Corporate Governance and Corporate Entrepreneurship in Companies and Associations.
The project will examine Swedish riding schools in order to find relationships between corporate governance and corporate entrepreneurship. Theoretically, the fields of corporate governance and corporate entrepreneurship are separated, although empirical experience indicates a close interrelationship. For example, a board's composition can have a vital influence on the corporation's capacity to create an efficient strategy. The empirical orientation of the two fields is mainly directed towards large, listed corporations. Consequently, small companies in general and associations in particular are not considered. Hence, our knowledge is theoretically fragmented and empirically distorted. The project will examine one industry, the riding school industry, since it contains both private companies and public associations. Here it will be possible to focus on basic differences in corporate governance and its influence upon corporate entrepreneurship, keeping other factors constant, such as the demand structure of the market and legislation. The project will contribute theoretical knowledge about the ways in which corporate governance and corporate entrepreneurship influence the performance of the firm as well as empirical knowledge about firms in the riding school industry and practical knowledge about the ways in which private companies and public associations can facilitate the development of their firms.
Sven-Olof Collin, Kristianstad University College
The project has indicated the relevance of a property right approach as a method in order to understand the relationship between corporate governance and corporate entrepreneurship. It has been indicated that corporate entrepreneurship is a propensity, not a posture, which can be influenced by governance mechanisms, such as the external managerial labour market and the board.
The board have different functions, were the project added conflict resolution or principal identification, to the list of three functions (monitoring, service, decision making), implying that the board is an arena were the principal organise its interest through negotiations among the dominant principals and the top managers. This function is probably more important in non-for profit organisations, such as public riding schools, than in listed corporations. Different features of the organisation and the environment influence the functional emphasis of the board and can create functional harmony or disharmony.
The board can have a power structure were certain positions are more powerful than other positions. The composition of these specific positions will influence the developmental capacity of the organisation more than the overall composition of the board. We found that the gender composition of the powerful positions influenced the capacity, where more women made the organisation more entrepreneurial. Our interpretation is that it is the dominating consumer's influence that created the entrepreneurial capacity.
The expected fit between strategy and structure were found mainly in the large organisations, where more diversification in strategy implied more decentralisation of structure. Small organisations had a fit between the organisational strategy and the market conditions and a fit between the organisational structure and the monitoring interest of the main principal.
Many of the organisations in the industry are very poor, unable to have an executive compensation system with significant financial or even fringe benefits. One solution found was to offer entrepreneurial action as part of the reward system. The manager were allowed to use the organisation in entrepreneurial action in order to create a reputation on the managerial labour market, which at the same time were exploited as a capacity in the organisation.
Governance strategy is a concept developed in order to describe the principal's conscious plans and actions in designing single corporate governance mechanisms and composing the mix of governance mechanisms, with the aim of disciplining and enhancing the entrepreneurial capacity of the agent in order to make it possible for the organisation to satisfy the needs of the principal. We have formulated two hypotheses related to the concept of governance strategy. The beast hypothesis claims that the principals of organisations that experience strong external influence, such as hard government regulation or tough market conditions, will have very strong governance strategies were they tend to use many of the available governance mechanisms. Thus, tougher environment creates tougher beasts. The orchestra hypothesis claims that if a principal cannot use all the available governance mechanisms, the principal will tend to use the remaining with a stronger emphasis. If you cannot use the whole orchestra in order to produce a strong sound, you will have to make a louder sound with the only instruments you have available.
Governance can be divided among a set of organisations in a division of labour concerning governance. We have explored an emergent organisational structure where the municipality with financial means and sometimes with material resources support an association that assume responsibility of the democratic education and the social cohesion, and finally a private firm with the responsibility to make the riding in an economic way. By this arrangement, governance is distributed among three parties that create a governance partnership between three different organisations, with different logics and different capacities, utilising their specific competencies in order to create value that would be hard to attain in the normal organisational form, such as an independent association or an independent private firm. Thus, through dividing property rights among several actors, and thereby the governance, value can be produced. We believe that this is a form with great potential for the riding industry in the future.