide. This work is also part of the international PhD thesis by Unai Arzubiaga-Orueta (Getxo, 1983), entitled "Orientazio ekintzailetik familia enpresen emaitzara: estrategiari buruzko erabaki hartzearen analisia Admnistrazio Kontseilu eta zuzendaritza mailetan- From entrepreneurial orientation to firm performance in family firms: analyzing the influence of strategic decision-making at the corporate and management levels". It was written up under the supervision of Dr Amaia Maseda and Dr Txomin Iturralde, tenured lecturers at the UPV/EHU. Specifically, this work is the result of a research stay by Arzubiaga at the prestigious Lancaster University Management School.

Bibliographical reference

Arzubiaga, U., Kotlar, J., De Massis, A., Maseda, A., & Iturralde, T. (2018). Entrepreneurial orientation and innovation in family SMEs: Unveiling the (actual) impact of the Board of Directors. Journal of Business Venturing 33(4), 455-469

University of the Basque Country

Related Innovation Articles:

Food system innovation -- and how to get there
Food production has always shaped the lives of humans and the surface of the Earth.
What is the best way to encourage innovation? Competitive pay may be the answer
Economists and business leaders agree that innovation is a major force behind economic growth, but many disagree on what is the best way to encourage workers to produce the 'think-outside-of-the-box' ideas that create newer and better products and services.
Innovation is widespread in rural areas, not just cities
Conventional measures of innovation suggest that only big cities foster new ideas, but a more comprehensive measure developed at Penn State shows that innovation is widespread even in rural places not typically thought of as innovative.
Scaling up search for analogies could be key to innovation
Investment in research is at an all-time high, yet the rate of scientific breakthroughs isn't setting any records.
Why you should be concerned about Oprah Winfrey when introducing an innovation
New research by Bocconi University's Paola Cillo and Gaia Rubera with Texas A&M's David Griffith asserts that the reaction of large individual investors to innovation is an important component of stock returns, their reaction to innovation depends on their national culture, and there is a way to segment large individual investors and pitch innovation to them accordingly.
Responsible innovation key to smart farming
Responsible innovation that considers the wider impacts on society is key to smart farming, according to academics at the University of East Anglia (UEA).
Pillars of academic innovation
Highlights from the Sixth Annual Conference of the National Academy of Inventors, including high-tech solutions to combat child pornography and radicalization materials; groundbreaking programs to promote STEM major retention; and new materials for wearable technology.
Universities drive innovation in the classroom
The current issue of Technology and Innovation, Journal of the National Academy of Inventors ® (19.2) examines innovation from the university perspective, highlighting what the most innovative institutions and educators worldwide are doing to prepare future engineers and industry leaders to effectively manage IP to grow their companies and the global economy as a whole.
How universities are fostering innovation and entrepreneurship
Technology and Innovation 19.1 zeroes in on innovation and entrepreneurship, with a special focus on what universities are currently doing to foster growth in those areas both for their success and the success of the communities and regions to which they are connected.
Shaping the future of health innovation
Future advances in healthcare will be aided by a new £10 million facility -- the National Institute for Health Research Innovation Observatory based at Newcastle University, UK.
More Innovation News and Innovation Current Events

Trending Science News

Current Coronavirus (COVID-19) News

Top Science Podcasts

We have hand picked the top science podcasts of 2020.
Now Playing: TED Radio Hour

Listen Again: The Power Of Spaces
How do spaces shape the human experience? In what ways do our rooms, homes, and buildings give us meaning and purpose? This hour, TED speakers explore the power of the spaces we make and inhabit. Guests include architect Michael Murphy, musician David Byrne, artist Es Devlin, and architect Siamak Hariri.
Now Playing: Science for the People

#576 Science Communication in Creative Places
When you think of science communication, you might think of TED talks or museum talks or video talks, or... people giving lectures. It's a lot of people talking. But there's more to sci comm than that. This week host Bethany Brookshire talks to three people who have looked at science communication in places you might not expect it. We'll speak with Mauna Dasari, a graduate student at Notre Dame, about making mammals into a March Madness match. We'll talk with Sarah Garner, director of the Pathologists Assistant Program at Tulane University School of Medicine, who takes pathology instruction out of...
Now Playing: Radiolab

What If?
There's plenty of speculation about what Donald Trump might do in the wake of the election. Would he dispute the results if he loses? Would he simply refuse to leave office, or even try to use the military to maintain control? Last summer, Rosa Brooks got together a team of experts and political operatives from both sides of the aisle to ask a slightly different question. Rather than arguing about whether he'd do those things, they dug into what exactly would happen if he did. Part war game part choose your own adventure, Rosa's Transition Integrity Project doesn't give us any predictions, and it isn't a referendum on Trump. Instead, it's a deeply illuminating stress test on our laws, our institutions, and on the commitment to democracy written into the constitution. This episode was reported by Bethel Habte, with help from Tracie Hunte, and produced by Bethel Habte. Jeremy Bloom provided original music. Support Radiolab by becoming a member today at     You can read The Transition Integrity Project's report here.