To read this content please select one of the options below:

Board diversity as strategic choice and why it should matter to SMEs

Elmar Puntaier (School of Strategy and Leadership, Coventry University, Coventry, UK)
Tingting Zhu (Department of Accounting, Finance and Economics, De Montfort University, Leicester, UK)
Paul Hughes (School of Business, University of Leicester, Leicester, UK)

International Journal of Entrepreneurial Behavior & Research

ISSN: 1355-2554

Article publication date: 6 December 2022

91

Abstract

Purpose

Diversity in boards has gained attention as a reflection of societal imbalances. The purpose of this paper is to investigate the impact of diversity in terms of both gender and nationality in management boards of small and medium-sized enterprises (SMEs) on firm performance from an upper echelons perspective. The authors also examine how board-specific characteristics influence the structural makeup of boards in gender and nationality diversity terms.

Design/methodology/approach

The authors focus on the UK because of its individualistic society and flexible labour market and assess 309 SMEs in the manufacturing industry over 2009–2019. A 3-stage least squares (3SLS) estimator is used to analyse the data, the Shannon index to measure board diversity, return on assets as proxy for firm performance, and owner-manager presence, board member age and tenure are the board-specific characteristics of primary interest.

Findings

Both gender and nationality diversity contribute to firm performance and represent distinct upper echelon characteristics that change the cognitive and psychological dynamics of boards. Firms with larger boards do not perform better, but diverse boards reduce the narrowing view of CEOs. Yet the presence of owner-managers, despite their performance-enhancing contribution, holds firms back from benefitting from diversity as a strategic choice.

Originality/value

This study extends the upper echelons theory to include board diversity as an important aspect that should become more central in upper echelon thinking when understanding firm performance. The authors’ findings suggest that theoretical developments in search of understanding firm behaviour must proceed by accounting for diversity and not simply focusing on decision-making styles.

Keywords

Acknowledgements

All the analysis, interpretations and conclusions drawn from the data are entirely and solely those of the user. The authors are grateful for the recommendations and constructive feedback received from Andrew Johnston and two anonymous reviewers.

Citation

Puntaier, E., Zhu, T. and Hughes, P. (2022), "Board diversity as strategic choice and why it should matter to SMEs", International Journal of Entrepreneurial Behavior & Research, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJEBR-03-2022-0225

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

Related articles