Introduction
Corporate governance structures determine the strategic policy and decision making
frameworks in all types of organisations. However the small scale of SMEs and in particular
their ownership structures leads to a combination of roles especially those of owner and
manager (‘‘principal’’ and ‘‘agent’’ Berle and Means (1932) in Williamson (1974)). In this
context the decisions regarding the allocation of organisational resources are the product of
governance structures in which the responsibility for allocation of strategic resources is
concentrated in the hands of very few individuals. The governance structures become
instrumental in mediating the competition for scarce resources and determining their relative
value. This paper examines the strategic role of HRM in SMEs and its contribution to firm
performance and comments the implications for governance.
Recognition of the importance of small and medium sized enterprises to the economic
system of a country is responsible for an increased interest in recent years in studying SMEs