Board of directors and innovation: multiple facets in small and medium-sized enterprises

Purpose This article analyzes the impact of board composition (i.e. size, independence, and human capital), roles (i.e. control and strategy), and effectiveness (i.e. historical contributions) on innovation (i.e. internal product-service innovation) in small and medium-sized enterprises. Design/methodology/approach A four-stage process, including various key components of the board of directors (BoD), was developed and then tested on a sample of Canadian small and medium-sized enterprises using structural equation modeling. Findings The main findings that emerged from the analysis are as follows: An increase in board size and independence tends to dilute the overall human capital of the board. Conversely, enhanced human capital is a key factor that enables the board to effectively fulfill its strategic responsibilities. This strategic role significantly drives board effectiveness, which ultimately serves as the binding element linking the board to a specific organizational outcome in small and medium-sized enterprises: internal product-service innovation. Originality/value The originality of this article is multifaceted. First, it presents a unique multistage theorization that allows for the examination of interaction effects within a sequential framework of various key components of the BoD. Additionally, this study incorporates several rarely analyzed variables, enriching the existing literature on corporate governance, innovation, and small and medium-sized enterprises. Finally, contextual elements such as the choice to specifically analyze small and medium-sized enterprises in Canada enrich the current literature on the subject, which continues to be dominated by large companies and countries like the United States.