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Board-management relations in small firms: The paradox of simultaneous independence and interdependence

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Abstract

The author introduces constructs based on neo-classical and socio-economic assumptions, and argues that board-management relations should be characterized by both “independence” and “interdependence”. Interdependence is especially important in small firms. The article presents a model of directorates from research about directorates based on agency theory assumptions. This model is supplemented with constructs from the theory of contractual relations. Whilst traditional literature tends to focus upon “independence” from an agency theory perspective, this article argues that it is necessary to use more than one dimension of attributes regarding the board-management relations in order to understand the board's contribution to company performance, and that trust and solidarity is especially important in small firms. Board-management relations described by simultaneous “independence” and “interdependence” are proposed to give the highest contribution to company performance. The theoretical propositions are exemplified and supported by results of a field survey of directorates in small firms.

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  1. The Norwegian Small Business Research Center, Nordland Research Institute Bodø Graduate School of Business, N 8002, Bodø, Norway

    Morten Huse

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Huse, M. Board-management relations in small firms: The paradox of simultaneous independence and interdependence. Small Bus Econ 6, 55–72 (1994). https://doi.org/10.1007/BF01066112

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