Edinburgh Napier University

  There have been a large number of studies examining how firms are governed and how they should be governed. However, these studies have mainly concerned themselves with large public limited firms. Given that most firms are small, there is a need to consider the governance requirements of small firms and how these may differ to the needs of larger organisation. The aim of this paper is to consider governance issues that are relevant to smaller firms and not just large firms. A detailed review of the relevant literature has been used to formulate an holistic model of governance applicable to SMEs. Eleven semi-structured interviews were conducted with senior decision makers in Scottish based SMEs to ascertain what these individuals understood by the term corporate governance, what factors influenced the implementation of governance within these firms and if governance was important when accessing finance. The findings suggest senior managers of small firms do understand the idea of corporate governance but they do not necessarily link the concept of governance to the management of their own firm. The most important influence on the governance of SMEs would appear to be the level of interaction that they have with externals.