Governance Structures in Italian Family SMEs

This paper is focused on governance structures, which are analyzed in a two-fold theoretical perspective, that is both contractual (agency theory) and relational (social capital theory), and in the context of Italian family and non-family SMEs The paper intends to offer three types of contributions to governance literature. First, we focus on the whole set of bodies which can be involved in governance and not only on boards of directors. Family firms of small and medium size are generally supposed to feature quite simple governance structures. The paper shows that, on the contrary, they can be fairly elaborate and identifies basic archetypes. Second, we explore archetypes of governance structures. Literature on SMEs and family business governance generally assumes that bodies like the shareholders meeting and the board of directors are often paper ones. This study highlights - for the first time in Italy - to what extent governance structures simply exist and to what extent they are actually used. We posit that increasing ownership complexity and company size induce companies to set up more articulated governance structures in terms of both existence and functioning. Another hypothesis we make is that governance structures are utilized less in family firms than in non-family firms. Third, family business governance literature shows that governance structures may serve either the purpose of reducing agency threats (which is particularly true for “official” corporate bodies) or the purpose to create trust, unity and commitment in the firm (which is especially the case of “unofficial” ones like the family council). Our study shows how in family firms official and unofficial bodies can be both present; particularly, it tests the hypothesis that the former are less used than the latter. All the hypotheses have been tested on a statistically representative sample of 546 Italian small and medium-sized businesses, returned from an 15157 mailing sample to an initial population of 94,504 SMEs. Questionnaires were sent to company leaders.