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The purpose of this study is to further the understanding of how outside directors in micro firms contribute to the development of these firms. Many studies have emphasized the importance of external directors on company boards, especially in small firms where internal resources might be scarce. However, this area has still received little attention by researchers. Interviews have been conducted with 50 small business owners in Sweden identifying 13 companies with external directors. These 13 companies have then been examined further. Guided by the internal need within the corporation the external directors in general fill 2 different roles. For most micro firms the strategic discussions are strengthened through the addition of outside directors and depending on the firm industry they might also find value in the access to the professional networks of their outside directors. In addition the owners’ strong emotional attachment to their firm and its operations can be balanced through the outside directors providing emotional clarity and support in difficult decisions. External funding can often work as a catalyst for including external directors on the board. Overall the traditional board roles, as described in previous research, take somewhat different forms in the context of micro firms.

Objectives: The purpose of this study is to further the understanding of how outside directors in micro and small enterprises contribute to the development of these firms.

Prior Work: Many studies has emphasized the importance of external directors on company boards, especially in small firms. However, this area has still received little attention by researchers and the external representatives in micro and small firms are very few. The service role is deemed to be most important due to the lack of internal resources in small firms.

Approach: Interviews have been conducted with 50 small business owners in Sweden identifying 12 companies with external directors who have been examined further.

Results: Guided by the internal need within the corporation the external directors in general fill 2 different roles. Either as long term supporters of the owners or as a complement to the owners questioning their choices and providing specific expertise. Outside funding can often work as a catalyst for including external directors on the board.

Implications and Value: This article focus on boards in micro and small firms which has previously been neglected and highlight the service role of external directors and how this role is utilized in different ways. 

An initial public offering (IPO) represents one of the final stages in the life of a small firm as it transitions from private to public. In this paper the experience of directors is examined to determine the extent of the role they play in ensuring a successful listing. Unique data from 122 IPOs on the Swedish Stock Exchange have been examined in a search for the effect of director experience on aftermarket performance. Specific aspects of director experience within a board, such as interlocking directorships and average tenure, are connected to the underpricing of Swedish IPOs. Contrary to expectations, no statistically significant relationship was found between long-run aftermarket performance and director experience at the time of an IPO. This suggests that the previous experience of directors, as measured in earlier studies, is less relevant to long-term aftermarket performance in Sweden. This stresses the importance of examining different institutional contexts.

122 initial public offerings (IPOs) occurring on the Stockholm Stock Exchange from January 1996 until September 2006 have been examined to assess the impact of institutional isomorphism on the selection of directors for boards facing the transition to listed companies. A high level of union representation as well as the restructuring of boards prior to an IPO and in anticipation of legal changes gives strong support for the influence of coercive isomorphism on IPO firms. Companies within industry sectors make similar choices with regard to their directors, their choices beingdis similar from their associates in other industry groupings. This supports the concepts underlying mimetic isomorphism. Finally normative isomorphism is largely supported by the reliance of corporations on a closed group of directors with similar educational backgrounds. All in all, societal and regulatory pressures, as modelled under institutional theory, are influencing the processes of corporate governance during an IPO.

Corporate governance systems throughout the world are commonly classified into

shareholder or stakeholder oriented systems. Shareholder orientation is common in the

Anglo-Saxon world while the stakeholder model is more commonly applied in central

European countries. Both models, as described in this article, have both strengths and

weaknesses and several scholars have suggested an ongoing convergence of the two

models. The Swedish middle road represents a compromise between the two models that

draws from the best of the market-orientation of the Anglo-Saxon system and the

inclusiveness of the stakeholder interests of the “European” one.

One hundred and thirty (130) Initial Public Offerings (IPOs) occurring on the Stockholm Stock Exchange (SSE) between 1996 and 2006 were examined to test hypotheses based upon DiMaggio and Powell’s institutional isomorphisms. Union representation lent credence to the hypothesis about coercive isomorphism. Industry groupings supported the concept of mimetic isomorphism while normative isomorphism was tenuously supported.