Article

Corporate governance for competitive advantage in SMEs

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Abstract

Corporate governance, a term generally reserved for large companies, is increasingly relevant to small and medium-sized enterprises (SMEs), and improved corporate governance may help even the smallest firms achieve competitive advantage.Good corporate governance is most likely to lead to competitive advantage in SMEs where incorporation is an appropriate enterprise form. Previous research on high-growth companies in the United Kingdom suggests that the take-up of incorporated status and the adoption of strong corporate governance practices may help companies to attain competitive advantage. Corporate governance is defined as the system by which firms are ruled and controlled, and specific activities for SME board members wishing to achieve competitive advantage in corporate governance terms are recommended. These activities are a function of the governing board’s responsibility to ratify decisions and to control the monitoring of the management's performance.Policy guidelines for the development of strong corporate governance strategies in SMEs are outlined.These guidelines address such issues as the need to conduct an annual review of the firm’s strategy and the appraisal of the board’s performance. (SAA)

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