EVOLUCIÓN DEL GASTO EN LOBBY: TOTAL Y POR SEGMENTOS DE PRODUCCIÓN

SMEs can be significantly affected by management’s inability to adapt their practices in an evolving business environment (Jumpponen et al., 2008) or simply managerial incapability (Ma and Lin, 2010). For example, a usual reason of firms’ failure is associated with inability to manage change (Hambrick and Crozier, 1985). Such lack of managerial skills affects firms more in uncertain business environments (Venkataraman et al., 1990). A firm’s governance itself influences the likelihood of survival (Parker et al., 2002) as firms with weak governance appear to be particularly vulnerable in economic downturns (Lee and Yeh, 2004). Therefore the issue is the choice of measure to quantify management ability. Experience has been used as a proxy in a number of cases (see for example Wilson et al., 2013) and it can have two aspects namely, the years of experience of a director and the collective experience of the board. In fact, Ohlson and DePrijcker (2008) argued that managerial or industry related experience is the single most important managerial issue that affects the firm failure process. In such occasions the age of directors is used as a proxy for the experience of the board of directors. The number of directors that a firm has, has been usually used as a proxy for the management’s ability to direct and to control effectively the firm (Bennett and Robson, 2004; Daily et al., 2002), reflecting the breadth of knowledge and business and social networks. Firm directors can have broader experience and broader knowledge of the industry depending on their age and on their number. Evidence from the wider corporate literature suggests that directors with wider experience, such as those (non-executive directors) who have experience in other firms’ boards have a positive effect in firms’ performance (Murayev et al., 2016) and as such, one can argue, have a reduced propensity to fail. Among the specific

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experience that firm directors may have is on past firm failures. Past failure experience, appears to be useful for small business directors but it can also act as a reputation destroyer for financiers and suppliers (Wilson et al., 2013). Therefore the experience of past failure does not always provide positive effects to the firm (Ucbasaran et al., 2010; Coad, 2013). A crucial point for firms that have directors with failure experience would be their firm’s financing at the early stages when lenders are unwilling to support them. On the other hand, one can critically assume that past failures can also be helpful experience but the relationship is not always easy to establish.

Excluding the experience of past business failures, directors who have general previous directorship experience may have more effective networks that can be useful for the company, particularly for a new firm. These networks may provide young firms with access to external resources that are not otherwise easily accessible (Watson, 2007). Such external sources can include contacts with suppliers and market knowledge (Wilson et al., 2013). However, Zhao and Aram (1995) noted that any benefits associated with director experience diminish after a certain level. Too many directors are not necessarily a positive development in the knowledge and network base of the firm.

In terms of the board composition of SMEs, there is evidence that a strong and vigilant board of directors can significantly affect the potential of the firm (Huse, 2000) and perhaps reduce its failure propensity. In fact, when a small firm grows, it is expected that a board can offer advice on critical issues (Motwani et al., 2006; Stavrou, 2003) and direct the company appropriately so as to respond to changes in the market place (Zahra et al., 2009). As a result, the number of directors in a firm may add to the overall management experience and ability to make decisions. In fact, the number of business directors together with the duality at the top (the CEO and the chairman’s positions are taken by the same person) has been of special interest for many years in the corporate literature (for duality at the top see for example, Jensen and Meckling, 1976; Daily and Dalton 1994; He and Wang, 2009; Quigley and Hambrick, 2012; Krause et al., 2014; Murayev et al., 2014) although the application to SMEs is quite different due to the owner-centered nature of the smaller firms.

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In the small firm failure area, De Maere et al., (2014) found evidence that Belgian unlisted firms with boards where the CEO is independent of the board chair are less likely to become bankrupt, although this holds for firms where the directors are also longer-tenured with few additional directorships. Interestingly, De Maere et al., (2014) also found evidence that bankrupt firms tend to have a (marginally) larger board size compared to non-bankrupt examples. This finding contradicts the assumption that more directors increase the overall ability of a firm’s management and also contradicts earlier findings from the larger end of companies which found a positive association between board size and firm performance (Dalton et al., 1999). This might suggest that SMEs are different to corporates when the relationship between board size and failure propensity is concerned.

The size of the SMEs and the fact that they generally operate at a local or regional level has given rise to research on the locality of the directors. In other words, it is of importance for a director to know the local market, especially when the SME is quite new. The locality of the directors especially in young firms can reduce the failure risk as it has been suggested that local directors tend to know the market well, have more effective networks locally and can access more support from the local economy (Wilson et al., 2013). Local knowledge, and professional networks in an area gives an advantage to SMEs especially in the early stage of their development through enhanced understanding of the local customer base, the supplier relationships and the regulators (Johanson and Vahlne, 2009; Wilson et al., 2013). This local knowledge ultimately leads to a reduced probability of failure for small firms (Wilson et al., 2013). In the wider context of directors’ knowledge and experience, Zahra et al., (2009) suggested that these are particularly important directors’ characteristics in new SMEs since they are developing and providing human and social capital in the early stages of the business development.

Likewise, to the extent that duality at the top concerns the larger end of SMEs, evidence suggests that this, together with outside directors that represent up to half of the board seats, is negatively correlated with failure in small firms (Ciampi, 2015). This is contrasted to cases where there is duality at the top but outside directors represent over half of the board seats; in such cases the presence of outside directors is positively associated with small firm failure, possibly due to

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external directors depriving the internal directors of the majority vote (Ciampi, 2015).